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Crawford faces fresh front in ABCP revolt


John Greenwood

Thursday, April 03, 2008


Graham Hughes for National Post

ABCP committee chair, Purdy Crawford.

  Even as retail holders of seized-up asset-backed 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 same treatment.

Corporate holders of the frozen notes say they feel frustrated at the way the negotiations around the restructuring are 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 themselves.

"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 you."

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 junior miners.

"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.


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