“Significant progress” has been reported by the Pan Canadian Investors Committee, created to propose a restructuring and solution to the liquidity problem affecting the structured finance third party asset-backed commercial paper (ABCP).

The committee was created on September 6.

Over the course of the past three weeks, it has met with the international group of bank counterparties as well as the various conduit sponsors and indenture trustees to discuss alternative proposals to restructure Third Party ABCP.

“We are delighted that investors have come forward and shown support for our efforts at finding a solution,” said Purdy Crawford, committee chairman, in a news release. “While much work remains to be done, we are gratified that the various stakeholders, including the conduit sponsors and indenture trustees, are working together in a constructive manner and we are very pleased with the level of communication and cooperation among the parties.”

The committee also announced today that it has engaged J.P. Morgan as its financial advisor. “They will be invaluable in assisting the Investors Committee and in working with other participants in this process to develop and implement a solution that will preserve and enhance value,” said Cawford.

Crawford explained that certain of the fundamental principles underlying a workable solution to the Third Party ABCP liquidity problem would include a fair and equitable solution in the best interests of all investors, the avoidance of value destruction that could result from a wholesale liquidation of trust assets, the conversion of short-term commercial paper to floating rate notes (FRNs), and greater market transparency of the underlying assets supporting these notes in order to promote liquidity.

Support for the standstill created by the “Montreal Proposal” is strong with the backing of approximately 82% of investors, the committee said. Additionally, the committee said it has achieved investor support ranging from 66-2/3% to 98% for each of the 22 conduits covered by the standstill. All figures are based upon the outstanding principal amount of the Third Party ABCP issued by these conduits and have been validated by Ernst & Young Inc.

Following a meeting of the committee held earlier this week, Crawford indicated that the committee is pursuing an extension to the original standstill period. “Given the highly complex process and the significant number of stakeholders involved, a successful restructuring cannot be completed by mid-October in respect of all of the affected conduit trusts” said Crawford.

The Montreal Proposal called for investors to continue to “roll” their ABCP during the standstill period in order to evidence the support of the interim arrangements.