A U.S. bankruptcy court judge approved an application Tuesday, seeking to make the controversial Canadian restructuring plan of C$32 billion in toxic asset-backed commercial paper enforceable in the U.S.

Ernst & Young, which was appointed monitor by an Ontario court in March, petitioned the U.S. Bankruptcy Court for the southern district of New York to import, in its entirety, the restructuring plan under chapter 15 of the U.S. bankruptcy code. U.S. Judge Martin Glenn approved the decision, Ken Coleman of Allen & Overy LLP told Dow Jones. Allen & Overy represents Ernst & Young.

"It closes the door now to any litigation either in Canada or in the U.S.," says Diane Urquhart, an independent financial analyst.

The plan of arrangement, as proposed by Pan-Canadian Investors Committee under the provisions of the Companies' Creditors Arrangement Act, was approved by an Ontario court in June. CCAA is, in essence, the equivalent to U.S. Chapter 11 bankruptcy protection.

As part of the plan, which was hammered out by lawyer Purdy Crawford, the major players and promoters in Canada's ABCP market -- from the banks to the brokers and credit-rating agencies, as well as the Crawford committee -- received releases that protect them from lawsuits.

The firms that sold the paper to both Canadian- and U.S.-affiliated investors include: Deutsche Bank (DB), Merrill Lynch (MER.XX), HSBC Bank (HSB.PR.A-T), UBS AG (UBS), Citigroup (C), Swiss Re (SWCEY), Wachovia (WB) and Bank of America (BAC).

-By Caroline Van Hasselt, Dow Jones Newswires; 416-306-2023; caroline.vanhasselt@dowjones.com
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