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TORONTO — Almost nine months after the market for ABCP froze, a $32-billion restructuring plan won overwhelming approval from noteholders and now faces only one major hurdle before investors can begin to get their money back.
Almost 96 per cent of 1,932 noteholders on Friday voted in favour of the restructuring plan crafted by Purdy Crawford's committee of large investors.
The proposal calls for investors to receive new, longer-term notes to replace their asset-backed commercial paper, which has been locked up since the market froze in August when buyers disappeared because of concern about links to subprime mortgages.
The new notes are designed to give investors all their money back at maturity, but that could be as long as nine years from now. In early days, the notes are expected to trade at a significant discount.
That's tough to swallow for investors who bought paper they thought was a 30 or 60-day investment that was almost equivalent to cash.
Many small investors are getting buyouts from the securities firms that sold the ABCP, and will get 100 cents on the dollar if the restructuring succeeds.
But bigger investors with more than $1-million or $2-million are not included – and are angry.
“Notwithstanding the fact that I did vote in favour of the plan because I don't know what the future holds if the plan fails, I want the committee to know they have not caused justice for us,” Murphy Hull, a property developer with $19.5-million of frozen ABCP that he bought from Bank of Nova Scotia, said at the Toronto meeting where the votes were tallied.
The remaining obstacle is a potentially significant one – a legal challenge from companies and other large holders who are unhappy with the proposal because it grants the creators and sellers of ABCP immunity from lawsuits.
The judge overseeing the restructuring said in a recent ruling that there is a “very serious issue of law” about whether the immunity is legally allowed.
A lawyer representing General Motors Acceptance Corp. of Canada said the finance company voted no. While GMAC generally supported the plan, the idea of granting legal immunity was “fundamentally unfair.”
“Obviously we have sympathy and empathy for gentlemen like Mr. Hull,” Mr. Crawford said after the vote. “I wish we could do more for people like that.”
Mr. Crawford acknowledged that the committee has “some work to do next week” to face the legal challenges, which the judge overseeing the restructuring will consider at a fairness hearing scheduled for next Friday.
Without the judge's approval, the plan cannot go ahead.
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