Nortel Networks UK Pension Trust Ltd., Surrey, England, will no longer need to enter the Pension Protection Fund, London, after the trustees recovered assets associated with the sponsoring employer's insolvency.
PricewaterhouseCoopers, adviser to the trustees, said in a news release that the pension fund is expected to exit the assessment period in October. The pension fund is set to receive from Nortel about £550 million ($767 million) above the PPF level for distribution to participants — some of whom had seen benefit cuts.
Total insolvency recoveries are expected to be around £1.2 billion, with about £200 million expected over this year and 2019, the news release said.
Parent company Nortel Networks went into insolvency in January 2009. The firm's European, U.S. and Canadian businesses subsidiaries made simultaneous bankruptcy filings in their respective countries. Key assets and business units were sold on a joint, global basis raising more than $7 billion, the release said.
Following years of mediation, negotiation and litigation over how these proceeds should be split, a settlement in October 2016 resulted in the $7 billion being distributed among the different subsidiaries in May and June 2017.
When the parent company collapsed, the U.K. company subsidiary — Nortel Networks U.K. Ltd. — sponsored its own pension fund with more than 40,000 participants. The pension fund had a deficit on a buyout basis of more than £2 billion, which PwC said left the trustee as one of the largest creditors in the insolvency proceedings.
The U.K. pension fund began an assessment period to see whether it should join the £23.4 billion ($32.6 billion) PPF, which is the lifeboat for the defined benefit funds of insolvent U.K. companies. "This well-earned result has been achieved following a sustained effort by the trustees and the PPF, working together over several years. The PPF will no longer be required to use its resources to help pay members benefits," PwC said in the release.
Added Jonathon Land, head of PwC's pensions credit advisory practice and adviser to Nortel's UK pension trustees, in the release: "We have worked with the trustees over the last 10 years to help them achieve this result," said. "The turning point in the scheme's fortunes was the decision by judges in the U.S. and Canada to allocate the $7 billion disputed residual assets on a modified version of the pro rata basis, as had been argued by the trustees in court."
In a letter published on the Nortel Pensions U.K. website, David Davies, chairman of the trustee board, wrote: "we have recovered enough assets to fulfill our dream of being able to buy sufficient member benefits to ensure we can exit the PPF assessment and proceed to buyout with our chosen insurance partner(s)."
Spokesmen for Nortel's U.K. pension fund could not be reached for comment.
