Wednesday, June 04, 2008
Just before noon yesterday lawyers
involved in the restructuring of
$32-billion of asset-backed
commercial paper concluded their
final arguments and headed off to
lunch, some of them stopping in
outside the courtroom to
congratulate Purdy Crawford, the
head of a committee that spearheaded
Ontario Superior Court Justice Colin
Campbell has yet to issue a decision
but he made clear several times
during the proceedings which way he
"Unless I see something remarkable
in my notes, I'll approve," he said,
signalling the conclusion of what he
jokingly called the "semifinals" of
Lawyers for several note-holder
groups say they will appeal if Judge
Campbell gives the plan the green
light. Because of the significance
of the restructuring -- the ABCP
crisis is one of Canada's
biggest-ever market meltdowns -- the
appeals process would be expedited.
Final approval of the plan would
clear the way for the conversion of
the frozen paper into long-term
Proponents say investors will get
most of their money back if they
hold the notes until about 2017 when
they mature, but it is far from
clear if there will be a liquid
market if they want to sell in the
In comments to reporters, Mr.
Crawford said the workout could be
completed as early as the end of
this month if there are no appeals.
However he suggested more court
hearings are likely, saying "we
still have a lot of hills to go."
The ABCP market fell apart in August
after investors stopped buying the
notes because of concerns about
exposure to subprime mortgages.
When issuers were unable to roll
over maturing notes, a group of
major investment dealers and banks
agreed to halt trading in the
securities while they mapped out a
If it is implemented, about 1,800
individual investors will get their
money back thanks to "relief " plans
put together by investment dealers.
Larger players such as pension funds
like the Caisse de depot et
placement du Quebec are also
expected to recoup most of their
But corporate holders are not so
lucky and many are bitterly opposed
to the plan.
They are particularly angry because
it provides immunity from legal
action to all the ABCP market
participants, effectively taking
away their right to go to court to
get their money back.
In a bid to make it more palatable
to them, the plan proponents made a
last-minute amendment giving
noteholders limited ability to sue,
but only for fraud.
James Woods, a lawyer representing a
group of Quebec noteholders, called
the amendment "cosmetic." Mr. Woods
said claims should not be
straight-jacketed by restrictions
that make it "extremely difficult"
to establish a case.
Mr. Woods said Canada's reputation
would be hurt if the restructuring
goes ahead and several months later
it becomes apparent there was fraud
but the perpetrators were protected
But Judge Campbell complained that
Mr. Woods had been unable to come up
with a single example of such a
"Mr. Woods, it is time to put up or
shut up on that one," he said.