John Greenwood
Wednesday, November 19, 2008


It's been more than a year since $32-billion of assetbacked commercial paper froze up and despite a massive restructuring effort, noteholders have yet to get any of their money back. The lawyers and advisors have been more fortunate.

According to documents obtained by the Financial Post, lawyers and financial advisors putting together Canada's largest-ever restructuring accrued fees of $89.1-million for work performed from the time the market fell apart in August, 2007, until the end of April.

In the seven months since April, the legal bill has continued to grow as the workout was approved in Ontario Superior Court and again the Supreme Court of Canada, so it is likely the final tally will be well in excess of $100-million.

"It's obviously disappointing that so much money has been expended and yet the noteholders who were the victims of this situation haven't gotten any money yet," said Ted McFeely, a Calgary-based investor with $388,000 of his savings tied up in stalled ABCP. "I'm fortunate because I don't need these funds for day-to-day living. I know there are a lot of people who aren't in my situation and I know it's creating a great deal of hardship for them."

Meanwhile, a spokesman for the investor committee overseeing the restructuring said the process is "on track" to be completed within the next few weeks.

"There won't be any surprises," said David Weiner. "It's roughly on track for the end of the month, early December at the worst."

Under the restructuring, the frozen paper will be converted to long-term notes maturing around the middle of the next decade. However, because of the collapse in demand for so-called structured credit products, many observers are skeptical about the chances of a secondary market developing for the restructured notes.

The plan was originally scheduled to close in the fall of 2007. Proponents blame the numerous delays on the complexity of the plan and the unprecedented turmoil in financial markets. Purdy Crawford, the head of the investor committee, said the last deadline set for the middle of last month was missed because parties to the restructuring were taking too much time over signing of documents.

Despite the meltdown in the ABCP market, the assets underlying the notes have continued to gather interest. At the end of April, there was $946.6-million of interest left for noteholders after fees were paid to lawyers, financial advisors and the sponsors of the ABCP trusts.

The lion's share of the notes are held by institutions and pension funds such as Caisse de depot et placement du Quebec. However, about $300-million is held by individual investors. As part of the restructuring, they will have their ABCP bought back at face value by the selling brokers, including Canaccord Capital and Credential Securities