April 23, 2008 at 7:44 AM EDT
Lawyers for corporations stuck with frozen asset-backed commercial paper
packed a Toronto courtroom to implore a judge overseeing the $32-billion
restructuring plan for the seized up market not to take away their right
to sue for losses, a last-ditch attempt to change the terms of the deal
before it goes to a vote Friday.
Companies ranging from miner Barrick Gold Corp. to drugstore chain Jean
Coutu Group Inc. to GPS-tracking company WebTech Wireless Inc. asked Mr.
Justice Colin Campbell yesterday to alter the terms of the planned
restructuring to give the corporations a better chance at recouping
They argue that the judge should strike down so-called "legal releases"
that protect players in the market from lawsuits or give the companies a
separate vote on the proposal, to give them more leverage in
The investors who created the plan, who will argue their case today as
hearings continue, say that the releases are a key part of the plan, and
changing it in any way will cause the proposal to fall apart, leading to
massive losses for all holders.
It's a very high-stakes game of brinksmanship, with losses of tens of
billions of dollars possible if the plan fails, and Judge Campbell
returned again and again throughout yesterday's arguments to the spectre
of a possible liquidation.
"There is not just a risk for one company," Judge Campbell said. "There
is a much broader risk there, of much greater magnitude."
As it stands, the corporate investors say they are being shortchanged.
Small retail investors are being bought out by their investment dealers
at 100 cents on the dollar should the restructuring succeed, but the
corporations have been left out of the buyout plans.
The corporations don't have enough votes to stop the restructuring
proposal, which is getting overwhelming support from the smaller
investors who have their eyes on the buyouts, leaving the courts as the
only option to seek changes.
As a result, the companies want to retain the right to sue for any
losses, something that would be waived under the legal releases that are
part of the restructuring plan.
The committee of investors that drafted the plan, which was led by
lawyer Purdy Crawford, has argued that the deal is a product of the "art
of the possible" and the best that was possible when negotiating amid a
That's no reason to let the plan go ahead, said James Woods, a lawyer
representing a group of Montreal companies, including Jean Coutu. He
countered Judge Campbell's questions about the consequences of failure
by arguing that the releases are illegal and the issue should not be
what is just possible but "what is legally possible."