Monday, April 14, 2008
The head of a committee that is
spearheading the restructuring of
$32-billion of frozen asset-backed
commercial paper says there is a
contingency plan in case blanket
immunity deals granted to
participants of the workout may not
hold up in some situations.
Speaking on a conference call with
investors on Monday, Purdy Crawford
conceded there is a possibility that
cases alleging fraud could be
allowed to proceed even if the
restructuring wins court approval.
"We have that under consideration,"
Mr. Crawford said, adding his
committee is looking at separating
firms involved in such cases as a
way to minimise the impact on the
He declined to comment further on
Mr. Crawford also predicted that
Credential Financial Inc. will
likely announce a bail-out offer for
its retail clients sometime this
"Credential is working on a similar
proposal [to Canaccord Capital Inc.]
and we are reasonably optimistic it
will be announced within the next
few days," he said.
Canaccord last week offered to buy
back stalled ABCP from more than
1,400 retail clients, promising to
pay par value plus interest.
Mr. Crawford said he expects the
roughly 335 Credential individual
investors to get all their money
back as well.
"The sun will come up one day this
week, don't worry," he told an
anxious noteholder from Alberta.
Observers say that the restructuring
will likely go ahead if retail
investors, who are the majority of
noteholders, are made whole.
Still, there are many investors who
remain unhappy about the process.
Some corporate noteholders are
Speaking on the conference call,
Tony Giardini, chief financial
officer of Ivanhoe Mines Ltd.,
complained that the right to sue
that would be taken away by the
restructuring could be worth more
than the value of the new notes.
"I would rather have my legal
rights," he said.
Observers estimate there are about
200 companies with as much as
$4-billion of stalled ABCP. But the
size of the group relative to the
retail investors and the big
institutional holders means that
they will likely not have much clout
when noteholders vote on the
restructuring on April 25.
So the corporate investors are
planning to make their voices heard
by challenging the restructuring in
court. Some argue that the
restructuring is unfair because it
pits corporate investors against
retail and institutional investors.
Others suggest that the blanket
immunity called for by the
restructuring might not be
protection against allegations of
"Does the court even have the
jurisdiction to release parties from
fraud?" asked one caller.
Mr. Crawford said he has been asked
to appear before the House of
Commons Finance Committee to talk
about possible changes to
regulations that might prevent
problems like the freeze-up of the
ABCP market ever happening again.
"When [the restructuring] is
completed, I will appear before the
committee and put forward some
proposals," he said.