Business

Restructuring of Canadian ABCP completed

Holders of $32 billion in asset-backed commercial paper that has been stuck in limbo since August 2007 will get their new notes within three business days.

Holders of $32 billion in asset-backed commercial paper that has been stuck in limbo since August 2007 will get their new notes within three business days.

The Pan-Canadian Investors Committee for Third-Party Structured ABCP, a group that has been trying to engineer a resolution since the market froze up amid the credit crunch, announced Wednesday that restructuring of the $32 billion has been fully implemented.

On Jan. 12, the Ontario Superior Court approved a complicated and controversial deal to swap essentially non-tradable, mortgage-backed debt for new securities. Old short-term ABCP notes are being exchanged for longer-term notes under the plan.

"We are delighted to announce the successful completion after nearly a year and a half of arduous negotiations, legal challenges and compromise during ever-changing credit market conditions," said Purdy Crawford, chair of the investors committee.

After the market froze in August 2007, months of difficult negotiations followed as different investors tried to squeeze the most they could from any potential settlement.

The financial brinkmanship culminated in December's threat by some banks to walk away from the proposal settlement, an action that led to $3.5 billion in guarantees from Ottawa, and the governments of Quebec and Ontario.

Under the current deal, investors who had bought less than $1 million in ABC paper will get a refund from the brokerage firms that initially sold them the financial vehicle.

The National Bank of Canada, the Caisse de dépôt et placement du Québec and some other larger players will receive new bonds for their investments, debt instruments that in all likelihood will trade at a large discount to their face values.