Tuesday, April 01
Vladimir Salyzyn, 78, said he kicks
himself for being out $900,000, because he has a commerce degree,
teaches economics and should have known better where to put his money.
But there was no hint ABCP spelled
trouble, Murray and Cindy Candlish said on Tuesday. The couple reported
their life savings of $350,000, like Salyzyn’s cash from selling a farm,
are locked away from them in asset-backed commercial paper.
Marc Bence/Edmonton Journal
Purdy Crawford (left) spoke to investors about an ABCP rescue plan at
the Sutton Place Hotel in Edmonton on Tuesday.
“If you’re puzzled I can understand it — I
was puzzled for at least two months,” Bay Street lawyer Purdy Crawford
told an Edmonton meeting of ABCP casualties in recalling.
As head of Canada’s national ABCP
restructuring committee, Crawford emphasized its job is to salvage value
from the securities instead of trying to lay blame for a prolonged
financial crisis since issuers of the paper started failing to keep
payment promises last August.
Crawford’s group is attempting to clear up
confusion and losses left over from 43 varieties of securities created
by financial institutions and sold across the country.
ABCP’s fatal flaws showed up when
investors worried about a spreading American mortgage market meltdown
tried to cash in the Canadian paper.
The certificates gave off no whiff of risk until the moment they failed
because they only paid at best a fraction of a percentage point more
interest than conventional savings deposits, said Peter Myers, facing up
to personal losses that took him by complete surprise.
The main attraction of ABCP was its
billing as safe short-term investment alternatives that could be turned
back into cash in as little as 30 days.
“I was told it was Triple-A rated and
guaranteed by the banks,” said Myers, a 64-year-old engineer who
reported the financial crisis that halted ABCP withdrawals froze his
“substantial” retirement nest egg.
“How did we ever get into this?” asked
Phil Sims, adding he is out $150,000. “Why would anybody invest in
subprime mortgages? My10-year-old son would know better.”
Salyzyn, the Candlish family, Myers and
Sims stepped forward as Edmonton-area examples of an estimated 1,800 to
2,000 Canadians who own “retail” or personal ABCP finance products.
The troubled investors filled a downtown
hotel meeting room and fired questions at Crawford and his committee.
The group held Edmonton and Calgary meetings on a national tour that
includes distributing tonnes of telephone directory-sized information
books explaining ABCP and the rescue plan.
Crawford repeatedly assured personal
investors they are a high priority and their frustration over the
complexity and slow pace of the restructuring is understood.
“It hurts. It sucks. It scares people,”
the Candlishes said. “We’re just trying to save our homes and get our
kids through college.”
The bulky information tome alone is
annoying, Crawford agreed in an interview. “If I’d been in their
position and somebody gave it to me, I’d probably throw it across the
room and say the hell with this.”
Retail investors own an estimated $317
million in ABCP, or less than one per cent of a total $35 billion in
frozen certificates. The paper represents money-market assets from
real-estate mortgages to receivable balances owing on credit cards and
But the personal savings group will have
clout in a vote on the restructuring plan April 25, said committee
member Stephen Halperin, a Toronto lawyer.
The court-supervised process requires
approval by a double majority representing two-thirds of total ABCP face
value and 50 per cent, plus one of its owners by head count.
“A note holder who has $1,000 invested has
the same vote as a note holder who has $1 billion invested,” and
personal investors “vastly outnumber” institutional and corporate
owners, Halperin said.
Repayment of ABCP deposits is projected to
take years and recover as little as two-thirds of their value. Investors
also give up rights to sue creators of the certificates if the
But the Canadian paper still has value
compared to collapsing U.S. mortgage markets, and the bleak alternative
to a restructuring agreement is worse losses and years of lawsuits, the