* UK pension trustee, European administrator withdraw claims
* Deal eliminates three of the four largest claims on U.S.
* No agreement on how to divide $7.5 bln in cash
By Tom Hals
Dec 17 Nortel Networks Inc., a defunct telecoms
company, has reached a deal that will cut more than $3 billion
from what was allegedly owed to former Nortel entities in
Europe, marking what it called a "significant milestone" to
ending its five-year bankruptcy.
In return for withdrawing the claims, administrators of
insolvent Nortel entities in Europe and a pension trustee in
Britain would each receive high-priority administrative claims
for $37.5 million, according to a court filing on Tuesday.
"The settlement agreement represents a critical step forward
by the parties to resolve the costly and contentious litigation
amongst the Nortel affiliates," said the filing, in the U.S.
Bankruptcy Court in Wilmington, Delaware.
The parties also agreed to work together to try to resolve
how to divide $7.5 billion in cash that was raised from
liquidating the former Canadian telecommunications equipment
maker, according to the documents.
The deal ends lengthy and long-running court fights over
which Nortel entity owed what to whom, stemming from the
complexity of unscrambling a company once worth $250 billion
with 93,000 employees worldwide.
Thousands of bondholders, retirees and suppliers have been
waiting to be repaid billions of dollars.
The legal battles have been fought in numerous jurisdictions
applying a variety of laws, making a resolution in court a
challenge. Several rounds of mediation also failed.
Tuesday's deal resolves a claim by a pension trustee that
not enough money had been put aside for retirees in Britain. The
trustee had been seeking more than $1 billion from two different
bankrupt Nortel entities in North America.
An administrator overseeing failed entities in Europe sought
hundreds of millions of dollars on the theory that the U.S.
business was a "shadow director," and therefore responsible for
failed Nortel businesses outside North America.
As a result of the agreement, three of the four largest
claims against Nortel's U.S. estate will be withdrawn, reducing
the stack of alleged unpaid bills by $5.14 billion. The largest
claim, for $2.79 billion, was filed by bondholders and is not
part of the agreement.
Tuesday's agreement does not resolve the disposition of $7.5
billion in cash that piled up as Nortel liquidated its
businesses, including a package of patents that set off a
bidding war by world's biggest tech companies.
Nortel's various entities around the globe agreed in 2009 to
sell the businesses as quickly as possible rather than wait for
an agreement over how to divide the money raised.
That dispute is now set for an unusual trial next year. It
will be overseen simultaneously by U.S. Bankruptcy Court Judge
Kevin Gross in Wilmington, Delaware, and Ontario Superior Court
Justice Geoffrey Morawetz. The two court rooms will be linked by
video, which the two judges have done regularly during the
A hearing to approve Tuesday's settlement is scheduled for
The case is In re Nortel Networks Inc, U.S. Bankruptcy
Court, District of Delaware, No. 09-10138