A nearly eight-year legal battle over how to divide what remains of Nortel Networks Corp. has ended in a deal that will put a stop to legal fees eating away at the remaining US$7.3 billion pot and bring former employees and pensioners one step closer to being paid out.
"It's about time," said Mark Zigler, a lawyer with Toronto-based Koskie Minsky LLP, which represents a group of nearly 20,000 Canadian claimants.
"It stops the bleeding in terms of continued costs worldwide."
Considered one of the largest bankruptcy cases in Canadian history, the legal and professional fees of Nortel's demise have climbed to US$2 billion over the past five years, according to an audit by independent financial analyst Diane Urquhart.
Zigler said the agreement announced late Wednesday will see Canadian debtors receive about 57 per cent of the proceeds, which amounts to about US$4.1 billion. U.S. debtors will get 24 per cent, or about US$1.8 billion, with the remainder expected to be paid to debtors in Europe.
The deal will see Canadian claimants collect a return of about 44 per cent on their claims, he said, which is lower than the original 71 per cent return anticipated when a deal was struck last May in U.S. bankruptcy court in Delaware and Ontario Superior Court.
Zigler said it was a tough decision, but claimants in Canada and Europe had to make a "compromise" with U.S. creditors or a deal wouldn't have even been struck.
"No one is a winner in insolvency," he said. "I think the pensioners did as well as they could've given what they were being offered by the other parties. In that retrospect, they persevered. It took eight years, all power to them to have the patience to fight this out."
Nortel filed for bankruptcy in North America and Europe in January 2009.
Once considered a crown jewel in the Canadian tech scene, the company – which had a significant Ottawa presence – was worth nearly $300 billion and employed more than 90,000 people around the world during its height from 1999 to 2000.
The latest settlement still needs approval from bankruptcy courts in Canada, France, the United States and the United Kingdom. If that occurs, then pensioners and other creditors can expect to receive some form of payment by early next year.
If approved, the deal also closes the doors to any future litigation over the Nortel's remaining assets, which mostly came from the sale of certain parts of the company when it folded.
But former Nortel worker and long-term disability claimant Greg McAvoy was disappointed by the way the proceeds were divided.
"We were held hostage by the bondholders," said McAvoy, who was a manager in Nortel's research and development department.
Instead of all the Canadian claimants receiving the same proportion, the Calgary resident said it should've been divided in relation to the amount of their claims.
"I think they could've done a better job of negotiating at what estate was going to get in the percentage of their claims and weighted with what group was originally going to get ," said McAvoy, who suffers from multiple sclerosis and is among a group of long-term disability claimants.
"But at least there's some money. It's a little something but it's not a relief that I won't be getting most of my claim back."