After voting in favour of the asset-backed commercial paper (ABCP) market restructuring plan on Friday, retail investors are looking forward to getting their money back, but institutional investors have far less to celebrate.

Institutional investors were subdued in their response to Friday’s vote, as they have considerably more to lose. The restructuring plan offers no relief on notes held by corporations, who now face the prospect of selling their notes on a secondary market to be established in the near future, likely at a substantial loss. Still, many voted for the plan.

“From our point of view, this is our best chance of getting a return on our members’ investments, and it was made in the best interests of our members,” said Louise Koza, spokesperson for the University of Western Ontario’s Joint Pension Board. “It’s in our members’ best interest since it has the greatest chance of allowing our members to sell, at an acceptable price, the units that they hold in what we are calling the Liquidating Trust (a pool of ABCP paid in kind to members who have made redemptions from our affected investments). It is also expected to provide a greater level of certainty regarding future returns on the asset-backed commercial paper.”

Another institutional noteholder, the Greater Toronto Airports Authority, had a similar outlook.

“The GTAA believes that acceptance of the restructuring is in the best interest of all creditors affected by the ABCP issue,” it said in a statement.

Minister of Finance Jim Flaherty also weighed in, describing the vote as a good example for others of a market-led workout without a government bailout using taxpayer dollars. “I am pleased that the vote on the restructuring plan put forward by the Pan-Canadian Investors Committee has now taken place,” he said in a statement. “A large majority of investors has expressed support for the restructuring proposal.”

Friday’s meeting was a far cry from the acrimonious launch of the “Canadian roadshow” in Toronto in late March, during which Pan-Canadian Investors Committee chairman Purdy Crawford was subjected to the anger and frustration of noteholders. While many retail investors were no doubt relieved to hear the outcome of the vote, the committee was reminded of the ill will the episode has created. Retail investor Murphy Hull used the occasion to sum up his feelings about the outcome of the saga.

“I want this committee to know that notwithstanding the fact that I did vote for the plan because I don’t know what the future holds if the plan fails, I want this committee to know they have not caused justice for people like myself,” said Hull. He was roundly applauded by other noteholders.

“Obviously we have sympathy and empathy for gentlemen like Mr. Hull,” Crawford said afterwards. “On the other hand, he made the point rather eloquently that we’ve been making all along, that he voted in favour because of the consequences of failure. I wish we could do more for people like that, but as I keep saying, what we’re doing is the art of the possible.”

Daryl Ching of Clarity Financial Strategy said Friday’s events reflect the different tactics employed by the various investors groups. “The retail clients were very smart about the situation. They got coordinated, they got organized, they launched a Facebook page and they made their voices heard. And they got public sympathy, so they won in the court of public opinion.”

Ching suggested the institutional investors made a mistake by waiting until the last minute to raise objections in the Ontario Superior Court about the restructuring plan. “What they tried to do over the last couple of days is make a material change to a restructure plan that’s been going on for seven months on a provision that we all knew existed,” he said. “I think Judge [Colin] Campbell’s thought is ‘too late’. You can’t come in the 11th hour and request a change to the restructure plan. These efforts should have started back in January or February, and maybe the result might have been different.”

Ching doesn’t hold out much hope for institutional investors to recoup their losses anytime soon. “A meaningful secondary market will probably not develop for a least a year, in my opinion,” he added. “I think people are going to want to do a lot of research, and sophisticated buyers are going to want to see a track record and make sure these notes perform for a certain period of time before they jump in.”

Retail investors will still have to wait to see their money, as the Superior Court must now sanction the plan. A hearing is scheduled for early May, which will be followed by a 21-day hold period for possible appeals. Absent appeals, new notes will then be issued.

For more about the ongoing ABCP story, click here to visit our special section, The Paper Chase.

To comment on this story, email