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The cost of being Canadian

porsche-boxster-2007 (9K)

My good friend Brian applies this phrase to all things that cost more than they should for no other reason except that this is Canada.

Cell phone services was the first item on the list. He bought a Blackberry a couple of years ago, that wonderful device made by an equally wonderful Canadian company called Research In Motion (RIM). He wanted a plan and technology that would work from wherever he happened to be in the world.

The best service plans (technology and price) are offered in the USA. This has little to do with RIM, and much to do with a peculiar canadian market oligopoly.

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An ABCP legal conundrum


I have reprinted this column because I believe it to be one of the best. Jim Middlemiss was the reporter who first wrote about this curious Facebook group back in February. I was disappointed with the article because I thought it missed the point. But it definitely started the ball rolling. Maybe I missed the point?

This article was published before Justice Campbell gave his reasons for postponing approval of a plan that gave the banks blanket immunity to fraud. Mr. Middlemiss demonstrates here the same level of insight and nuance that Justice Campbell will need to stick handle this case to a reasonable conclusion.

An ABCP legal conundrum

fpLogo (3K) by Jim Middlemiss,
Financial Post
Published: Friday, May 16, 2008
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Hunter and the Hunted

purdy2 (3K) hunter2a (4K) A historical perspective
on the Facebook group

Canaccord and other ABCP Clients

This article appeared online today. Because online articles have a habit of disappearing with time, I have reprinted it here for posterity. The images here are from my archive, the text from Canadian Business online.

There were many media stories that appeared over the last two months, but this is one of the most detailed and lengthy reviews.

CanadianBusinessLogo (5K)

ABCP: Hunter and the hunted

by Thomas Watson
From the Summer 2008 issue of Canadian Business magazine
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Strength in numbers

brian (6K)

Congratulations to all of you for your accomplishment. Canaccord Capital has done what should have been done in the first place! Alone you were nothing, but together you are a force to be reckoned with.

The media heard from you, the politicians started listening, and ALL of those who are handsomely paid to ensure things work properly have reached a pivotal point in their careers.

The job is not done. You have not been paid yet. And trust is in short supply, just like the liquidity all the experts talk about.

This thing, this whole steaming pile of excuses financial taxonomists have labeled 'canadian non-bank asset backed commercial paper', will hopefully become a historical footnote.

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The Road Show is over

purdy2 (3K)

Ladies and Gentlemen, Purdy Crawford has left the building.

It's Love, Brother Love
Say Brother Love's Travellin' Salvation Show-ow (halle-halle)
Pack up the babies and grab the old ladies
And everyone goes, 'cause everyone knows, brother Love's show

from Brother Love's Travelin' Salvation Show by Neil Diamond

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Mad as Hell!


Excerpts from a member email and a YouTube link, appropos for the occasion.

Everything that I am seeing shows me that Purdy et al are going to try to get the CCAA restructuring approved by scaring enough of the retail holders to vote for it or at least refrain from voting against the plan. If they have to deal with some bad press, so be it.

Peter Brown would obviously prefer to preserve the value of his Canaccord shares than pay anything of substance to ABCP holders, so he will support the CCAA plan while paying lip service to the sufferiing of the Canaccord clients that Canaccord put into the paper.

I think that we need to make it 100% clear that we definately intend to blow up their CCAA plan and sue if there is not a settlement offered, and a good one at that.

I am still interested in starting a website called "I'm mad as hell.ca".

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The chips are down

So, Purdy Crawford, prominent Bay street lawyer, and chairman of the Pan-Canadian committee, is now conducting a whirlwind, cross-country, dog-and-pony show selling The Proposal.

If the plan fails to get the go-ahead, retail investors "get damn little," Mr. Crawford said yesterday. "That's not a threat. It's a reality."

Mr. Crawford calls this the 'art of the possible'.

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Media Mania

Getty Images

Now the media coverage of ABCP retail investors has become a bit of a frenzy.

It has become hard to keep up with it all. Some respected (or at least widely syndicated) columnists have have even started to write columns and offer opinions on the topic.

There has been a remarkable twist to the story. Each noteholder has a vote on the bankruptcy. By most accounts, there are some 1400 retail noteholders that 'own' only $270 million of this paper, out of $33 billion that is frozen. Each of these noteholders has a vote. Most of this bad ABCP debt is held by big players in Canada's financial community. The retail investors outnumber the big guys 15:1.

Collectively, this means creditors that are owed less than 1% of the debt could scupper the $33 billion Pan-Canadian barge. The banks will not like this. The country's largest pension fund will not like this. Certain investment dealers across the country should look for a new line of work.

The barge would sink, and the members of the committee would have to demonstrate that they know how to swim.

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The Proposal

purdy2 (3K)

Things have changed but remain the same. Accounts are still frozen and no one knows what they are worth BUT the Committee has come up with a proposal.

Here is a suggested introductory letter that the committee might consider sending to ABCP retail investors, in the spirit of full disclosure and transparency.

(Warning - the following paragraphs contain examples of extreme sarcasm or satire, reader discretion is advised.)

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Finally, some attention

There has been an explosion of news in recent days on the ABCP issue, at least compared to what we are used to.

Another deadline was missed by the committee, but they have promised to file something in court on Monday. In essence, it's a bankruptcy proceeding.

They are proposing to swap the short term notes, most of which have matured at least 5 months ago, into long term notes that will mature in 8 years. After fees are deducted, noteholders may get all their principal back.

The Big Banks provide a credit facility. It is not a guarantee, but a way of limiting their losses. One of the reasons that there is no deal do date is that some of Canada's Banks have been reluctant to sign on.

We have also got the attention of the federal politicians. The Federal Finance Committee appears set to hold at least 12 hours of hearings on the ABCP crisis and intends to hear from 'severely affected Canadians'.



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