Montreal Proposal down to wire

With the deadline for a restructuring proposal for $33-billion of asset-backed commercial paper hours away, a roomful of investment bankers and lawyers are still struggling to come out with a document that will enable investors to put a value on their holdings for the first time since the market melted down in early August.

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The market for third-party ABCP froze up on August 13 after investors were spooked by the subprime mortgage crisis unfolding south of the border. A group of financial institutions led by the Caisse de dépôt et placement du Québec launched the Montreal Proposal as a way to prevent the default of the stranded notes and to rescue value for investors. Under the plan, the illiquid ABCP would be converted into very highly-rated, longer-term floating rate notes.

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Many observers worry that because of the larger global problem, there will be little investor appetite for the new floating rate notes from the Montreal Proposal.

"Look at the global market, there is just no liquidity," said a source close to the very secretive restructuring. "It's not like all this is happening in a robust market. The credit crunch is hanging over this whole thing."