Apr 15, 2008 04:30 AM
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
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
"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
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."