A group of institutional investors have agreed on a plan to support the struggling Canadian commercial paper market.

The group issued a statement today saying they had met in Montreal to “work out a solution to the liquidity problem affecting the third party structured finance asset-backed commercial paper market in Canada.”

The liquidity problem was sparked by the announcement Monday that Toronto-based Coventree Inc. was having difficulty finding buyers for the specialized debt products it packages.

That development sparked wider fears of a credit crunch.

Signatories to the agreement include ABN AMRO, Barclays Capital, the Caisse de dépôt et placement du Québec, Desjardins Group, Deutsche Bank, HSBC, PSP Investments, Merrill Lynch, National Bank and UBS.

The institutions said they have the support of investors who hold at least two-thirds of all outstanding third-party asset-backed commercial paper.

The signatories said they expect other market participants to sign on to the agreement.

Under the plan, the institutions said they had agreed to convert short-term, third-party, asset-backed commercial paper into floating-rate notes. These notes would mature only when the underlying financial assets mature.

“Existing liquidity facilities will therefore not be necessary and will be cancelled, and all outstanding liquidity calls will be revoked,” the agreement said.