Excerpts from the NRPC-US update on 07-10-2009. Includes claims and medical info.

This post is for the benefit of all ex-Nortel employees and retirees and provides excerpts from information that has been sent out by the NRPC-US steering committee to the paying membership of the group. Anyone wishing to join the NRPC-US group and receive the information and support directly can find the pertinent information at www.nnra.org

Chronology of events last 4 weeks.

June 19 Nortel announced that it has entered into an agreement with Nokia Siemens Networks to sell its wireless network infrastructure business assets for US $650 million. Nortel also announced that it was advancing in discussions with external parties to sell its other businesses.

June 26 certain creditors and suppliers of Nortel Networks filed a series of objections to the proposed sale of a business unit to Nokia Siemens Networks.

June 26 the U.S. Pension Benefit Guarantee Board objected to certain provisions of the proposed sale set forth by Nortel and asked the court that they be modified.

June 28 Koskie Minsky, the Canadian law firm appointed by the Canadian court to represent all current and former Canadian employees published a weekly news bulletin which may be found at http://www.kmlaw.ca/Case-Central/Overview/?rid=107.

This bulletin is significant for U.S. pensioners because both the U.S. and the Canadian NRPC groups have retained Segal Co. to assist in calculating and filing claims with the court(s). Koskie Minsky has already received an initial set of Canadian claims information from Nortel and this newsletter contains a good description of how the claims process will proceed. In the U.S. we intend to follow the same or a similar process.

July 6 U.S. private equity firm MatlinPatterson Global Advisors confirmed that it plans to put forward a comprehensive proposal to reorganize the businesses of bankrupt Canadian telecom equipment maker Nortel Networks.

It stated that it “does not believe that the current proposed transaction with Nokia Siemens Networks maximizes value for Nortel stakeholders." and “MatlinPatterson believes Nortel is a solid company with a valuable brand, talented employees and innovative technologies. It is interested in retaining, for current investors, the inherent value of the company rather than merely accepting a 'fire sale' of its core asset followed by the wholesale liquidation of the remaining businesses". A rescue bid would require a debt-for-equity swap and would need to be put forward by July 24, the date set by the bankruptcy courts to consider the $650 million "stalking horse" bid by Nokia Siemens for most of Nortel's core and profitable wireless equipment operations.

July 3 Nortel announced that it was close to a deal to sell one of its key businesses to rival Avaya Inc. The enterprise Business unit was responsible for 20 per cent of Nortel's business last year. The sales would mean that over the course of a single week Nortel had agreed to sell off assets responsible for nearly half its revenue.

July 8 Koskie Minsky published another bulletin containing updates on the Canadian and U.S. court proceedings. (Also available at the site listed above)

Claims

No Bar Date (the date by which our claims must be filed) has been established. Current estimate is still late September. Should Nortel receive court approval to discontinue any employee benefits after the bar date the court would establish another later bar date for the filing of claims resulting from lost benefits. These claims will be more difficult to estimate and calculate than are the pension claims for the initial bar date. Fortunately Segal Co. is also willing and able to help us should this be necessary.

Medical Benefits

Questions continually arise regarding the outlook for our US medical benefits. Although there are no clear answers yet, the process to be followed is becoming clearer.

First, Nortel has an obligation to file a business plan with the court, which must then be approved by the court. Nortel has not done this. Only after the plan is filed and approved may Nortel petition the court to drop medical benefits on the basis that such costs are too burdensome for Nortel to sustain if it is to achieve its business plan.

Should this happen the court must then decide whether to allow Nortel to drop medical benefits after an employee notification period or whether Nortel must first enter into a negotiation with former employees (called a Section 1114 Process). Whether or not the Court will require a Section 1114 process is dependent on the wording of our various pension plans. No one has yet examined the wording regarding benefit cancellations in the various pension plans because copies of all of the plans have not yet been received by the court.

Should the court order a Section 1114 process Nortel would be required to negotiate with a committee of former employees. This negotiation may result in an agreement between Nortel and former employees to allow Nortel to alter reduce or discontinue benefits in exchange for something of value.

If a Section 1114 process occurs, Segal Co. has considerable expertise in advising employee committees on how to obtain the most value from the process. Segal’s fees for assisting us in the Section 1114 Process would be borne by Nortel. Segal has more experience working with former employee groups on Section 1114 Committees than any other firm in North America and has been successful at helping such groups to set up their own comprehensive and affordable health plans.

Another question which arises is about the likelihood of availability of COBRA should Nortel medical coverage end. Nortel is obliged to offer COBRA to all former employees as long as it has any current employees and continues to offer them medical benefits. While COBRA is more expensive than our existing medical coverage, it does provide insurance for an interim period while former employees explore other medical coverage options.