ABCP restructure suffers growing pains

Last week, the Yukon received only a tiny fraction of the interest payment it was supposed to get from its controversial investment of $36.5 million in asset-backed commercial paper. The territory was entitled to $39,700.

Last week, the Yukon received only a tiny fraction of the interest payment it was supposed to get from its controversial investment of $36.5 million in asset-backed commercial paper.

The territory was entitled to $39,700. It received $1,205.

But the rest of the money should be paid soon, said Clarke LaPrairie, assistant deputy minister of finance.

He’s hopeful the outstanding money will be tacked on to the next payment, due in July, for $423,000.

The government has already received $1.1 million in interest on the investment, made in 2007.

The investments in repackaged consumer debt was supposed to earn Yukon $200,000 in just 30 days. Then the credit markets collapsed in August 2007.

Since then, Yukon and other investors have crafted a restructuring deal to turn the short-term investments into longer-term ones.

But the new trust set up to handle the ABCP investments is facing a cash crunch. It needs to pay legal and administrative fees racked up during its creation.

Historically low interest rates have also hurt returns on the underlying investments.

And high bank fees are to blame, too, according to some analysts.

But once one-time costs are paid, the trust should begin to accrue more money and make bigger payments, said LaPrairie.

Most of Yukon’s $36.5 million won’t be freed up anytime soon. Eighty per cent of the new investments mature in January of 2017. The remaining 20 per cent mature in 2013.

Whether the territory receives all this money, or not, depends on the health of credit markets in the next four to eight years.

The territorial government has so far written down $6 million of this investment from its books. But that doesn’t mean they don’t expect to see all the money, said LaPrairie.

“It’s not reflective of what we expect to be paid in the future. It’s—if there was a market—what would be the market price?”

It’s possible not all the money will be paid back. But, in such a worst-case scenario, in which the credit markets are still a mess eight years from now, “we’d probably have bigger problems, because the world would be a worse place than it is today,” said LaPrairie.

Contact John Thompson at

johnt@yukon-news.com.