Court ruling could hinder Pension Protection Fund access to Nortel funds
UK - The UK Pension Protection Fund (PPF) is unlikely to have access all of the funds needed to plug a massive £2.1bn (€2.5bn) deficit in the Nortel Networks UK Pension Plan following a recent US court ruling.
Last week, the US Court of Appeals denied the PPF’s request for powers typically granted to federal regulators in bankruptcy proceedings.
Speaking to IPE, Sackers partner Peter Murphy said it “would follow” that the ruling, which denied the PPF ‘police power exemption’, would hamper its ability to continue regulatory action despite the bankruptcy of Nortel’s global subsidiaries - leaving it on equal footing with other unsecured debtors.
But the ruling should not prevent the lifeboat scheme from further involvement in US bankruptcy proceedings, he said.
“It simply means they are not able to potentially leapfrog, or at least use the Pensions Regulator’s process, to assess the amount of the proof of debt they are able to make a claim for during the bankruptcy proceedings,” he said.
Murphy noted that, under current legislation, the PPF was also unable to supersede other debtors during any bankruptcy proceedings in the UK, as it remained an unsecured creditor alongside any other claimant.
Asked how the ruling might affect its ability to collect debt from companies based overseas, a spokeswoman at the PPF said: “We are considering the judgment in detail.”
However, Murphy noted that the recent UK Court of Appeals ruling against Nortel - passed down in October last year and likely to progress to the UK Supreme Court - sought to clarify the issue of whether a Financial Support Direction (FSD) could be awarded priority status, at least in UK.
“This is not by virtue of any express legislative backing, but by way of how the pensions and bankruptcy legislation go hand in hand, and whether an FSD might be treated, in some circumstances at least, as an expense of the administration of the company,” Murphy said.
He added that the FSD has been discussed as possessing “super-priority” in administration proceedings, but that the matter remained “up in the air”.