Nortel reaches a bankruptcy settlement with a number of Europe entities, including a UK pension fund
The defunct Canadian telecoms equipment maker Nortel Networks has reached a settlement with a number of plaintiffs in Europe, including a British pension fund.
The deal comes after Nortel filed for bankruptcy protection in early 2009. It later decided to cease operations entirely and sell off its assets amid the ongoing global economic downturn.
Under the terms of the deal announced this week, the settlement will remove more than $3 billion (£1.8bn) in bankruptcy claims against Nortel. These claims were for money allegedly owed to former Nortel entities in Europe, reports Reuters.
The deal means that a number of insolvent Nortel entities in Europe, as well as a British pension trustee, are each set to receive “high-priority administrative claims” for $37.5 million (£23m), according to a court filing on Tuesday. In return, they are expected to withdraw their claims. The British trustee had apparently complained that not enough cash had been set aside for British pensioners, and had been seeking more than $1 billion from defunct Nortel entities in North America.
The deal also signals the end of a complex and lengthy legal battle, which aimed to establish which Nortel entity owed what to whom. The agreement also means that three of the four largest claims against Nortel’s US estate will be withdrawn, reducing the number of allegedly unpaid bills by $5.14 billion (£3.1bn).
“The settlement agreement represents a critical step forward by the parties to resolve the costly and contentious litigation amongst the Nortel affiliates,” stated the filing in the US Bankruptcy Court in Wilmington, Delaware.
Nortel was perhaps one of the highest profile tech victims of the global economic downturn that began back in September 2008. At the height of its sucess, Nortel employed 94,500 people worldwide and was worth a staggering $250 billion (£153bn).
More recently, the company ran into difficulties over the repayment of an interest charge of $107 million and in January 2009 it applied for bankruptcy protection in the US, Canada and the UK.
Nortel had hoped to re-emerge from bankruptcy protection, but by then the global recession was in full swing, and many Nortel customers were reconsidering their relationship with the company. This, coupled with the fragile stock market that deterred potential asset buyers, led the company to announce in June 2009 that it would not emerge from Chapter 11, but would instead sell-off all its remaining business assets.
The ignominious end came in July 2011 when a consortium that included the likes of Apple, Microsoft, Research In Motion, Sony, EMC and Ericsson, acquired Nortel’s valuable patent portfolio for $4.5 billion (£2.8bn). That sale was a blow to Google, which had earlier placed a stalking horse bid by offering Nortel $900 million (£562m) for the patents.
Those asset sell-offs resulted in a $7.5 billion (£4.6bn) cash pile for the liquidated Nortel, and there is no word yet on how or where that cash will be allocated. However, it is reported that all parties have agreed to work together to try to resolve how to divide the remaining funds.
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