In the news
May 12, 2015
Nortel’s $7 billion in assets to be divided proportionately, judges rule
By Steven Church
WILMINGTON, DELAWARE — Judges in the U.S. and Canada have rejected proposals by warring creditors of Nortel Networks Corp. for dividing more than $7 billion (U.S.) in cash and said the money will be distributed on a proportional basis once claims against the defunct Canadian phone-maker have been sorted out.
Tuesday’s long-awaited ruling is meant to resolve a legal dispute that pits 56,000 retirees from the company’s U.K. and Canada units against each other and U.S. bondholders, who are pressing to collect as much as $1 billion (U.S.) in interest.
The Canadian parent company, its U.S. unit and the U.K. unit proposed competing plans for dividing the money in a joint trial last year that linked courtrooms in Toronto and Wilmington, Delaware. But the judges went their own way, and scolded the creditor groups for not agreeing on a single allocation plan.
“The court can only speculate why the parties, all represented by the ablest of lawyers and sparing no expense, were unable to reach a settlement,” said U.S. Bankruptcy Judge Kevin Gross in Wilmington.
The judges said they will divide the money based on the debt each of the three entities must face after all of the claims have been resolved. The money will be divided by the total claims remaining and each Nortel entity will get its share.
For now, the cash is being held in trust. Most of it was raised when Nortel’s U.S. unit sold a bundle of patents in 2011 to a group that included Microsoft Corp., Apple Inc. and Sony Corp.
When Nortel filed for bankruptcy in 2009, it sought court protection from creditors in the U.S., Canada, the U.K. and France. Separate administrators oversaw each of the cases with separate law firms.
After the patents were sold, a dispute broke out among the units in Canada, where the parent company was located; the U.S., home of its most profitable operations; and Europe, where a U.K. pension plan covered 36,000 former workers.
Both judges Tuesday urged the contenders to accept their ruling and end the long-running bankruptcy case.
“These insolvency proceedings have now lasted over six years at an unimaginable expense and they should if at all possible come to a final resolution,” Ontario Superior Court Judge Frank Newbould in Toronto wrote. “It is in all the parties’ interest for that to occur.”
The case is Nortel Networks Inc., 09-bk-10138, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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