Canadian Court Rules on ABCP Restructuring Plan
Shortly after markets closed y/day the Ontario Court of Appeal announced a unanimous ruling endorsing a plan to swap C$32bln of insolvent Canadian commercial paper into longer-term notes or bonds, rejecting an appeal from note-holders opposed to a clause protecting banks from most lawsuits.
The ruling sets a new precedent in Canadian bankruptcy law by defining the scope of releases that may be granted in restructuring insolvent companies. The panel of judges said immunity may be granted for criminal conduct such as fraud in exchange for help in getting companies out of bankruptcy.
Canadian banks, including CIBC and RBC, are providing below-cost financing to the plan, while other institutions will assume increased risks in their credit-default swap contracts in exchange for the immunity, according to the 55-page ruling.
Several Canadian companies — including Jean Coutu, Hy Bloom, Aeroports de Montreal, and Ivanhoe Mining, who hold about C$1bln of commercial paper — argued the immunity is illegally broad because it strips paper owners of the right to sue for losses except in very narrowly defined circumstances of fraud. The ruling dismissed the objections.
Today Ivanhoe said it would seek a Supreme Court hearing.