||The proposed plan to
restructure third-party asset-backed commercial paper was delayed
again this week. The holdup is mostly due to the complexity of the
restructuring, the large number of participants involved in the
process and current market conditions.
"We acknowledge that it's taking longer
than we would wish and we apologize to all stakeholders for this further
delay," says Purdy Crawford, chairman of the Pan-Canadian Investors
Committee for Third-Party Structured ABCP. "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
Despite the delay, the committee says it has made significant progress
over the course of the past several weeks toward settling issues and
completing the required documentation to implement the restructuring.
The restructuring plan was created pursuant to the Companies' Creditors
Arrangement Act (CCAA) and has been approved by the Superior Court of
Participants involved in the restructuring include the court-appointed
monitor, Ernst & Young, as well as the asset providers, the Canadian
banks, credit-rating agency DBRS, and BlackRock, which will become the
asset administrator at closing.
Another missed deadline has some concerned that it may be a long while
before ABCP is unfrozen and investors start to get their money back.
The money of the more than 1,800 retail investors, who mostly bought
notes through Credential Securities and Canaccord Capital, remains
frozen. It's now been almost eight months since they gave approval to a
plan they thought would be expediting the process to get their money
"If this deal terminates, the Credential and Canaccord deals are null
and void, and our people won't have their money," says independent
industry analyst Diane Urquhart, who is a consultant to the legal team
representing retail note holders. "Canaccord and Credential have each
respectively set aside the cash, at least by letter of credit. They've
got the cash earmarked to provide the payment; it's just sitting there
on the other side of the wall waiting for the implementation of the
Urquhart outlines that there remain no other legal barriers to the ABCP
restructuring plan. The last appeal failed earlier this month.
Basically, it's a case of crossing the finish line. Urquhart is
beginning to wonder if some of the major players — most notably the
large international banks that are major lenders — are really committed
to seeing the deal through. Many of the international financial
institutions have been hit hard by the global financial crisis.
"I think people are working in good faith, but we're in a financial
crisis," she says. "The international banks involved are Deutsche Bank,
Merrill Lynch (which is now owned by Bank of America), UBS, Royal Bank
of Scotland and Citigroup, which is teetering with a bailout package.
The major players involved are in new financial circumstances and are
not compelled to close, even though they've agreed to close and the
court has approved."
Last year's restructuring of securities law by the federal government
made foreign holders of credit default swap contracts exempt from the
authority of the CCAA protection. According to Urquhart, the involvement
of the international lenders, which are crucial to the success of the
restructuring, remains an act of good faith.
"While we believe that if they extend the agreement they have endeavored
to continue to support it," she says, "they've got the prerogative to
let this go month by month for the next seven years unless the judge
says there is evidence that there isn't good faith intent to close.
Ontario Superior Court Justice Colin Campbell does have the authority to
remove the court stay on the commercial paper owners. The consequence of
that is we are free to enter the courts and file lawsuits."
A spokesperson from the Investors Committee told Advisor.ca that all of
the restructuring plan participants, from the asset provider to the
liquidity providers, have agreed to the restructuring plan and remain
committed to it.
In the meantime, Urquhart says the retail note holders will be looking
for other avenues of restitution through regulators. First up is the
Investment Industry Regulatory Organization of Canada (IIROC). Urquhart
says she and lawyers representing the retail note holders will be
meeting with Susan Wolburgh-Jenah, president and CEO of IIROC and her
staff next week.
"IIROC's October 17 compliance review found that securities dealers did
not conduct due diligence and did not explain risk to the retail market.
We are asking they use their authority as a self-regulatory organization
authority to lay allegations of breach of the Know-Your-Client rule,"
she says. "The remedy we're suggesting is that they repurchase the ABCP
in its present form."
Filed by Mark Noble, Advisor.ca,
email@example.com and Craig Sebastiano,