UPDATE 3-Canada ABCP plan upheld, but appeal possible

(Adds comment from lawyer predicting appeal, details)

By Lynne Olver

TORONTO, Aug 18 (Reuters) - The Ontario Court of Appeal has upheld a lower court's approval of a restructuring plan for asset-backed commercial paper, putting investors a step closer to recovering at least some of the C$32 billion ($30.2 billion) the securities were worth before the market froze a year ago.

The unanimous ruling of three judges, released on Monday, is a blow to corporate noteholders who had objected to the restructuring plan for nonbank-sponsored commercial paper, known as ABCP.

This segment of the short-term debt market seized up in August 2007 as concerns grew about U.S. subprime mortgages, although it later became clear that subprime mortgages were not the main type of asset backing the securities.

The committee of large investors that drafted the restructuring plan last fall and winter said it expects the process to close by Sept. 30, if there are no further appeals.

But a lawyer for one corporate investor said he expects somebody will take the matter to the Supreme Court of Canada.

"I think there is likely to be an appeal from some source or another," said Howard Shapray, a Vancouver, British Columbia-based lawyer whose client, Ivanhoe Mines (IVN.TO), bought about C$70 million of asset-backed commercial paper in July and August of 2007.

Shapray said he was "disappointed" with the Ontario appeal court's analysis, but would have to discuss the matter of an appeal with his client.

Most of the 2,000 or so retail investors with frozen ABCP are eligible for special repurchase programs.

But corporate noteholders, including mining, drug and high-tech companies, are not eligible for such buybacks. They had objected to the restructuring plan, arguing that it improperly cut off their rights to sue banks and investment dealers, except in cases of possible fraud.

A number of them appealed a June 5 decision from Ontario Superior Court Justice Colin Campbell that had allowed the fix-it plan to proceed.

The three-judge appeal panel concluded Campbell had the authority to approve the plan and it declined to "interfere" with his finding that the plan was fair and reasonable.

"He was required to consider and balance the interests of all noteholders, not just the interests of the appellants, whose notes represent only about 3 percent of that total," the appeal panel said in its written decision.

"That is what he did."

The plan, crafted by industry participants, is considered the largest and most complex restructuring effort attempted in Canada.