Court upholds ABCP ruling

The Ontario Court of Appeal has upheld a lower court’s approval of the third-party asset-backed commercial paper (ABCP) restructuring plan.

In its decision, the Court of Appeal said it “ought not to interfere” in the decision “that the plan is fair and reasonable in all the circumstances.”

Since June 5 — when the Ontario Superior Court of Justice sanctioned the restructuring — ABCP investors have been waiting for a ruling regarding the plan’s fairness.

Certain creditors who opposed the plan appealed the decision.

Under the restructuring proposal, the affected ABCP will be exchanged for longer-term notes in which the terms match the terms of the underlying assets.

The plan was put together by The Pan-Canadian Investors Committee for Third-Party Structured ABCP, headed by lawyer and former Imasco chairman Purdy Crawford.

The committee was set up last year after a liquidity crisis threatened the Canadian ABCP market, which was triggered by a loss of confidence amongst investors stemming from the news of widespread defaults on U.S. subprime mortgages.

A number of investors and pension plan sponsors were hurt by the frozen ABCP market, most of all the Caisse de dépôt et placement du Québec. Earlier this year, the fund took a $1.9 billion provision on its $12.6 billion investment in ABCP.

“Our committee is now in a position to put the final steps in place to complete the restructuring plan and noteholders can look forward to the issuance of new notes and the establishment of a liquid market for them,” says Crawford. “Absent any further appeals, we expect the restructuring to close by September 30, 2008.”

Filed by Craig Sebastiano, BenefitsCanada.ca, craig.sebastiano@rci.rogers.com

(08/19/08)