The 25th report by the Canadian court monitor Ernst & Young contains a summary list of claims against Nortel from the Canadian claims process. The total is about $28 billion US. The monitor states that some of the claims are duplicated between companies and some are only placeholders. If the duplication counts for a third of the total claims that is still a huge number (approximately $20B) and will swamp the other claims from other countries. Also we have to remember that the claims in Canada do not yet contain those from pension funds or other employee related claims.
The US claims are listed on the Epiq Systems web site. There isn't a total shown on the web site, but it looks very big. The first 50 claims total well over $10B US so all of them must be at least $20B.
Adding these two sums and assuming the rest of the world has at least $10B US claims on Nortel, the total could reach $50B or more.
If we assume 10% are denied or adjusted then it may be that Nortel in its final liquidation will have at least $45B US in claims against possibly $6B in remaining estate cash.
That means an average %13 payback on claims worldwide.
Then if that actually happens, the various governments will impose taxes on the lump sums resulting from the claims settlements, and we are going to be lucky to get 10 cents on the dollar for what Nortel owes us.
Not much to show for all the years spent working to build the company.
Maybe my calculations will be wrong, and maybe the judges will rule out many of the claims, and maybe Canada and other countries will come to their senses and give priority to retirees and employee's claims before other creditors.
Then again, maybe pigs will fly......
Saturday, October 31, 2009
Friday, October 30, 2009
Nortel Canada's available cash projected to be zero by January 2010
The following information is courtesy of Diane Urquhart, Independent Financial Analyst.
The 25th E & Y Court Monitor's Report dated October 22, 2009 shows that the cash in the Nortel Global Estate continues to grow, before the receipt of the cash sale proceeds from Ericsson, Avaya, Ciena and the expected buyers of the LG Nortel and residual intellectual property portfolio. Nortel Global Estate Gross Cash has grown to US$2,864 million at October 3, 2009 from US$2,573 million at July 11, 2009.
However, the Nortel Canada Estate Available Cash is declining, and at October 3, 2009it is just US$182 million or 8% of the total Nortel Global Estate available cash of US$2179.
E & Y Canada Court Administrator is forecasting that the Nortel Canada Estate Available Cash at December 31, 2009 will be just US$58 million. This means that the Nortel Canada Estate, (before the allocation of business sales proceeds), will probably be down to zero by January 2010.
Nortel Global Estate October 3,2009
Gross Cash ---------- $2,864M US
Available Cash ----- $2,179M US
Nortel Canada Estate October 3, 2009
Available Cash -------- $182M US
Nortel Canada Estate December 31, 2009
Available Cash --------- $58M US
Nortel Canada Estate January 31, 20010
Available Cash --------- 0
The cumulative total cash for expected Nortel business sales proceeds is about US$3,300 million. Koskie Minskey LLP and CAW Legal Counsel need to fight vigorously in the open courtroom to get an allocation of over 40% of the Nortel Global Estate business sales proceeds, just so that the Nortel Canada Estate unsecured creditors get the same cash settlement ratio as the US and UK unsecured creditors.
The E & Y Canada Court Administrator is the chief negotiator for the allocation of the Nortel Global Estate business sales proceeds to the Canada Estate, and this is not appropriate and needs to be examined in the open court process.
E & Y Canada Court Administrator has not publicly opposed the actions of the U.S. and U.K creditors causing the depletion of the Nortel Canada Estate to date. The E & Y Canada Court Administrator is an officer of the court, where the judge is supposed to make the decisions.
The CCAA process is supposed to be one that supervises the negotiation between the debtor and its creditors. The CCAA judge should set the terms of inter-country negotiation on the basis of cross-border cash settlement protocols that are recommended to him by the debtor and the creditor groups as expressed by their legal counsel in the open courtroom.
Apparently KM LLP and the CAW are not being permitted to negotiate directly with the debtor company and the other major creditors in the world and these legal counsel are not making their own published arguments for the cross-border cash settlement protocols.
The Federal Government should appoint a negotiator to represent the Canadian Nortel pensioners, long term disabled and terminated employees in order to aggressively defend their right to obtain the same cash settlement ratio as the US and UK unsecured creditors, including the US Pension Benefit Guarantee Corporation and Internal Revenue Service and the U.K. Pension Protection Fund on fairly determined government claims.
It’s important that all Canadian retirees speak up to support a reasonable approach to bankruptcy that carefully considers the plight of the Canadian pensioners. Write or speak to your MP asking him to support Federal Government intervention in the cross-border negotiation on the disbursement of the Nortel Global Estate business sales proceeds to the Canada Estate.
Many thousands of Canadians are asking for amendment of the Federal BIA to give preferred status for the Canadian employment-related claims and for the Ontario Government to contribute up to $400 million to the Nortel pension funds.
Ontario should honour the commitment provided by the Ontario Pension Benefit Guarantee Fund to pay for the deficit portion of the first $1000 per month of pension income for Ontario resident pensioners.
Unless, all three of these actions take place, there will be large material cuts in income for the Nortel Canadian Long Term Disabled, Pensioners and Severed Employees.
The 25th E & Y Court Monitor's Report dated October 22, 2009 shows that the cash in the Nortel Global Estate continues to grow, before the receipt of the cash sale proceeds from Ericsson, Avaya, Ciena and the expected buyers of the LG Nortel and residual intellectual property portfolio. Nortel Global Estate Gross Cash has grown to US$2,864 million at October 3, 2009 from US$2,573 million at July 11, 2009.
However, the Nortel Canada Estate Available Cash is declining, and at October 3, 2009it is just US$182 million or 8% of the total Nortel Global Estate available cash of US$2179.
E & Y Canada Court Administrator is forecasting that the Nortel Canada Estate Available Cash at December 31, 2009 will be just US$58 million. This means that the Nortel Canada Estate, (before the allocation of business sales proceeds), will probably be down to zero by January 2010.
Nortel Global Estate October 3,2009
Gross Cash ---------- $2,864M US
Available Cash ----- $2,179M US
Nortel Canada Estate October 3, 2009
Available Cash -------- $182M US
Nortel Canada Estate December 31, 2009
Available Cash --------- $58M US
Nortel Canada Estate January 31, 20010
Available Cash --------- 0
The cumulative total cash for expected Nortel business sales proceeds is about US$3,300 million. Koskie Minskey LLP and CAW Legal Counsel need to fight vigorously in the open courtroom to get an allocation of over 40% of the Nortel Global Estate business sales proceeds, just so that the Nortel Canada Estate unsecured creditors get the same cash settlement ratio as the US and UK unsecured creditors.
The E & Y Canada Court Administrator is the chief negotiator for the allocation of the Nortel Global Estate business sales proceeds to the Canada Estate, and this is not appropriate and needs to be examined in the open court process.
E & Y Canada Court Administrator has not publicly opposed the actions of the U.S. and U.K creditors causing the depletion of the Nortel Canada Estate to date. The E & Y Canada Court Administrator is an officer of the court, where the judge is supposed to make the decisions.
The CCAA process is supposed to be one that supervises the negotiation between the debtor and its creditors. The CCAA judge should set the terms of inter-country negotiation on the basis of cross-border cash settlement protocols that are recommended to him by the debtor and the creditor groups as expressed by their legal counsel in the open courtroom.
Apparently KM LLP and the CAW are not being permitted to negotiate directly with the debtor company and the other major creditors in the world and these legal counsel are not making their own published arguments for the cross-border cash settlement protocols.
The Federal Government should appoint a negotiator to represent the Canadian Nortel pensioners, long term disabled and terminated employees in order to aggressively defend their right to obtain the same cash settlement ratio as the US and UK unsecured creditors, including the US Pension Benefit Guarantee Corporation and Internal Revenue Service and the U.K. Pension Protection Fund on fairly determined government claims.
It’s important that all Canadian retirees speak up to support a reasonable approach to bankruptcy that carefully considers the plight of the Canadian pensioners. Write or speak to your MP asking him to support Federal Government intervention in the cross-border negotiation on the disbursement of the Nortel Global Estate business sales proceeds to the Canada Estate.
Many thousands of Canadians are asking for amendment of the Federal BIA to give preferred status for the Canadian employment-related claims and for the Ontario Government to contribute up to $400 million to the Nortel pension funds.
Ontario should honour the commitment provided by the Ontario Pension Benefit Guarantee Fund to pay for the deficit portion of the first $1000 per month of pension income for Ontario resident pensioners.
Unless, all three of these actions take place, there will be large material cuts in income for the Nortel Canadian Long Term Disabled, Pensioners and Severed Employees.
Wednesday, October 28, 2009
Canada's Finance Minister's proposal on pensions
Canada's finance minister Flagherty, announced a range of proposals to change the approach to defined pension funding. Sounds good, but it does nothing for us Nortel pensioners who are faced with a shortfall in our pension Trust Fund (Some Trust).
With the usual flair of a slick politician Flagherty has placed some crumbs on the table which will basically help companies and probably hurt future retirees if companies decide to move away from defined pensions.
There is no mention of retirees currently facing a trust fund deficit as a result of company mismanagement and bankruptcy. We are still categorized as second class creditors with no priority to ensure the remaining company assets pay off the trust fund deficit.
The article in the Globe and Mail may be found at the following address:
http://www.theglobeandmail.com/report-on-business/flaherty-tackles-pension-short\
fall/article1340878/
With the usual flair of a slick politician Flagherty has placed some crumbs on the table which will basically help companies and probably hurt future retirees if companies decide to move away from defined pensions.
There is no mention of retirees currently facing a trust fund deficit as a result of company mismanagement and bankruptcy. We are still categorized as second class creditors with no priority to ensure the remaining company assets pay off the trust fund deficit.
The article in the Globe and Mail may be found at the following address:
http://www.theglobeandmail.com/report-on-business/flaherty-tackles-pension-short\
fall/article1340878/
Quebec to aid Nortel pensioners
Article published in the Montreal Gazette yesterday regarding the Nortel Defined Pension for people who retired from Quebec.
'You've given enough': Minister: Régie des rentes will step in to manage pension funds if company backs out
BY PAUL DELEAN, THE GAZETTEOCTOBER 27, 2009
Former Nortel employee Claude Gauthier scrapped his planned holiday in the Gaspé this summer.
He didn't feel a vacation was affordable after getting word the indexed company pension he'd received since 1996 likely would be reduced about 31 per cent as Nortel gets disassembled from within the confines of creditor protection. It'll cost him about $800 a month.
Health, dental and life-insurance benefits also are being dropped.
"I'm lucky: My house is paid for. But this affects our lifestyle completely. Nothing's going down in price. The car will need to be smaller and use less gas. I won't be able to go to the osteopath as often for my back pain," said Gauthier, 67, a Châteauguay resident for worked 34 years for Nortel, setting up telephone offices across the country.
An estimated 3,000 Nortel retirees in Quebec will be affected by the shortfall in the corporate pension, and though their appeals to the federal government for changes to protect pensioners better have so far produced nothing concrete, there's been some movement at the provincial level.
The Quebec government announced yesterday it's prepared to help by allowing their funds to be managed by the Régie des rentes du Québec for a five-year period if and when Nortel's defined-benefit pension plans are terminated.
They'll be guaranteed a minimum return equal to what an annuity would have generated, and may do significantly better, depending on how markets evolve and its "prudent" managers perform.
"You have given enough for society. It's our turn to give back to you," Employment Minister Sam Hamad told about 50 Nortel retirees at a gathering in LaSalle.
A law passed earlier this year allowed Quebecers receiving or entitled to defined-benefit pensions from companies that went bankrupt to have their funds administered by the Régie for a five-year period with the goal of generating better returns for the beneficiaries, but it did not cover companies like Nortel, which is liquidating under creditor protection.
Hamad said the government is making an exception for Nortel, but would consider it for other companies in a similar situation, if their employee pension committees request it.
To date, the Régie des rentes du Québec has taken over pension management for one group, former employees of the Aleris aluminum plant in Trois Rivières.
Nortel retirees won't be obliged to place their pension money with the RRQ.
If they want an annuity, or to manage the funds themselves through a life-income fund, they have those options as well.
"My choice is certainly to let the Régie do it," said Ken Lyons, spokesman for the Nortel Retirees and Former Employees Protection Canada Committee.
"To me, it's the logical thing to do."
Even if the RRQ delivers better returns over five years, and Nortel's asset liquidation were to generate more cash than expected for unsecured creditors like the pension fund, retirees still won't receive as much as they're getting now.
"Because we had a pension plan, we were limited in what we could contribute to RRSPs, so we don't have that backup," Gauthier noted.
The plight of the Nortel pensioners has resonated nationally, and it may be a sign of things to come.
"Over 90 per cent of pension funds in Canada have taken an average hit of 20 per cent," Lyons said. "If your company's in difficulty, you too may end up losing big-time."
'You've given enough': Minister: Régie des rentes will step in to manage pension funds if company backs out
BY PAUL DELEAN, THE GAZETTEOCTOBER 27, 2009
Former Nortel employee Claude Gauthier scrapped his planned holiday in the Gaspé this summer.
He didn't feel a vacation was affordable after getting word the indexed company pension he'd received since 1996 likely would be reduced about 31 per cent as Nortel gets disassembled from within the confines of creditor protection. It'll cost him about $800 a month.
Health, dental and life-insurance benefits also are being dropped.
"I'm lucky: My house is paid for. But this affects our lifestyle completely. Nothing's going down in price. The car will need to be smaller and use less gas. I won't be able to go to the osteopath as often for my back pain," said Gauthier, 67, a Châteauguay resident for worked 34 years for Nortel, setting up telephone offices across the country.
An estimated 3,000 Nortel retirees in Quebec will be affected by the shortfall in the corporate pension, and though their appeals to the federal government for changes to protect pensioners better have so far produced nothing concrete, there's been some movement at the provincial level.
The Quebec government announced yesterday it's prepared to help by allowing their funds to be managed by the Régie des rentes du Québec for a five-year period if and when Nortel's defined-benefit pension plans are terminated.
They'll be guaranteed a minimum return equal to what an annuity would have generated, and may do significantly better, depending on how markets evolve and its "prudent" managers perform.
"You have given enough for society. It's our turn to give back to you," Employment Minister Sam Hamad told about 50 Nortel retirees at a gathering in LaSalle.
A law passed earlier this year allowed Quebecers receiving or entitled to defined-benefit pensions from companies that went bankrupt to have their funds administered by the Régie for a five-year period with the goal of generating better returns for the beneficiaries, but it did not cover companies like Nortel, which is liquidating under creditor protection.
Hamad said the government is making an exception for Nortel, but would consider it for other companies in a similar situation, if their employee pension committees request it.
To date, the Régie des rentes du Québec has taken over pension management for one group, former employees of the Aleris aluminum plant in Trois Rivières.
Nortel retirees won't be obliged to place their pension money with the RRQ.
If they want an annuity, or to manage the funds themselves through a life-income fund, they have those options as well.
"My choice is certainly to let the Régie do it," said Ken Lyons, spokesman for the Nortel Retirees and Former Employees Protection Canada Committee.
"To me, it's the logical thing to do."
Even if the RRQ delivers better returns over five years, and Nortel's asset liquidation were to generate more cash than expected for unsecured creditors like the pension fund, retirees still won't receive as much as they're getting now.
"Because we had a pension plan, we were limited in what we could contribute to RRSPs, so we don't have that backup," Gauthier noted.
The plight of the Nortel pensioners has resonated nationally, and it may be a sign of things to come.
"Over 90 per cent of pension funds in Canada have taken an average hit of 20 per cent," Lyons said. "If your company's in difficulty, you too may end up losing big-time."
Friday, October 23, 2009
Monitor report on Nortel status
Ernst & Young have published their 25th report on Nortel.
It is contained in docket 1719 on the Epiq website.It contains information on Nortel's current cash position and the status in terms of the various entities around the world.
It shows that Nortel still has $2.9 Billion in cash though some of it is restricted due to the restructuring and various legal agreements. This is cash for and from operations and does not include the sale of businesses which will complete before the end of the year. The amounts from those sales will be held in a separate account until agreement is reached as to how the money will be divided between the various Nortel entities.
It is contained in docket 1719 on the Epiq website.It contains information on Nortel's current cash position and the status in terms of the various entities around the world.
It shows that Nortel still has $2.9 Billion in cash though some of it is restricted due to the restructuring and various legal agreements. This is cash for and from operations and does not include the sale of businesses which will complete before the end of the year. The amounts from those sales will be held in a separate account until agreement is reached as to how the money will be divided between the various Nortel entities.
Thursday, October 22, 2009
Lawyers making lots of money from Nortel's bankruptcy
Just a quick run through of the most recent 20 dockets on the Epiq website covers a number of agreements made by the court to pay all sorts of law firms who have come out of the woodwork to feast on Nortel's carcass.
We unsecured creditors have not received a penny yet we seem to have law firms representing us who have never told us what they are doing on our behalf. Akin Gump for example was awarded $523,199 in fees and $44,610 in expenses for work done in one month on our behalf. Capstone Advisory group was awarded $483,336 in fees and $27,108 in expenses also for supporting us during the month. I wonder what they have done for that money. I certainly haven't heard from them.
Nortel also is getting a lot of help. So many law firms enjoying the feast as well as advisory groups. Huron consulting for example has been paid $1,967,507 in fees and $233,037 expenses since March 2009 for their wonderful advice to Nortel in terms of restructuring. I can't say I am too thrilled with the value they added to the scene for over $2M.
All those costs are coming out of our claims. These people get paid first and they continue to get paid month after month as the case drags on. Once they have had their fill and the court case is finally over, we will get to fight over the slim pickings left as the vultures fly on to their next victim.
So much for the rights of employees, pensioners, and other creditors.
We unsecured creditors have not received a penny yet we seem to have law firms representing us who have never told us what they are doing on our behalf. Akin Gump for example was awarded $523,199 in fees and $44,610 in expenses for work done in one month on our behalf. Capstone Advisory group was awarded $483,336 in fees and $27,108 in expenses also for supporting us during the month. I wonder what they have done for that money. I certainly haven't heard from them.
Nortel also is getting a lot of help. So many law firms enjoying the feast as well as advisory groups. Huron consulting for example has been paid $1,967,507 in fees and $233,037 expenses since March 2009 for their wonderful advice to Nortel in terms of restructuring. I can't say I am too thrilled with the value they added to the scene for over $2M.
All those costs are coming out of our claims. These people get paid first and they continue to get paid month after month as the case drags on. Once they have had their fill and the court case is finally over, we will get to fight over the slim pickings left as the vultures fly on to their next victim.
So much for the rights of employees, pensioners, and other creditors.
Wednesday, October 21, 2009
Huge Protest Rally in Ottawa on Pension Reform
At Parliament Hill in Ottawa on 21st October, thousands of former Nortel employees and their supporters gathered to drive home the message that government needs to protect the rights of seniors during bankruptcy proceedings. It seems that they made a big impact, at least on the Opposition Parties in Canada. The following is from CBC news:
The Liberal Party says it is committed to changing Canadian bankruptcy laws so former employees of failed companies like Nortel don't lose their pensions and disability benefits when their employer goes bust.
"You gotta know that I'm hearing you loud and clear the Bankruptcy Act must be changed," Liberal Leader Michael Ignatieff told Nortel pensioners at a rally on Parliament Hill Wednesday.
Ignatieff said his party will be meeting Monday to discuss new proposals for the pension system. Liberals are committed to changing bankruptcy laws "so that you are not left at the back of queue in insolvency and bankruptcy," Ignatieff said. "It's not right; we agree with you."
Leaders and MPs from all three federal opposition parties joined about 2,000 former Nortel employees and Canadian Auto Workers union members at the noon-hour rally. The demonstrators were calling on the federal government to change bankruptcy laws so that employees would be given higher priority on Nortel's list of unsecured creditors.
The company filed for bankruptcy protection in January and has been selling off its units piece by piece ever since. Once those sales are complete and the company stops operating, former employees such as Josée Marin will lose the disability benefits they thought were protected. In addition, retirees stand to lose a large portion of their underfunded pensions.
Marin, who can't work because of health issues that include Crohn's disease and asthma, said she learned in June that she would lose both her disability and her insurance benefits. She said she will have to turn to Canadian Pension Plan benefits to support her son and herself, reducing her income to around $800 a month.
"I stand to live in my car if nothing's done," Marin said, tears welling up in her eyes as other former employees shouted and cheered behind her, waving placards with slogans such as "Hands off our pensions" and "MPs fiddle while pensioners get burned."
"I'm sick; I'm tired; I'm exhausted," she said. "I can't take care of myself, because I'm trying to save my life."
Unlike bondholders and other creditors who chose to make investments and who might have had their investments insured, she and other former employees have no recourse.
"And I don't see anything being done there," Marin said. "I don't see my prime minister here. Where the hell is he?"
Many of those at the rally blamed the government for their situation.
Phyllis Kendall, who was waving a placard that read, "Why don't governments care?" said she's been emailing her MP and MPP for months.
"Nobody's prepared to do anything. They all say it's the other guy's problem," she said. "I feel sick to my stomach to think that Nortel has come to this, and it's partially the government's responsibility they should have intervened long before they did."
Prime Minister Stephen Harper did not make an appearance, but Ignatieff, Bloc Québécois leader Gilles Duceppe and NDP Leader Jack Layton all gave speeches.
Layton said the laws that have left Nortel pensioners in this position "were written to be unfair to the working people , and it's time those laws were changed to put workers first."
He also slammed the federal government for saying that pensions are a provincial responsibility.
"They try to pretend that it's only the provinces that can help you out. Well, they're flat wrong about that," Layton said. "And it's time Stephen Harper took some responsibility and showed some guts."
Tuesday, October 20, 2009
US Bankruptcy court grants stipulations for IRS & PBGC
Nortel has been negotiating with the IRS and the PBGC regarding their claims against Nortel and have been able to get the bankruptcy judge to approve stipulations which provide liens to the IRS and the PBGC against proceeds from the sale of the Enterprise business to Avaya. See dockets 1658 and 1659 on the Epiq Solutions web site. The stipulations are in dockets 1495 and 1639. The deal with Avaya was contingent on the IRS and PBGC waiving any claims and potential claims against the Purchaser and the Non-Debtor Subsidiaries.
There is a lot of legalese in the dockets which clouds the meaning of these agreements but it appears to me that in order to meet the terms of the contract with Avaya the IRS and PBGC may have obtained some form of agreement that gives them a better position in terms of their claims against Nortel. Not being a lawyer I find the language frustrating and intentionally unclear.
Example of the detail as stated in the stipulation for the PBGC:
PBGC Waiver and Release.
Effective at the closing of the sale of the Enterprise Business to the Purchaser, which will be contemporanous with the payment by the Purchaser into escrow of the Enterprise Proceeds (as defined below), the PBGC hereby releases, and waives against the Non-Debtor Subsidiaries, and their respective assets, any claim, lien, interest or obligation for joint or several liability, the right to assert or take any action giving rise to any such claim, lien, interest or obligation, and the right to assess or impose any such liability, arising before or after the date of this Stipulation under Title IV of ERISA or under Sections 430 or 412 of the IRC, or Sections 302 or 303 of ERISA (the “PBGC Waiver”) solely as to the Pension Plan. This Stipulation shall not effect the liability of any other entity to the Pension Plan or to the PBGC with respect to the Pension Plan.
The PBGC Lien.
In consideration for the PBGC Waiver, NNI grants to the PBGC a lien (the “PBGC Lien”) on the proceeds ultimately allocated to the sale of the NGS Shares and the DiamondWare Shares (the “Share Sale Proceeds”), with such sale being effectuated pursuant to the Amended and Restated Asset and Share Sale Agreement by and among Nortel Networks Corporation, Nortel Networks Limited, Nortel Networks Inc., and other identified sellers, and Avaya Inc., dated as of September 14, 2009 (as amended and as may be amended from time to time, the “Avaya Agreement”), which was approved by the Bankruptcy Court pursuant to the Order Authorizing and Approving (A) The Sale of Certain Assets of, and Equity Interests In, Debtors’ Enterprise Solutions Business, (B) The Assumption and Assignment of Certain Contracts and Leases and (C) The Assumption and Sublease of Certain Leases entered by the Bankruptcy Court on September 16, 2009 (the “Sale Order”). The Parties agree that any purchase price adjustments required under Section 2.2 of the Avaya Agreement attributable or allocable to NGS and DiamondWare shall be explicitly included in the determination of the Share Sale Proceeds after the determination of the Enterprise Proceeds (ashereinafter defined) and the US Sale Proceeds (as hereinafter defined). The PBGC Lien shall be in an amount equal to the lien imposed by Section 4068 of ERISA with respect to the liabiltiy of NNI and any member of its “controlled group” as defined in Section 4001(a)(14) of ERISA (collectively, the “Nortel Entities”) to the PBGC under Section 4062 of ERISA as a result of the termination of the Pension Plan, provided, however, that nothing in this Stipulation acknowledges or creates, or has the effect of acknowledging or creating, in favor of the PBGC a claim against any of the Nortel Entities or against any assets of any of the foregoing in an amount, or entitled to a priority, greater than the PBGC would have had in the absence of this Stipulation. The PBGC Lien will not be less than 30% of the Share Sale Proceeds.
There is a lot of legalese in the dockets which clouds the meaning of these agreements but it appears to me that in order to meet the terms of the contract with Avaya the IRS and PBGC may have obtained some form of agreement that gives them a better position in terms of their claims against Nortel. Not being a lawyer I find the language frustrating and intentionally unclear.
Example of the detail as stated in the stipulation for the PBGC:
PBGC Waiver and Release.
Effective at the closing of the sale of the Enterprise Business to the Purchaser, which will be contemporanous with the payment by the Purchaser into escrow of the Enterprise Proceeds (as defined below), the PBGC hereby releases, and waives against the Non-Debtor Subsidiaries, and their respective assets, any claim, lien, interest or obligation for joint or several liability, the right to assert or take any action giving rise to any such claim, lien, interest or obligation, and the right to assess or impose any such liability, arising before or after the date of this Stipulation under Title IV of ERISA or under Sections 430 or 412 of the IRC, or Sections 302 or 303 of ERISA (the “PBGC Waiver”) solely as to the Pension Plan. This Stipulation shall not effect the liability of any other entity to the Pension Plan or to the PBGC with respect to the Pension Plan.
The PBGC Lien.
In consideration for the PBGC Waiver, NNI grants to the PBGC a lien (the “PBGC Lien”) on the proceeds ultimately allocated to the sale of the NGS Shares and the DiamondWare Shares (the “Share Sale Proceeds”), with such sale being effectuated pursuant to the Amended and Restated Asset and Share Sale Agreement by and among Nortel Networks Corporation, Nortel Networks Limited, Nortel Networks Inc., and other identified sellers, and Avaya Inc., dated as of September 14, 2009 (as amended and as may be amended from time to time, the “Avaya Agreement”), which was approved by the Bankruptcy Court pursuant to the Order Authorizing and Approving (A) The Sale of Certain Assets of, and Equity Interests In, Debtors’ Enterprise Solutions Business, (B) The Assumption and Assignment of Certain Contracts and Leases and (C) The Assumption and Sublease of Certain Leases entered by the Bankruptcy Court on September 16, 2009 (the “Sale Order”). The Parties agree that any purchase price adjustments required under Section 2.2 of the Avaya Agreement attributable or allocable to NGS and DiamondWare shall be explicitly included in the determination of the Share Sale Proceeds after the determination of the Enterprise Proceeds (ashereinafter defined) and the US Sale Proceeds (as hereinafter defined). The PBGC Lien shall be in an amount equal to the lien imposed by Section 4068 of ERISA with respect to the liabiltiy of NNI and any member of its “controlled group” as defined in Section 4001(a)(14) of ERISA (collectively, the “Nortel Entities”) to the PBGC under Section 4062 of ERISA as a result of the termination of the Pension Plan, provided, however, that nothing in this Stipulation acknowledges or creates, or has the effect of acknowledging or creating, in favor of the PBGC a claim against any of the Nortel Entities or against any assets of any of the foregoing in an amount, or entitled to a priority, greater than the PBGC would have had in the absence of this Stipulation. The PBGC Lien will not be less than 30% of the Share Sale Proceeds.
Sunday, October 18, 2009
Globe and Mail editorial
From Saturday's Globe and Mail Published on Friday, Oct. 16, 2009 11:00PM EDT Last updated on Friday, Oct. 16, 2009 11:33PM EDT
Globe Editorial
Beyond the illusion of security
Canadians can no longer assume they will retire with security. Many are seeking increasingly scarce work while others flail as their once-flush retirement accounts hemorrhage. A Globe and Mail series beginning today shows that the crisis in Canadian pensions is not looming; it is here, and has been for some time. A concerted national effort, involving changes in policy, behaviour and mindset from governments, businesses, unions, pension overseers and individual Canadians, is needed to repel the crisis.
The financial crisis is just the public face of the pension crisis. Stock market plunges have devalued everyone’s savings in the short term, draining retirement accounts by $50-billion, according to one estimate. When companies started toppling, apparently secure pensions were thrown into bankruptcy court (where they were put at the back of the creditors’ queue, as with Nortel); or they were thrown into rescuing arms; General Motors had received pension funding exemptions because it was deemed too big to fail, and this year governments decided that it was also too big to be allowed to fail.
But the gestation period for the pension crisis has been long. Private sector participation in workplace pension plans has been falling. Defined-benefit plans that deliver a guaranteed income benefit amount are disappearing, covering 41 per cent of all workers in 1991 but only 30 per cent in 2006. Pensioners in the steel and forestry industries have already met the fate now being meted out to Nortel retirees. The mentality that informed the too-big-to-fail policy – defer or forget about the problem, because it will eventually get fixed or fix itself – afflicted policy-makers, pension administrators and beneficiaries of all sizes. Infrequent assessments of pension plans, done only every three years, predicated on unreasonable assumptions about investment returns, made pools of savings look more enduring than they were. Employers and employees failed to strike deals to rebalance plans, even when the number of retirees started to exceed the number of workers.
Another set of poorer Canadians should never have had the illusion of security in the first place. A large proportion of workers – 44 per cent, or eight million Canadians – have neither an RRSP nor an employer-based registered pension plan. A growing proportion is self-employed. They will depend on the Canada and Quebec Pension Plans and government backstops like Old Age Security. These provide basic assistance, but little more. The maximum CPP monthly payment for a 65-year-old is $908.75. Unless blessed with other assets, a senior who relies on the public system alone lives a life of poverty.
Meanwhile, government finances are getting squeezed in two ways. More than five in six public-sector workers are in registered pension plans, usually requiring significant government co-payments; unlike their private-sector counterparts, these workers have successfully maintained relatively expensive benefits during collective bargaining. Second, an aging population means governments are spending more on health care, while the proportion of taxpaying workers falls. Increasing taxes, and increasing public spending on retirement income, are not solutions to the pension crisis.
With so many Canadians at personal financial risk, a new approach is needed. Regulators must be more active in monitoring plans between official evaluations. Governments should facilitate the creation of multi-employer pension plans, whose scale can help spread risk and attract workers from smaller workplaces; new plans could get tax credits to encourage their growth. Commitments inherent in existing defined-benefit plans should be legislatively enshrined, so that they cannot be lost in bankruptcy or squandered when good times make plan administrators succumb to the temptation to reduce incoming payments. The principle, outlined by University of Toronto professor Keith Ambachtsheer in an unpublished paper, is that “accruing pension promises must be fully costed and fully funded at all times.”
But employers do not need to wait for the government’s hand. They can ensure their plans are better funded by setting higher default contribution rates from employees. Other employers can facilitate payroll deductions to the savings account of the employee’s choice. As long as these schemes, or “nudges,” as described by the economists Cass Sunstein and Richard Thaler, still leave the ultimate choice on whether to participate in the hands of individual workers, they should be pursued widely. And employers must see the larger public benefits that come with their sponsorship of pensions. Without their participation, families and governments will buckle under the pressure to provide for Canada’s retirees.
Institutions can only do so much; pensions are just part of a larger process of retirement planning incumbent on every Canadian. No amount of alchemy, short of another stock market boom, will make the lost assets return. Individuals need to make their own contribution to build or rebuild their savings. And they need to embrace financial literacy as a competency for life, just as they learn safe driving.
As a society, Canada decided many years ago that its older people and retirees should not have to depend purely on family, charity or their own devices to live. But the promise inherent in our patchwork pension framework has unravelled. National will must be summoned to repair it.
Globe Editorial
Beyond the illusion of security
Canadians can no longer assume they will retire with security. Many are seeking increasingly scarce work while others flail as their once-flush retirement accounts hemorrhage. A Globe and Mail series beginning today shows that the crisis in Canadian pensions is not looming; it is here, and has been for some time. A concerted national effort, involving changes in policy, behaviour and mindset from governments, businesses, unions, pension overseers and individual Canadians, is needed to repel the crisis.
The financial crisis is just the public face of the pension crisis. Stock market plunges have devalued everyone’s savings in the short term, draining retirement accounts by $50-billion, according to one estimate. When companies started toppling, apparently secure pensions were thrown into bankruptcy court (where they were put at the back of the creditors’ queue, as with Nortel); or they were thrown into rescuing arms; General Motors had received pension funding exemptions because it was deemed too big to fail, and this year governments decided that it was also too big to be allowed to fail.
But the gestation period for the pension crisis has been long. Private sector participation in workplace pension plans has been falling. Defined-benefit plans that deliver a guaranteed income benefit amount are disappearing, covering 41 per cent of all workers in 1991 but only 30 per cent in 2006. Pensioners in the steel and forestry industries have already met the fate now being meted out to Nortel retirees. The mentality that informed the too-big-to-fail policy – defer or forget about the problem, because it will eventually get fixed or fix itself – afflicted policy-makers, pension administrators and beneficiaries of all sizes. Infrequent assessments of pension plans, done only every three years, predicated on unreasonable assumptions about investment returns, made pools of savings look more enduring than they were. Employers and employees failed to strike deals to rebalance plans, even when the number of retirees started to exceed the number of workers.
Another set of poorer Canadians should never have had the illusion of security in the first place. A large proportion of workers – 44 per cent, or eight million Canadians – have neither an RRSP nor an employer-based registered pension plan. A growing proportion is self-employed. They will depend on the Canada and Quebec Pension Plans and government backstops like Old Age Security. These provide basic assistance, but little more. The maximum CPP monthly payment for a 65-year-old is $908.75. Unless blessed with other assets, a senior who relies on the public system alone lives a life of poverty.
Meanwhile, government finances are getting squeezed in two ways. More than five in six public-sector workers are in registered pension plans, usually requiring significant government co-payments; unlike their private-sector counterparts, these workers have successfully maintained relatively expensive benefits during collective bargaining. Second, an aging population means governments are spending more on health care, while the proportion of taxpaying workers falls. Increasing taxes, and increasing public spending on retirement income, are not solutions to the pension crisis.
With so many Canadians at personal financial risk, a new approach is needed. Regulators must be more active in monitoring plans between official evaluations. Governments should facilitate the creation of multi-employer pension plans, whose scale can help spread risk and attract workers from smaller workplaces; new plans could get tax credits to encourage their growth. Commitments inherent in existing defined-benefit plans should be legislatively enshrined, so that they cannot be lost in bankruptcy or squandered when good times make plan administrators succumb to the temptation to reduce incoming payments. The principle, outlined by University of Toronto professor Keith Ambachtsheer in an unpublished paper, is that “accruing pension promises must be fully costed and fully funded at all times.”
But employers do not need to wait for the government’s hand. They can ensure their plans are better funded by setting higher default contribution rates from employees. Other employers can facilitate payroll deductions to the savings account of the employee’s choice. As long as these schemes, or “nudges,” as described by the economists Cass Sunstein and Richard Thaler, still leave the ultimate choice on whether to participate in the hands of individual workers, they should be pursued widely. And employers must see the larger public benefits that come with their sponsorship of pensions. Without their participation, families and governments will buckle under the pressure to provide for Canada’s retirees.
Institutions can only do so much; pensions are just part of a larger process of retirement planning incumbent on every Canadian. No amount of alchemy, short of another stock market boom, will make the lost assets return. Individuals need to make their own contribution to build or rebuild their savings. And they need to embrace financial literacy as a competency for life, just as they learn safe driving.
As a society, Canada decided many years ago that its older people and retirees should not have to depend purely on family, charity or their own devices to live. But the promise inherent in our patchwork pension framework has unravelled. National will must be summoned to repair it.
Saturday, October 17, 2009
Canada pensions in crisis. A Globe and Mail article
An article in Canada's Globe and Mail by Jacquie McNish published on Friday, Oct. 16, 2009 11:00PM EDT, explores the extent to which Canada's poorly managed and governed pension schemes have impacted the lives of pensioners and future retirees. As more companies fall into bankruptcy, thousands of retirees are seeing their pensions fall into peril. The apparent lack of concern by the Provincial and Federal governments is jeopardizing many as they face huge cuts in benefits and income as a result.
The article can be found at:
http://www.theglobeandmail.com/report-on-business/retirement/retirement-dreams-under-siege/article1327536/
And a telling video from the article, highlighting the impact on one Nortel retiree's life can be seen at:
http://www.theglobeandmail.com/report-on-business/retirement/retirement-lost-john-mlacak-73/article1324809/
The article can be found at:
http://www.theglobeandmail.com/report-on-business/retirement/retirement-dreams-under-siege/article1327536/
And a telling video from the article, highlighting the impact on one Nortel retiree's life can be seen at:
http://www.theglobeandmail.com/report-on-business/retirement/retirement-lost-john-mlacak-73/article1324809/
Thursday, October 15, 2009
Nortel US Retiree Medical Insurance Renewal
Nortel has sent out a letter to US employees and retirees who are currently registered on the Nortel Medical Insurance Plan. The letter is the annual renewal notification with details on premium pricing.
For retirees there will be a change in the billing method. For those who have had the premium deducted from their pension they will have to start sending payments to Ceridian Benefits Billing Services starting in 2010. This is due to the fact that the PBGC will be taking over the US pension payments and do not include an option to automatically deduct the premium cost from the monthly payment.
You can check this out and more at the Nortel Medical health site shown on the links shown on this page. Or you can go directly to the retiree plan using the following address in your browser:
https://www.nortelhealthn-site.com/english/images/stories/AE_GuideForRetireesFINAL_20091005.pdf
Here is the information provided on the site for the billing:
Premium Billing
As announced in a letter sent to your home from the US Pension Benefit Guaranty Corporation (PBGC) in September, the PBGC has assumed responsibility for the US Retirement Income Plan (also known as the U.S. Defined Benefit Pension Plan). As indicated in the letter, the PBGC will be administering the pension plan and paying benefits from the US Retirement Income Plan fund in accordance with the Nortel plan documents and applicable law. However, the PBGC will not be deducting medical plan premiums from the monthly payments. Consequently and in preparation for the PBGC administering pension payments in 2010, Ceridian Benefits Billing Service (BBS) will begin billing you for your monthly premiums starting with the November 2009 premium. You will receive a bill from BBS mid October with instructions on payment submission. Payments to BBS will be due the first day of each month (beginning with the November 1, 2009 payment) and considered late the last day of the same month. We strongly encourage you to pay your premiums to BBS promptly and as directed on the BBS invoice as failure to pay the full invoice amount by the grace period due date on the BBS invoice will lead to cancellation of your Nortel retiree medical coverage with no reinstatement rights. Please note BBS offers an automatic bank draft for your convenience and assurance your premiums are paid on time. Directions on automatic bank drafts can be found on the back of the BBS invoice.
If you previously had your premiums deducted from your Nortel Networks pension check (issued by the pension plan Trustee, Northern Trust) and have not received an invoice from BBS by October 1, 2009 or have questions about billing, auto draft, etc. please call Ceridian directly at 1- 800/995-9935 to make sure you are properly set up to pay the premiums directly to BBS. For questions related to the PBGC assuming responsibility for the pension plan please call PBGC directly at 1-800-400-7242 or (202) 326- 4000 or visit the PBGC website at www.pbgc.gov for complete contact information including email options.
For retirees there will be a change in the billing method. For those who have had the premium deducted from their pension they will have to start sending payments to Ceridian Benefits Billing Services starting in 2010. This is due to the fact that the PBGC will be taking over the US pension payments and do not include an option to automatically deduct the premium cost from the monthly payment.
You can check this out and more at the Nortel Medical health site shown on the links shown on this page. Or you can go directly to the retiree plan using the following address in your browser:
https://www.nortelhealthn-site.com/english/images/stories/AE_GuideForRetireesFINAL_20091005.pdf
Here is the information provided on the site for the billing:
Premium Billing
As announced in a letter sent to your home from the US Pension Benefit Guaranty Corporation (PBGC) in September, the PBGC has assumed responsibility for the US Retirement Income Plan (also known as the U.S. Defined Benefit Pension Plan). As indicated in the letter, the PBGC will be administering the pension plan and paying benefits from the US Retirement Income Plan fund in accordance with the Nortel plan documents and applicable law. However, the PBGC will not be deducting medical plan premiums from the monthly payments. Consequently and in preparation for the PBGC administering pension payments in 2010, Ceridian Benefits Billing Service (BBS) will begin billing you for your monthly premiums starting with the November 2009 premium. You will receive a bill from BBS mid October with instructions on payment submission. Payments to BBS will be due the first day of each month (beginning with the November 1, 2009 payment) and considered late the last day of the same month. We strongly encourage you to pay your premiums to BBS promptly and as directed on the BBS invoice as failure to pay the full invoice amount by the grace period due date on the BBS invoice will lead to cancellation of your Nortel retiree medical coverage with no reinstatement rights. Please note BBS offers an automatic bank draft for your convenience and assurance your premiums are paid on time. Directions on automatic bank drafts can be found on the back of the BBS invoice.
If you previously had your premiums deducted from your Nortel Networks pension check (issued by the pension plan Trustee, Northern Trust) and have not received an invoice from BBS by October 1, 2009 or have questions about billing, auto draft, etc. please call Ceridian directly at 1- 800/995-9935 to make sure you are properly set up to pay the premiums directly to BBS. For questions related to the PBGC assuming responsibility for the pension plan please call PBGC directly at 1-800-400-7242 or (202) 326- 4000 or visit the PBGC website at www.pbgc.gov for complete contact information including email options.
Wednesday, October 14, 2009
Wall Street Journal reports on Queens Park Rally
Stan and Barbara Araelien, former Nortel Networks employees, protested their loss of pension and severance pay in Toronto Wednesday. The telecommunications-equipment maker filed for court protection from creditors in the U.S., Canada and elsewhere in January. It’s being broken up in an effort to raise cash for creditors. (Mark Blinch/Reuters)(Wall Steet Journal)
The Wall Street Journal added the above picture to its picture of the day list in a report on the protest by Ex-Nortel employees at Queens Park in Toronto. It would be great if we had more support in the media on both side of the border to shame the Canadian government into doing something positive to help retirees from bankrupt companies.
Monday, October 12, 2009
Filed Claims against Nortel
Now that the bar date has passed, the claims against Nortel in the US can be seen by accessing the Epiq Systems website and selecting the Filed Claims and Schedules page. Their site is available by the link on the right hand column of this page.
There are 88,467 records of claims many of which are duplicates and amended claims. However a quick search of the highest 30 claims yields a total that is well over $10 billion dollars. The rest of the claims probably total an additional sizeable amount.
The following is a list of the top 15 claims:
Mellon Bank NY $3,940,749,260 (2 claims)
IRS $3,031,692,382 (2 claims)
Flextronics $2,845,900,434 (10 claims)
Law debenture $150,986,875
Franchise tax $137,006,015
Zafarano 401K $100,000,000
EDS Canada $98,957,440
Beal Bank $55,300,276
Airvana $38,248,461
Sun Microsystems $19,942,982 (2 claims)
Hoyos $18,198,076
Groot $16,964,556
NETAS $14,261,663
Guangdong $12,461,072
Zafirovski $12,250,543
I'm sure you have noticed that the last one on my list above is Mike Zafirovski with a claim for $12 million and more. Considering the damage he has done and the time he spent doing it perhaps he should be paying that back to the retirees and ex-employees who are suffering as a result of his mismanagement and incompetence.
Many of these claims will be disputed so the process of sorting them out will take time. However this only represents the claims in the US and as yet we haven't seen the claims in other countries. Once all the claims have been submitted and agreed upon, and the Nortel assets have been sold and decisions made on how those assets will be allocated by country then the negotiations with creditors can really begin.
There are 88,467 records of claims many of which are duplicates and amended claims. However a quick search of the highest 30 claims yields a total that is well over $10 billion dollars. The rest of the claims probably total an additional sizeable amount.
The following is a list of the top 15 claims:
Mellon Bank NY $3,940,749,260 (2 claims)
IRS $3,031,692,382 (2 claims)
Flextronics $2,845,900,434 (10 claims)
Law debenture $150,986,875
Franchise tax $137,006,015
Zafarano 401K $100,000,000
EDS Canada $98,957,440
Beal Bank $55,300,276
Airvana $38,248,461
Sun Microsystems $19,942,982 (2 claims)
Hoyos $18,198,076
Groot $16,964,556
NETAS $14,261,663
Guangdong $12,461,072
Zafirovski $12,250,543
I'm sure you have noticed that the last one on my list above is Mike Zafirovski with a claim for $12 million and more. Considering the damage he has done and the time he spent doing it perhaps he should be paying that back to the retirees and ex-employees who are suffering as a result of his mismanagement and incompetence.
Many of these claims will be disputed so the process of sorting them out will take time. However this only represents the claims in the US and as yet we haven't seen the claims in other countries. Once all the claims have been submitted and agreed upon, and the Nortel assets have been sold and decisions made on how those assets will be allocated by country then the negotiations with creditors can really begin.
Saturday, October 10, 2009
2000 attend rally at Queens Park
Around 2000 people attended the rally to protest the Nortel pension situation in Toronto Canada. The rally was organized by the NRPC and the CAW to make the Ontario public and politicians aware of the outrage by Nortel ex-employees regarding their treatment following Nortel's filing for bankruptcy protection. It was also intended as a message to all people approaching retirement that what is happening to Nortel retirees could happen to them also.
Seven buses, sponsored by the CAW, brought in about 400 from the suburbs with another 500 or so coming by public transport. An impressive crowd braved the weather, brought their signs and raised their voices to call on the Government of Ontario to honour their pension guarantee.
The rally was peaceful with guest speakers who voiced our concerns, possible solutions and called on both the Ontario and Canadian Governments to get involved. Both the Liberal and Conservative leaders declined invitations to speak at the rally. However Andrea Horwath, NDP leader, voiced her full support.
The Canadian Government has been missing in action to help ex-Nortel employees, some of whom are suffering from losses in income that has plunged them into poverty and has ruined their future prospects of a reasonable retirement. The pressure must be kept on all politicians if we are to allow retirement with dignity.
A second rally will be held in Ottawa on October 21. Let's hope these elected representatives will live up to their oath and start to listen to the people instead of playing their silly political games.
Seven buses, sponsored by the CAW, brought in about 400 from the suburbs with another 500 or so coming by public transport. An impressive crowd braved the weather, brought their signs and raised their voices to call on the Government of Ontario to honour their pension guarantee.
The rally was peaceful with guest speakers who voiced our concerns, possible solutions and called on both the Ontario and Canadian Governments to get involved. Both the Liberal and Conservative leaders declined invitations to speak at the rally. However Andrea Horwath, NDP leader, voiced her full support.
The Canadian Government has been missing in action to help ex-Nortel employees, some of whom are suffering from losses in income that has plunged them into poverty and has ruined their future prospects of a reasonable retirement. The pressure must be kept on all politicians if we are to allow retirement with dignity.
A second rally will be held in Ottawa on October 21. Let's hope these elected representatives will live up to their oath and start to listen to the people instead of playing their silly political games.
Wednesday, October 7, 2009
US filed claims and NUSRPC status
The following is an email sent to me by the NUSRPC and outlines the current status of claims and some future possibilities.
NUSRPC Members Update October 7, 2009
The NUSRPC is a volunteer organization. Nothing in this e-mail is intended to be, nor should be construed to be, legal or financial advice.
Status Update
We are pleased to report that the NUSRPC, working with Segal Co., was able to complete and transmit claims calculations for the NUSRPC members who had non-qualified pensions so that all of those claims could be submitted before the September 30 bar date.
Obtaining the required information from Nortel/Mercer proved to be a far more difficult and time consuming process than we had expected. However the effort was successful and the lessons we learned and the procedures developed will certainly benefit former Nortel employees in Canada as they go through a similar process with Segal Co. and Nortel/Mercer in Canada.
Claims were calculated for 195 of our 421 members. Those who did not have a non-qualified pension will not be assessed charges for Segal Co.’s work. In terms of next steps (from Akin Gump) “Normally, a company has until 120 days after a plan of reorganization becomes effective to object to claims. This means that it could be many many months before claimants hear anything. Once the claims objection deadline contained in the plan of reorganization passes, the claims are deemed allowed, if not objected to.”
What’s Next?
Since Nortel’s plan is to completely sell off its assets and cease operations we may be sure that at some point our benefits (Medical, Life Insurance, LTD and Long Term Care) will also cease. We know that the majority of our members regard continuing medical benefits as their most important issue.
What we do not know is:
1. When will Nortel petition the court for permission to cease benefits?
2. Whether or not COBRA will be available as a temporary alternative for former employees. Nortel is obliged to offer COBRA as an alternative to former employees as long as they offer medical benefits to current Nortel employees. But should Nortel withdraw medical benefits from their remaining employees they would face no obligation to offer COBRA to former employees.
3. What will be the court’s response to the petition? The court may choose to grant Nortel’s petition outright. Or they may choose to grant the petition subject to certain conditions or negotiations. These conditions or negotiations could provide former employees and the NUSRPC with an opportunity to mitigate the loss of our benefits.
The NUSRPC cannot influence the timing of Nortel’s petition or the availability of COBRA. Nor can we affect the Court’s decision – other than by making our views known to the Court. What the NUSRPC can do and has been doing is to work to identify the options available to us should the court choose to grant Nortel’s petition subject to certain conditions or negotiations. We have identified some options which may be open to us which could provide the possibility of alternative medical coverage. We are investigating these so that we may be as prepared as possible when and if the time comes.
Should the court’s decision make such options possible the NUSRPC may require some expert assistance from both legal and benefits professionals. For this reason we have not yet made final plans for a refund of remaining membership fees. Should the court’s decision not make such options possible we will consider a wind up of the NUSRPC and a refund all remaining monies to our members (reflecting pro-rated fees for those who received Segal calculations).
The NUSRPC will continue to provide you with updates as developments occur regarding our benefits or affecting the claims we have already filed.
NUSRPC Members Update October 7, 2009
The NUSRPC is a volunteer organization. Nothing in this e-mail is intended to be, nor should be construed to be, legal or financial advice.
Status Update
We are pleased to report that the NUSRPC, working with Segal Co., was able to complete and transmit claims calculations for the NUSRPC members who had non-qualified pensions so that all of those claims could be submitted before the September 30 bar date.
Obtaining the required information from Nortel/Mercer proved to be a far more difficult and time consuming process than we had expected. However the effort was successful and the lessons we learned and the procedures developed will certainly benefit former Nortel employees in Canada as they go through a similar process with Segal Co. and Nortel/Mercer in Canada.
Claims were calculated for 195 of our 421 members. Those who did not have a non-qualified pension will not be assessed charges for Segal Co.’s work. In terms of next steps (from Akin Gump) “Normally, a company has until 120 days after a plan of reorganization becomes effective to object to claims. This means that it could be many many months before claimants hear anything. Once the claims objection deadline contained in the plan of reorganization passes, the claims are deemed allowed, if not objected to.”
What’s Next?
Since Nortel’s plan is to completely sell off its assets and cease operations we may be sure that at some point our benefits (Medical, Life Insurance, LTD and Long Term Care) will also cease. We know that the majority of our members regard continuing medical benefits as their most important issue.
What we do not know is:
1. When will Nortel petition the court for permission to cease benefits?
2. Whether or not COBRA will be available as a temporary alternative for former employees. Nortel is obliged to offer COBRA as an alternative to former employees as long as they offer medical benefits to current Nortel employees. But should Nortel withdraw medical benefits from their remaining employees they would face no obligation to offer COBRA to former employees.
3. What will be the court’s response to the petition? The court may choose to grant Nortel’s petition outright. Or they may choose to grant the petition subject to certain conditions or negotiations. These conditions or negotiations could provide former employees and the NUSRPC with an opportunity to mitigate the loss of our benefits.
The NUSRPC cannot influence the timing of Nortel’s petition or the availability of COBRA. Nor can we affect the Court’s decision – other than by making our views known to the Court. What the NUSRPC can do and has been doing is to work to identify the options available to us should the court choose to grant Nortel’s petition subject to certain conditions or negotiations. We have identified some options which may be open to us which could provide the possibility of alternative medical coverage. We are investigating these so that we may be as prepared as possible when and if the time comes.
Should the court’s decision make such options possible the NUSRPC may require some expert assistance from both legal and benefits professionals. For this reason we have not yet made final plans for a refund of remaining membership fees. Should the court’s decision not make such options possible we will consider a wind up of the NUSRPC and a refund all remaining monies to our members (reflecting pro-rated fees for those who received Segal calculations).
The NUSRPC will continue to provide you with updates as developments occur regarding our benefits or affecting the claims we have already filed.
Tuesday, October 6, 2009
Nortel still has cash.
Nortel isn’t broke:
Nortel has US$2.6B in cash now and will have up to US$6B in cash for disbursement to creditors after all its business sales.
Nortel CHOSE to enter bankruptcy protection in the US and CCAA in Canada and so it CHOSE not to pay out its benefits, because Canadian Federal bankruptcy laws permit companies to make this choice.
The Nortel case is a precedent for a line up of Canadian corporations to walk from their obligation to pay for employee benefits, like pensions, long term disability and health plans and severance.
Unlike the US, Canadian pensions are not protected by any federal insurance program. The Canadian NRPC group along with the CAW and legal and financial supporters are working to get the government in Canada to change the bankruptcy process to provide some priority to pension plans over other creditors.
Anyone with a Canadian pension can be impacted, as we Nortel retirees are finding out. If you are affected or may be affected call or write to the Canadian Prime Minister and the Member of Parliament where you reside, or last resided, in Canada, and let them know you want the law changed to protect retiree benefits.
Nortel has US$2.6B in cash now and will have up to US$6B in cash for disbursement to creditors after all its business sales.
Nortel CHOSE to enter bankruptcy protection in the US and CCAA in Canada and so it CHOSE not to pay out its benefits, because Canadian Federal bankruptcy laws permit companies to make this choice.
The Nortel case is a precedent for a line up of Canadian corporations to walk from their obligation to pay for employee benefits, like pensions, long term disability and health plans and severance.
Unlike the US, Canadian pensions are not protected by any federal insurance program. The Canadian NRPC group along with the CAW and legal and financial supporters are working to get the government in Canada to change the bankruptcy process to provide some priority to pension plans over other creditors.
Anyone with a Canadian pension can be impacted, as we Nortel retirees are finding out. If you are affected or may be affected call or write to the Canadian Prime Minister and the Member of Parliament where you reside, or last resided, in Canada, and let them know you want the law changed to protect retiree benefits.
Monday, October 5, 2009
Nortel contests IRS $3Billion claim
Nortel's law firm entered a motion into the court records to contest the huge claim made by the IRS for $3billion in back taxes interest and penalties dating back nearly a decade.
Docket number 1495 on the EpiqSystems website (See right hand panel) lists a series of reasons as to why Nortel considers this claim outrageous and requests that the IRS provide a lot more back up information than simply listing the numbers.
Given the performance of Nortel financially over the last 10 years it's hard to imagine that they would owe such a large sum to the IRS, especially since they have gone through so many audits and reviews to straighten out their finances.
The IRS has come back with a counter request to have the situation reviewed in a separate court case. I don't think the judge has agreed to that and is unlikely to do so. This is obviously going to drag on for some time, and Nortel has asked for a specific date to be set for the IRS to come up with substantive evidence as to their claim.
Docket number 1495 on the EpiqSystems website (See right hand panel) lists a series of reasons as to why Nortel considers this claim outrageous and requests that the IRS provide a lot more back up information than simply listing the numbers.
Given the performance of Nortel financially over the last 10 years it's hard to imagine that they would owe such a large sum to the IRS, especially since they have gone through so many audits and reviews to straighten out their finances.
The IRS has come back with a counter request to have the situation reviewed in a separate court case. I don't think the judge has agreed to that and is unlikely to do so. This is obviously going to drag on for some time, and Nortel has asked for a specific date to be set for the IRS to come up with substantive evidence as to their claim.
Thursday, October 1, 2009
Pension direct deposit shock.
My Nortel Canadian pension is deposited directly into my US bank account by Northern Trust around the 25th of each month, and like clockwork it has worked perfectly since I retired in 2002. A paper record is mailed to me as well and I keep the copy in my financial records.
This last month, September 2009, I received the paper record as usual a day or so before the pension deposit was due, however after a few days had gone by I checked my account and there was no deposit in there. Since it was a Friday, I thought it was a delay in exchanging the Canadian amount into US dollars and waited until Tuesday before checking again. Much to my consternation, there had not been a deposit and now my pension was 5 days later than it should have been.
I called Northern Trust and explained my problem and the representative told me that there had been a few cases like that in Canada and the US and that he would check with the management and get back to me in a few days.
Luckily I had enough money in my account to cover any outstanding bills, but I thought about the people who maybe had automatic bill pay and were depending on receiving the pension payment on time. In addition, with the situation that we find ourselves in with Nortel in bankruptcy proceedings, this whole business was very disconcerting.
Although the Northern Trust representative told me that it was their problem and not Nortel's, there was some niggling doubt at the back of my mind, and I spent a few uneasy days until I received a message that the glitch had been taken care of and the money was on its way to my account.
After a week's delay, much to my relief, the money was posted to my account. This was the first time I ever experienced such a situation, and I must say it brought home to me the issue we are all facing when Nortel finally winds up the pension plan.
In spite of all assurances, I'm sure there may be some glitches and delays and we all will be concerned that our pensions will continue to be paid. It's one thing to hear about percentage reductions being possible until it actually happens and then we will all be faced with a reduced amount of money each month. No matter how much we may plan and be prepared for this, I'm sure it will be a shock, and at this stage of life it doesn't seem fair at all, that we have to go through such a miserable experience.
Canada needs to take note of this traumatic situation and think long and hard about what it is doing to its seniors. We Nortel retirees know first hand the neglect of not providing a national pension insurance scheme. With many boomers on the cusp of retirement there may be many more who will encounter a similar fate. It's time the government took some real action to protect the senior's livelihood, and it's also time that the media paid more than lip service to help seniors live out their retirement in reasonable financial security.
For those of us in the US with defined benefit pensions the PBGC provides that security. Thank goodness that in 1974 the US Congress recognized the need to protect seniors from the impersonal bankruptcy process that favors companies at the expense of the individual. Millions of retirees are still living with dignity as a result, whilst in Canada many will face unbelievable hardship as a result of the apathy of the Canadian government.
This last month, September 2009, I received the paper record as usual a day or so before the pension deposit was due, however after a few days had gone by I checked my account and there was no deposit in there. Since it was a Friday, I thought it was a delay in exchanging the Canadian amount into US dollars and waited until Tuesday before checking again. Much to my consternation, there had not been a deposit and now my pension was 5 days later than it should have been.
I called Northern Trust and explained my problem and the representative told me that there had been a few cases like that in Canada and the US and that he would check with the management and get back to me in a few days.
Luckily I had enough money in my account to cover any outstanding bills, but I thought about the people who maybe had automatic bill pay and were depending on receiving the pension payment on time. In addition, with the situation that we find ourselves in with Nortel in bankruptcy proceedings, this whole business was very disconcerting.
Although the Northern Trust representative told me that it was their problem and not Nortel's, there was some niggling doubt at the back of my mind, and I spent a few uneasy days until I received a message that the glitch had been taken care of and the money was on its way to my account.
After a week's delay, much to my relief, the money was posted to my account. This was the first time I ever experienced such a situation, and I must say it brought home to me the issue we are all facing when Nortel finally winds up the pension plan.
In spite of all assurances, I'm sure there may be some glitches and delays and we all will be concerned that our pensions will continue to be paid. It's one thing to hear about percentage reductions being possible until it actually happens and then we will all be faced with a reduced amount of money each month. No matter how much we may plan and be prepared for this, I'm sure it will be a shock, and at this stage of life it doesn't seem fair at all, that we have to go through such a miserable experience.
Canada needs to take note of this traumatic situation and think long and hard about what it is doing to its seniors. We Nortel retirees know first hand the neglect of not providing a national pension insurance scheme. With many boomers on the cusp of retirement there may be many more who will encounter a similar fate. It's time the government took some real action to protect the senior's livelihood, and it's also time that the media paid more than lip service to help seniors live out their retirement in reasonable financial security.
For those of us in the US with defined benefit pensions the PBGC provides that security. Thank goodness that in 1974 the US Congress recognized the need to protect seniors from the impersonal bankruptcy process that favors companies at the expense of the individual. Millions of retirees are still living with dignity as a result, whilst in Canada many will face unbelievable hardship as a result of the apathy of the Canadian government.
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