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
"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
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
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
"It should be a market solution and that's what he's encouraging," Miles
© Times Colonist (Victoria) 2008