A settlement has been reached to end a lengthy battle over divvying up the US$7.3 billion raised in Nortel Networks Corp.’s bankruptcy liquidation.
The decision could bring some certainty for about 20,000 Nortel pensioners in Canada who have seen their benefits dramatically reduced since the bankruptcy filing in 2009.
The former Canadian technology giant filed for bankruptcy in 2009 following an accounting scandal. At its height from 1999 to 2000, Nortel was worth nearly $300 billion and employed more than 90,000 people globally.
The deal announced Wednesday follows years of courtroom battles over Nortel’s remaining assets, which mostly came from the sale of certain parts of the company when it folded.
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Under the deal, Nortel’s Canadian debtors will receive about 57 per cent of the sales proceeds, which amounts to about US$4.1 billion. U.S. debtors will get 24 per cent, or about $1.8 billion, and the remainder is expected to be paid to debtors in Europe.
The settlement — which still needs approval in Canada, France, the United States and the United Kingdom — would clear the way for pensioners and other creditors to receive payment.
The legal battle over Nortel’s assets began in May 2014 and involved judges in Canada and the U.S. The hearings were aimed at allocating billions of dollars among various Nortel companies worldwide so they could pay creditors, including bondholders, the Canadian Nortel pensioners and approximately 40,000 U.K. Nortel pensioners.
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The Nortel trial is considered one of the largest bankruptcy cases in Canadian history. The cost of Nortel’s demise has climbed well above US$1 billion over the past five years, with legal expenses eating away at money that would otherwise be available to be divided among the various parties.
In May, Ontario’s top court rejected an application by a group of U.S. bondholders to appeal a decision from 2015 on how the US$7.3 billion in assets should be divided. A panel of three judges from the Ontario Court of Appeal ruled that reasons put forth by the group contained “no merit” and were dismissed.
In its ruling, the appeal court expressed frustration over the delays and legal battles that have been staged in the case. It noted that it has been seven years since the bankruptcy filings, and more than 6,800 former Nortel employees and pensioners had died by then with legal costs climbing well above US$1 billion.