Extendible Commercial Notes (ECNs)
Goldman Sachs made a significant contribution to the world of debt capital markets
through the invention of Extendible Commercial Notes. ECNs offer an attractive alternative
to traditional and nontraditional institutional investors and simultaneously add new
options for issuers, particularly with regard to short-term financing needs that may
relate to mergers and acquisitions activity.
As a creative mechanism for accessing liquidity from investors, ECNs replicate the
flexibility of a credit facility and provide a threefold benefit: They satisfy the
requirements of rating agencies while simultaneously providing a premium to investors and
lowering costs for issuers. ECNs were created in response to the long-standing requirement
by rating agencies that certain issuers provide backup liquidity for their commercial
paper notes through bank credit facilities. In recent years, however, such facilities have
grown increasingly expensive. In reducing costs by as much as 20 percent, ECNs provide a
valuable addition to the $1.3 trillion market for short-term commercial debt.