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ABCP restructuring won't meet deadline

November 25, 2008 at 5:50 PM EST

The committee overseeing the restructuring of $32-billion in frozen asset-backed commercial paper said late Tuesday afternoon it will not meet its latest deadline, Nov. 30, for completing the process, meaning yet another delay before frustrated investors see their money.

“The delay is principally due to the complexity of the restructuring, the large number of participants involved in the process and current market conditions,” the committee said in a news release.

“We acknowledge that it's taking longer than we would wish and we apologize to all stakeholders for this further delay,” committee chair Purdy Crawford said in the release. “The spirit of co-operation that has prevailed among the participants to the restructuring continues and we are focused on getting this deal done as soon as humanly possible.”

Earlier, Steve Halperin, a lawyer for the committee, said that there is “no magic” to the delay.

“It's just taking a long time,” he said in a telephone interview. “It's a complicated transaction [that is] exacerbated by what's going on in the market. Everybody's working around the clock 24/7, everybody's still at the table.”

Under the terms of the so-called Montreal Accord, the ABCP, which has been frozen since August, 2007, is to be swapped for new bonds that will not mature for as long as nine years.

The restructuring has been stretched out by numerous delays, including a lengthy court battle seeking approval for the settlement.

Colin Kilgour, a Toronto financial consultant who has been advising ABCP investors on the restructuring, said Tuesday that the latest delay may stem from the fact that many of the key foreign financial institutions involved – including Deustche Bank, Citibank, Merrill Lynch and Bank of America, for example – have been distracted by larger problems connected with the global financial crisis.

Bank of America is in the process of taking over Merrill, for instance, while Citi is being bailed out by the U.S. government to the tune of hundreds of billions of dollars in loan guarantees and capital infusions, the bulk of them announced just two days ago.

“The best possibility is that it's difficult to get time on the calendar from these folks to get it done,” Mr. Kilgour said in a telephone interview.

There also is a bleaker possibility, he said.

“The worst possible outcome is that they're trying to renegotiate something, and that would be very difficult to accomplish.”

However, Mr. Halperin, the committee lawyer, played down this possibility. “There's no evidence of that.”

Mr. Kilgour also said he is optimistic that the settlement will ultimately be approved and investors will get their money.

He said the first clue that another delay was in store was that the committee failed to meet a court-ordered deadline that it make all documents related to the swap and the new securities publicly available no later than seven days before the closing date.

The documents were to be posted on the web site of accounting firm Ernst & Young Inc.

“We are in that seven-day window of the end of the month, and nothing has been made public,” Mr. Kilgour said.

As well, the committee itself made a separate commitment that it would make certain documents available to prospective investors in order to facilitate trading. “Those were going to be made available 10 days prior to closing, but, again, nothing has been made available,” Mr. Kilgour said.

In an interview with Bloomberg on Oct. 20 when the delay to Nov. 30 was announced, committee chairman Purdy Crawford said he would “go to Africa and hide” if the plan was not completed by the end of this month.

Mr. Crawford would not be reached Tuesday afternoon, but, speaking on his behalf, Mr. Halperin said he was tied up in meetings. “He hasn't gone to Africa,” he said. “I knew someone would ask me that. It was only a matter of time.”

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