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ABCP challengers file arguments with court

September 2, 2008 at 4:39 PM EDT

Corporate challengers to the $32-billion restructuring plan for the asset-backed commercial paper market have filed their arguments with the Supreme Court of Canada, arguing the high court needs to hear the case because it is of national importance.

The challengers are upset that the plan virtually takes away the right to sue the financial institutions that sold the paper, under the terms of legal releases. The backers of the plan say that the restructuring isn't possible without the releases, which were a condition of support from the banks that are a key part of the plan.

Challengers, which include Domtar Inc. and Jazz Air LP, argue that the releases aren't allowed under Canadian bankruptcy law and that the Ontario courts were wrong to declare the plan fair and legal.

The case raises “issues of public and national importance, which will impact upon many Canadian companies, individuals, debtors, creditors and investors as well as numerous other participants in the Canadian investment and business community,” James Woods, a lawyer for Domtar and Jazz, wrote in a submission Tuesday to the Supreme Court.

Both the challengers and the committee that crafted the restructuring plan have asked the Supreme Court to speed up its usual process for hearing a case so that investors who have been stuck with the paper since last August can get a decision sooner. If the court allows the plan to go ahead, the proposal calls for swapping the frozen paper for freely trading bonds.

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