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Investment loss just an ‘accounting adjustment’

The Yukon government’s $36.5-million investment in asset-backed commercial paper has lost $6 million in value, as noted in the…

The Yukon government’s $36.5-million investment in asset-backed commercial paper has lost $6 million in value, as noted in the government’s newly released public accounts statements.

It is simply an “accounting adjustment” and “not a recognition of any realized loss,” assert Finance officials.

“The Yukon fully expects to receive the entire principle as the investments mature beginning in four and a half years and ending eight years from now,” deputy minister David Hrycan said during a briefing on Thursday morning.

The writedown represents current market value — the value that would be obtained if the asset-backed commercial paper were to be sold immediately.

"Today they’re worth less, but when we hold them to maturity we will get the full value back — so there’s no loss,” said Hrycan.

Because the government does not intend to sell the investment before its maturity date, the full value will not be accessible to the government until the investments begin to mature in 2012.

The original purchase of the asset-backed commercial paper, conducted in the summer of 2007, violated the terms of the Yukon’s Financial Administration Act.

The investments were not rated by “at least two recognized security rating institutions.” The investment was rated solely by Toronto-based Dominion Bond Rating Services.

Justice officials concluded the investment contained no “willful intent to defraud the public,” as Finance employees believed they also had a guarantee from a bank. As a result, officials determined nobody in the Yukon’s Finance department committed an offence.

However, if public money is ultimately lost as a result of the investment, the parties responsible are “liable for the money and it may be recovered from them as a debt due to the government,” states the act.

In the legislature on Thursday afternoon, Liberal Leader Arthur Mitchell focused on the writedown, noting since the year-end of March 31 covered by the the report, the value of the the government’s investments has probably dropped further.

“If this premier thinks he wants to count, on the one hand, interest payments — phantom interest payments to date, on an investment — but on the other hand, the principal is shrinking daily, well, that’s great,” said Mitchell.

“Let’s earn our three and a half, or four per cent on the principal while the principal disappears,” he added. “That’s great math.

“When the day comes that I misplace $6 million of Yukoners’ money, I’ll tender my resignation.”

“I think the member opposite should do a little more homework, and a little less speechifying,” said Fentie.

The premier noted the territory’s public accounts showed a $165-million “net financial situation,” and that the Yukon had year-end investment earnings of $2.4 million.

Both values are entirely independent of the ABCP investment.

“The government continues to maintain a strong cash position. The liquidity issues in the ABCP market have not had an impact on the government,” said the statement of public accounts.