UPDATE 1-Coventree says OSC investigating company's IPO

TORONTO, Jan 26 (Reuters) - Coventree Inc COF.TO said on Monday that the Ontario Securities Commission was seeking more information on the company's initial public offering that was completed in November 2006.

The small Canadian structured-finance company, which recently announced it would wind down its operations, said it is cooperating with the OSC investigation and that no formal proceedings had been commenced against it.

Coventry said that if formal proceedings were commenced, it would incur additional expenses, and may be required to pay monetary penalties which could be "substantial."

The company said that in connection with the OSC investigation it agreed that it would not make any cash or other distributions to shareholders without having given at least 45 days' prior written notice to the OSC.

In early 2008 the OSC said it was looking into Coventree's participation in the asset-backed commercial paper market and various timely disclosure issues as part of a wider investigation into the ABCP market.

Coventry said on Wednesday it would start to wind down its operations now that a plan to restructure billions of dollars of nonbank ABCP has been finalized.

The company, which was hard hit by the meltdown of the nonbank ABCP market, said it would begin to reduce staff, including its senior officers, retaining only the few employees required to finalize the wind-down. It said it has not yet taken any steps to formally commence the wind-down.

Coventry expects to be paid approximately C$9.4 million ($7.7 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 ABCP restructuring plan earlier in the month, 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=$1.22 Canadian) (Reporting by John McCrank; editing by Alden Bentley)