The ABCP Crusades

ABCP is an abbreviation for Asset Backed Commercial Paper, a supposedly very safe short term investment certificate that paid a little more interest than a standard bank account. It all went toxic in Canada back in August 2007, one of the first signals of a world economic calamity that was about to unfurl.

purdy2 (3K)

A friend of mine had a load of this crap in his RRSP. The big banks formed a committee. Brian started a Facebook group. I did up a web page blog in support of the cause.

The crusade had begun. It lasted over 18 months, involved cross country tours, investor uprisings, parliamentary committees, trusts, bankruptcies, votes for money, Supreme Court challenges, financial collapse and government guarantees.

A final deal was struck on Dec 24, 2008, on xmas eve. It was drama at its best.

It's all history now. I did a total of 16 blogs on the subject, on one of the most boring topics imaginable. I guess that says something about me.

Diogenes's picture

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".

Diogenes's picture

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'.

Diogenes's picture

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.

Diogenes's picture

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.)

Diogenes's picture

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'.

Diogenes's picture

How Safe is Your RRSP?

I have a friend who has an RRSP. He is self employed. This RRSP is his pension.

financial analyst

Last July he sold the remaining stocks in the plan and directed all funds be placed in a safe, short term, money market fund like T-Bills

His full service broker at Canaccord Capital purchased a 30 day note that paid a competitive rate of interest.

It's highly rated AAA paper, as good as cash

Not long after, and much to his surprise, he discovered he had purchased Asset Backed Commercial Paper (ABCP). The markets froze Aug 13, 2007.

More than 7 months later he has not seen a dime. There is a chance he never will. The account is frozen. He cannot cash it in, he cannot borrow against it. At the present time, it is worthless.



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