A rating agency review that has kept some significant leveraged super senior players on the sidelines appears close to ending, allowing the firms to re-enter. The issue has centered on Canadian banks, whose conduits such as theBank of Montreal'sApex Trust, are key LSS investors and account for a significant portion of the global market. The banks have been holding off entering deals while the Dominion Bond Rating Service reviewed liquidity facilities of LSS deals. The review has kept global dealers on tenterhooks, as many significant Canadian investors require ratings from the local agency. After a conference call Tuesday, it appeared the agency was close to deciding on minimum liquidity requirements for the deals and would put together a standard interpretation of all liquidity agreements in the event of a market disruption.

"The purpose is to standardize liquidity and provide sufficient protection to [commercial paper] investors so the [asset-backed commercial paper] market can continue to grow and prosper," said Sean O'Connor, senior v.p. in structured finance at DBRS in New York, adding the project was started because of tremendous growth in the Canadian ABCP market. "A market disruption has never happened in Canada. But if it does, we want this market event to be interpreted the same way under every liquidity agreement."

DBRS proposed minimum liquidity language in a letter circulated April 18, but Jamie Feehely, senior v.p. in the CDO group in Toronto, said it is still developing market standards. DBRS has considered variations to the proposed language submitted in the interim and so far has approved that of ABN AMRO, Barclays Capital, HSBC and Merrill Lynch. Other liquidity providers have until Aug. 18 to submit language proposals, Feehely said. Officials at the banks either could not be reached or declined comment.