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.