Territory could lose millions on investment scheme

The Yukon government currently has $36.5 million sitting in limbo as a result of its holding US-based subprime loans through an investment known as…

The Yukon government currently has $36.5 million sitting in limbo as a result of its holding US-based subprime loans through an investment known as asset-backed commercial paper.

Some market analysts are predicting investors in these notes could see losses as high as 50 per cent.

That could mean $18.25 million in losses for the territory.

“I gotta tell ya, I’m not all that concerned about it,” said Finance Minister Dennis Fentie.

“We are working closely with the institutions related to this matter and on December 14 — that’s the date we’ve been provided — there will be a maturity date going forward.”

Two separate securities were bought in July and August. They were supposed to mature 30 days later.

However, the lenders announced that, due to extreme volatility in the global credit markets, they could not provide the funds.

As early as August 16, lenders and investors agreed in principle to restructure the asset-backed commercial paper into a more long-term investment.

But just how long is still up in the air.

The new maturity date will not be decided until December 14.

“The investment is technically in default,” said Opposition leader Arthur Mitchell in the house on Tuesday.

“When did the premier find out about this problem, and why didn’t he notify the public at the time?”

The Yukon government was not the only entity caught in the asset-backed commercial paper fiasco, which was caused by the US subprime mortgage market crisis.

More than $35 billion dollars is currently tied up in the commercial paper market.

Holding similar investments are the Ontario Teachers’ Pension Plan and mining companies such as Cameco Corp. and Redcorp Ventures Ltd., the company trying to reopen the Tulsequah Chief Mine.

When Redcorp discovered, on August 16, that the financial institutions might default, it held a news conference.

The company told investors it was having liquidity troubles with the $102.2 million it had invested.

Company stocks subsequently fell by 50 per cent.

The Yukon government chose to disclose the news on page 81 of the 320-page Public Accounts, which was recently tabled in the legislative assembly.

“It’s fully disclosed in the public accounts and that is the appropriate mechanism for this,” said Fentie.

“All we are dealing with to date is an extension of the maturity date itself on the note and that’s all there is to report.”

“Any reporting that this is a loss of money is false, that is not the case whatsoever,” he added.

Commercial-paper markets have been struggling around the globe as a result of the US subprime mortgage crisis.

However the problem is most grave in Canada, according to a September article in the Financial Post by John Greenwood.

In Canada, investors are finding that they cannot get their money back.

The government’s Finance department is confident that it won’t be among the money losers.

“Historically these notes are considered one of the least risky investments out there,” said Yukon director of financial systems Clarke LaPrairie.

“The individual investments we’re talking about here are rated by the rating agency as AAA, which is the highest rating possible.”

However, only one rating agency was involved in the rating scheme. And in Canada, there was no requirement to disclose which assets the investments were based on.

There are different ratings and different yields for different asset-backed commercial papers.

The papers held by the Yukon government only yield four to five per cent and were not seen as high risk, said LaPrairie.

“It’s something we’ve historically invested in.”

Investors considered them low risk, said Greenwood in an interview Wednesday. That’s because they are backed by assets.

However, those assets are not proving as solid as investors believed.

The Yukon won’t know how much of a financial hit it will receive until December 14.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Crystal Schick/Yukon News file
Runners in the Yukon Arctic Ultra marathon race down the Yukon River near the Marwell industrial area in Whitehorse on Feb. 3, 2019.
Cold-weather exercise hard on the lungs

Amy Kenny Special to the Yukon News It might make you feel… Continue reading

Yukonomist Keith Halliday
YUKONOMIST: The Neapolitan election

Do you remember those old bricks of Neapolitan ice cream from birthday… Continue reading

Whitehorse City Hall (Joel Krahn/Yukon News file)
This week at city hall

A look at issues discussed by Whitehorse city council at its April 6 meeting.

Two people walk up the stairs past an advance polling sign at the Canda Games Centre on April 4. (Haley Ritchie/Yukon News)
April 12 is polling day: Here’s how to vote

If in doubt, electionsyukon.ca has an address-to-riding tool

Yukon Party leader Currie Dixon addressing media at a press conference on April 8. The territorial election is on April 12. (Haley Ritchie/Yukon News)
Getting to know Currie Dixon and the Yukon Party platform

A closer look at the party leader and promises on the campaign trail

lwtters
Today’s Mailbox: Rent freezes and the youth vote

Dear Editor, I read the article regarding the recommendations by the Yukon… Continue reading

Point-in-Time homeless count planned this month

Volunteers will count those in shelters, short-term housing and without shelter in a 24-hour period.

The Yukon’s new ATIPP Act came into effect on April 1. Yukoners can submit ATIPP requests online or at the Legislative Assembly building. (Gabrielle Plonka/Yukon News file)
New ATIPP Act in effect as of April 1

The changes promise increased government transparency

A new conservancy in northern B.C. is adjacent to Mount Edziza Provincial Park. (Courtesy BC Parks)
Ice Mountain Lands near Telegraph Creek, B.C., granted conservancy protection

The conservancy is the first step in a multi-year Tahltan Stewardship Initiative

Yukon RCMP reported a child pornography-related arrest on April 1. (Phil McLachlan/Black Press file)
Whitehorse man arrested on child pornography charges

The 43-year-old was charged with possession of child pornography and making child pornography

Team Yukon athletes wave flags at the 2012 Arctic Winter Games opening ceremony in Whitehorse. The postponed 2022 event in Wood Buffalo, Alta., has been rescheduled for Jan. 29 to Feb. 4, 2023. (Justin Kennedy/Yukon News file)
New dates set for Arctic Winter Games

Wood Buffalo, Alta. will host event Jan. 29 to Feb. 4, 2023

Victoria Gold Corp. has contributed $1 million to the First Nation of Na-cho Nyak Dun after six months of production at the Eagle Gold Mine. (Submitted/Victoria Gold Corp.)
Victoria Gold contributes $1 million to First Nation of Na-cho Nyak Dun

Victoria Gold signed a Comprehensive Cooperation and Benefits Agreement in 2011

Most Read