ATB takes $55.5M hit on asset-backed paper

ATB Financial, Alberta's government-owned bank, took a $55.5 million hit in the second quarter over its asset-backed commercial paper (ABCP), the Crown corporation said Friday.

That raises the total ABCP charges the bank has taken to more than $308 million, including a provision of $253.1 million taken in the 2007-08 fiscal year.

ABCP is short-term corporate debt made up of a bundle of loans like credit card receivables. The debt was then resold to investors, including individuals and banks, but the ABCP market was frozen in the summer of 2007 after buyers balked because they feared the paper was based on bad assets.

Since then, a court-approved recovery plan has been working towards completion. Bloomberg News reported Friday that the plan to address the $32 billion worth of ABCP will go back for a judge's consideration on Dec. 19.

The ATB writedown cut the bank's profit to $5.7 million for the second quarter ended Sept. 30, down from $8.5 million in the quarter a year earlier.

Operating revenue, excluding ABCP, was $225.1 million, compared with $215.2 million in 2007.

Much of the ABCP is held by Canadian pension plans, but smaller amounts are held by companies and individuals.

The restructuring plan worked out by a committee headed by Bay Street lawyer Purdy Crawford would issue new notes that will mature in several years and take care of individual investors with less than $1 million in ABCP by enabling them to sell their notes immediately without taking a big financial hit.

Most of the estimated 2,000 individual investors saddled with ABCP are entitled to receive cash for their notes. Those holding more than $1 million worth of notes will get long-term notes that can either be sold at whatever price they can negotiate or be held until they mature.

Corrections and ClarificationsThe original headline on this story incorrectly indicated ATB Financial took a $555 million hit in its asset-backed paper. The amount was actually $55.5 million. Nov. 28 | 6:00 p.m. MT