Nortel Networks Corp., Mississauga, Ontario, and its creditors — including its pension plan participants — reached an out-of-court settlement to divide the $7.3 billion in residual assets following the company’s 2009 bankruptcy liquidation.
According to a news release from Nortel, its Canadian debtors will get 57% of the assets, while U.S. debtors will receive 24%. The remainder will go to creditors in Europe.
The settlement is pending approval from courts in Canada, the U.S., the United Kingdom and France.
Once the courts approve, pension plan participants in various Nortel plans will receive payments from the residual assets. The amount of payments to each plan or participant was not provided.
The settlement follows a May 2015 ruling in U.S. and Canadian bankruptcy courts that Nortel’s assets should be evenly distributed among its creditors. The U.K. Supreme Court in 2013 ruled that U.K. plan participants should be treated the same as other Nortel creditors.
Officials at Nortel Retirees and Protection Canada, an organization representing Nortel’s Canadian pension plan participants, could not be immediately reached for comment.
Nortel’s U.S. pension plan was taken over in 2009 by the Pension Benefit Guaranty Corp., which assumed responsibility for the $514 million shortfall in the $716 million plan. PBGC spokesman Marc Hopkins said in a statement that the agency “is not a party to the agreement and objects to it.”
“In particular, the agreement does not resolve PBGC’s issues in the Nortel proceedings, including the allowance of PBGC’s bankruptcy claims, which total $708 million. The agreement also calls for a Chapter 11 plan that would be contrary to the Bankruptcy Code,” the statement said.
The statement added that the PBGC does not expect benefit payments to the plan’s participants to change as a result of the agreement or any court proceedings. “However, if our claims in the bankruptcy are not fairly resolved, the plan sponsors that pay PBGC premiums will have to shoulder a greater burden in the coming years.”
The asset and liability sizes for the Canadian, U.K. and French plans could not be learned by press time.
Angela Dimsdale Gill, head of pension litigation at the law firm of Hogan Lovells, trustee for Nortel’s U.K. pension plan, said in a news release that the settlement “is an enormous step on the road to conclusion. It is very much hoped that the distribution of funds to all creditors everywhere is now genuinely within sight.”