With the noteholder vote just days away, Purdy Crawford, chair of the Pan-Canadian Investors Committee, answered questions on the proposed restructuring of the Canadian third-party structured asset-backed commercial paper (ABCP) at a Toronto CFA Society luncheon Tuesday.
Francesca Guolo, partner at Goodmans LLP and Andrew Kresse, managing director, global structured solutions, with JPMorgan Securities, rounded out the panel.
Under the restructuring proposal, the affected ABCP will be exchanged for longer-term notes, in which the terms match the terms of the underlying assets. Three new trusts will be created, referred to as Master Asset Vehicles (MAVs), with different structures (depending on the nature of the underlying assets), margin funding requirements and associated levels of risk.
The proposal has two main objectives: preserving value, and ensuring the fair and equitable treatment of all noteholders. But it does mean a tradeoff: noteholders will be asked to accept a lower yield in exchange for getting back more of their invested principal.
Crawford noted the challenges of coming up with a solution to meet the expectations of various stakeholders who, while they all had the same objective, had very different ideas of what they were willing to give up to reach a resolution. “It’s not easy,” he said. “But ultimately, we were able to work together and get it done.”
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Of course, only time will tell if the restructuring proposal will go forward. Noteholders will have the opportunity to vote on the proposal on Apr. 25, 2008.
If the proposal is approved, said Guolo, the next step will be a sanction hearing in early May. And if all goes according to plan, we could see a final closing of the issue by May 30. If not, or if the decision is appealed…well, it’s back to the drawing board.
However, Crawford expressed confidence that the proposal will be approved. He also voiced a conviction that the solution will reintroduce liquidity into the market, and that a “fairly healthy market” for the new notes will develop over time.
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