Nortel pension agreement filed in docket 2405

The 36th report of the court appointed Monitor for Nortel's bankruptcy has been filed in the Canadian court. It is contained in docket 2405 on the Epiq web site and may be accessed at http://chapter11.epiqsystems.com/docket/Default.aspx?rc=1.

The report contains the agreement between Nortel and the NRPC and CAW in terms of the LTD,Medical and Dental, and Pension payments. It is detailed and provides all the information along with the conditions.

Basically in terms of the pension the payments will continue until Sept 30th at 11:59pm and Nortel and the Monitor assure us that there will be no wind up before that date.

However on Oct 1st, Nortel will no longer have any responsibility for the administration or payment of the pension. The responsibility will be handed over to an administrator appointed by the Ontario Government.

This means that wind up will occur then or shortly after if there is no action by the Ontario Government to take over the pension.

Nortel is also granted relief in that they will only make the special payments to the trust fund through March 31st and then will only make the normal monthly payments through Sept 30th. The special payments are approx. $2.2M per month, and the normal payments are $378 K per month. So Nortel is essentially cutting us loose after Sept 30th, and eliminating top up payments after March 31st.

Medical,Dental,life Insurance, and LTD will continue until the end of the year.

As part of the deal, the NRPC and Caw had to make some concessions. One is that all claims of pensioners under the CCAA process will be considered as having the same priority as any of the unsecured creditors. However that does not stop us from gaining priority under the BIA process if the Federal Government enacts an amendment to the BIA to give pensioners priority, and if Nortel enters the BIA process.

The deal also includes agreements not to sue plan administrators or Nortel executives regarding the administration of the trust fund.

The deal also ensures that any further retention plans by Nortel to keep employees and executives are not opposed by the NRPC.

Funny thing is that the next report entered by the Monitor is exactly that; a special retention bonus plan to keep employees through the end of 2011. See docket # 2406.

So it seems Nortel will be rid of the pension plan burden by September 2010, rid of the Medical and Dental, LTD, and Life Insurance costs by end of the year 2010, and will continue operations until at least the end of 2011. Who knows perhaps they will continue for ever and never enter BIA in which case the pension claim will be paid out at a negotiated percentage with all unsecured creditors. The percentage return will not be stellar given the state of the Nortel assets held in Canada.

So it looks like we may have gained some time, and can plan better, but Nortel is certainly not bending over backwards to help us.