National Bank announces measures to relieve clients from ABCP uncertainties
Montreal, 20 August 2007 -
National Bank of Canada (TSX: “NA”) announced today a number of measures to relieve clients from the uncertainties related to the current liquidity problem in the asset-backed commercial paper (ABCP) market. National Bank will acquire all of the ABCP held in mutual funds and pooled funds of subsidiaries of the Bank, all of the ABCP currently held by all its individual retail clients as well as certain other clients, at 100% of the acquisition cost plus accrued interest. As a result, these clients of the Bank and its subsidiaries will no longer have any exposure to the current market for ABCP while having access to liquidity for more immediate needs. The Bank intends to complete the operation in an expeditious manner.
National Bank has decided to take the following measures:
Holders of Mutual and Pooled Funds: National Bank will agree to acquire all ABCP currently held in the National Bank and Altamira public mutual funds and in the pooled funds used by Natcan in its discretionary management (except for two alternative funds) and by National Bank Trust in its private investment management at 100% of the acquisition cost of such ABCP to these funds plus accrued interest. Payment to the funds will be made in cash and used to purchase securities such as Canadian treasury bills or other similar high quality liquid government bonds.
Individual Investors: National Bank will agree to acquire ABCP purchased through the Bank, National Bank Financial or National Bank Direct Brokerage and held in their accounts by individual retail clients of such entities at 100% of their acquisition cost plus accrued interest. Payment will be made in Bearer Deposit Notes or in National Bank Banker's Acceptances.
Corporations: National Bank will also agree to acquire ABCP purchased through the Bank, National Bank Financial or National Bank Direct Brokerage by other clients who have total holdings of Cdn. $2 million or less in ABCP in their accounts at such entities and who do not qualify as accredited investors under securities regulations, at 100% of the acquisition cost of such ABCP plus accrued interest. Payment will be made in Bearer Deposit Notes or in National Bank Banker's Acceptances.
“Thanks to the Bank’s good financial position, we have the opportunity to voluntarily take these extraordinary measures to maintain the relationship of confidence that we have with our clients,” said Louis Vachon, President and Chief Executive Officer of National Bank. “We will continue to work for all participants, and with them, to protect the value of their investment in ABCP instruments and to find solutions to the current situation,” concluded Louis Vachon.
These measures build upon the agreement reached last Thursday in Montreal among a number of major players in Canada’s financial markets to establish normal operation in the Canadian third party ABCP market and to work out a solution to the liquidity problem affecting these vehicles.
As a result of these initiatives, the Bank expects to acquire approximately Cdn. $2.0 billion in ABCP including approximately Cdn. $150 million in bank conduits ABCP. The Bank also currently owns less than Cdn. $100 million in bank conduits ABCP. In the fourth quarter, the Bank will assess the value of the ABCP acquired as well as other contingencies related to its exposure to ABCP. National Bank does not provide liquidity facilities to any structured asset backed commercial paper conduits, nor to any conduits administered by any other bank. As of July 31, 2007, National Bank had reduced its committed backstop liquidity facilities to its own asset-backed commercial paper conduit to $750 million.
The detailed terms of these measures will be communicated to our clients separately and apply to ABCP held as of August 10, 2007 for individual investors and corporations as described above. These measures are subject to the receipt of all regulatory and other approvals, consents and authorizations necessary to implement the entire proposal and achieve the results desired for our clients on the basis contemplated by the Bank and its affiliates. This announcement does not constitute an offer to purchase, sell or exchange any securities and the Bank’s offer will be made by written communication by the Bank to its affected clients after all regulatory and other approvals, consents and authorizations which in the opinion of the Banks or its counsel, are required to implement the announcement as aforesaid, have been obtained. These measures are being undertaken despite having no legal or contractual obligation to do so.
Conference call with analysts
Louis Vachon, President and Chief Executive Officer of National Bank of Canada will hold a conference call with analysts this morning (August 20, 2007), at 11:00 a.m. ET concerning this announcement.
Access via telephone: 416-340-2216 / 1-866-898-9626 (toll-free).
A recording of the call will be archived and accessible until Monday August 27, 2007 by dialling 416-695-5800 / 1-800-408-3053 (toll-free). The access code is 3232798#.
Conference call with journalists
Louis Vachon, President and Chief Executive Officer of National Bank of Canada will hold a telephone press briefing this afternoon (August 20, 2007), at 2:00 p.m. ET concerning this announcement.
Journalists must confirm their participation by contacting Valérie Lamarre at 514-394-5000 extension 2393.
About National Bank of Canada
National Bank of Canada is an integrated group which provides comprehensive financial services to consumers, small and medium-sized enterprises and large corporations in its core market, while offering specialized services to its clients elsewhere in the world. National Bank offers a full array of banking services, including retail, corporate and investment banking. It is an active player on international capital markets and, through its subsidiaries, is involved in securities brokerage, insurance and wealth management as well as mutual fund and retirement plan management. National Bank has more than $130 billion in assets and, together with its subsidiaries, employs 16,852 people. The Bank’s securities are listed on the Toronto Stock Exchange (NA). For more information, visit the Bank’s website at www.nbc.ca.
Information (The telephone number provided below is for the exclusive use of journalists and other media representative):
Director – Public Relations
National Bank of Canada