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Judge extends protection for ABCP through May


April 15, 2008 at 11:03 AM EDT

TORONTO — An Ontario Superior Court judge has agreed to extend the bankruptcy protection that's covering Canada's $32-billion third-party asset-backed commercial paper market until the end of May.

Lawyers told Justice Colin Campbell that the extension is necessary because a vote on the plan to fix this market is scheduled for April 25, and the court would have to hold a sanction hearing after that date.

The committee that's working to salvage this market, led by Toronto lawyer Purdy Crawford, has warned that the sector could collapse if court protection were lifted before the market is fixed.

Meanwhile, Justice Campbell spoke toughly to a lawyer who said he wants permission to examine an executive from National Bank and an official from DBRS, as well as permission to carve out a new class of investors. The requests came from Allan Sternberg, a lawyer representing Montreal businessman Hy Bloom, whose companies are holding frozen ABCP and who is suing National Bank in Quebec Superior Court.

“We are rapidly running into a position where the relief that you are going to go past the vote time,” Justice Campbell said.

Mr. Sternberg's request to reclassify investors “would fundamentally change a plan that's been worked on for six months,” the judge said.

“I'm very reluctant to see the court have to get involved,” he added.

“Maybe you better go back and look at the consequences if this plan fails,” he told Mr. Sternberg.

“It is absolutely essential for thousands of Canadians that we get this plan done.”

Justice Campbell said he doesn't know that he has the authority to compel officials from National Bank and DBRS, and suggested Mr. Bloom should try to deal with some of his issues in the Quebec Superior Court.

Mr. Sternberg noted that if the restructuring plan for the ABCP sector passes, Mr. Bloom's lawsuit against National Bank would fall by the wayside because of blanket legal releases the plan grants to all of the major players who created or sold ABCP.


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