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Backers of the Montreal Accord have reached an agreement to extend until mid-December the deadline to restructure $40-billion of troubled asset backed commercial paper (ABCP).
The accord was due to expire Monday, but people familiar with the negotiations said dozens of banks and investors backing the pact expect to announce later Monday that they have agreed to a two-month extension. Sources said that banks and investors agreed to the extension this weekend after negotiators successfully convinced the half dozen sponsors and trustees of Canadian asset backed commercial paper to join the accord.
The support of the sponsors, which includes such companies as Toronto-based Coventree Inc., was a big breakthrough, sources said, because it gives participating banks short-term protection that sponsors will not trigger loans or liquidity agreements backing ABCP.
“Getting all of the sponsors and their trustees onside is a big lift,” said one person involved in the accord.
Lawyers Purdy Crawford, right, and Stephen Halperin are two key members of the legal team retained to help fix a $40-billion asset backed commercial paper crisis. (The Globe and Mail)
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The accord was first struck in August after a global credit panic froze Canadian-sponsored ABCP, which has less bank support than notes issued in other countries. Major pension funds and banks backing the short-term notes struck the Montreal Accord to buy time to restructure the notes. Those funds and banks that signed the accord have agreed not to demand their money back or trigger underlying notes.
Original backers of the accord include: ABN AMRO, Barclays Capital, Caisse de dépôt et placement du Québec, Desjardins Group, Deutsche Bank, HSBC, PSP Investments, Merrill Lynch, National Bank and UBS.
