The Yukon government could lose as much as $7.3 million through the restructuring of its asset-backed commercial paper investments.
A committee of investors and bank officials that is working to restructure the frozen $33-billion asset-backed commercial paper market reached a deal late Thursday night.
The proposal was brought before a judge for final approval this morning.
A framework to restructure the frozen paper into new longer-term notes was completed in December, but it lacked important details, such as how much the noteholders could expect to lose.
Noteholders will learn the extent of their losses today.
JP Morgan, the investment bank advising the committee, estimates the assets are currently worth 80 per cent of their original value, the Globe and Mail reported today.
A 20 per cent loss on the Yukon government’s $36.5-million investment amounts to roughly $7.3 million.
And that’s if the government decides to hold the notes until maturity.
The restructured paper, originally a 30-day investment, could have a new term of five to 10 years.
However, if the government attempts to sell the new notes in the open market, which will likely start up as early as May, it could face much larger losses.
In February, auditor general Sheila Fraser found that the Yukon government broke the law when it made the investment.
The notes do not meet any of the guidelines set out in the territory’s Financial Administration Act.
Although the law was broken, Justice officials have found that no one within the Finance Department committed an offence under section 77 of the Act.
There was no “willful intent” to defraud the public.
Finance officials invested in the paper believing they had a guarantee from a bank, which would have made the investment legal.
However, section 69.1 states: “If public money is lost or is not collected through the misconduct, neglect of duty, or negligence of a person responsible for handling public money, the person is liable for the money and it may be recovered from them as a debt due to the government.”
Justice did not investigate negligence because, until today, it was not certain whether the government had actually lost money.
A noteholders’ meeting is expected to occur in mid-April to consider the restructuring plan.
The government should have its restructured investments in hand by the end of April.