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Top-up plan seen for ABCP investors

Canaccord clients 'should pressure' for debt agreement


Nathan VanderKlippe

 

Wednesday, April 02, 2008

 

VANCOUVER -- The 1,400 retail investors who bought $269-million in commercial paper through Canaccord Capital will be given a "fair recovery" before the April 25 vote on the financial restructuring plan, Peter Brown, Canaccord's founder and chairman, said yesterday.

"We are going to help our clients. We are working on a package now," he said in an interview yesterday, moments after dozens of his company's clients railed against Canaccord in an emotional ABCP-restructuring presentation in downtown Vancouver.

Yet his package won't come in time to ward off a parliamentary look into the plight of retail investors.

WARD PERRIN / CANWEST NEWS SERVICE

Vancouver investors follow along as Purdy Crawford explains the plans for ABCP on Wednesday.

The federal finance committee agreed to hold hearings in the next few weeks, which are expected to call testimony from federal and provincial regulatory authorities, including the Office of the Superintendent of Financial Institutions, the Investment Dealers' Association, the banking ombudsman and Canada's various provincial securities commissions to testify.

But Mr. Brown, who laid some of the blame on investors who put their money in commercial paper because they were chasing higher yield - "and with yield, there is risk" - made it clear that Canaccord is not prepared to completely meet the demands of its angry clients, who want back 100% of their investment, plus interest.

"Are we going to buy the whole note? No," he said. "But there will be a market for the notes at some point and it will be below par and we will contribute toward their loss."

He declined to elaborate further on the terms of the "help," but defended Canaccord's willingness to invest its clients' money in the $32-billion asset-backed commercial paper market, which suddenly ran out of liquidity late last summer.

"This was AAA R1-High, which is the highest rating in Canada. There had never been a default in 70 years of the Canadian money market of AAA paper," Mr. Brown said. "We couldn't control that or foresee it."

A team chaired by Toronto lawyer Purdy Crawford negotiated a financial restructuring of the highly complex paper, which has now been frozen for nearly eight months.

The team described that plan in Vancouver yesterday but was met with raised voices, emotional pleas and a raucous, jeering audience that demanded it be refunded its investments.

"I am here because I want my money. I don't want coupons, Canadian Tire money, Bre-X shares or all that sort of thing," said Angela Speller, a 61-year-old retiree who has invested more than $1-million in commercial paper, and is now having difficulty funding her children's educations.

Dozens of people presented similar stories, often in angry terms during the final, and loudest, stop on a six-city restructuring sales tour. Canaccord clients hold the lion's share of the estimated $300-million of commercial paper held by retail investors, and many of them live in British Columbia, where the company is based.

Some took aim directly at those institutions who, unlike their competitors, have so far declined to buy back their clients' commercial paper.

"To Peter Brown, Canaccord, Credential Securities, and the Scotiabank how do you sleep at night knowing you have impoverished seniors, widows, orphans - and I'm not making this up," said Holly Bennett, who has $37,000 frozen up in commercial paper.

"You need to make these people whole."

Small investors have been empowered by the knowledge that they hold massive sway over the success of the restructuring deal, since their votes count equally to those of the country's biggest investors in passing it - and they radically outnumber the big players. If the deal is quashed, it will likely trigger a commercial paper fire sale and massive losses among major institutions a fact that has given small investors huge bargaining leverage.

As a result, Craig Haaf, another B.C. retail investor, said he will refuse to vote for the restructuring unless Canaccord pays in full.

"Anything less than 100% is just simply going to be unacceptable, so they're going to have to go back and sweeten the pot," he said. Otherwise, he said, "why not take our chances scuttling the deal and going after Canaccord now with a class-action lawsuit?"

With files from Duncan Mavin
 

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