ABCP bailout? There are a thousand-fold more income trust investors

....and our $35 billion loss was caused solely by the government.

ABCP investors demand their money back now

Clients shouldn't have to wait on stalled talks, lawyers tell Flaherty

December 13, 2008
David Paddon
The Canadian Press

Lawyers for 2,542 retail investors with delinquent asset-backed commercial paper investments are calling on Finance Minister Jim Flaherty to make sure their clients are repaid immediately.

The lawyers argue that unsophisticated retail investors shouldn't have been sold the risky commercial paper in the first place.

They want investment dealers and banks who distributed the notes to repay their retail clients all their money, plus interest, without delay.

Efforts to salvage $32 billion in Canadian asset-backed commercial paper, or ABCP, have been stalled for months.

Most of the ABCP is held by pension plans and corporations but retail investors' support has been a crucial part of a court-approved restructuring that has been stalled by the global credit crisis.

The lawyers representing retail investors with ABCP paper were responding to news that Ottawa is being asked to provide about $9.5 billion in guarantees to ensure the process doesn't break down.

Flaherty's office has confirmed that officials from his department met this week with representatives of a committee, headed by Purdy Crawford, that represents institutional investors.

Henry Juroviesky, representing mostly retail clients of Canaccord Capital and Credential Securities, wrote that their lawyers should have equal access discussions with finance officials.

He also called on Flaherty to make sure the retail investors don't have to wait for the restructuring effort to be completed.

Juroviesky took aim at one of the biggest sore points in the original agreement worked out in Ontario Superior Court under the federal Companies Creditors Arrangement Act – that ABCP holders give up their right to sue the businesses that sold them the paper.

"Any new plan of compromise implemented under federal government assistance cannot include any immunity to and/or release or surrender of legal claims and causes of action originating from the sale of ABCP to retail owners, except in the context of a full cash settlement for this group," Juroviesky wrote.

Under the original proposal, spearheaded by Crawford, holders of ABCP would exchange their short-term notes – which have matured and would have been repaid under normal circumstances – for longer-term notes that mature years from now.

That plan met the needs of pension managers, such as the Caisse de depot et placement du Quebec, with billions of dollars in assets and long-term investment horizons.

But it didn't satisfy individuals who had put much of their retirement savings into ABCP. They had significant voting power under the court-supervised compromise plan and many supported the deal reluctantly, after being assured they'd quickly be repaid under side deals offered by their investment dealers.