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Investors demand more from Canaccord
Buy-back offer excludes many noteholders, ABCP retail clients tell parliamentary hearing

John Greenwood  

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 whole."

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 buyouts.

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 investors.

"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 International.

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 lawmakers.

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

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CanWest Interactive, a division of CanWest MediaWorks Publications, Inc.. All rights reserved.


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