A solution for the restructuring of Canada’s frozen $33 billion asset-backed commercial paper (ABCP) market is one step closer, according to The Globe and Mail’s website.
At a late-night meeting on Thursday, the parties involved agreed to the terms of a deal which hinged on the backing of a credit line by Canada’s big banks to support the restructuring plan.
A proposal will now go before a judge on Friday, who will be asked to sign off on the plan before the agreement expires at midnight.
JPMorgan, the advising investment bank, has prepared estimates of the values of the ABCP assets averaging 80 cents on the dollar.
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However, sources tell The Globe and Mail that the new notes are likely to command much less once they are available on the open market, which could happen in May. Any holders planning to sell the new notes are expected to incur sizeable losses.
The co-operation of the banks was integral and was one of the last issues to be resolved. TD Bank initially refused to back the line of credit, saying that it didn’t sell any ABCP and was therefore not responsible. Bank of Montreal had also been wary of participating because of recent losses.
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