Investors Scrutinizing the Regulators

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Fox Guarding the Hen House




Small ABCP investors aim to sell vote
Law firm seeks U.S. fund to pay cash for frozen paper and voting rights

Apr 04, 2008 04:30 AM

James Daw

Strategists for small investors are courting ruthless gamblers to buy their frozen commercial paper and their power to trigger a $32 billion fire sale.

"We have to show the other players we are serious," says Brian Hunter of Calgary, one of 1,800 conservative Canadian investors caught in a financial nightmare.

Hunter and other clients put nearly $300 million worth of their savings with Canaccord Capital Inc. and Credential Financial Inc., and now stand to take heavy losses under a complicated restructuring deal to be put to a court-appointed vote on April 25.

They have enough votes to defeat the plan aimed at salvaging some value for 100 times more ABCP the asset-backed commercial paper caught in Canada by the United States subprime mortgage crisis.

But despite some encouraging words from Bay Street lawyer Purdy Crawford, who held public hearings this week to sell the deal he helped negotiate, and from Canaccord chair Peter Brown, no one has offered immediate cash to get the small investors on side.

So Hunter has directed a Toronto law firm to scout out a single U.S.-based investment company that's prepared to pay cash to the small investors and then face down Canada's leading financial institutions, or defeat the deal and sue the sellers of the paper.

"I can't sit back and say Peter Brown and Purdy Crawford are going to look after me," said Hunter, an oil engineer, who gathered support using the Facebook social-networking website. "We are looking for other options and, if we need to, this deal will be voted down."

Lawyers at Juroviesky and Ricci LLP have commissioned Blackmore Partners of Chicago and Toronto to find the highest bidder for the small investors' paper and voting rights.

A spokesperson for Crawford's Pan-Canadian committee told reporters it's doubtful a hedge fund or private equity investment company will pay face value to the small investors, and Hunter acknowledges that's likely true.

But Diane Urquhart, an independent analyst advising Juroviesky, said it's possible someone suing sellers of the commercial paper on behalf of those investors could recover full value, plus punitive damages, to earn a profit.

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