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​Canadian, US courts reach settlement over £2.1bn Nortel deficit

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Courts in the US and Canada have ruled that the underfunded UK pension fund for Nortel is entitled to a share of $7.3bn (€6.4bn) in residual assets, six years after the Canadian telecoms firm collapsed.

The ruling, passed down jointly by the Delaware Bankruptcy Court in the US and the Supreme Court of Ontario, saw both judges accept the argument put forward by the trustee of the UK pension fund that assets should be divided on a pro rata basis.

The ruling brings to a close a protracted dispute that began in 2010 when the UK Pensions Regulator lodged a claim for up to £2.1bn (€2.9bn) to resolve the deficit in the UK fund.

John Tillman, lead insolvency partner on the cross-border case, said he was delighted both judges had accepted the call for a pro rata approach put forward by the UK trustee.

“Our objective throughout has been to try to ensure the 33,000 remaining members of the UK pension scheme receive a fair share of the proceeds that are to be distributed from the worldwide insolvency process,” he said. 

Consultancy PwC speculated that the ruling in favour of a pro rata approach could see a precedent set for future international insolvencies.

Jonathon Land, pensions partner at PwC, argued that the ruling saw pensioners “treated fairly”.

“Despite opposition from the bondholders who were looking to receive interest on their original claim, we are pleased to see the judges in both Canada and the US ruled that our approach to allocation was the most appropriate.”

The ruling comes six months after Nortel’s trustees secured £340m to fund the deficit in a case supported by the Pension Protection Fund.

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