Thursday, February 28, 2008

National Bank lets the cat out of the bag - standstill is still in effect

By: Daryl Ching, Clarity Financial Strategy

Nicole Mordant and Lynne Olver from Reuters published an article that confirms that the non-bank ABCP negotiations are still on track. Interestingly enough, the source did not come from the Crawford Committee but from National Bank. National Bank reported their Q1 results today announcing that their ABCP is stilled valued at $1.71 billion, which represents about a 25% write down. Bank CEO Louis Vachon repeated that he doesn't expect National to take further writedowns on the paper unless there is a severe U.S. recession or a disorderly liquidation of the ABCP conduits, neither of which he anticipates.

"We are getting much closer to execution and documentation and obviously that creates more complexity... But all parties are fully engaged and we are very confident that the process will reach a successful conclusion," said Ricardo Pascoe, Co-President and Co-Chief Executive of National Bank Financial. Mr. Pascoe also indicated that the standstill is still in effect and no margin calls have been made.

We applaud National Bank for speaking out and answering a very important question on investors’ minds. Is the restructuring still on track and is the standstill period still in effect? However, it would bring the market much comfort to hear this from Mr. Crawford’s Committee. We are hopeful that as the dust settles with BMO’s conduits, that the Crawford Committee will be forthcoming with their progress.

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