Investors Scrutinizing the Regulators

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Fox Guarding the Hen House




Disgruntled investors confront committee
Bay Street group pitches salvage plan


Gina Teel


Wednesday, April 02, 2008


"I'm stuck like everybody else....I'm not working, and I'd like to recover it."



From left, Stephen Halperin, Purdy Crawford, Andrew Kresse and Adam Howard of the Pan-Canadian Investors Committee meet Tuesday with investors whose money is frozen in the asset-backed commercial paper fiasco.


It wasn’t a happy crowd that turned out to hear Bay Street lawyer Purdy Crawford and his Pan-Canadian Investors Committee pitch their plan to breathe some life back into Canada’s frozen $32-billion asset-backed commercial paper market.

Retail investors caught in the fray, like Linda Paget, were clearly perturbed prior to the start of the Calgary meeting — one of five information sessions Crawford’s committee is holding across the country.

“I now have high blood pressure over all of this,” she said.

Paget said she has $130,000 stuck in assetbacked commercial paper (ABCP), put there on the advice of Canaccord Capital Inc., a Vancouver-based brokerage, who she said assured her it was a safe investment.

Linda Paget and Wayne Duke, who spoke to the committee on Tuesday, have about $130,000 and $200,000 respectively tied up in the troubled ABCP market.

Paget explained her husband died six years ago, and she doesn’t have much of an income. “So that’s the problem,” she said.

About 100 people showed up for the meeting, where Crawford and his committee presented the case as to why retail investors should consider voting for the restructuring proposal on April 25.

Crawford’s team of lawyers and bankers has been working to remedy the situation since last August, when the market for nonbank ABCP tanked amid fears the notes were linked to U.S. subprime mortgages.

In his preamble, Crawford told the crowd he’s received many messages from people about the potential hardships they’re facing as a result of the ABCP woes. The committee has a great deal of sympathy and empathy, he said.

“We don’t . . . control the other parties involved, but you can be sure that we will be doing everything we can within reason to make the results for the retail investor as positive as possible,” Crawford said.

There are an estimated 1,700 to 2,000 retail investors in Canada who collectively hold about $350 million of ABCP.

Retail investors each get one vote on the restructuring deal, and so have the power to scuttle it.

Many, like Paget, are angry because they were told the investments were safe.

Others, like retiree Wayne Duke, said he got a rude awakening when he discovered he has about $200,000 in ABCP.

“I’m stuck like everyone else,” he said. “It’s retirement money. I’m not working, and I’d like to recover it.” Under the proposed restructuring, new asset-backed notes would be issued in place of the shortterm notes frozen last August, but retail investors would have to wait about nine years for the new longerterm notes to mature.

They’d also be worth less when they begin trading — some estimate 40 cents to 60 cents on the dollar.

Saying yes to the deal also means retail investors give up their right to sue those who sold them the ABCP in the first place — a concession the committee said was necessary to realize the restructuring proposal.

This clearly didn’t go over well with one investor, who told the committee he has, on behalf of his mother, $150,000 frozen in ABCP.

The investor said he was troubled by the lack of certainty that goes with the proposed restructuring.

“For someone like me, in exchange for the certainty I can understand giving up my legal right to sue, but I don’t really have very much more certainty now than I did before. So as it stands today, I will absolutely be voting it down,” he said to a round of applause.

"Their vote is getting lost in this whole thing"


Peter Linder


Lawyer Peter Linder, who represents oil and gas companies with more than $70 million locked up in ABCP, argued under the proposed restructuring, his class of creditors should have their own votes.

Instead, they are being grouped in one class with everybody else — which means his clients have no bargaining power.

“What that means is that my oil and gas companies that I represent, their vote is getting lost in this whole thing,” he said following the meeting.

Brian Hunter, vice-president of Montane Resources Inc., has about $650,000 tied up in ABCP.


Hunter, who started a group on Facebook where others caught in the debacle can commiserate, said he’s yet to hear anybody who’s looked at the proposal in detail say they’d vote for it.


At the meeting, Hunter said he’ll vote against the proposal. He wants all his money back.

“That’s my starting position. Why would I negotiate against myself?” Hunter said.

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