The Nortel UK pension scheme and other parties involved in the international insolvency of Nortel Networks have finally agreed how to share out the $7bn (€6.3bn) of the group’s remaining assets, according to PwC.
The firm, which has been financial adviser to the scheme during the process involving court cases in countries including the US and Canada, said the exact amount being returned to Nortel’s UK pensioners was not yet known.
This is because of, inter alia, ongoing non-litigation in Canada and Europe, it said.
Jonathon Land, head of PwC’s pensions credit advisory practice and adviser to Nortel’s trustees, said: “This case will impact how pension scheme creditors are treated for years to come.”
He said it was becoming more common for groups to operate across geographical and legal boundaries and that pension scheme creditors had to make sure they really understood where their legal support came from.
The UK pension scheme is one of the largest creditors in the Nortel group insolvency.
“An agreement is very welcome and brings nearer the day when distributions might be made to creditors, including the Trustee of Nortel’s UK pension scheme,” Land said.
He said the trustee directors had acted with great professional integrity seeking to achieve the best possible deal for their members.
PwC said it was an unprecedented result when, in May 2015, judges in the US and Canada issued a “ground-breaking” decision to allocate the residual assets on a pro rata basis, as had been argued by the Nortel UK pension scheme.
The Canadian court denied leave to appeal the allocation decision and, despite an appeal process commencing in the US, negotiations continued, and an agreement was reached.
The appeal, lodged by Nortel Networks bond holders challenging the decision to give the UK pension fund an equal claim on the assets, was thrown out by US and Canadian courts in July 2015.
The deal is subject to creditor approval in the US and Canada and to Court sanction in the US, Canada and various other jurisdictions, including the UK.
Nortel Networks became insolvent in January 2009, with its European, US and Canadian entities making simultaneous insolvency filings in London, Delaware and Toronto.
In July 2015, two courts in the US and Canada threw out an appeal by Nortel Networks bond holders against a decision to provide the UK pension fund with equal claim on assets, after the US creditors were accused of misleading the case.
At the time, Nortel’s UK group company was the sponsoring employer of a large defined benefit pension scheme with more than 40,000 members, and a buyout deficit of more than £2bn (€2.2bn).