MONTREAL (Reuters) - A blue-chip investor group trying to fix Canada’s frozen C$33 billion market ($32.4 billion) for third-party asset-backed commercial paper missed Friday’s deadline for a deal, but said on Saturday it extended a standstill pact on the complex workout plan to January 31.
In a statement, the Pan-Canadian Investors Committee for Third-Party Structured Asset Backed Commercial Paper said substantial progress had been made in establishing a framework to restructure the ABCP issued by the 21 remaining trusts covered by an August 16 standstill agreement known as the Montreal Accord.
The group, formed by Quebec’s public pension fund manager Caisse de depot et placement and led by veteran corporate lawyer and business executive Purdy Crawford, remains on target to close the restructuring plan by March 14, it said.
“We have come a long way towards a successful outcome. I encourage our ABCP investors to allow us a short time longer to finish the task,” Crawford said.
Asset-backed commercial paper is a segment of the short-term debt market. The notes are secured by a pool of assets such as accounts receivable, auto loans, mortgages and credit-card receivables.
The C$33 billion market for ABCP sponsored by third parties -- not by Canada’s big banks -- seized up in mid-August when buyers became worried about possible links to the U.S. subprime mortgage meltdown.
Crawford and some Canadian market players have insisted that the assets behind the non-bank ABCP are mostly of high quality, and that the market was shut down by investor fear and a lack of confidence, rather than declining values stemming from deteriorating asset quality.
Yet some Canadian companies holding ABCP have already written down the value of their investments by between 5 percent and 40 percent. This wide spread in writedowns is a result of the absence of a trading market since mid-August and detailed information about the assets in each of the trusts.
The committee said the Canadian banks are willing to consider measures to assist in the restructuring process, which aims to replace the ABCP with notes having maturities similar to those of the underlying assets.
Some C$3 billion of the ABCP in question is supported primarily by U.S. subprime assets, the committee said.
The Caisse, considered Canada’s most influential institutional investor, has already said that of its C$13.2 billion of ABCP holdings, some C$1 billion is linked to subprime assets and that it expects to write down up to half of that amount at year-end.
The committee said about C$3 billion of the ABCP targeted n the workout plan is supported solely by traditional, unleveraged assets, while another C$27 billion is backed by leveraged assets, unleveraged synthetic assets or a combination of the two.
The group is working to finalize term sheets as well as the syndication of a margin funding facility required to support certain of the restructured assets, it said.
Reporting by Robert Melnbardis; Editing by Eric Walsh