Mar 25, 2008 04:30 AM
A few hundred retail investors now have the power – if they get
organized – to demand better treatment from a $32 billion financial
So, Brian Hunter is shopping for a Toronto lawyer, and pressing advisers
of Canaccord Capital Corp. of Vancouver to help enlist their clients'
"My starting position is: We want our cash, plus interest and damages,"
says the Calgary engineer who began to gather a core of supporters using
the social networking website Facebook.
He has about $650,000 in retirement savings riding on the success of his
efforts, and needs to find about 1,000 investors who together have less
than $300 million at stake to exert the maximum pressure for full
Small investors have been mere bystanders while a high-powered committee
headed by Toronto lawyer Purdy Crawford cobbled together a deal to
salvage maximum value from $32 billion worth of commercial paper floated
by non-bank financial institutions.
But now the deal to convert the short-term paper into long-term notes
requires court approval, and the votes of a majority of about 1,800
investors at a meeting on April 25.
Most who will be eligible to vote are small investors like Hunter, who
says he thought the commercial paper he bought was to pay less than a
percentage point more interest than government treasury bills.
Major pension plans like Caisse de dépôt et placement du Québec have the
most to lose if restructuring does not succeed.
About 1,400 retail clients bought the commercial paper from Canaccord,
which claims it cannot afford to reimburse those clients the way some
larger securities dealers have done for their clients.
Canaccord alleges in a lawsuit that Scotia Capital, the wholesaler of
the commercial paper its representatives sold, withheld material
information about the low quality of assets backing up some of the
Freelance financial analyst Diane Urquhart of Mississauga disputes
Canaccord's claim it cannot afford to reimburse clients. She argues the
retail investors deserve special treatment from the securities industry
that created the mess.
She says the market value of the commercial paper may be down by 40 to
60 per cent, but reimbursing clients would only cost Canaccord between
17 per cent and 26 per cent of its shareholders' equity after tax
Ted McFeely, president of a small energy company in Calgary, says retail
investors like him "have some pretty good leverage," if not with
Canaccord then with other holders of the commercial paper.
"You don't rustle our cattle and think you can get away with it," he
vows in a telephone interview. "They have just ignored us like an ant
they want to squash. But it looks like (the voting process) gives us the
power to stop (the deal) if they don't deal with us."
David Weiner, a spokesperson for Crawford's Pan-Canadian Investors
Committee for Third-Party Asset-backed Commercial Paper, says the deal
on the table is intended to give all investors maximum value.
Those who want to vote on the deal have to agree to relinquish their
right to sue anyone over the commercial paper. Litigation could drag out
a resolution for years, and be extremely costly.
Hunter agrees: "I don't think it's in anyone's interest to slay this,"
but says he is still determined to see if a better deal is available for
James Daw, CFP, appears Tuesday,
Thursday and Saturday. He can be reached at Business, 1 Yonge St.,
Toronto M5E 1E6; at 416-945-8633; 416-865-3630 by fax; or at