Nortel UK scheme to receive £1bn after 'groundbreaking' legal win
The UK pension scheme of the collapsed telecoms group Nortel could receive up to £1bn (€1.2bn), after a US court win put the fund on an equal footing with bondholders in the insolvency payout.
The settlement could be enough to keep it out of the Pension Protection Fund (PPF).
The two judges who have overseen the huge Nortel litigation – Judge Gross in the US and Justice Newbould in Canada – made orders in the last week at hearings in Delaware and Toronto permitting the core parties to implement a settlement that was reached in principle last October.
The order allowed approximately $7bn (€6.4bn) of Nortel’s residual assets to be distributed to the group’s creditors worldwide.
David Davies, chair of the Nortel Pension Scheme’s trustee board, said: “We appreciate the efforts of the PPF in working towards this outcome and are grateful for the valuable protection the PPF has provided to scheme members during this time. The trustees will now get on with the difficult task of trying to buy out member benefits with insurance companies that we hope will secure higher than PPF levels of benefits.”
The Nortel scheme has been in the PPF’s assessment period since its parent company filed for bankruptcy in 2009.
The trustees of the UK Nortel Pension Scheme said in a statement that they were “delighted that a settlement of the long-running dispute over Nortel’s residual assets has finally been achieved”.
Last October’s agreement was conditional on creditor support from the US and Canada as well as court approvals in the US, Canada, and several other jurisdictions including the UK.
The trustees said all these requirements have now been fulfilled and the money could now start to flow.
They said they had been pursuing claims on the Nortel assets for more than eight years, adding: “It has been an arduous and at times very bitter fight.”
The settlement was based on “ground-breaking decisions” issued in May 2015 by the Delaware and Toronto Courts, the trustees said. These rulings held that creditors everywhere would share the residual assets pro rata according to their creditor claims, on an equal footing – the first time insolvency distributions had been ordered in that way.
Multiple appeals were launched against those judgments, but were eventually rejected.
Nortel Networks became insolvent in January 2009, with its European, US, and Canadian entities making simultaneous insolvency filings in London, Delaware, and Toronto.
Nortel’s UK company had been sponsoring a large defined benefit pension scheme with more than 40,000 members, and a buyout deficit of more than £2bn at the time of the insolvency.
Jonathon Land, head of PwC’s pensions credit advisory practice and adviser to Nortel’s trustees, said: “Nortel’s UK employees helped to generate these assets, and so it is welcome news that the cash will now start to flow from the central ‘lockbox’ to the different estates, and in turn to the ultimate creditors including these pensioners.”