Financial Update

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· Gold +13.60 to $805.70US per ounce

Ruling on ABCP restructuring plan likely won't mark and end to courtroom battles

By David Friend, The Canadian Press

TORONTO - The Ontario Court of Appeal says the restructuring plan intended in part to unfreeze $32 billion of asset-backed commercial paper investments should proceed as planned - marking a major victory for individual investors.

In the decision released late Monday, the judges found that a decision made by an Ontario Superior Court judge two months ago should be upheld.

That earlier decision by the Superior Court had prevented ordinary corporate and individual investors from suing brokerages, financial services companies, the banks and bond rating agencies for millions of dollars in losses they suffered from the collapse of the asset backed short term investments last year.

The restriction on lawsuits was one of the main reasons the various players in the financial community, particularly the banks, and many investors, were able to agree on a broad restructuring plan to reimburse investors who lost money on the so-called ABCP investments.
"We ought not to interfere with his decision that the plan is fair and reasonable in all the circumstances," the appeal judges wrote.

"Implementation of the plan, in his view, would work to the overall greater benefit of noteholders as a whole. I can find no error in principle... It was his call to make."
The appeals court decision marks a significant step for small investors who have been trying to get their money back from the failed investments since the market froze last year.
If the court had decided against the restructuring plan it would have wiped out months of preparations intended to move past the process.

Canadian ABCP was a victim of last summer's crisis in U.S. subprime mortgages, amid worries that some of the paper was tied to dodgy U.S. home loans, in addition to bundles of higher-quality mortgages, car loans, credit card receivables and other assets.

Many corporate investors relied on bond rating agencies, who rated the debt as an acceptable risk, and poured milliions of dollars into the short-term investments, hoping to get their money back quickly when they needed it.

However, the investments were frozen last summer because the financial community could not value the ABCP investments.

A rescue plan was hatched by the Pan-Canadian investors committee - representing very large investment groups, including pension plans - late last summer to clean up the problems, and was headed by Bay Street lawyer Purdy Crawford.

Individual investors who had chunks of their life savings in ABCP have seen that investment teeter on the brink of either being tied up for several years or wiped out if the rescue plan failed and the notes were dumped at a discount by the major players.

Some mid-sized investors, a number of corporations and large individual investors with ABCP holdings of more than $1 million but less than hundreds of millions, launched the appeal. Many regard themselves as disadvantaged by the plan.

"Each of the appellants has large sums invested in ABCP - in some cases, hundreds of millions of dollars. Nonetheless, the collective holdings of the appellants - slightly over $1 billion - represent only a small fraction" of the ABCP, the judges wrote.