The Yukon government isn’t the only one with money tied up in the frozen third-party asset-backed commercial paper market.
Nearly 1,800 small investors were talked into buying the stuff.
These customers have been all but ignored since the market collapsed in August, and a Bay Street lawyer named Purdy Crawford led an unprecedented attempt to salvage it.
After all, what’s a few hundred thousand dollars when it’s just a tiny part of a $32-billion market?
However, with the new restructuring plan scheduled to come up for a vote on April 25, people are starting to pay attention to the little guys.
They have strength in numbers and many are threatening to vote “No.”
“We’re totally opposed to it,” said Murray Candlish, a grain farmer from Daysland, Alberta.
“It might be OK for governments and pension plans that can afford to hang on for seven or eight years to get their money back, but for us we’re going to need a little bit every once in a while.”
Whenever Candlish and his wife had a good year on the farm, they’d put away a few thousand dollars.
With the sale of a few properties a couple years ago, the pot grew to $340,000.
They invested it in asset-backed commercial paper through independent investment dealer Canaccord Capital.
“We wanted to put it in a safe investment,” said Candlish on Friday.
“We didn’t want risk — we didn’t want to risk our whole life savings — so we put it in this.”
The man who sold the paper to Candlish told him it was just as safe as a GIC.
“If this stuff falls apart,” the man told Candlish, “the whole banking system in Canada will fall apart.”
The market collapsed less than a month later.
Canaccord Capital has denied that it was at fault in any way for Candlish’s investment.
And if Candlish and more than a thousand others like him vote in favour of the restructuring plan, they waive their right to sue Canaccord or the other investment companies involved.
These small investors also need to be able to access their money and can’t afford to wait until the newly structured paper matures, eight years down the road.
“Our son’s getting married this fall and if we had to do some house renovations or repair the car, I’m not sure where we’d get the money from, to tell you the truth,” said Candlish.
“My wife works in a nursing home; I do a few jobs here and there and we get a little farm income.
“That pays the grocery bill but if we need five to 10 thousand dollars for anything else…
“We were counting on this nest egg to look after things like that.”
Some experts are warning that if investors sell off the new paper early they can only expect to receive 60 cents on the dollar.
Investors like Candlish are hoping that Crawford and his committee will put something on the table for the little guy.
The deal is a lose-lose situation for small retail investors, said independent financial analyst Diane Urquhart from Toronto.
If they vote for the restructuring proposition, and then sell it without waiting the full eight years, these small investors will only get 40 to 60 cents on their dollar, she said.
Plus they’re waiving their right to sue for damages.
But if they vote “No,” the restructuring plan will fail and the next step would most likely be full liquidation on the paper.
“The result of that would be that all would be worse off, substantially below 40 and 60 per cent of value,” said Urquhart.
But at least, they could sue.
“The retail owners (would be able to) enter the courts to seek remedy for all of their damages for the brokers having sold them a flawed savings product.”
There is substantial evidence of misconduct in the sale of the commercial paper, she added.
All Canadian banks have already paid out any retail customers with investments under $2 million.
However, three brokerage firms, Canaccord, Credential Securities and National Bank Securities, are not paying out their customers.
Customer lists are a private and confidential matter, which has made it hard for small investors to get in contact with each other and organize themselves.
That’s where Facebook comes in.
Brian Hunter, a Calgary-based engineer who has $650,000 of his life savings tied up in the paper, started a Facebook group for the small investors.
That was about three to four weeks ago.
Since then, over 175 people, including Candlish, have signed up.
The group has hired a pair of lawyers and is currently requesting a cash settlement, or that the restructuring plan be modified before the vote.
“The retail group should not be forced into the dilemma of having to vote “No” to protect their legal rights,” said Urquhart.
“And with that ‘No,’ disrupt the $32 billion of 100 institutions who appear to agree to accept the restructuring proposal.”
The Yukon Finance Department is one of those institutions, and has said that it will vote in favour of the restructuring.
Crawford has indicated that he is prepared to make a deal.
Everyone is waiting to see what that deal might be and whether it will prevent the “No” vote.
“He’ll sweeten it up a little bit, we’re just not sure how much,” said Candlish.
“Right now we’re asking him to give us back our entire investment plus interest. And now we’ve had to hire two very expensive lawyers and we want them paid for, too.
“We’re encouraged and cautiously optimistic that something can be arranged before we have to go to vote,” he added.
“But as it stands, we’re voting ‘No.’”