Thursday, April 03, 2008
Graham Hughes for National
ABCP committee chair, Purdy
Even as retail holders of
commercial paper move closer
to getting their money back,
another key investor group
are considering holding a
proposed restructuring to
ransom unless they get the
Corporate holders of the
frozen notes say they feel
frustrated at the way the
negotiations around the
progressing because while
the big institutions and
retail investors are to some
extent being taken care of,
they could be left facing
the brunt of the losses.
"We are being caught in the middle,"
said Terry Chandler, chief executive
of Redcorp Ventures Ltd., a junior
mining company with about
$91-million invested in ABCP.
Mr. Chandler said corporate
noteholders such as Redcorp have
been in "discussions" about banding
together to get a better deal for
"You do something for one group and
not for everyone else," said the
chief financial officer of another
mining company. "I don't see how
they can offer this deal [to retail
investors] but not to the others."
He said unless corporate investors
get the same treatment as other
players, they will move to stop the
restructuring of the $32-billion of
seized-up ABCP from going ahead.
"I think that could happen very
quickly," he said.
On Wednesday, Purdy Crawford, the
lawyer spearheading the workout,
came the closest he has come yet to
promising that the 1,800 retail
noteholders will get their money
back. At a meeting of ABCP investors
in Vancouver, he said, "that's
what's going to happen... I think
there's sunshine over the hill for
Insiders reckon there are more than
200 companies that own the stricken
notes, ranging from autoparts giant
Magna International to tour operator
Transat AT to Baffinland Iron Mines
Corp. and more than a dozen other
"There are a lot of corporations
saying, what about us," said Colin
Kilgour, an industry expert who is
advising some of the noteholders.
"You've got a situation that works
for the mega-investors and the micro
investors, but the guys in the
middle, [the restructuring] is not
doing much for them."
But getting their way could be a
challenge. If the deal is to go
ahead, it must win approval from a
majority of investors. Since retail
holders are by far the biggest group
in terms of numbers, they will be
the ones who make the decision at
the end of the day.
Even though their numbers are
relatively small, corporate
investors might still make
themselves heard by banding together
as one by the time voting day rolls
around on April 25.
They are also said to be looking at
the possibility of challenging the
restructuring in court. Many
companies say the restructuring
process will not stand up legally
and they hope to use the threat of
court action as a way to get a
better deal from the restructuring.
The market for ABCP fell apart in
August after issuers were unable to
roll maturing notes and banks that
had agreed to provide emergency
liquidity declined to step up. Under
the restructuring, investors would
receive new term notes, but analysts
predict they will likely trade well
below face value. Indeed, some
analysts predict the losses could be
as high as 80 cents on the dollar.