Small investors have clout in Canada debt plan-chair

Tue Apr 1, 2008 11:09pm EDT
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Retail investors still have the clout to influence the rescue plan for C$32 billion ($31.1 million) in distressed Canadian debt even though they hold just a small portion of its value, the head of the restructuring committee said on Tuesday.

About 1,800 individual investors own less than 1 percent of Canada's non-bank asset-backed commercial paper (ABCP), which has been frozen since last August. Purdy Crawford, chairman of the committee responsible for the restructuring, is leading information roadshows for them on the plan this week.

Under Canadian rules, investors holding two-thirds of the value of the papers must vote in favor of the rescue, which includes a swap of the short-term notes into others that would mature in seven years, at a meeting set for April 25.

But a simple majority investors must also approve it, giving the retail players power due to their numbers compared with major institutions, Crawford told reporters after presenting the plan, hammered out over the past several months, to about 120 people in Calgary.

About 1,400 retail investors are clients of Vancouver-based Canaccord Capital Inc, which has said it cannot afford to buy out their positions but is working on some relief.

Crawford said he was optimistic that the restructuring would be successful with so much at stake. Investors in the past two days have talked about financial hardship on themselves and their families with their money locked up.

"It's pretty clear that if this restructuring, or any restructuring, fails, the paper is not going to have any value or very little value," he said.

"So whether you think it will be easy or not the value will have to come from litigation, and that's true also of the major investors ... and they don't want to be in that position."   Continued...