Saturday, October 31, 2009

Total claims against Nortel

The 25th report by the Canadian court monitor Ernst & Young contains a summary list of claims against Nortel from the Canadian claims process. The total is about $28 billion US. The monitor states that some of the claims are duplicated between companies and some are only placeholders. If the duplication counts for a third of the total claims that is still a huge number (approximately $20B) and will swamp the other claims from other countries. Also we have to remember that the claims in Canada do not yet contain those from pension funds or other employee related claims.

The US claims are listed on the Epiq Systems web site. There isn't a total shown on the web site, but it looks very big. The first 50 claims total well over $10B US so all of them must be at least $20B.

Adding these two sums and assuming the rest of the world has at least $10B US claims on Nortel, the total could reach $50B or more.

If we assume 10% are denied or adjusted then it may be that Nortel in its final liquidation will have at least $45B US in claims against possibly $6B in remaining estate cash.

That means an average %13 payback on claims worldwide.

Then if that actually happens, the various governments will impose taxes on the lump sums resulting from the claims settlements, and we are going to be lucky to get 10 cents on the dollar for what Nortel owes us.

Not much to show for all the years spent working to build the company.

Maybe my calculations will be wrong, and maybe the judges will rule out many of the claims, and maybe Canada and other countries will come to their senses and give priority to retirees and employee's claims before other creditors.

Then again, maybe pigs will fly......

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