Canada ABCP restructuring takes major step forward

Mon Mar 17, 2008 7:06pm EDT
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By Nicole Mordant

VANCOUVER, British Columbia (Reuters) - A Canadian court granted bankruptcy protection to 20 asset-backed commercial paper trusts on Monday, a move applauded by analysts as a major step forward in the drawn-out and complicated restructuring of the embattled market.

Justice Colin Campbell of the Ontario Superior Court granted a request from the committee working on a repair of the ABCP market, issued by groups other than Canada's big banks, to halt any margin calls against the trusts until April 16.

The court ruling paves the way for investors to vote on the restructuring plan at a meeting expected in late April.

"This was a very necessary step... We are one step closer to the finish line," Daryl Ching, founder of ABCP consulting firm, Clarity Financial Strategy, said of the ruling.

Canadian Finance Minister Jim Flaherty said in a statement he was pleased that the committee had finalized its restructuring proposal and urged all investors to vote on it.

Committee Chairman Purdy Crawford said the route of court protection was the "best alternative to minimize harm and maximize recovery for all investors."

"The failure of the plan would ultimately lead to the forced liquidation of billions of dollars in assets and very depressed prices. This would in result in substantial losses to investors and a lengthy period of uncertainty," Crawford said on a conference call with reporters.

Canada's C$33 billion ($33 billion) market for non-bank ABCP seized up in August last year on investor concerns that the money market investments were exposed to U.S. subprime mortgages.   Continued...