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ABCP investors remain in limbo
Victorian writes a year is too long to wait for a refund

Fiona Anderson

Wednesday, August 13, 2008

VANCOUVER -- Investors who put much of their life savings into asset-backed commercial paper, which they believed were risk-free, can't understand why a full year later they still haven't got their money back.

"A year is too long to wait to have our own savings returned," Wynne Miles of Victoria wrote in an e-mail.

Miles and her husband have "a significant portion of their retirement savings," in the securities, which were frozen on Aug. 13, 2007 when the market for the short-term notes -- which are backed by assets such mortgages -- collapsed.

At the time, investors, most of whom were banks and pension funds, were unable to sell the notes they held as potential buyers were frightened away in the wake of increasing defaults of subprime mortgages in the United States.

To prevent a complete free fall in value, the major market participants agreed to stop trading the $33 billion worth of tainted ABCPs held in Canada, freezing not only the notes they held but also the notes held by retail investors. The freeze was originally set to last only two months.

The "moving deadlines" have been especially difficult, Miles said.

"People look forward to these deadlines and then nothing happens," she said. "And a year is a long time to go without a good sleep."

The current holdup is the Ontario Court of Appeal.

In April, a proposal to restructure the frozen ABCPs -- which would exchange the short-term frozen notes with longer-term, less valuable notes -- was approved by 96 per cent of note-holders.

Retail investors like Miles voted in favour only after their brokers -- Canaccord Capital Corp. and Credential Securities Inc., the brokerage arm of Canadian credit unions -- agreed they would top up the restructured value to ensure their clients received a full refund.

But the restructuring had to receive approval for the companies' offer to stand.

The offer only applied to retail investors who held less than $1 million in the notes.

And the restructuring plan, if passed, would eliminate any investor's right to sue for losses.

So a number of larger corporate investors, including Ivanhoe Mines Ltd., have been fighting the restructuring, wanting either the same deal as the other retail investors, or the ability to sue for their losses.

The matter is now before the Ontario Court of Appeal, which heard the case at the end of June.

But it has not yet rendered its decision.

And many observers expect the case will eventually go all the way to the Supreme Court of Canada.

That's bad news for Victoria resident Angela Speller.

She and her husband, who are both retired, have 100 per cent of their savings -- about $1 million -- tied up.

So for now they are living on a small pension and postponing any large purchases, like replacing their 10-year-old car.

Speller can't understand why the minister of finance hasn't stepped in and forced the companies to pay investors back.

But Dan Miles, director of communications with the minister's office, said the minister's position has always been that the market should correct itself.

"It should be a market solution and that's what he's encouraging," Miles said.

Times Colonist (Victoria) 2008

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