Monday, March 24, 2008

Canaccord Pursues `Relief Program' for Commercial-Paper Clients

(Bloomberg) -- Canaccord Capital Inc., a Vancouver-based brokerage, is working on a ``relief program'' for clients who were sold commercial paper that hasn't traded since the market froze in August.

``I have huge amount of empathy for them in what's been a structural collapse of part of the Canadian capital markets,'' Chief Operating Officer Mark Maybank said today in a telephone interview. ``We're doing everything we can to help our clients.''

About 1,400 Canaccord customers hold C$269 million ($263 million) of the frozen commercial paper in their accounts, according to the brokerage. A relief plan is unlikely to include an outright buyback of the notes, he said.

``We don't have the ability or the capital base to buy it out directly from our clients,'' he said, from Ixtapa, Mexico. ``I'm optimistic that we're going to be able to post a successful restructuring, identify market participants, potential buyers that we can work with to address the needs of our clients.''

That contrasts with National Bank of Canada, the country's sixth-biggest bank, which agreed last year to buy back about C$2 billion of the commercial paper held by its consumer clients.

Canada's market for asset-backed commercial paper sold by non-bank dealers ground to a halt in August after investors shunned the short-term debt because of concerns of possible links to U.S. subprime mortgages. A group led by pension funds, institutional investors and lenders, including Canaccord, spent the last seven months on a restructuring plan to rescue the market. The plan includes converting the short-term debt into new notes that mature within nine years.

Potential Loss

Many investors are angry because they bought the paper on the assumption it was a safe, short-term investment. Now, they have to wait years to recover their money, or sell the new notes at a potential loss once they begin trading.

Investors will be asked to vote on the plan in the next month while the trusts are under bankruptcy protection.

Canaccord, which holds about C$43 million of the paper, supports the restructuring and will vote in favor of the plan, Maybank said.

Canaccord shares rose 39 cents, or 4 percent, to C$10.09 in 3:59 p.m. trading on the Toronto Stock Exchange, and have fallen by more than a third this year, reducing its value to about C$482 million.

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