Canaccord buys back $152 million in ABCP debt

Canaccord Capital Inc. said Friday it has repurchased $152 million in distressed commercial paper in a move that marks the final step in the 17-month struggle over Canada's ABCP market.

Canaccord said it has paid 1,440 holders of asset-backed debt vehicles as part of an agreement between a series of financial institutions and owners of the nearly worthless commercial paper to try to breath some life back in this market.

Three month stock chart for Canaccord Capital Inc.

The Vancouver-based investment firm estimated that the buyback, which covers individuals owning $1 million or less in ABCP, means that 98 per cent of the investors who purchased this type of debt from Canaccord have essentially received a full refund.

"Over the past 17 months, Canaccord has worked to protect our clients' best interests through a very difficult situation," said Mark Maybank, Canaccord's chief operating officer.

The company's — and country's — problems in the commercial paper market began in 2007, when the firms that bundled mortgages and other debt obligations discovered they were unable to attract short-term funding for this longer-term borrowing.

As a result, asset-backed securities lost their trading market and the ABC paper was no longer saleable.

Since that time, the $32 billion specialized commercial paper market has been the subject of rancorous negotiations as Purdy Crawford, the head of the Pan-Canadian Investors Committee for Third-Party Structured Asset-Backed Commercial Paper, attempted to broker a deal between various bond holders and a variety of Canadian financial institutions.

In December, an Ontario court finally approved an arrangement that would have various banks and brokerage firms buy back ABCP debt from a variety of holders of this financial vehicle.

For its part, Canaccord will take a $2.7 million pre-tax charge in its third-quarter earnings when the results are announced on Feb. 12, 2009.

The company said it might need to take additional writeoffs in future quarters.

"We are disappointed by the necessity of additional charges for our firm," said Canaccord president and chief executive officer Paul Reynolds.