Tuesday, January 19, 2010

The 35th monitor report on Nortel status

The Canadian monitor Ernst & Young has issued the 35th report on the status of the Nortel restructuring and bankruptcy proceedings. The report may be seen in docket #2288 on the Epiq website.(See link on right hand column). You also can see the report at the Ernst & Young web site.

Some highlights:

Nortel is requesting an extension of the stay of proceedings until April 23rd 2010.

Nortel has $4.999B US cash of which $2.94B is in the treasury and $2.059 from sales of assets so far is held in escrow.

The following is a summary of the cash split by region.
Canada $152M
US $961M
UK/Europe $855M
Asia $824M
Cala $148M

There are various restrictions on the use of some of the cash for a variety of purposes. (see report)

Pension funding continues for both current and special service payments in the ordinary course with respect to the registered defined benefit and defined contribution plans. Funding for non-registered pension or other retirement plans is stayed.

Funding continues for the Health and Welfare Trust. $4m restricted cash is held in relation to the benefits paid through the H&WT.

A Canadian Funding and Settlement Agreement has been proposed for NNI to provide $190.8M to help continue Canadian operations.

A bargain is being worked that NNL and NNI would agree to a $2.06B claim by NNI on the NNL assets in Canada.This would be an unsecured pre-filing claim and would be part of the bargain that involves Advance Pricing Agreements between NNI and the IRS and NNL and the CRA. This is in relation to the claim by the IRS for back taxes owed by NNI due to transfer pricing errors made from 2001 to 2005.

The deal to get the funding to keep the Canadian operation going is dependent on both NNI and NNL completing these APA agreements.

Seems like the Canadian creditors are going to get hosed as a result of this bargain, but it will keep the operation going at least for another couple of months. As if it wasn't bad enough that Nortel is heading into oblivion, now our Canadian claims may be wiped out as a result of this obscene agreement. Many thanks to the CEOs and CFOs who worked the books and landed us in this mess!

All the more reason to get the Canadian government (Do they really exist? Where are they?) involved to change the BIA to give pensioners priority over other unsecured creditors. Looks like we are being out- manoeuvered by all the good old boys and good old girls in the club.

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