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Canada Commercial Paper Holders Face More Delays From Appeals

By Joe Schneider and Doug Alexander

April 28 (Bloomberg) -- Investors holding C$32 billion ($31.8 billion) of Canadian debt that's been frozen since August face more delays getting their money back because some noteholders may appeal a restructuring plan approved last week.

Opposition from corporate noteholders, including gold miner Barrick Gold Corp., will keep the issue before courts for as much as a year as appeals get resolved, lawyers said.

"If there are appeals, it would delay the completion of the transaction,'' said Stephen Halperin, a lawyer representing a group of institutional investors led by Purdy Crawford who crafted the plan to convert the short-term debt into longer-term notes.

Appeals are likely because Barrick and other investors aren't willing to give up their right to sue the banks that sold the asset-backed commercial paper, said Richard Powers, a lawyer and executive director of MBA programs at the University of Toronto's Joseph L. Rotman School of Management. He said the debate over the legal releases, which are a condition of the debt swap that was approved by investors on April 25, may have to be resolved by the Supreme Court of Canada.

"Look at the parties,'' Powers said in a telephone interview. "They have lots of resources and they have a lot at risk here. It's only to their advantage to push it.''

Ontario Superior Court Judge Colin Campbell said last week he plans to consider the legal releases at a hearing on the debt swap May 2. Investors have 21 days after that to file an appeal.

"The court is simply not in a position to make an informed decision on what may or may not be appropriate claims to be released without more information,'' Campbell wrote on April 24.

Other Releases

Legal releases given to third parties in a company restructuring have been thrown out as improper by appeal courts in Quebec and Alberta, said Ken Rosenberg, who represents noteholder Ivanhoe Mines Ltd.

The releases are legal and valid, Benjamin Zarnett, who represents Crawford's group, told Campbell. He pointed to restructuring cases including that of Ontario steelmaker Stelco, in which third parties were protected from lawsuits. The banks that agreed to provide back-up financing for the new notes will withdraw their support if the legal protection is removed, Zarnett said last week.

The banks "are providing value that underpins the plan,'' Zarnett said. "The entire plan is null and void if any part of it is found illegal or invalid.''

Halperin said any appeals can be dealt with quickly by the courts. Investors won't receive the new securities until the appeals have been heard, Crawford said.

"This is commercial litigation and the appeal courts will move reasonably quickly to accommodate us,'' Halperin said. "It won't be years.''

Not Welcome

Further delays won't be welcomed by investors who've been unable to access their investments since August. Clients of Canaccord Capital Inc. and Credential Securities Inc. who hold less than C$1 million would get all their money back once the swap is completed, while noteholders with more than that can sell at a discount once the debt begins to trade, or hold them to maturity.

"It'll make me a complete basket-case,'' said Jill O'Hara, when asked about another delay. O'Hara is a 52-year-old paralegal who faces the prospect of losing her Victoria, British Columbia home unless she can tap C$255,000 tied up in the debt.

"It'll be quite devastating if they do grant them an appeal and it does go on, because I'm back to square one,'' she said.

The case is Between the Investors Represented on the Pan- Canadian Investors Committee for Third-Party Structured Asset- Backed Commercial Paper and Metcalfe & Mansfield Alternative Investments II Corp. File No. 08-CL-7740. Ontario Superior Court of Justice (Toronto).

To contact the reporters on this story: Joe Schneider in Toronto at; Doug Alexander in Toronto at

Last Updated: April 28, 2008 00:04 EDT

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