By Lynne Olver and Randall Palmer
TORONTO/OTTAWA (Reuters) - The Supreme Court of Canada declined on Friday to hear a legal challenge to a proposed restructuring of the country's nonbank asset-backed commercial paper market, ending months of uncertainty and clearing the way for an unprecedented overhaul to go ahead.
As usual, the court gave no reasons for its decision.
The restructuring plan covers short-term debt securities that were worth C$32 billion ($30.5 billion) before concerns over U.S. credit quality caused a market spasm in August 2007.
The court decision will enable investors to eventually start recovering some of their money, and the group of large investors that started crafting the workout plan a year ago said it will try to implement the plan in October.
"We're obviously pleased that we can move forward quickly to complete the transaction," said Purdy Crawford, a lawyer who spearheaded the investor committee's efforts.
Corporations that owned some of the commercial paper had fought the plan, but the Supreme Court of Canada turned down their appeal request. The Ontario Court of Appeal had already upheld a lower court's decision to let the plan proceed.
In the nonbank ABCP market, small structured-finance companies set up trusts that issued commercial paper to large institutional investors and corporations looking to park cash for short periods. The paper was "backed" by longer-term assets such as receivables, mortgages and other loans.
Corporate investors owning more than C$600 million of the paper complained that the proposed restructuring plan, designed to help recover some of their money, was full of uncertainty and would unfairly prevent them from suing banks and brokerages, except in cases of fraud.
These challengers included Jean Coutu Group , Domtar Inc, Jazz Air LP, Ivanhoe Mines , Webtech Wireless and Sabre Energy Ltd.
Some of the commercial paper also wound up in the accounts of retail clients of Canaccord Capital Inc , Credential Securities and National Bank of Canada . National Bank, the country's sixth-largest bank, bought back C$2.1 billion worth of commercial paper from its retail customers a year ago, and offered special credit to other customers.
Most of the remaining 2,000 or so retail investors are eligible for special repurchase programs when they receive their new, restructured notes, but many corporate noteholders were not offered similar deals.
Spokesmen for National Bank and the Caisse de depot et placement du Quebec -- a huge pension fund manager that held about C$13 billion of the ABCP -- said they were pleased with the ruling.
"With this final decision, we just want to look in front of us and work with our customers," said National Bank spokesman Denis Dube.
"It is another important step and is good news for all noteholders and for our depositors," Caisse spokesman Mark Boutet said in an e-mail.
Finance Minister Jim Flaherty said that he welcomed the end of the legal hurdles for the restructuring plan.
And Vancouver, British Columbia-based Canaccord said in a statement that it is "eager" to restore funds to its clients who were hurt by the market disruption.
Shares of Canaccord could rally on Monday, as the ABCP saga in which it played a starring role seems to be drawing to a close, although one analyst said bigger financial-market influences could drive trading in Canaccord stock.
Gabriel Dechaine, an analyst with Genuity Capital, said if there are no major U.S. financial developments over the weekend, then Canaccord's stock -- down 45 percent so far in 2008 -- could get a lift from the Supreme Court's refusal to hear an appeal.
But Dechaine currently rates the shares "hold," and noted that brokerages are suffering from the widespread market turmoil.
($1=$1.05 Canadian)
(Reporting by Lynne Olver in Toronto, and Randall Palmer and David Ljunggren in Ottawa; editing by Rob Wilson)
