The pan-Canadian investors committee for third-party structured asset-backed commercial paper (ABCP) reached an agreement in principle on late Sunday afternoon regarding a comprehensive restructuring of the ABCP issued by 20 of the trusts covered by the Montreal Accord.
“I am pleased that we were able to build on the momentum achieved leading up to our December 14 announcement, and that the parties came to a consensus on a plan which I believe will allow noteholders to increase long-term value, and significantly decrease risk, of the outstanding ABCP, all well ahead of the new Jan. 31, 2008 deadline,” said Purdy Crawford, chairman of the committee.
“I am confident that this plan will provide most holders of outstanding commercial paper with the opportunity to receive the full repayment of principal by holding restructured notes to maturity,” he added. “Importantly, based on the advice of JPMorgan, the committee’s financial advisor, most of these notes are expected to be AAA rated.”
The investors committee has approved the agreement in principle, which should be completed by March 2008. The restructuring has also been approved in principle by certain of the dealer bank asset providers as well as by the sponsors of each of the trusts.
Certain other lenders, including several of the large Canadian banks, have indicated an interest in providing certain credit facilities to support the restructuring.
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The Caisse de dépôt et placement du Québec is very satisfied with the agreement in principle, which is designed to preserve the value of the ABCP held by investors, and it intends to continue to collaborate on putting it in place. “The solutions provided by the agreement serve the interests of the Caisse’s depositors,” stated Henri-Paul Rousseau, president and CEO of the Caisse.
The restructuring will (i) extend the maturity of the ABCP to provide for a maturity similar to that of the underlying assets; (ii) pool certain series of ABCP which are supported in whole or in part by underlying synthetic assets; (iii) mitigate the margin call obligations of the existing conduits with margin call risk and create a structure to address margin calls if they occur; and (iv) support the liquidity needs of those ABCP holders requiring it.
“I am pleased that an agreement-in-principle has now been reached among parties to the Montreal accord for the restructuring of non-bank asset-backed commercial paper,” said Federal Minister of Finance Jim Flaherty. “This is a welcome development for Canada’s capital markets. I trust the plan will be given very serious consideration by all concerned parties.”
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