Just finished re reading the appeals court 3 panel rejection of the note holders. Its worth a read just to refresh why the noteholders have little chance of succeeding. Also shows how Fung has moved from stating they want to stay in CCAA protection to a more negotiable approach. Maybe this was to show movement.

http://italaw.com/sites/default/files/case-documents/italaw1090_0.pdf

Some high lights:

b. Loss of leverage
[76] In Crystallex’s view, a reduction of the Noteholders’ leverage was
desirable. It points to the Noteholders’ competing CCAA application, seeking to
cancel all of the shareholders’ equity, which the supervising judge rejected as not
fairly balancing the interests of all stakeholders. The Noteholders’ plan,
subsequently proposed, would entitle them to 46 per cent of the equity in return
for giving up their Notes, which Crystallex also views as excessive.5

5 The Noteholders proposed that they receive 22.9 per cent of the equity for the $36 million needed for the arbitration and 58 per cent of the equity in return for giving up their Notes, for a total of approximately 81 per cent of the equity. Assuming that the Noteholders sought a maximum total entitlement of 81 per cent, if they advanced the $36 million on the terms of the Tenor DIP Loan, as they now seek to do, the amount of equity on conversion of their notes would be 46 per cent.

[77] Crystallex argues that the Noteholders are not contractually entitled to
convert their Notes to equity, and should therefore not be entitled to do so.
Moreover, they argue, in the event of bankruptcy, the Noteholders would only be
entitled to recover their principal and interest at the statutory rate of 5 per cent
under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, and, if the arbitration is realized, they will be entitled to the higher rate of interest they are
contractually entitled to under the Notes.

[81] The Noteholders are sophisticated parties. They pursued a strategy. It
ultimately proved less successful than hoped. It appears that the supervising
judge would have been prepared to approve the advance of funds to Crystallex
by the Noteholders, on the terms of the Tenor DIP Loan, notwithstanding the
Soundair principles, had the Noteholders agreed to do so, without condition, on
April 5, 2012.

[82] The facts of this case are unusual: there is a single “pot of gold” asset
which, if realized, will provide significantly more than required to repay the
creditors. The supervising judge was in the best position to balance the interests
of all stakeholders. I am of the view that the supervising judge’s exercise of
discretion in approving the Tenor DIP Loan was reasonable and appropriate,
despite having the effect of constraining the negotiating position of the creditors.

[90] While Mr. Fung initially indicated that Crystallex’s plan was to stay
creditors’ claims until the arbitration was settled or realized, his more recent
evidence was that approval of the Tenor DIP Loan does not preclude further
discussions about a plan with the creditors. In submissions before the
supervising judge, and again before this court, counsel for Crystallex reiterated
that Crystallex intended to exit from CCAA protection as soon as a plan was
negotiated with the creditors and approved, and that Crystallex intended to
negotiate a plan by the expiry of the stay on July 30, 2012. The supervising judge
found that Crystallex intended to negotiate a plan with its creditors. There is
some basis in the record for such a conclusion.

[93] I agree. While the approval of the Tenor DIP Loan affected the
Noteholders’ leverage in negotiating a plan, and has made the negotiation of a
plan more complex, it did not compromise the terms of their indebtedness or take
away any of their legal rights. It is accordingly not an arrangement, and a creditor
vote was not required. In this case it was within the discretion of the supervising
judge to approve the Tenor DIP Loan.