Canaccord Capital has announced a relief program designed to fully reimburse their retail clients who hold asset-backed commercial paper (ABCP).
The so-called Canaccord Relief Program was outlined by CEO Paul Reynolds and combines an unidentified third-party market bid with a Canaccord funded top-up to achieve par value. Clients holding $1 million or less of ABCP will remain entitled to receive any unpaid interest to the extent it is payable, pursuant to the restructuring plan. Canaccord will also reimburse a share of the overall restructuring costs borne by their eligible clients.
He also announced plans for a write-down totaling $54.2 million or $39.6-million after tax, related to the relief program. “This is a significant charge to our earnings that reflects our commitment to resolving a very difficult process in the best possible way for our clients,” Reynolds says. “We remain well capitalized and committed to our clients, which we believe we’ve demonstrated throughout this process.”
“Despite everyone’s best efforts, we believe the restructuring proposal put forward by the Crawford committee inadequately addresses the needs of our clients,” he adds. “As a result we have worked hard to negotiate a deal that would meet the needs of small investors, and have contributed our own capital to this effort.”
The program is dependent on the successful restructuring of the ABCP market as proposed by the Crawford committee, and should help to expedite the process.
“We appreciate our clients’ patience during this difficult time and we regret that this process has taken so long to complete and the hardship this has caused our clients,” says Reynolds. “We hope they will view the Canaccord Relief Program as a successful outcome to this unprecedented disruption in the Canadian capital markets.”
Daryl Ching, managing partner of Clarity Financial Strategy in Toronto says this is good news for the institutional clients who had so far been left out of the plan: “This is the closest we’ve ever gotten to certainty that there’s going to be approval of this plan.” He believes today’s announcement makes a yes vote by the retail clients a distinct possibility.
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The ramifications for institutional clients are threefold, according to Ching: “Their options are, one: when the secondary notes are released they can sell the assets right away; two: they can hold them for an interim period in order to try and get a higher price; three: they can hold them until maturity and hope to get back par plus interest in nine years.”
The Pan-Canadian Investors Committee for Third-Party Structured ABCP welcomed the announcement and encourages other financial intermediaries who may have sold affected ABCP to small investors to follow Canaccord’s initiative. “We believe this is an important step in resolving the concerns of smaller noteholders,” says committee chairman Purdy Crawford. “The committee is delighted that the restructured notes available under the Committee’s plan have provided a basis for renewed liquidity options such as this.”
Canaccord also announced the departure of two of its executives: Robert Larose, who ran the company’s private-client operations, is leaving for personal reasons, while William Whalen, head of fixed income, is retiring.
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