By Frank Pingue
TORONTO (Reuters) - The judge overseeing a massive restructuring plan for Canada's nonbank asset-backed commercial paper market doesn't have the jurisdiction to give banks immunity from lawsuits, a lawyer told a court hearing on Tuesday.
A sticking point in the $32 billion court-approved restructuring plan is that it prevents corporate noteholders from suing the banks and brokerages that sold them the stricken asset-backed commercial paper, which has been frozen since last August.
Canadian banks have agreed to fund the restructuring plan as long as they are not sued, but opponents say the legal releases in the plan are too broad and could rule out fraud claims.
Granting such immunity is outside the court's jurisdiction, according to the submission made on Tuesday by Ken Rosenberg, who represents noteholder Ivanhoe Mines Ltd.
"One of the problems in this case is everybody is swinging for the fences and we don't have to swing for the fences in this case," Rosenberg said. "Sanction this plan within the jurisdiction of the court."
The comments were made during the second day of a scheduled two-day hearing on the fairness of the restructuring plan. The judge in the case has not yet said when he expects to present his decision.
During Monday's hearing, the group spearheading the plan said its overwhelming approval last month in a vote by investors should be enough to see the plan through.
The intricate plan was approved at a meeting on April 25 by 96 percent of noteholders. The banks that back the deal insist on immunity as compensation for concessions they are making. They have threatened to walk away if the immunity is removed.
"They need this plan as much as we need this plan and they are playing chicken with the court," Rosenberg said. "You can sanction it, and you can tell them to live with it."
The market for ABCP issued by nonbank trusts ground to a halt last summer on concerns sparked by deteriorating U.S. subprime mortgage debt.
(Reporting by Frank Pingue; Editing by Peter Galloway)
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