The value of some third-party asset-backed commercial paper (ABCP) has dropped significantly, according to a research note from RBC Dominion Securities.
The note cites JPMorgan Chase’s recently released report on the restructuring that says leveraged super senior (LSS) swaps transactions were worth approximately 30%.
Those transactions comprise $17.2 billion out of the approximately $33 billion in ABCP outstanding.
“Valuing LSS transactions at 30% and the approximate $3 billion of ABCP backed by U.S. subprime assets at 20% (our estimate) implies a valuation of 56% for the ABCP, if all other assets are worth par (other assets includes unlevered synthetic assets, traditional assets and cash),” the note says.
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RBC believes the court protection received last week is positive for ABCP holders, since it reduces the near-term risk of a disorderly liquidation.
“CCAA protection also gives retail investors a greater say as a majority of investors must approve the restructuring,” says the note. “Their support is key in completing a restructuring and avoiding a disorderly liquidation.”
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