By Joe Schneider and Doug Alexander

May 2 (Bloomberg) -- A Canadian judge agreed to consider the approval of a restructuring plan for C$32 billion in Canadian commercial paper May 12 and 13, as long as banks agree to extend a so-called standstill agreement that froze the debt market.

Ontario Superior Court Judge Colin Campbell said he preferred to begin the hearing in 10 days to give himself time to review submissions from lawyers who oppose the immunity banks and brokerages that sold the debt get under the plan. Campbell also said he'd need time to issue a ruling after the hearing.

In a restructuring of ``this magnitude and this importance, I don't think it's fair to me'' to make a ruling overnight, Campbell said as he urged the banks to extend the standstill agreement. His only other option was to hold the hearing May 7 and May 8, Campbell said. The agreement expires May 9.

Peter Howard, whose clients include Bank of America, HSBC and other non-Canadian banks that provided funding guarantees on the commercial paper, said he wasn't in a position to give assurance the deadline would be extended.

He will ask for instructions from his clients and get back to the judge ``as soon as I can,'' Howard said. ``A request from a judge is received very differently'' than a request from a lawyer, he said.

Standstill Agreement

The group of foreign banks as well as Canadian lenders and pension funds led by Caisse de Depot et Placement du Quebec negotiated the so-called Montreal Proposal on Aug. 16. Under the accord, the banks agreed they wouldn't demand collateral from the affected trusts and those funds wouldn't ask banks for emergency funding.

The standstill agreement has been in place while a group led by lawyer Purdy Crawford worked on a plan to restructure the debt, which was supposed to mature within 364 days. The group filed an agreement in Ontario court on March 17, proposing commercial paper from 20 trusts be swapped for new notes maturing within nine years.

The main issue of contention in the plan is an agreement that would protect banks and brokerages that sold the notes from any future lawsuits.

``The releases are invalid and we will maintain that position,'' James Woods, who represents 18 companies that want to sue including Jean Coutu Group Inc., told the judge today.

Hearing Delayed

Campbell last week delayed the hearing on the plan to get more information on the lawsuits.

Ernst & Young Inc., the accounting firm appointed by Campbell to monitor the restructuring process, gave the judge a summary listing of more than five dozen potential lawsuits. Some were provided on the condition they remain confidential, Ernst & Young's lawyer Craig Hill told the judge. Those are listed in the report as, for example, ``Claimant 1'' versus ``Dealer 3.''

Among companies indicating they wanted to sue are Aeroport de Montreal, Air Transat AT Inc., Cinar Corp., Domtar Inc., Ivanhoe Mines Ltd., Jura Energy Corp., Labopharm Inc., Pomerleau Inc., Redcorp Ventures Ltd., Tecsys Inc., WebTech Wireless Inc., Wynn Capital Corp. and Xceed Mortgage Corp.

The complaints are generally the same in all cases, with companies accusing banks and dealers of breach of contract, misrepresentation and negligence.

The case is Between the Investors Represented on the Pan- Canadian Investors Committee for Third-Party Structured Asset- Backed Commercial Paper and Metcalfe & Mansfield Alternative Investments II Corp., 08-CL-7740, Ontario Superior Court of Justice (Toronto).

To contact the reporters on this story: Joe Schneider in Toronto at jschneider5@bloomberg.net; Doug Alexander in Toronto at dalexander3@bloomberg.net.