TORONTO – A U.S. court has approved a settlement that would make Nortel Networks’ U.S. bondholders eligible to receive up to US$1 billion in interest that has accrued since the company filed for court protection in 2009.
The ruling involving so-call “post-petition” interest was issued Thursday by Judge Kevin Gross of the U.S. Bankruptcy Court in Delaware and approved a deal reached in July between Nortel’s U.S. subsidiary and the most of its American bondholders.
However, Mark Zigler, a lawyer representing Nortel’s Canadian pensions and former employees, suggested in an email response that the decision decision would likely be appealed.
“We have the decision and are reviewing it,” he said. “We expect that the monitor and Nortel Networks Ltd. (the Canadian parent company) will seek to appeal the decision as there appear to be solid grounds for appeal based on preliminary discussions we have had with US counsel.”
Thursday’s decision in the U.S. comes after a months-long cross-border court battle over Nortel’s remaining assets that wound up in September.
Judges in Canada and the United States have been trying to navigate what has been described as a “tsunami” of legal arguments, dry facts and, occasionally, stormy lawyer summations over how to split up about $7.3 billion among various creditors and claimants of the collapsed Canadian technology company in Canada, the United States and Britain.
Zigler noted the decision did not determine how much of the $7.3 billion in Nortel assets would be allocated to the U.S. estate “or whether the U.S. Nortel estate is actually solvent so that bondholders can even hope to collect any post-filing interest.”
“We are awaiting decisions from both the Canadian and US courts on these questions,” said Zigler, of Koskie Minsky LLP.
Meanwhile, Zigler noted that a Canadian court has determined there is no entitlement to post-petition interest, although he conceded that decision was subject to appeal by the bondholders.