Monday, March 17, 2008

Clarity Financial Strategy remains cautiously optmistic about a successful restructure

By: Daryl Ching, Clarity Financial Strategy

The Crawford Committee is expected to appear in front of the Superior Court of Ontario this afternoon to convert the ABCP trusts to corporations and apply for bankruptcy protection. This is no surprise and a move that has been contemplated for some time. The reason for this is because, since February 22, the Crawford Committee has been unsuccessful convincing all the parties at the table to agree to an extension in the standstill period. If the restructure is approved, there still remains another month and a half, in which investors need to vote for the proposal and the restructure gets completed. The Committee requires assurance that there is some form of bankruptcy protection so that no party can cause an event of default in the interim period.

According to the Globe and Mail, one Canadian bank has been delaying its formal approval. As a result, a Restructure Plan could not be released on Friday. It is our view the Restructure Plan will get still get completed. Unfortunately, there is no telling of when this will happen. The repercussion of a the committee disbanding is an event of default and a fire sale. This would be a disastrous scenario and nobody wants to see this happen, as there is too much at stake. Again, as I have mentioned before, the big game of chicken continues as banks hope that others will step up, so they don’t have to. Perhaps it might be time to call up on JP Morgan to step in for the missing piece of the margin facility so that the Committee can finally ink a deal and we can start moving on with a vote.

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