Nortel Networks Nears Bankruptcy Exit after Years of Litigation

by San Antonio Attorney

Canada and Delaware judges confirmed a bankruptcy plan to pay an estimated US$7 billion to Nortel Networks’ creditors, concluding the lengthy litigation over the defunct telecommunications company that filed for bankruptcy in 2009.

The decisions by Judge Kevin Gross of the Delaware bankruptcy court and Justice Frank Newbould of the Superior Court of Justice in Toronto closing one its very long and costly Chapter 11 case, marked by fights over money raised by the Nortel’s liquidation.

According to Newbould, it was untoward the case wasn’t resolve faster without the extra cost and setback caused by the lawsuit.

The entire proceedings in the U.S. and Canada courts were connected by video.  The synchronized ruling is going to permit repayment of retirees in Canada, vendors, investment funds and government agencies later this year.

During the hearing, Gross had an outburst because an attorney for the U.S.  Trustee opposed the liability releases in the plan.  At first, the lawyer refused to leave the podium and only gave in when Gross yelled that he would call the security guards.

Nortel Networks, which is based in Ontario, used to be the largest manufacturer of telecommunications devices in the world, employing 93,000 people and a market capitalization of $250 billion during the peak of the technology bubble in the 1990’s.

Due to an accounting quandary and several management missteps, Nortel declared bankruptcy in January 2009.  Its global businesses were liquidated, raising US$7.3 billion.

The proceeds of the liquidation quickly started years of battles in court as Nortel companies the United States, Canada and Europe fought over the money.

In 2013, Canadian mediator Warren Winkler attempted but failed to resolve the disputes and said it was “one of the most complex transnational legal proceedings in history.”

In 2014, the American and Canadian judges jointly supervised a trial to settle how to distribute the liquidation money.

In 2015, they ruled that creditors of each estate have to divide the funds equally, sparking appeals and a resolution in 2016.

 

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