Tuesday, January 5, 2010

Nortel seeks Chapter 11 extension in US court.

Nortel’s lawyers have entered a motion into the court records to request that Nortel be given relief to extend its Chapter 11 protection to July 2010. The details may be found in docket #2232 on the Epiq Web site. (See the link in the right hand column).

The same motion states that NNI has named John Ray as its principal officer to help lead the next stage of the Debtors’ efforts to maximize value.

There is also information on the claims submitted (6,000 of them), and negotiations with the PBGC regarding the defined pension.

The following are some extracts from the docket:

Relief Requested
By this Motion, the Debtors seek an order pursuant to section 1121(d) of the Bankruptcy Code extending (a) the Exclusive Filing Period through and including July 13, 2010, and (b) the Exclusive Solicitation Period through and including September 13, 2010.

Facts Relevant to this Motion
The Debtors’ current Exclusive Filing Period under section 1121(b) of the Bankruptcy Code extends through February 1, 2010, and the current Exclusive Solicitation Period extends through April 2, 2010.

Since the Petition Date, the Debtors have worked diligently on a variety of fronts to administer their estates, to maximize value for their stakeholders.

Restructuring efforts. As discussed in greater detail below, the Debtors have undertaken significant steps with respect to the ultimate disposition of their assets and the transfer of substantial groups of employees to purchasers through their pursuit of business divestitures, the design and implementation of an internal reorganization to further such sales and, together with the Canadian Debtors, the restructuring of certain of Nortel’s Asia-Pacific affiliates.

At the same time, the Debtors have made substantial efforts to reduce costs, including the rejection of real property leases and contracts not necessary for their continued business operations.

The Debtors also have taken other steps to preserve and maximize value, including the development of a key employee incentive and retention plan, the resolution of significant inter-company funding and coordination issues, the prompt resolution of reclamation claims asserted by suppliers against the Debtors and the establishment of a September 30, 2009 claims bar date. Recently, after consultation with the Committee, the Bondholder Group, the Monitor and the Canadian Debtors, NNI also named John Ray its principal officer to help lead the next stage of the Debtors’ efforts to maximize value.

Additionally the Debtors have engaged suppliers and customers of Nortel’s worldwide operations in an effort to preserve the value of their business operations while divestitures are pursued. The Debtors also have actively coordinated the U.S. restructuring efforts and court proceedings with the various other multi-jurisdictional proceedings and their non-debtor affiliates, and have actively solicited input from, provided input to and coordinated restructuring efforts with the Committee, the Bondholder Group, the Monitor and the Joint Administrators.

In light of the foregoing and as described below, the Debtors have made and continue to make substantial progress toward the stated objective of value maximization. In addition, with the Sale Transactions either complete or well underway, the focus will now shift to proceeds allocation and the realization of value from Nortel’s intellectual property portfolio. These efforts will occupy the next several months, at a minimum. Given the Debtors’ successes since the Petition Date and the additional tasks to be addressed, the best interests of the Debtors, their estates, and their creditors would be well served by extending the Debtors’ exclusive periods to file a plan of reorganization and solicit support for such a plan for the reasons set forth herein.

Claims Resolution. To proceed with the development of a plan of reorganization, the Debtors will need complete and accurate information describing the nature, validity, amount and status of all claims that will be asserted against them in addition to those listed on the Debtors’ Schedules. Accordingly, the Debtors requested, and the Court ordered, the establishment of a September 30, 2009 general bar date (the “Bar Date”) for the filing of claims (other than those against NN CALA) [D.I. 1280].

On August 10, 2009, the Debtors completed mail service of notice of the claims bar dates to all known creditors. On December 3, 2009, the Court entered an order establishing January 25, 2010 as the general claims bar date for claims against NN CALA [D.I. 2059].

To date, the Debtors have received over 6,000 proofs of claim in connection with their chapter 11 cases. Since the Bar Date, the Debtors and their advisors have been taking all necessary and appropriate actions to administer the claims reconciliation process.

The Debtors have recently filed their first objections to claims [D.I.s 2188-2190] and expect to file additional objections throughout the period during which exclusivity is proposed to be extended.

The Debtors also have expeditiously resolved most of the reclamation claims asserted in these cases. Of the thirty reclamation demands made against the Debtors in these
chapter 11 cases, twenty-seven have been resolved and only three remain outstanding. Pursuant to the Order Establishing Procedures for Addressing Reclamation Demands Pursuant to Sections 105(a), 362 and 546(c) and Rule 9019 of the Federal Rules of Bankruptcy Procedure [D.I. 336], the Debtors have settled twenty demands on a consensual basis and resolved another seven demands through filing of the Debtors' Second Reclamation Notice [D.I. 756]. The Debtors are actively working to resolve the remaining reclamation demands.

Finally, the Debtors are working with the Canadian Debtors, the Monitor, the Committee, and the Bondholder Group on the development of a protocol for the resolution of claims that raise cross-border issues with the Canadian Debtors. The finalization of this protocol is a requirement of the CFA. It is possible that additional claims protocols will be developed with other jurisdictions as well.

NNI Principal Officer. On December 8, 2009, the Debtors filed a motion seeking approval of the retention of John Ray as the Debtors’ Principal Officer, nunc pro tunc to December 7, 2009 [D.I. 2095]. As described more fully in the motion, in his capacity as Principal Officer and in light of his substantial experience, Mr. Ray will provide important leadership to the Debtors as these proceedings move into the next phase. The motion on Mr. Ray’s retention is scheduled to be heard by this Court at a hearing to be held on January 6, 2010.

Other Efforts. In addition to the above, the Debtors (1) are working with the Pension Benefit Guarantee Corporation to reach agreement regarding issues related to the Debtors’ defined pension plans, (2) have filed settlements pursuant to Bankruptcy Rule 9019, and (3) have rejected several executory contracts determined to be non-essential for their continued business operations.

Accordingly, in light of the accomplishments of the Debtors thus far in these chapter 11 cases, as well as the extraordinary complexity and breadth of Nortel’s global business, further extension of the Exclusive Periods is warranted. The various matters described above, as well as various others that will require the Debtors’ attention over the next several months, will need to be resolved before the Debtors will have adequate information necessary to prepare a plan of reorganization and disclosure statement.

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