John Greenwood and Jim Middlemiss
Friday, September 19, 2008
Graham Hughes for
Purdy Crawford, head of the committee
that drew up the ABCP restructuring plan.
||Retail holders of ABCP
are breathing sighs of relief after the Supreme Court of Canada
denied a challenge to a proposed restructuring of frozen $32-billion
of asset-backed commercial paper, clearing the way for about 1,400
individual note holders to get their money back.
"We got pretty lucky is all I can say," said Brian Hunter, a
Calgary-based oil and gas engineer who helped organize individual
The lion's share of the frozen ABCP was held by companies and
institutions but a small piece, $178-million, was held by about 1800
retail investors. In connection with the restructuring, those people
will get their money back along with interest once the deal is
completed, which could happen as early as the middle of October.
"I'm greatly relieved but it's been a
long road," said Wynne Miles, a retail noteholder in Victoria.
A successful workout will remove a massive problem that has been
weighing on the Canadian financial system for more than a year, freeing
up liquidity and boosting confidence at a time when both are in short
supply. Without it, analysts say, investors would likely lose all their
money and the collapse of the trusts would send shock waves through
"I am pleased that the [ABCP workout] cleared its final legal hurdle
this afternoon with the Supreme Court of Canada's decision not to hear
an appeal of the Ontario Court of Appeal's ruling in this matter,"
federal finance minister Jim Flaherty said in a statement.
Under the restructuring, the frozen ABCP will be converted into long
term notes maturing in about eight or nine years. The plan was bitterly
contested by a small group of corporate note holders such as the
drugstore chain Jean Coutu who complained they would face losses.
The Supreme Court appeal was their last chance to block the plan.
"I think it's a shame that a plan that is patently flawed received
judicial sanction," said Howard Shapray, a lawyer for Vancouver-based
Ivanhoe Mines Ltd.
Canada's third-party ABCP market seized up in August 2007 after
investors began fleeing exposure to subprime mortgages and banks that
had agreed to provide emergency liquidity declined to step up. As a
result, holders were left unable to sell or redeem their notes.
Most of the paper that ended up in the hands of individuals was sold by
Canaccord Capital Corp. and Credential Securities, both of whom played
key roles in the deal to buy out the retail investors.
The most controversial aspect of the restructuring was a clause
providing legal immunity for the banks and financial institutions that
created and sold the notes, a provision that critics said would allow
some players to avoid consequences for wrongdoing.
"Today's decision clears the last significant hurdle to completing our
work," said Purdy Crawford, the head of an investors committee
overseeing the restructuring.
The complex plan calls for the participation of more than a dozen banks
and financial institutions, including some that have been significantly
affected by the recent turmoil in financial markets. Observers say some
of those players may have incentive to back away from the deal to
address their own problems.