UPDATE 1-Coventree to wind down following ABCP deal

TORONTO, Jan 21 (Reuters) - Coventree Inc COF.TO said on Wednesday it would start to wind down its operations now that a plan to restructure billions of dollars of nonbank asset-backed commercial paper has been finalized.

The small Canadian structured-finance company, which was hard hit by the meltdown of the nonbank ABCP market, said it expects an unrealized loss from financial instruments of C$300,000 in its first quarter, ended Dec. 31.

It also said it would begin to reduce staff, including its senior officers, retaining only the few employees required to finalize the wind-down.

It also said it expects to be paid approximately C$9.4 million in fees under the terms of ABCP restructuring plan and that will "offset a substantial portion of the severance and other termination costs".

An Ontario Superior Court approved the C$32 billion ($25.7 billion) ABCP restructuring plan last week, 17 months after the market froze because of the credit crunch and left investors unable to sell or redeem the paper.

The restructuring involves issuing new long-term notes to investors in exchange for their short-term paper.

Coventree was one of the major players in the market for ABCP that was not sponsored by Canada's big banks. After the market seized up when investors became concerned about the worsening U.S. subprime-mortgage market, its stock price plunged, revenue dried up along with asset securitizations, and it had to lay off much of its staff.

($1=$1.26 Canadian) (Reporting by Scott Anderson)