ABCP rescue plan opponents argue top court should hear case
A group of companies led by Jean Coutu Group filed a brief with the Supreme Court of Canada on Monday asking it to block a rescue plan for about $32 billion of asset-backed commercial paper (ABCP).
The group, which includes Domtar Inc., Jazz Air LLP and about a dozen other companies that held the investments, insists that the case is of national importance and merits the high court's consideration.
The Montreal-based pharmacy chain and its allies were responding to supporters of the rescue plan who filed a brief last week that maintained their opponents haven't "raised any issue of national importance" that would warrant review by the Supreme Court.
The top court is deciding whether to hear an appeal of an Ontario Court of Appeal decision which upheld a Superior Court ruling that removed a major roadblock for the rescue plan.
The group said the affected companies are based in several provinces and represented by law firms across the country and that the issues in the case "cannot be left to the sole determination of the Ontario courts."
ABCP was considered to be a low-risk investment, because the notes were backed by assets ranging from credit card and car-payment receivables to more esoteric financial derivatives.
It was supposed to be a short-term investment that would mature within a year, but the erosion of the U.S. sub-prime mortgage market in 2007 disrupted the ABCP market and left investors unable to redeem their notes.
A restructuring plan worked out by a committee headed by Bay Street lawyer Purdy Crawford would see the issue of new notes that will mature in several years and take care of individual investors with less than $1 million in ABCP by enabling them to sell their notes immediately without taking a big financial hit.
One of the dissident group's biggest complaints is that the rescue plan would all but remove their ability to seek compensation from their financial advisers or others involved with the sale of the ABCP to them — except in cases of fraud.
It also would not compensate mid-sized investors for having to wait to get their money or sell the notes at a discount.
About $32 billion of ABCP issued by special non-bank trusts has been frozen for more than a year. Much of it held by Canadian pension plans, but smaller amounts are held by companies and individuals.
With files from the Canadian Press
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