In light of the news that the Canadian Chartered banks had decided to take care of their own (see post “Banks agree to support each other; what of the rest?“, Aug 21-07), you have to ask yourself why National Bank’s Ironstone Trust isn’t giving its commercial paper investors their money when the paper comes due. According to the Sun-Times Media Group (I think it used to be called Hollinger), Ironstone “failed to honour $25 million that came due on August 21st, and $3 million that came due on August 24th.”

According to National’s website, this is great stuff to invest in:

Managing the world’s most important investments: YOURS!

National Bank Financial Inc. is the Administrative Agent and Financial Services Agent for four Canadian ABCP conduits – Fusion Trust, Ironstone Trust, Silverstone Trust and MMAI-I Trust. These Trusts are bankruptcy remote special purpose vehicles rated by DBRS that fund the purchase of eligible assets by issuing asset-backed commercial paper, extendable commercial paper and floating rate notes.

Now, back on August 15th, the CIBC advised Ironstone that it wouldn’t provide funding under their previously-arranged Liquidity Line. But, once the banks rallied around their own campfire, you’d have thought that Ironstone – and National – would be in the clear. One can’t tell from the National’s press releases, as there aren’t any. And Ironstone hasn’t put anything out on CNW since their August 15th “market disruption” notice.

How is that not material information that investors should know? There’s been plenty of good press about the smart brand protection move to acquire the asset-backed commerical paper (“ABCP”) assets at face value from retail mutual funds. But what is up with Ironstone? Why are corporate clients with more than $2 million of Ironstone’s asset based commerical paper not getting their funds from a bank when the paper comes due?

MRM