Aug. 15, 2007 (LPAC)--Top commercial banks, including Deutsche Bank and Barclay's, refused "emergency financing" for 17 Canadian trusts that issue asset backed commercial paper (ABCP), triggering runs on these funds, including six operated by Coventree Incorporated. LPAC reported yesterday that Coventree was unable to refinance C$250 million in ABCP notes that came due Aug. 13, prompting it to request C$700 million in emergency funds which have been refused.

These 17 issuers are sitting on C$27 billion (US$25.3bn) of ABCP. The $120 billion Canadian ABCP market, part of $1.2 trillion worldwide, is in crisis.

This is not a bank refusal of "emergency financing," because in reality, these banks are responsible for providing financial back up to funds--"conduits" which in most cases they created. For Example, Deutsche Bank has refused to supply "emergency financing" to funds run by the National Bank of Canada, and the Quanto Financial Corporation. Yet, according to Quanto Financial's website, Deutsche Bank, and the National Bank of Canada, are part owners of the company. As LPAC reported yesterday, these same banks are linked to Coventree. Although the banks are required under contracts to provide backup during "market disruption," the banks are trying to claim otherwise, a claim that is sure to end up in the courts.

Coventree holds C$16 billion in ABCP. Quanto Financial has another three of the 17 funds. Barclay's refused to fund another fund managed by Quanto Financial. This amount refused could be as much as C$1 billion according to Bloomberg.

The real question is how many trusts and banks in the United States and Europe are in the same position. While mentioning no names, Bloomberg reports that at least three U.S. and one European issuer of ABCP was unable to get financial relief. ABCP accounts for no less than half of the $2.16 trillion in U.S. commercial paper alone. This ABCP paper, in turn, is heavily invested in by mutual funds which hold the savings of tens of millions of people.