Monday, January 25, 2010

Nortel obtains extension to Banruptcy protection for 3 months.

The following is a press release on the Nortel Website. Note the agreement included the recognition of the $2.0637B claim by NNI on NNC for errors in transfer pricing. This was part of the deal struck by the IRS to make sure that NNI pays back taxes on revenues that were transferred to the Canadian company. This will result in a dilution of the pay back (if any) to Canadian creditors.

Nortel Obtains Further Extension of Stay Period Under CCAA and Obtains Canadian and U.S. Court Approvals for Inter-Company Funding Agreement

January 21, 2010

TORONTO – Nortel Networks Corporation ("NNC") announced today that it, its principal operating subsidiary Nortel Networks Limited ("NNL") and its other Canadian subsidiaries that filed for creditor protection under the Companies' Creditors Arrangement Act have obtained an order from the Ontario Superior Court of Justice ("Canadian Court") further extending, to April 23, 2010, the stay of proceedings that was previously granted by the Canadian Court. The purpose of the stay of proceedings is to provide stability to the Nortel companies to continue with their divestiture and other restructuring efforts.

Nortel also obtained approvals today from the Canadian Court and the United States Bankruptcy Court for the District of Delaware ("US Court") of the Final Canadian Funding and Settlement Agreement, previously announced on December 23, 2009, which, among other things, provides that Nortel Networks Inc. ("NNI") will pay to NNL approximately US$190 million over the course of 2010, which amount includes the contribution of NNI and certain U.S. affiliates towards certain estimated costs to be incurred by NNL on their behalf for the duration of the creditor protection proceedings.

These approvals also allow the creation and allowance of a pre-filing claim in the Canadian creditor protection proceedings against NNL in favour of NNI in the amount of $2.0637 billion. In addition, Nortel obtained various other approvals from the Canadian Court and US Court which, among other things, authorize NNL and NNI to enter into advance pricing agreements with the U.S. and Canadian tax authorities to resolve certain transfer pricing issues, on a retrospective basis, for the taxable years 2001 through 2005

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