The Yukon government will have to wait at least six weeks to discover the fate of its $36.5 million in frozen investments.
“Basically we’re where we were before,” assistant deputy Finance minister Clarke LaPrairie said today.
“This just changes the date.”
A consortium of banks, lenders and investors, had promised to have the loans restructured by December 14.
But, by Friday, they couldn’t strike a deal.
The date was extended until January 31.
This is the second time that the deadline has been extended since the so-called Montreal proposal was launched in August.
“We can appreciate how tough it is,” said LaPrairie.
“Restructuring something like this is unprecedented and really complex.”
“And really, six-and-a-half weeks with Christmas in between is not a horrendous delay,” he added.
The $33-billion asset-backed commercial paper market broke down in early August when investors were unable to find buyers for the paper.
The consortium was set up days later in hopes of stretching the investments from one-month to five- to 10-year maturities.
The unfinished proposal must be approved by at least two thirds of noteholders in each of the 21 frozen trusts for the restructuring to go ahead.
Investors that sign the restructuring deal wave their right to go to court to try to recover their losses.
There are concerns failure to reach a deal Friday could cause some investors to seek a legal fix.
The Yukon government has yet to dismiss this option, said LaPrairie.
The Yukon invested in two separate trusts, Opus and Symphony, which were both created by Newshore Capital Group.
The trusts were supposed to mature in August and September.
This commercial paper is a financial vehicle that allows investors to share the risk and return on debt, which is supposed to be backed by hard assets.
Many believed this debt was in traditional assets, such as commercial mortgages, car loans and credit obligations.
However, of the $33 billion of assets held by the trusts, only $3 billion was in this traditional debt.
Another $3 billion was in the American subprime mortgage market, according to information released by the consortium.
The remaining $27 billion was in something called collateralized debt obligations, which tend to be riskier and make it difficult to see exactly what investors are buying.
Even so, the commercial paper was given the highest rating by Dominion Bond Rating Service.
No other rating service would touch the stuff.
Nevertheless, investors trusted Dominion and the banks that sold the paper.
With slightly higher interest than similarly rated investments, the paper became popular with many governments and businesses.
The Ontario government holds $719.5 million in asset-backed paper.
Earlier in the month, the provincial government disclosed that it is expecting to lose nearly $100 million as a result.
Alberta expects to lose $79.6 million as well.
The Yukon government has yet to comment on how much of its $36.5 million it expects to lose.
Finance Minister Dennis Fentie has said he’s not worried about the fate of the money.
Canada’s auditor general is currently investigating the territorial government’s investment in the paper.
A release from the consortium said that investors could expect to have the newly restructured commercial paper in their hands by March 14.
It was always said that the restructuring would be completed by mid-to late March, but this is the first time the group gave a specific date.