Friday, April 11, 2008
OTTAWA - A day after Canaccord Capital Inc. tabled an offer to
repurchase stalled asset-backed commercial paper from its retail
clients, many of those investors say it's not enough.
"We will not be happy until all the other individual noteholders get
paid too," said Wynn Miles, a self-employed Victoria woman with her life
savings tied up in illiquid notes.
"I want my savings returned. I also need to know that clients of
National Bank (Financial) and the other investment dealers are made
Miles made the comments at a special House of Commons committee hearing
into the ABCP debacle.
In the wake of the credit crunch and the failure of the $35-billion ABCP
market, many investors allege it was flawed and never should have been
sold in the first place.
A group of institutions led by the Caisse de depot et placement du
Quebec is working to restructure the notes.
They say their plan is the best way to prevent further losses, but they
need the support of people such as Miles.
That's because retail holders vastly outnumber institutional and
corporate holders, and in order to go ahead, the workout must win
approval from a majority of investors.
Canaccord's buy-back offer to 1,400 of its retail clients was a key step
in bringing the individual investors onside, but it may not be
sufficient. There are roughly 400 additional retail investors who are
not covered under the offer. Most are clients of Credential Financial
Inc., a brokerage owned by a group of credit unions, but there are also
clients of other chartered banks that have not been offered ABCP
Noteholders are set to vote on the restructuring April 25.
Brian Hunter, an oil-and-gas engineer in Calgary with about $658,000
tied up in illiquid ABCP, has said he will continue to pressure the
backers of the restructuring to make a similar offer to remaining retail
"It is my understanding that there are plenty of customers of the
chartered banks that hold this paper too," said Hunter, who set up a
Facebook site to help organize retail note-holders.
"We have to look at how these guys can be helped, too."
Juroviesky and Ricci LLP, a firm of lawyers representing individual
noteholders, has said that unless all members of the group have their
notes bought back, it will continue to fight the restructuring.
An executive at the firm who asked not to be named said the next step
may be to challenge the restructuring in court.
Even if the plan wins majority approval, there are questions around the
legality of using the bankruptcy protection process, the official said.
In total there are about 2,000 holders of ABCP. More than 100 are
companies, ranging from tiny junior miners to autoparts giant Magna
Many are angry that they are not being offered the same deal as the
retail investors and at least one group is said to be looking at legal
strategies to get their money back.
"No one wants this restructuring to fall apart, but this is not fair,"
said a senior company official.
The market for asset-backed commercial paper fell apart back in August,
after issuers were unable to roll maturing notes and banks that had
agreed to provide emergency funding declined to step up.
Even with a successful workout, the new notes will trade at a
significant discount to face value, analysts said.
Among those giving testimony before the House of Commons finance
committee on Thursday was Larry Elford, a former financial adviser from
Lethbridge. Elford said the ABCP crisis should be a wake-up call for
Investors must rely on a patchwork of watchdogs and regulators who have
not done a good job, he said.
"There simply is no agency to call that doesn't have a conflict of
interest," he said.
© The Edmonton Journal 2008
Copyright © 2008 CanWest Interactive, a division of CanWest MediaWorks
Publications, Inc.. All rights reserved.
CanWest Interactive, a division of CanWest MediaWorks Publications,
Inc.. All rights reserved.