Nortel Creditors Reach an Agreement to Divide Bankruptcy proceeds

by San Antonio Attorney

After almost eight years of legal battle over Nortel Networks Corp.’s remaining assets, the creditors have reached deal that will end the mounting of legal fees that are eating up the $7.3 billion bankruptcy proceeds and bring pensioners and past employees a little closer to getting their pay.

According to reports, Nortel’s bankruptcy case has cost the company $2 billion in professional and legal fees incurred over the past 5 years.

Mark Zigler, one of the lawyers of a group of claimants, said the deal revealed on Oct. 12 will include giving about 57% of the proceeds to Canadian debtors.

The agreement will provide Canadian claimants a recovery of around 44% on their claims, according to him, which is much lesser than the original 71% recovery expected when an agreement was reached last May.

Zigler explained that it was a difficult decision, but Canadian and European claimants needed to make a bargain with American creditors or an agreement wouldn’t have even been reached.

Nortel declared bankruptcy in Europe and North America in January 2009.

During its peak, the worth of Nortel was almost $300 billion.  Between 1999 and 2000, the company had about 90,000 employees worldwide.

The most recent settlement is still subject to the approval of the bankruptcy courts in the UK, US, France and Canada.  If that happens, the creditors and pensioners can expect to get a payment by the start of 2017.

If accepted by the courts, the agreement also shuts the doors to any potential lawsuit over the company’s residual assets, which are generally proceeds from the sale of Nortel’s parts when it collapsed.

However, former company employee and disability applicant Greg McAvoy was dissatisfied over how the proceeds were distributed.  All the claimants in Canada received the same proportion, regardless of how much they were claiming.

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