Monday, March 17, 2008

DBRS Comments on the CCAA Filing of the Affected Trusts Under the Montréal Accord

As noted in a related DBRS press release published today, DBRS has today downgraded to D 20 of the Affected Trusts under the Montréal Accord. This rating action was taken following the announcement that a filing has been made on behalf of each of the Affected Trusts under the Companies’ Creditors Arrangement Act (CCAA) and should not be seen as indicative of deterioration in the credit quality of the assets held by the Affected Trusts.

On August 13, 2007, a number of Canadian asset-backed commercial paper (ABCP) issuers (the Affected Trusts) were unable to roll over maturing ABCP. In an August 16, 2007, press release, DBRS placed the Affected Trusts Under Review with Developing Implications following an announcement that a consortium representing banks, asset providers and major investors in the Affected Trusts (the Pan-Canadian Investors Committee or the Committee) had agreed in principle to take steps to establish “normal operations in the Canadian third-party ABCP market.” The agreement in principle (the Montréal Accord) called for all investors in the Affected Trusts to exchange their holdings for term notes matching the amortization and maturity of the transactions held within each series or trust, as applicable. In a press release dated December 23, 2007, the Committee announced that an agreement in principle had been reached regarding a comprehensive restructuring of the ABCP issued by 20 of the Affected Trusts covered by the Montréal Accord (the Framework Agreement). Today’s CCAA filing by the Committee on behalf of the 20 Affected Trusts represents a step in the restructuring process proposed in the Framework Agreement.

In a number of press releases, commentaries and newsletters published since August 16, 2007, DBRS has stated that the credit quality of the majority of the assets held by the Affected Trusts remained strong. This continues to be true. Today’s downgrade reflects the fact that the Affected Trusts are now subject to a court-supervised process which, if successful, will see the obligations of the Affected Trusts be restructured per the terms of the Framework Agreement.

The CCAA is a federal statute that provides a mechanism whereby debts and obligations may be restructured under the supervision of the court and subject to the approval of creditors and the court. A CCAA filing is sometimes thought of as being analogous to a filing under the Bankruptcy and Insolvency Act (BIA), yet there are important differences. Under the BIA, the goal of the bankruptcy process is to maximize the value of the remaining assets for the benefit of creditors. Under the CCAA, the objective is to restructure obligations so that the filing entity remains viable. Bankruptcy proceedings often end with a liquidation of the bankrupt’s assets, whereas one of the goals of a CCAA filing is to avoid liquidation of the assets.

Upon the CCAA filing, creditors of the Affected Trusts, including noteholders, will be stayed from enforcing their claims. This court-ordered stay will effectively replace the standstill agreement which was agreed to as part of the Montréal Accord.

As part of today’s filing, the Committee has submitted to the court a Plan of Arrangement and Compromise (the Plan). Details of the Plan will be sent to holders of the ABCP issued by the Affected Trusts. The court will be asked to issue a Meeting Order so that a meeting may be held at which noteholders will be asked to approve the Plan. Approval of the Plan requires the votes of a majority of noteholders voting at the meeting and of noteholders holding 66 & 2/3 of the aggregate principal amount of ABCP held by noteholders voting at the meeting. If noteholders approve, the Plan will be brought before the court for approval.

DBRS will continue to monitor the restructuring process and will provide additional information on www.dbrs.com as it becomes available.

DBRS Downgrades Affected Trusts to D Upon CCAA Filing

DBRS has today downgraded the ratings of 20 Affected Trusts under the Montréal Accord to D following an announcement that a filing has been made on behalf of each of the 20 Affected Trusts under the Companies’ Creditors Arrangement Act (CCAA).

On August 13, 2007, a number of Canadian asset-backed commercial paper (ABCP) issuers (the Affected Trusts) were unable to roll over their maturing ABCP, resulting in requests being made by the sponsors of the Affected Trusts to liquidity providers for provision of liquidity funding, or the extension of extendable notes. Requests for liquidity were not granted by a number of liquidity providers, who disputed the satisfaction of all conditions precedent for the provision of liquidity.

In an August 16, 2007, press release, DBRS placed the Affected Trusts Under Review with Developing Implications following an announcement that a consortium representing banks, asset providers and major investors in the Affected Trusts (the Pan-Canadian Investors Committee or the Committee) had agreed in principle to take steps to establish “normal operations in the Canadian third-party ABCP market.” The agreement in principle (the Montréal Accord) called for all investors in the Affected Trusts to exchange their holdings for term notes matching the amortization and maturity of the transactions held within each series or trust, as applicable.

In a press release dated December 23, 2007, the Committee announced that an agreement in principle had been reached regarding a comprehensive restructuring of the ABCP issued by 20 of the Affected Trusts covered by the Montréal Accord (the Framework Agreement).

The Committee today announced that per the terms of the Framework Agreement, each of the 20 Affected Trusts being restructured has filed for creditor protection under the CCAA. Upon a CCAA filing, creditors of the Affected Trusts, including noteholders, will be stayed from enforcing their claims and the Affected Trusts will enter a court-supervised process under which their obligations may be restructured subject to the approval of a majority of creditors and the court. For more information on the restructuring process, please see the DBRS commentary released simultaneously with this press release.

DBRS will continue to monitor the situation and will release further details on www.dbrs.com as appropriate. Further information on the Framework Agreement can also be found on www.dbrs.com.

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