Two days to go before the NTC agreement ends.

Here we are March 29th with 2 days to go before Nortel Canada has to decide if it will wind up the pension plan immediately.

The judge has rejected the settlement hammered out with Nortel and after re reading his decision and also the settlement agreement, I have to concur with him that there is clearly uncertainty in the agreement.

Our representatives and lawyers agreed to include clauses that would waive our rights to claim priority in current or future bankruptcy proceedings, and then also included a clause H2 that would have allowed us to have priority if the Canadian government amended the BIA giving pensioners priority. So the judge rightly said that this would constitute a form of claw back and as such it created uncertainty for the other creditors and hence he dismissed the motion.

Here's some of the background detail on the proposed settlement.

Clause H1 precludes any CCAA plan of arrangement which includes priority for Pension or HWT claimants.

Clause E1 basically says that Pension claims shall not have any priority in any manner over the claims of ordinary unsecured creditors. It goes on to say that Pension claimants waive rights to re-file or re-claim in these proceeding or any subsequent receivership or bankruptcy proceedings.

Clause H2 basically says that notwithstanding anything else in the agreement, in the event of a bankruptcy of Nortel, if there is an amendment to any provision of the Bankruptcy and Insolvency Act, no party is precluded from arguing the appicability of such amendment.

So as I read it, if we don't have H2 in there we have given up our right to claim priority in the CCAA, and we also have given up our right to claim priority in BIA proceedings even if the BIA law is changed.

So what do we do?

(a) Give up the H2 clause and have our payments until Sept for retirees and Dec for LTD and then never have the opportunity to get priority if the law is changed?

Or (b)let the settlement die and hope that the Canadian government gets its act together and amends the BIA to give us priority? (Of course Nortel may never enter BIA and may submit a restructure under CCAA, so even in that case we may be screwed.)

With option A we have a bit more time to allow a smoother transition to the pension administrator. However it puts the LTD people in a terrible position once the money runs out in Jan 2011.

Option B means a lot of scrambling right away as Nortel will probably move to wind everything up asap, and we will all see huge impacts immediately, especially the LTD.

Another alternative might be to rewrite clauses E1 and H1 in the agreement, but that would probably take too long, and would mean a whole new set of negotiations which I am sure Nortel and the other creditors would not support.

So we are between the devil and the deep blue sea.