The Caisse de dépôt et placement du Québec and a number of financial institutions have agreed on a solution to the liquidity problem on the structured finance asset-backed commercial paper(ABCP)market.

The so-called “signatories”—the Caisse, PSP Investments, ABN Amro, Barclays Capital, Desjardins Group, Deutsche Bank, HSBC, National Bank and UBS—have agreed to help establish normal operations in the Canadian third-party ABCP market in the wake of a global credit crunch.

They hold at least two-thirds of all outstanding third-party ABCP and according to their press release, which was sent out at 8:39AM EDT on Canada Newswire, they are confident that “additional market participants will confirm their agreement with these arrangements within the next few hours.”

The holders of third-party ABCP who are signatories have agreed to continue to roll their third-party ABCP during the period ending 60 days following the date of this agreement, the “standstill period.” Also, signatories who are counterparties of the third-party ABCP conduits will not pursue any existing margin calls or make any further margin calls during the standstill period.

The Globe and Mail reported today that the Caisse had a meeting with Canadian and international lenders yesterday to help support this market.

It is believed that the Caisse is the biggest buyer of commercial paper issued by non-bank sponsors, which account for about one-third of the $120 billion market.

This type of debt is sold by firms such as Toronto-based Coventree, which has said this morning—as well as earlier this week—that it has had trouble finding buyers for asset-backed commercial paper.

At the end of last year, the Caisse held about $1.7 billion in commercial paper notes sold by funds that were asking for emergency loans. It also owned 19.9 million shares of Coventree, but it is not known if it still holds the investments.

To read a related story, Caisse Invested in Commercial Paper, click here.

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