September 3, 2009
XTO Energy, a BBB investment grade company, is a sizable issuer of Tier 2 commercial paper. Since we began issuing commercial paper in 2006, we have increased our employee count 80%, to more than 3200 and have invested over $25 billion in capital. Our access to the commercial paper market has been important to funding this expansion.
Eliminating the ability of 2a-7 money funds to own Tier 2 commercial paper, as currently proposed, will reduce liquidity to issuers like ourselves. If commercial paper were unavailable to us, we could borrow from our banks, but it would be more costly and could force the banks to increase their required reserves to support our credit. The proposed rules would increase portfolio concentration into fewer holdings, thus increasing risk for the money funds. Moreover, this proposed change fails to address the issues of last September, which primarily revolved around asset-backed programs and Tier 1 rated financials.
The proposed action appears to be in direct opposition of adding or maintaining existing liquidity in the system. We hope you give strong consideration to allowing 2a-7 money funds to continue to hold 5% of their assets in Tier 2 commercial paper. We believe XTO's commercial paper, as well as other Tier 2 issuers paper, provide 2a-7 money funds a low-risk, stable investment.