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Judge approves ABCP deal

June 5, 2008

An Ontario judge has approved the plan to restructure $32-billion of asset-backed commercial paper, moving individual and corporate investors closer to recovering troubled investments that have been frozen since last August.

Mr. Justice Colin Campbell of the Superior Court of Ontario issued reasons for his decision to approve a plan that was challenged by a number of individual and corporate investors.

The plan grants a sweeping immunity to every bank, rating agency and other major funds that helped nurture the market. The immunity will shield the ABCP players from future lawsuits related to the investment crisis. Not protected from this immunity are brokerages or dealers that may have fraudulently sold the troubled notes to investors.

A number of investors have challenged the legal release, but architects of the restructuring said it was necessary to win bank and other backers' financial support and concessions that are central to the plan.

Judge Campbell said in his reasons: “The plan does in my view represent a reasonable balance between benefit to all noteholders and enhanced recovery for those who can make out specific claims in fraud.”
It is widely expected that some investors will seek to appeal the judge's decision, meaning that investors may have to wait at least another month to receive money or new securities that will be issued under the plan.

“We are gratified that the court has approved the restructuring plan and determined that is was fair,” said Purdy Crawford, chair of the investors' committee, that led the restructuring.

“After nine months of arduous negotiations with, and compromise among all stakeholders, we are poised to bring this process to a successful conclusion for the benefit of noteholders.”

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