Ontario Superior Court Judge Colin Campbell on May 16 delayed ruling on the plan, saying he wasn't satisfied demands by banks for protection from lawsuits were legal or fair.
``The applicants, asset providers and Canadian banks have engaged in extensive discussions with a view to addressing the court's concerns,'' Ernst & Young International's Canadian unit, the court-appointed accounting firm overseeing the restructuring, said in a report posted today on its Web site.
Failure to win the judge's approval threatens the restructuring plan, which might lead to a fire sale of the insolvent commercial paper, lawyers in the case have said. The paper hasn't traded since August when investors shunned the debt over concerns about links to U.S. high-risk mortgage loans.
A group of foreign banks as well as Canadian lenders and pension funds led by Caisse de Depot et Placement du Quebec negotiated the so-called Montreal Proposal in August. The plan would convert the insolvent 30- to 90-day debt into new notes maturing within nine years.
The group, led by lawyer Purdy Crawford, proposed a way to resolve fraud claims by changing a clause giving sellers of the debt immunity from lawsuits.
Under the proposal, which takes more than three pages to define who can sue whom and when, the group created an exemption for cases in which sellers made fraudulent misrepresentations to the buyers of the debt.
Ken Rosenberg, an attorney for noteholders Redcorp Ventures Ltd. and Jura Energy Corp., opposed the immunity provision and said he'd have to read the proposal more closely before commenting.
``It appears to be very complicated,'' Rosenberg said today in a phone interview.
Insolvency protection for trusts holding the debt expires May 30. The group plans to ask the judge that day to extend the protection to June 30 on the assumption that the plan, if approved, will likely take effect in June.
The case is Between the Investors Represented on the Pan- Canadian Investors Committee for Third-Party Structured Asset- Backed Commercial Paper and Metcalfe & Mansfield Alternative Investments II Corp., 08-CL-7740, Ontario Superior Court of Justice (Toronto).