{"id":1608,"date":"2007-12-15T02:32:48","date_gmt":"2007-12-15T06:32:48","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=1608"},"modified":"2007-12-15T02:32:48","modified_gmt":"2007-12-15T06:32:48","slug":"canadian-abcp-almost-but-cant-pay","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=1608","title":{"rendered":"Canadian ABCP : Almost, But Can't Pay"},"content":{"rendered":"

The National Post has reported<\/a>:<\/p>\n

A group of investors and financial institutions trying to find a way to restructure $33-billion of seized-up asset-backed commercial paper has failed to meet a key deadline for a proposal, setting the stage for a potential legal showdown between frustrated noteholders and investment dealers.
\n…<\/strong>
\nHowever, in the four months since the strategy was hammered out, credit markets worldwide have deteriorated to the point that many observers worry the new notes may prove just as illiquid as the ABCP they will replace.
\n…<\/strong>
\nSources close to the negotiations said that the Bank of Canada has been pushing the major domestic banks to play a role in the restructuring by supporting the new longer term notes that would replace the ABCP by creating a market and sharing some of the risk. The banks have also been asked to support collateral calls that could be triggered under the terms of the underlying assets. However, they have yet to agree.<\/p><\/blockquote>\n

The liquidity thing is a valid concern for the investors, but I don’t see why anybody else cares. I’ve been predicting that – presuming that the paper comes out as advertised, with at least the senior tranche consisting of AAA floating rate paper – that the dealers would make out like bandits, 70-bid, par-offered. I can see no compelling reason why the banks should agree, for instance, to call a continuous two-way market with a 50 cent spread, 5-million up. Unless they’re paid.<\/p>\n

The banks have been asked to support collateral calls that could be triggered by the underlying assets? Why should they? Who’s paying them?<\/p>\n

I suspect that the investors are still living in a never-never land of zero default risk and easy trades that always win. Perhaps six more months of pain is in order.<\/p>\n

Update, 2007-12-17<\/strong>: TD has announced<\/a>:<\/p>\n

“TD is willing to consider measures that support attempts to resolve liquidity issues in the financial markets. However, our position has been that it would not be in the best interest of TD shareholders to assume incremental risk for activities in which we were not involved,” said Ed Clark, President and CEO, TD Bank Financial Group.
\n\u00a0\u00a0\u00a0 Following on comments made during its third and fourth quarter of 2007 earnings conference calls, TD Bank Financial Group further reiterated that it does not have any exposure to non-bank sponsored Asset Backed Commercial Paper (ABCP) products covered by the Montreal Accord. This includes holdings within TD Mutual Funds and other money market funds managed by TD Asset Management Inc. TD also noted that it did not distribute any related products to customers through its systems.
\n\u00a0\u00a0\u00a0 The Bank noted that markets for TDBFG-sponsored asset backed commercial paper (ABCP) have continued to perform satisfactorily.<\/p><\/blockquote>\n

Seems perfectly reasonable to me!<\/p>\n","protected":false},"excerpt":{"rendered":"

The National Post has reported: A group of investors and financial institutions trying to find a way to restructure $33-billion of seized-up asset-backed commercial paper has failed to meet a key deadline for a proposal, …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[29],"tags":[],"class_list":["post-1608","post","type-post","status-publish","format-standard","hentry","category-sub-prime"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1608","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1608"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1608\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1608"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1608"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1608"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}