Nortel Networks Corp., Mississauga, Ontario, has reached a settlement agreement with the Pension Benefit Guaranty Corp. to pay up to $565 million to the agency that took over its U.S. defined benefit plan in 2009 following the company’s bankruptcy liquidation.
The PBGC, which had been opposing a proposed bankruptcy plan that favored other creditors, agreed to support the new agreement, which is scheduled to be approved Jan. 9 in Delaware bankruptcy court in Wilmington. The PBGC would be paid once a final bankruptcy agreement is approved by other creditors.
The PBGC originally sought $750 million but amended its claim to $624.5 million in unfunded liabilities and $83.4 million in unpaid premiums. The proposed settlement caps the payment at $565 million.
In court documents filed Wednesday, Nortel said the agreement with PBGC overseen by a court-appointed mediator “provides substantial benefits to the debtors, their estates and their creditors. First and foremost, the settlement agreement represents a material compromise by the PBGC” by reducing the amount of the claim and by granting a general unsecured claim instead of the priority claim that the agency had sought. “These compromises, which were vigorously negotiated … also clears a path for bringing the debtors’ bankruptcy cases to a close,” Nortel said.
A PBGC statement said the agreement “provides fair treatment” and helps achieve “an expeditious resolution of this bankruptcy that has lasted for more than seven years.”