Banking and Finance

FarWest Savings has also taken a new step in the way it borrows money.

The S&L; has launched the thrift industry’s first program to issue commercial paper, a form of corporate debt. The $50-million program is being offered through Kidder, Peabody & Co., a New York investment banking firm.

The sad shape of the savings and loan industry has made it difficult and expensive for healthy S&Ls; to go through the process of issuing commercial paper to borrow money cheaply.

But FarWest’s program became possible after the Federal Home Loan Bank of San Francisco agreed to issue FarWest a 5-year, $50-million revolving letter of credit, which essentially insures the repayment of the S&L;’s commercial paper debt.

The San Francisco bank has not supported any commercial paper programs until now.

FarWest has borrowed $10 million so far to augment its corporate activities, said Ronald Struck, the S&L;’s chief financial officer. The S&L; will issue commercial paper from time to time when rates are attractive, he said.

The program provides not only a lower borrowing rate for the S&L; but greater access to the capital markets on Wall Street, Struck said.

Commercial paper is a short-term obligation--maturities usually do not exceed 9 months--issued by banks and other companies to investors. Issuers like commercial paper because maturities are flexible and because rates are slightly lower than bank rates.

Compiled by James S. Granelli, Times staff writer