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Investor confusion reigns

From Wednesday's Globe and Mail

Tuesday, April 01, 2008

CALGARY — The high-profile committee that's seeking investor support for its plan to salvage Canada's frozen $32-billion commercial paper market is bumping up against a troublesome, and potentially costly, barrier — investors just don't understand the thing.

The nearly 400-page document and accompanying slideshow that lay out details of the plan to swap the moribund paper for new bonds make it "way too complex," said Vladimir Salyzyn, a retired economics professor from the University of Alberta who now has roughly $900,000 from the sale of his farm stuck in third-party asset-backed commercial paper (ABCP).

"I've got a Bachelor of Commerce degree, I've got a PhD in economics. Maybe I'm getting a little senile with age, but not that much," the 78-year-old said with a smile following an investor meeting in Edmonton.

He walked away from the meeting still undecided about whether he will vote for the committee's plan.

Investors in Calgary had a similar reaction. "They've swamped us with a lot of information," said John Szpecht, a Calgary engineer, who holds about $25,000 of ABCP with his wife. "I'm trying to look for the pros and cons, and right now I'm not coming up with very many pros."

The committee's chair, Purdy Crawford, is hosting the investor meetings across Canada as he works to convince more than 1,800 individual holders who together have about $400-million of ABCP to vote in favour of the plan at a meeting that's currently scheduled for April 25. He needs a majority, or the plan to fix the whole $32-billion market will fail, causing what Mr. Crawford says will be major losses.

At the outset of yesterday morning's meeting in Edmonton, Mr. Crawford told investors that he'd heard from their counterparts in Toronto and Montreal on Monday — "with considerable justification probably" — that the documents are too complicated.

He noted the irony: The committee had been so focused on providing transparency to the market that it may have bogged the documents down in detail. Part of the reason the third-party ABCP market crumbled in August was that investors did not know exactly what the commercial paper was, and what assets lay underneath its esoteric structure. As Mr. Crawford's committee worked to restructure the sector, it tried to focus on gathering a plethora of information to give investors.

After meetings in Toronto and Montreal Monday, Mr. Crawford and his fellow presenters made a noticeable effort to simplify in Edmonton.

"We're going to do everything we can to continue to be accurate but to drop the footnotes and to try to deal with the bottom line," he said.

Mr. Crawford said the committee will arrange for a call next week, once people have had some time to digest the plan, where investors can submit questions and the appropriate person will call them back with answers.

While the vote on the plan is currently set for April 25, that date is flexible if the judge who is now overseeing the court-supervised restructuring process approves. Mr. Crawford has suggested he'd be willing to consider asking for an extension of the vote if investors feel they need more time to digest the plan.

In the meantime, Canaccord Capital Inc. is seeking a way for individual investors to get as close to 100 cents on the dollar back as possible.

About three-quarters of the 1,800 investors are people who bought the paper from Canaccord. But Canaccord argues it can't shoulder the whole load, and isn't solely responsible for the mess, which stemmed from a meltdown in world credit markets. That may mean that other players in the restructuring will have to add money to any buyout of paper from individual investors. "We'd like to see Canaccord step up to the plate and pick up their fair share," Wayne Duke, a retired oil and gas worker with just under $200,000 in ABCP.

© The Globe and Mail

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