Nortel Networks Inc, which filed for bankruptcy in 2009, has reached a settlement with a committee representing its long-term disabled employees over a plan to end disability benefits, according to court documents.
Nortel, once the largest telecommunication equipment company in North America, said it will not terminate any of the existing long-term disability benefits for its former employees on or before May 31, unless the company grants the committee a general unsecured claim of $28 million.
If the company were to grant the committee an unsecured claim, the proceeds of the claim, minus the administrative costs, would be allocated among the disabled employees and would free Nortel from any further liability.
The company has asked only for an initial approval of the settlement agreement with an opportunity for the employees to object to the settlement, according to documents filed on Friday. The initial hearing regarding the approval is expected to take place on February 14.
A hearing over a plan to end long-term disability benefits for the company's former U.S. employees had been postponed earlier this month. The proposal to end those benefits has been cast as a life-and-death battle against bondholders.
Nortel once dominated the Toronto Stock Exchange as a $250 billion telecoms company that spanned the globe. It struggled after the 1990s tech bubble burst and, dogged by accounting problems, filed for bankruptcy in January 2009.
The company has sold all of its operations, piling up $9 billion in cash in the process. However, it was never settled how to divide that money among the bankruptcy and insolvency proceedings in Canada, the United States and Europe.
Mediated talks aimed at dividing Nortel's cash are scheduled to end on Tuesday. The negotiations have pitted bondholders against retirees.
The bankruptcy case is In re: Nortel Networks Inc et.al, U.S. Bankruptcy Court, District of Delaware, No: 09-10138.
(Reporting by Tanya Agrawal in Bangalore; Editing by Saumyadeb Chakrabarty)