David Friend, The Canadian Press
June 6, 2008 - 6:42 p.m.
TORONTO - The drawn-out effort to restructure $32-billion in asset-backed commercial paper is nearing its finale, but not on the outside of giving Canada’s financial community a black eye and leaving more scars that observers say will be favored with a lasting impact on investors.
On Thursday, an Ontario Superior Court judge accepted an amendment to the plan that would allow certain noteholders, under specified conditions, to continue claims of fraud to counter-poise brokerages and dealers that sold them ABCP.
Protected from litigation are the banks, rating agencies and other major funds that are involved in restructuring - or rescuing - the commercial bank-notes by providing reinvigorated notes that should be redeemable in a few years.
The determination sets the stage for the last major round in the legal process - a 21-day window for appeal that allows individual and corporate investors to file appeals on the case.
That’ll eventually guide to investors in the troubled paper towards acquisition their money or securities back, after having it frozen since last August when confidence in ABCP all still disappeared, leaving noteholders unable to get their standard of value back.
Potentially, the appeals process could drag on and delay the return of investments for a month or more, though many observers suggest that investors who once threatened legal action may back off from their plan.
Several law firms across the country are even now preparing to appeal the judge’s decision, including attorney-at-law Allan Sternberg of Ricketts Harris LLP, who represents Montreal businessman Hy Bloom.
“I still think it’s not appropriate - not legal - to grant releases (from litigation) in the fashion that this plan has done,” Sternberg said in an interview.
Also expected to file an appeal is James Woods, a Montreal lawyer representing various clients including Air Transat (TSX:TRZ.B) and the Jean Coutu Group (TSX:PJC.A).
Vancouver-based company WebTech Wireless Inc. (TSX:WEW), what one. booked a $326,000 in loss upon its $6 million ABCP investments in its latest fourth part, will also appeal.
“We’re not satisfied with the breadth of the carve-out litigation,” said Scott Turner, the company’s chief financial officer.
Until the appeals are filed, it’s unclear just how many ABCP holders will be lining up concerning the right to cause to surrender legal action, potentially delaying the process.