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ABCP holders threaten to call in vultures


Andrew Willis
Thursday, April 3, 2008 at 8:59 AM EDT


Retail investors in frozen ABCP raised the stakes Thursday in their showdown with institutional investors, as their lawyers threatened to sell individuals' votes in the $33-billion restructuring to a U.S. vulture fund.

 

Law firm Juroviesky and Ricci, which is trying to lead a class action suit for individual investors holding asset-backed commercial paper, announced Thursday that it hired a consulting firm to solicit bids for ABCP from U.S. distressed debt funds. If a fund steps up, it would represent each investor in a April 25 vote on the restructuring. The law firm said the vulture fund would “keep the process honest.”

 

The ABCP restructuring committee, led by lawyer Purdy Crawford, has gone out of its way to keep vulture funds out of this process by freezing the market.

 

Individual investors want 100 cents on the dollar for about $330-million of paper that has been in limbo since August. The restructuring plan struck by some of the largest pension funds and financial institutions in Canada is expected to see the frozen paper initially trade at about 60 cents on the dollar, and see investors waive the right to sue.

Mr. Crawford has repeatedly promised a better offer for an estimated 1,800 retail investors, but has yet to make a formal offer. The potential arrival of a vulture fund heightens the pressure to cut a deal.

 

In a press release, Juroviesky said: “We feel that there is an opportunity for a well-funded institutional fund, with a longer liquidity time frame, to extract more value … than what we have been offered to date, and to accordingly offer my clients an appropriate deal, including a percentage of any upside.”

 

The law firm said institutional ABCP holders “stand to lose approximately $22-billion if the restructuring fails, so there is some leverage there for a party whose threats to vote it down are believable.”

 

The law firm hired consulting firm Blackmore Partners to gauge hedge fund interest in the ABCP portfolio.

 

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