Investors Scrutinizing the Regulators

Home Page


Securities Regulation In CanadA

Fox Guarding the Hen House




$4.45B fund to ensure ABCP solution
Backstop In Place; 'Major hurdle' in process crossed, Purdy says

Philip Ling, Canwest News Service; With files from the Financial Post
Saturday, December 27, 2008

The federal government, in co-ordination with the Ontario, Quebec and Alberta governments, has agreed to provide $4.45-billion in backstops to ensure the $32-billion restructuring of insolvent commercial paper proceeds.

In confirming late on Wednesday that all key stakeholders were in agreement, the announcement by the committee overseeing the restructuring raises hope investors who have had their asset-backed commercial papers frozen for the past 16 months could get access to their money as early as mid-January.

"We are ... pleased to have crossed a major hurdle in completing the restructuring plan," said Purdy Crawford, chairman of the committee set up to resolve the crisis.

"As a result of these latest developments, we can begin the process of completing this restructuring."

The committee leading the court-supervised re-organization of ABCPs had originally requested a $9.5-billion standby facility from the federal government.

Ottawa had been in talks this month with the provinces to seek their participation in contributing to the line of credit. Those three provinces have Crown-owned entities that hold the insolvent commercial paper, led by Quebec's big pension fund, the Caisse de depot et placement.

The government support "were vital for the conclusion of this agreement," said Fernand Perreault, Caisse's acting president. "The closing of the restructuring plan is very much in sight."

Jim Flaherty, the Finance Minister, said he would have preferred it if the government did not have to provide financial backing to support a deal to restructure frozen ABCPs held by Canadians.

"This was a private sector created problem, and I would have preferred a private sector solution," Mr. Flaherty said.

"Having said that, as minister of finance I am responsible for the systemic integrity of our financial system in Canada and my conclusion was that we needed to participate."

Jim Flaherty, the Minister of Finance, said yesterday: "I would like to commend all participants for their collective patience and hard work. The agreement will provide a stable and effective result for investors and asset providers." He confirmed Ottawa's contribution of $1.3-billion.

"The government's decision to support this restructuring plan reflects its ongoing commitment to protect financial stability and ensure the health of Canada's capital markets in these very challenging times," he said .

Click for more on ABCP