Nortel takes step to reduce claims filed by European parties against U.S. arm

The Canadian Press 0

TORONTO, Cananda – Some Nortel creditors have reached a tentative settlement with the U.S. arm of the collapsed telecommunications equipment maker, which was once one of Canada’s leading companies.

The deal would see Nortel Networks Inc. agree to pay US$75 million to resolve two sets of European claims against the U.S. entity, once the deal gets court approval.

The agreement, filed Tuesday in Delaware bankruptcy court, would resolve all the issues between the U.S. and European entities and is proposed as a step towards resolving overall claims against Nortel.

The settlement doesn’t prevent the parties from pursuing the so-called EMEA claims and the U.K. Pension claims in the Canadian courts, which also have jurisdiction in the Nortel bankruptcy.

But Nortel’s agreement to pay US$37.5 million to resolve the EMEA claims and US$37.5 million to resolve the U.K. Pension claims would reduce amount of claims before the U.S. court by about US$5 billion.

A hearing to approve the Dec. 17 agreement is scheduled for Jan. 7.

Nortel Networks Inc., the largest of Nortel’s subsidiaries, filed for Chapter 11 protection in Delaware under the U.S. bankruptcy code nearly five years ago — on Jan. 14, 2009.

A similar process under the Canadian Companies Creditors Arrangement Act was launched the same day through the Ontario Superior Court of Justice and in other jurisdictions where Nortel operated.

Since then, Nortel has auctioned off most of its assets and ceased operations. However, the courts have yet to decide how to dispense about US$7.3 billion to Nortel’s creditors.

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