Judge paves way for

Retail investors and massive financial institutions alike are breathing a sigh of relief after Ontario Superior Court of Justice Judge Colin Campbell gave the go-ahead for a vote to occur on Friday to determine the fate of $32 billion frozen in asset-backed commercial paper. Campbell was the last potential roadblock to proposed restructuring plans faced on the way to a likely “yes” vote by investors.

Justice Campbell, who has overseen the Companies’ Creditors Arrangement Act (CCAA) protection for all of the frozen ABCP, had the power to delay or allow amendments to the restructuring proposal put forth by the Pan-Canadian Committee, headed by Purdy Crawford. There are an estimated 200 institutional noteholders with about $5 billion in ABCP that are believed to be opposed to the restructuring deal.

Many of the companies have been making submissions to Campbell in court over the past few days, asking him to delay or open the door to amendments to the restructuring proposal.

“Not all 200 have been in court, but many of them have,” says Diane Urquhart, an independent analyst and investor advocate who has been working closely with the counsel of the retail ABCP noteholders. Among those reportedly making submissions to Justice Campbell are Barrick Gold, Air Transat, and Hollinger Canada.

While Campbell did not deny that some of the submissions had merit, he ultimately decided that the restructuring plan was more important.

“I have concluded that the noteholder vote scheduled for April 25, 2008, should go ahead. To postpone the vote, even if something else were to take place before the April 30 expiry of the Standstill Agreement, would signal the failure of the plan. A failure of the plan will have extremely serious consequences,” Justice Campbell wrote in his decision. “I do not take lightly, nor decide against the rights of certain noteholders,” he writes. “In my view, those issues should be considered together as part of the fairness process, not be determined in isolation at this time.”

Now that the vote can proceed, most investors are expected to vote in favour of proposed measures that will see the assets of most retail investors returned — more than 1,500 retail noteholders overwhelmingly hold the balance of power in the voting.

Urquhart says the two legal counsel firms representing retail noteholders who bought ABCP from Canaccord Capital and Credential Securities, Juroviesky & Ricci and Shibley Righton, have both urged investors to vote yes for the restructuring. A successful restructuring vote is a necessary condition for retail noteholders to get all of their principal investment back at par value.

The only real pitfall retail investors face is an amendment process for the restructuring deal if Campbell allows it. If that happens, the relief programs being offered by Canaccord and Credential could be terminated.

“The retail owner would like the restructuring to be successful, without material amendment,” Urquhart says. “We need to have a successful restructuring. If this restructuring [deal] is altered and people don’t receive their notes as expected, the Canaccord and Credential offers are withdrawn.”

It is unclear yet if there could be amendments made after the vote for restructuring concludes. Campbell suggested in his brief “endorsement” of the vote that concerns of noteholders could be addressed in fairness hearings, expected to begin next Friday, after the vote.

“I am satisfied that the legitimate concerns of some noteholders can be accommodated in the fairness [and] sanction process,” he wrote.

All proxy votes from noteholders need to be in by Thursday at 5 p.m., unless noteholders intend to vote in person in Toronto on Friday.

Shibley Righton and Juroviesky & Ricci reported that, as of Tuesday, April 22, the monitor for the voting process had received more than 1,800 voting registrations from investors holding roughly $29 billion in ABCP.

Filed by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com

(04/24/08)

Mark Noble