Canada Centrals Postpone Merger Amid Financial Market Woes
VANCOUVER, BRITISH COLUMBIA -- Credit Union Central of British Columbia and Credit Union Central of Ontario have decided to postpone their merger amid the uncertainty of the financial market's recent woes.
The transaction had been scheduled to close on Oct 1. Shareholders of the two organizations had approved the combination on June 22.
"While most conditions have been met, recent problems in the financial markets make it difficult to complete the relative valuation of each organization for the purpose of closing the transaction," the centrals said in a statement. "The extension of
the closing date will give the parties time to address this issue, while merger preparations continue."
The difficulties in valuation result from each central's investments in non-bank asset-backed commercial paper, "which has become illiquid in light of global credit conditions."
B.C. Central holds $23 million in nonbank ABCP within its $5.1 billion in assets. Ontario Central's holdings of nonbank ABCP amount to $161 million within its assets of $2.4 billion. These investments do not affect the ability of the two centrals to meet their member credit unions' liquidity needs, but the current trading halt in these securities agreed to under the Montreal Proposal makes it impossible to quantify the relative value of each central with certainty, the centrals said.
Measures to restructure the market for Canadian non-bank ABCP are under way, involving a national committee of financial institutions, pension funds and corporate investors. The process could take several months to complete, the centrals said. The merger is expected to be complete by year-end.
"We look forward to closing the transaction once the outstanding issues have been resolved," said Daniel Burns, chairperson of B.C. Central. "Preparations to integrate our organizations are well under way, and we will continue to work diligently toward a smooth transition."
The combined organization, to be named Central 1 Credit Union, will provide payments, treasury, Internet banking and trade services to more than 200 credit unions in B.C. and Ontario, from offices in Vancouver and Mississauga.
"Keeping focused on the many tasks involved in uniting our organizations will remain our highest priority," said Sheena Lucas, chair of Ontario Central. "Our vision and goal remain the same - a larger organization with greater capacity to meet the future needs of a growing credit union system."
The two centrals announced the proposal to combine their organizations on October 6 last year, with a long-term vision that other provincial centrals would join later to create a single national organization serving credit unions throughout Canada.