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.”
Many investors banked on high credit ratings the notes were afforded as if they were savings vehicles. But the ABCP market ground to a halt due to the global credit-market contagion.
The roadshow began in Toronto and Montreal on Monday and moved to Edmonton and Calgary on Tuesday. Another meeting is set for Vancouver on Wednesday.
Several participants in Calgary were executives with small oil companies that had invested working capital in ABCP and were left in the lurch by the freeze.
“This was money that was going to be required for their drilling programs, and they were advised that this was an appropriate and safe product to invest their monies, and it turned out to be fatally flawed,” said Peter Linder, a lawyer representing some of the junior oil and gas firms.
Linder said his clients should not be in the same creditor class with the same voting rights as the banks, financial institutions and retail investors, as is the case now.
However, Stephen Halperin, a lawyer on the committee, said it would not be appropriate to treat various groups differently when the goal is to restructure an entire market.
Editing by Tomasz Janowski