Global Diversified Investment Grade Income Trust - Status of the Disengagement Transaction

    MONTREAL, Aug. 22 /CNW Telbec/ - Further to the recent judgment from the
Court of Appeal of Ontario on the proposed ABCP plan of arrangement, Global
Diversified Investment Grade Income Trust ("Global DIGIT") (TSX: DG.UN) is
making an update on the status of its disengagement transaction with MMAI-I
Trust ("MMAI").

    Assets of Global DIGIT and Withholding of Payments by MMAI

    Substantially, all of the assets of Global DIGIT consist of three credit
default swaps ("GD Swaps") entered into with MMAI and the related collateral
to secure obligations under the GD Swaps. The GD Swaps are mirrored by
back-to-back credit default swaps (the "MMAI Swaps") between MMAI and Deutsche
Bank A.G. (the "Bank"). MMAI also entered into three other swaps with the
Bank, pursuant to which and in order to secure its obligations toward the
Bank, it issued asset-backed commercial paper ("ABCP") to purchase collateral
which was pledged to the Bank.
    The payment provisions under the MMAI Swaps are mirrored by those of the
GD Swaps, such that for each payment obligation of the Bank to MMAI under the
MMAI Swaps, there is a corresponding payment obligation from MMAI to Global
DIGIT and vice versa. However, in certain circumstances, MMAI's position is
that it has the right to withhold payments received from the Bank. On
August 14, 2007, as MMAI had not rolled over its matured ABCP and ceased
payments on such ABCP, it decided to withhold payments to Global DIGIT.
    As a result of diverging views with respect to the rights of MMAI and
Global DIGIT with respect to the amounts received from the Bank, the amounts
withheld were segregated into an escrow account pursuant to a Standstill
Agreement entered into by Global DIGIT and MMAI. In the escrow account an
amount of about $0.61 per unit has been accumulated as of July 31, 2008.

    The Disengagement Transaction

    On December 21, 2007, Global DIGIT entered into an agreement with MMAI in
order to negotiate in good faith a transaction pursuant to which MMAI would
effectively be replaced by the Bank as counterparty to the GD Swaps that are
presently in force between Global DIGIT and MMAI (the "Disengagement
Transaction") and would severe all relations between Global DIGIT and MMAI and
disengage MMAI from Global DIGIT's current structure.

    The Plan

    On March 20, 2008, noteholders members of the Pan-Canadian Investors
Committee for Third-Party Structured Asset-Backed Commercial Paper (the
"Committee") filed with the Ontario Superior Court of Justice a plan of
compromise and arrangement (the "Plan") pursuant to the Companies' Creditors
Arrangement Act in respect of the ABCP of certain issuer trustees, including
the issuer trustee of MMAI.
    On June 5, the Plan was sanctioned by the Court and further to an appeal
to the Court of Appeal of Ontario by certain dissident noteholders holding
ABCP, this court unanimously dismissed the appeal on August 18 and upheld the
Plan as proposed. The judgment of the Court of Appeal of Ontario could be
appealed to the Supreme Court of Canada by dissident noteholders with leave of
said Court. The leave to appeal, if granted, and a timetable for a hearing
before the Supreme Court is uncertain. It is envisaged by the Committee that
if the leave to appeal is not granted by the Supreme Court or if there is no
appeal, the implementation of the Plan would occur on or about September 30,
    Completion of the Disengagement Transaction and the resumption of the
distributions and redemptions depend on the successful implementation of the
Plan and is expected to become effective on the date that the Plan is
implemented. If the Disengagement Transaction is completed, distributions and
redemptions would resume, and it is anticipated that the distributions would
generally be at the same level as was previously the case (subject to losses
upon the occurrence of credit events and the costs of the Disengagement
Transaction which cannot presently be assessed), until the next reset date
(September 7, 2009). Funds available to pay distributions and redemptions
would flow directly from the Bank and would no longer be dependent on MMAI's
ability to renew or replace its outstanding indebtedness or otherwise be
subject to any claim by MMAI to withhold payments to Global DIGIT. Funds held
in the escrow account under the Standstill Agreement would be released in full
to Global DIGIT, as well as the amounts which have been accreting in respect
of the residual amount that would otherwise have been payable to Global DIGIT
at the maturity date of the GD Swaps which amounted to approximately $0.45 per
unit as of July 31, 2008.

    About Global DIGIT

    Global DIGIT provides an economic interest in a mezzanine tranche of
credit default swap in respect of portfolios of synthetic corporate exposures,
mortgage-backed securities, asset-backed securities and structured finance

For further information:

For further information: François Rivard, (514) 879-6405;

Organization Profile

Global Diversified Investment Grade Income Trust

More on this organization

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890