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Frozen funds relief may be near
Lawyer Crawford says big dealer plans investment plus interest for 335 small holders in debt fiasco

Apr 15, 2008 04:30 AM


Rita Trichur
Business Reporter

Credential Securities Inc., the investment dealer for Canadian credit unions, is expected to announce a relief plan this week for 335 retail investors with $48 million collectively entangled in the commercial-paper mess.

An investor committee led by Bay Street lawyer Purdy Crawford gave investors that spark of hope yesterday, suggesting that Credential investors holding frozen non-bank asset-backed commercial paper could receive their principal plus "accrued interest" in late May.

Credential, however, remained almost mum. Interim chief executive Bob Hague issued a brief statement saying the money manager "is continuing to work hard on a solution for our clients who have been affected by the asset-backed commercial paper market."

Word of a possible bailout follows an announcement last week by Canaccord Capital Inc. that it intends to buy back $138 million worth of notes from 1,430 of its clients.

"Credential is working on a similar proposal, and we're reasonably optimistic that it will be announced in the next few days," Crawford said. "The sun will come up one day this week, don't worry."

The Crawford committee, which is working to rehabilitate the $32 billion market for non-bank asset-backed paper, will head back to an Ontario court today to seek an extension of a "stay of proceeding" granted last month under the Companies' Creditors Arrangement Act. The move will keep the notes and their underlying assets protected from any potential default notices or legal action until the restructuring plan is given final court approval.


Lawyers representing individual investors, meanwhile, plan to file a motion asking the court to reserve for those investors a portion of up to $200 million being earmarked by the Crawford committee to cover legal and other professional fees related to the restructuring.

"Those professional fees are coming out of my clients' monies as well," said Henry Juroviesky, managing partner at Juroviesky and Ricci LLP.

"We should be able to get a piece of that $100 (million) to $200 million."

Juroviesky and Ricci currently claim to represent 500 to 750 individuals, but are trying to persuade the court to say they represent all 1,800 retail investors. The firm will initially ask for a $518,000 retainer to cover fees incurred since March.

Investors of all sizes are scheduled to vote April 25 on the Crawford committee's fix-it plan, which proposes to convert the short-term debt into longer-term notes. Some investors, however, complain they simply don't have enough time to review all the necessary documents.

Stephen Halperin, a securities lawyer at Goodmans LLP who is advising the committee, said the vote could technically be delayed for up to 30 days without court approval.

"And that is under consideration. No decisions have been made. As of now we're still planning to go forward with the April 25 date," he said.

The Canaccord relief plan is technically outside the scope of the Crawford committee's proposal but does hinge on a successful restructuring of the larger non-bank ABCP market.

Some investors quizzed the committee yesterday on whether the legal releases implicit in a "yes" vote would prevent investors from pursuing claims of "fraud" down the road.

Halperin did not give a definitive response, but said "the issue of the breadth of the releases has been raised with us by other stakeholders and it is under consideration with the committee and those with whom we would have to negotiate any terms of relaxation from the current status of those releases."

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