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Canadian Debt Holders May Sell Votes, Firm Says


By Doug Alexander

April 3 (Bloomberg) -- Canadian investors holding a portion of C$32 billion ($31.5 billion) in frozen commercial paper may sell their votes for a restructuring plan to hedge funds and other buyers, a lawyer working with debt holders said.

Juroviesky & Ricci LLP is looking to "non-traditional methods'' such as auctioning investors' voting and economic rights to the highest bidder, the Toronto-based law firm said today in an e-mailed statement. Lawyer Henry Juroviesky said he has "serious expressions of interest'' from at least two U.S.- based hedge funds after seeking bids from firms known for buying distressed debt.

"The next step is to really get the buyers coming to the table, get steam gathering in this process and hopefully good things will happen for the retail ABCP victims,'' Juroviesky said in an interview.

The law firm is urging investors to sell their votes after the group leading the restructuring refused to buy out individual investors. Hedge funds may have more clout than individuals, the firm said.

"There is an opportunity for a well-funded institutional fund with a longer liquidity time frame to extract more value than we have been offered to date,'' the statement said.

The firm was retained last week by investors Brian Hunter and Ted McFeely to provide legal advice. Juroviesky said he's now representing "several hundred'' investors. About 1,800 individual investors were sold at least C$317 million in commercial paper, including clients of Vancouver-based brokerages Canaccord Capital Inc. and Credential Securities Inc.

Debt Swap

Canada's market for commercial paper sold by non-bank dealers ground to a halt in August after investors shunned the debt on concerns about possible ties to U.S. subprime mortgages. A proposal to swap the short-term debt for notes that mature within nine years was submitted to the courts last month, and will be voted on by debt holders on April 25.

The plan, the largest restructuring in Canada, must be approved by investors with two-thirds of the debt as well as a majority of noteholders. Each noteholder gets one vote, giving individual investors the power to derail the restructuring.

"The general idea is that the guy with the votes makes the rules,'' Juroviesky said.

The law firm is working with Blackmore Partners, a consulting firm, to find buyers among private equity firms and hedge funds that may want to take on the debt.

"The value to somebody will be in the voting rights and then later acquisition of the paper,'' Juroviesky said.

Canadian politicians are also scrutinizing the asset-backed commercial paper market. The Parliamentary finance committee voted yesterday in Ottawa to hold hearings on the matter. Details of the meetings may be decided next week, said Jean- Francois Page, the committee's clerk.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

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