On December 23, 2007, the Pan-Canadian Investors Committee
for Third-Party Structured Asset-Backed Commercial Paper (ABCP)
announced that an 'agreement in principle' had been
reached for a restructuring of $33 billion of approximately $35
billion of Canadian ABCP. The repayment of this debt had been
frozen pursuant to a standstill created by the 'Montreal
Accord' as of August 16, 2007.
Pursuant to the agreement, all of the non-bank ABCP issued
by 20 trusts will be exchanged for longer-dated notes that will
match the maturity of the underlying reference assets in the
proposed structure. The plan will divide existing notes into
ABCP that is supported solely by $3 billion of
traditional securitized assets, such as credit card
receivables and auto loans;
ABCP that is supported by $26 billion of collateralized
debt obligations (CDOs), synthetic assets or a combination of
CDOs, synthetic assets and traditional securitized assets;
ABCP that is tied to risky US sub-prime or home equity
The agreement aims to provide most holders of the non-bank
ABCP the opportunity to receive full repayment of principal if
they hold the new restructured notes to maturity. Interest, if
any, will be paid on the restructured notes to the extent that
interest is paid in respect of the underlying pools of
A margin facility of approximately $14 billion will be
established to enhance the stability of the largest pool of
assets and to fund future margin calls on the assets supporting
the largest pool of restructured notes. These notes will also
benefit from a restructuring of certain 'mark to
market' triggers to 'spread loss' triggers, which
are considered to be more remote and transparent.
The agreement contemplates that measures will be taken to
provide liquidity for the restructured notes following
completion of the restructuring. The Investors Committee and
its advisors anticipate that AAA ratings will be accorded to
most of the restructured notes and that such ratings, together
with full transparency of the underlying assets supporting
these notes, will facilitate trading.
The restructuring plan addresses 20 of the 22 trusts covered
by the Montreal Accord. Skeena Capital Trust successfully
completed its restructuring on December 20, 2007. This included
the redemption of all Skeena notes and repayment to holders of
approximately $2.1 billion. With respect to Devonshire Trust,
the only other conduit trust covered by the Montreal Accord, it
was reported on February 4, 2008 that discussions are
continuing for a separate restructuring of that trust.
The implementation of the restructuring is subject to many
conditions and necessary consents and approvals. The Investors
Committee anticipates that the restructuring will be completed
by March 31, 2008.
The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should
be sought about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).