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Canada Commercial Paper Conversion Delayed to November Amid Credit Crisis
Canada Commercial Paper Conversion Delayed by Month

By Joe Schneider and Doug Alexander

Oct. 20 (Bloomberg) -- About C$32 billion ($26.8 billion) of Canadian commercial paper will remain frozen another month because the global financial crisis is delaying a restructuring, a committee overseeing the plan said.

The "large'' number of people and companies involved and the legal complexity of the plan are also contributing to a delay in converting the short-term debt to longer-term notes, the committee said in an e-mailed statement today.

The delay means individual investors, whose money has been frozen since August 2007 when a portion of the market for asset- backed paper in Canada collapsed, will have to wait at least until the end of November to get their money back.

"That's a pretty lame excuse,'' Layne Arthur, a Sylvan Lake, Alberta resident, said in an interview. "There's all kinds of bargains out there right now; I'd like to use my C$450,000 to buy some cheap stock.''

Arthur, 53, sold his family farm and put his money in asset- backed commercial paper sold through Canaccord Capital Inc. The plan has been delayed several times by court challenges and by negotiations among investors and banks.

"It's absolutely, out-of-control pathetic,'' he said of the delay. "I'd like to have a better reason.''

More than 1,750 investors holding C$186 million in the frozen debt are waiting to get their money back, after Vancouver-based Canaccord Capital and Credential Securities Inc. agreed in April to buy back the debt once the plan is done.

Canaccord Program

Canaccord's "relief program'' remains fully funded and will be completed seven to 10 days following the restructuring, Chief Operating Officer Mark Maybank said today in a memo to investment advisers.

"We are extremely disappointed by this delay, and continue to encourage swift implementation of the restructuring plan on behalf of our clients,'' Maybank said.

Canada's highest court last month refused to hear an appeal by drug-store chain Jean Coutu Group Inc. and other opponents of the plan, clearing the way for the issuance of replacement notes.

Most of the C$32 billion in commercial paper is held by companies and pension funds, which will be given new notes maturing within nine years in exchange for the insolvent paper.

Purdy Crawford, chairman of the committee, said the volatility in global credit markets has caused institutions and lawyers to be more conscious of the documents, so it's taking longer to write them up.

No Showstoppers

"There's no showstoppers but unfortunately we can't move forward with them,'' Crawford said in a telephone interview.

The volatility in the financial markets has also made it more difficult to put a value on the new paper, Crawford said. When the conversion is complete, investors should hold on to the paper until the markets calm down, he said.

Crawford said he expects the restructuring to be finished next month.

"God, if it doesn't get completed by the end of November, I am going to go to Africa and hide,'' he said.

The case is In the Matter of Metcalfe & Mansfield Alternative Investments, C48969, Court of Appeal for Ontario (Toronto).

To contact the reporters on this story:

Joe Schneider in Toronto at jschneider5@bloomberg.net;

Doug Alexander in New York at +1- dalexander3@bloomberg.net

Last Updated: October 20, 2008 15:45 EDT

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