UK Pensions Regulator wins dispute with Lehman Brothers, Nortel
GLOBAL - The UK Pensions Regulator (TPR) has won its dispute with Nortel Networks and Lehman Brothers' European division.
Earlier this year, TPR issued two Financial Support Directions (FSDs) against the beleaguered companies - calling on Lehman Brothers to pay more than £148m and Nortel more than £2.1bn to cover deficits in their respective UK pension plans.
Administrators for 20 companies in the Lehman Brothers and Nortel groups, however, challenged the FSDs and sought clarification from the High Court over their status when issued against insolvent companies.
They argued that an FSD could not require the payment of any sums by insolvent companies in support of a pension scheme.
But Justice Briggs today ruled in favour of the UK watchdog, saying that where an FSD was issued against a company after insolvency, the cost of complying with that direction was an expense in that insolvency.
The FSD therefore must be paid before any distributions to unsecured creditors, he said.
TPR welcomed the decision, saying it confirmed an FSD was valid if issued after an insolvency event and that it "clarified the effect of an FSD on an insolvent target".
The regulator said a contrary ruling would have been "severely detrimental" to scheme members, as well as the Pension Protection Fund.
It pointed out that the Nortel Networks UK Pension Plan and the Lehman Brothers Pension Scheme were "seriously underfunded".
The Nortel scheme had a deficit of £2.1bn when the company collapsed in January 2009, while the Lehman scheme had a deficit of approximately £148m when valued in 2007.