Representation Status
Koskie Minsky has been recognized by the court as the legal counsel for most ex-employees. The estimate is about 19,000 Canadian ex-employee claimants. K.M. will be representing 9,900 non-negotiated pension plan members, 1000 severed and people on Long Term Disability. They have received info from Nortel with the address list of all retirees, but are missing about 15,000 email addresses. Make sure your friends know to check the Canadian website to be registered and keep up to date. Active employees will have separate representation, as will CAW employees and those who choose to opt out.
Asset sales.
In Canada the process calls for written offers for the assets. There are 1 or 2 rounds of submission. It is a closed court process. The submissions are reviewed by the Monitor who recommends and seeks court approval.
In US the assets are sold by auction. Prospective buyers are identified and made public. A so called “stalking horse” bid is made by the first party. An auction is then scheduled and held with other bidders. The sale goes to the highest bidder.
The assets are sold from the country with the most involvement. Hence Wireless and Enterprise were sold through the US process.
Lock Box
All cash realized by the sales will be held in a lock box under joint jurisdiction of the courts. The monitor administers and manages the account. To release the funds a negotiation process is needed to reach an equitable allocation. If a compromise is not reached it could lead to protected litigation which would not a good thing since it will involve long legal wrangling and will cost a lot. The NRPC and KM are fully engaged to make sure Canada gets a fair realization. At this stage, there is no clear process or methodology for allocation of sale of assets among the estates. There still remains a large amount of intellectual property which has not been included in the sales and which also will require a methodology for disposition and allocation.
Monitor & Company
The monitor has become more involved in the management of the company. This way they can better look after the creditors. In the US there is the creditor’s committee- like the monitor, and in the UK there is an administrator. All decisions need court approval and therefore one area can’t be swamped by other jurisdictions. The Company is in a holding pattern. (1) Ongoing operations in selling units and transferring the people involved to purchasers (2) status quo on remaining units trying to keep some business flowing. There are only 3 remaining directors on the board which makes it easier to get decisions made. They are being paid a bit more but it is a lot cheaper than 9 directors
Funding on Canadian side.
The Canadian entity is a net spender of cash mainly because of R&D. It is reimbursed by non-Canadian entities which needs court approval in all areas. $157M been agreed to flow into Canada to keep it operating. Further negotiations are needed to continue. The monitor is working that.
Claims process
To ascertain the value of the claims everyone has to make a claim. Ex-employees (non negotiated) in Canada do not have to make their own individual claims since K.M. will handle that in a separate process. The CAW will work the claims for their members. All others must make their own claims.
Is is very difficult to say what the value of a pension claim might be. The fund is in a state of flux as the market shifts. Data from the company will help determine the formulae and assumptions that will be used. It will take a long while to work out. There may be a phased distribution where dollars are given out in a series of steps. There will be challenges to claims. People who don’t have real claims will try to get in on the process. K.M. will fight all claims that don’t appear real or justified.
Individuals in the pension plan will not be required to compile their own claim. There will be an omnibus claim filed in one big claim based on common methods of calculation with factors used to give the best possible numbers. There will be a communications with individuals to make sure that their claim is correct and agreed to.
Canadian Pension Plan Funding
In March it was estimated to be 69%. It could be higher due to market changes. All assets in the pension plan will have to be evaluated to determine the shortfall. The shortfall cannot be determined until all pension details are worked out. Nortel is still paying something into the fund.
Pension payments
The pension payments will continue as normal for now. There is no wind-up yet. The superintendent of pensions is a party in the court proceedings. Quebec and Ontario will press the case for an orderly process. Some money is still coming in to pay for unfunded liabilities and the intent is to keep that going as long as possible.
Severance
The court refused to pay severance. An appeal is underway. If granted approval to appeal, the hearing will be held in the Sept-Oct time frame. Provincial law has statutes protecting those with severance.
Health and Welfare Trust
Only administered by Sunlife. The trust has some assets which were partially pre-funded by Nortel in the past. K.M. should obtain standing on this by December. There is no law regarding pre-funding.
Tax impacts of payout
When settlement is made the process is normally lump sum payment which could require tax payments. If possible K.M. will work to have any settlements for pension used to top up the pension fund.
BIA amendment.
A petition has been circulating and will be presented to the Parliament. It may be too late however for Nortel pensioners. The NRPC political action committee is lobbying Investment Canada to use parts of the sale of assets for Nortel ex-employees.
Annuities
When the plan winds up pensions will be calculated on the funding ratio of the trust fund and converted to annuities. The Quebec Government has enacted a law (rule 1) which will allow pensioners with Quebec service to opt to have the government hold their pensions for up to 5 years in order to let the market improve. This would allow the pensioner to determine when to convert it to an annuity in order to maximize payments.
Hardship Cases
A hardship protocol has been approved by the court. People who are suffering financial hardship due to the loss of severance or other Nortel payment can apply. Check the K.M. and Ernst & Young websites. This will be an advance on any ultimate claim made.
Retainers
Koskie Minsky are now being paid by Nortel in an arms length mode as ordered by the court. There is no connection between K.M. and Nortel other than their representation on our behalf. K.M. will be returning the $150C ($120US) within the next month to everyone who sent them in. K.M. will be representing all ex-Nortel employees except negotiated (CAW), those who opt out, and some high level ex-executives.
Showing posts with label Nortel. Show all posts
Showing posts with label Nortel. Show all posts
Monday, August 31, 2009
IRS files $3B claim against Nortel
Just when I thought things couldn't get much worse, along comes the IRS to file a huge $3Billion claim against Nortel. If the judge allows this claim it would wipe out most of any assets left to divide among the rest of the creditors including those with non-qualified pension plan claims and severance claims. It's unclear why the IRS would have such a large claim since Nortel has been losing money over the last decade.
Could this have anything to do with Zafirovski's hurried departure from Nortel? I wonder.
The projected ratio of cash assets to claims with the sale of Nortel's business was estimated to be 50% or less worldwide before this bombshell so it looks like the return will be a lot less and will impact US claimants directly.
The details of the claim are uncertain but it is speculated that the claim stems from transactions between Nortel units in multiple countries and dates back to 1998 when Nortel was riding high on the internet wave. If this claim is upheld it will have a devastating impact on all other claimants.
Unfortunately there is no legal representation of ex-employees on the creditor's committee to fight the claim on our behalf (other than the PBGC), so once again we are at the mercy of the court in examining the validity of the claim to make sure that it truly represents what is owed.
The IRS has made large claims in many other bankruptcy proceedings and some of them have been reduced after negotiation and careful deliberation. Maybe the PBGC will step up to challenge the claim. Maybe not. In any event you can be sure we are once again being held over a barrel. First by Nortel, then the courts, and now by the IRS.
Could this have anything to do with Zafirovski's hurried departure from Nortel? I wonder.
The projected ratio of cash assets to claims with the sale of Nortel's business was estimated to be 50% or less worldwide before this bombshell so it looks like the return will be a lot less and will impact US claimants directly.
The details of the claim are uncertain but it is speculated that the claim stems from transactions between Nortel units in multiple countries and dates back to 1998 when Nortel was riding high on the internet wave. If this claim is upheld it will have a devastating impact on all other claimants.
Unfortunately there is no legal representation of ex-employees on the creditor's committee to fight the claim on our behalf (other than the PBGC), so once again we are at the mercy of the court in examining the validity of the claim to make sure that it truly represents what is owed.
The IRS has made large claims in many other bankruptcy proceedings and some of them have been reduced after negotiation and careful deliberation. Maybe the PBGC will step up to challenge the claim. Maybe not. In any event you can be sure we are once again being held over a barrel. First by Nortel, then the courts, and now by the IRS.
Friday, August 28, 2009
Canada Web Seminar now available on NRPC site
The web seminar audio and slides from the NRPC and Koskie Minsky, held on August 25, are now available on the Canadian Nortel pensioner’s web site. You need to be registered on the web site in order to listen to the seminar. Registering will also provide you with the communications from the NRPC and help ensure that your claim will be included in the total claim being made for Ex-Nortel employees in Canada.
The seminar covered a wide range of topics and provided many answers to questions that people have about the process. It discussed in detail the claims process for ex-employees which is being handled on your behalf by the NRPC and Koskie Minsky. This is distinctly different form the US where all claimants will be submitting their claims individually.
The seminar may be of interest to ex- Nortel employees who are not based in Canada. It discussed the sale of assets process, the management of the funds generated from those sales, the method of allocation of the assets by geographic location, and the possible time frame. Much of the information is useful for all ex-Nortel employees regardless of location.
There were over 300 questions submitted on line and via email and the NRPC will be attempting to answer them and publish them on their web site in the next few days.
Once I have absorbed the information, I will try to summarize the points made and post them on this site. In general my view from the seminar is that this will be a long drawn out process and that the determination of claims, the allocation of assets, and the eventual payment of claims may take years. In the mean time K.M. and the NRPC will work to keep the Canadian pension plan in operation as long as possible in order to let it build up as the market improves.
The payment of US claims will also be part of this long drawn out process. Until the total value of all assets is established and the allocation process is agreed upon, no monies will be released to satisfy claims in any jurisdiction.
The seminar covered a wide range of topics and provided many answers to questions that people have about the process. It discussed in detail the claims process for ex-employees which is being handled on your behalf by the NRPC and Koskie Minsky. This is distinctly different form the US where all claimants will be submitting their claims individually.
The seminar may be of interest to ex- Nortel employees who are not based in Canada. It discussed the sale of assets process, the management of the funds generated from those sales, the method of allocation of the assets by geographic location, and the possible time frame. Much of the information is useful for all ex-Nortel employees regardless of location.
There were over 300 questions submitted on line and via email and the NRPC will be attempting to answer them and publish them on their web site in the next few days.
Once I have absorbed the information, I will try to summarize the points made and post them on this site. In general my view from the seminar is that this will be a long drawn out process and that the determination of claims, the allocation of assets, and the eventual payment of claims may take years. In the mean time K.M. and the NRPC will work to keep the Canadian pension plan in operation as long as possible in order to let it build up as the market improves.
The payment of US claims will also be part of this long drawn out process. Until the total value of all assets is established and the allocation process is agreed upon, no monies will be released to satisfy claims in any jurisdiction.
Wednesday, August 19, 2009
Claims against Nortel Process - update
Today I had a helpful discussion with an attorney from Cleary Gottlieb Steen & Hamilton LLP, the law firm representing Nortel. I asked about the claims process and more specifically about what happens if there is a discrepancy. He told me that there will be omnibus hearings at which groups of creditors whose claims differ from Nortel’s will be reviewed by the court. Following these hearings a notification will be sent to the person making the claim showing the Nortel projection of the claim as compared to that submitted.
If the person submitting the claim agrees with Nortel’s estimate, I think the claim will then be fully accepted. If not, it is unclear what the next steps will be, but I think it will require some legal representation to present the basis for the claim before the court.
The NRPC-US steering committee has been negotiating with Nortel’s law firm and Segal to obtain agreement to transmit information from Nortel to Segal so that they can determine the claim amount for each individual. This process would only apply to the paying membership of the NRPC and if successful would mean that the factors used in the calculation would be agreed to before hand by Nortel’s actuaries and Segal’s actuaries. Hence the claim should be the same as what Nortel would estimate. Each individual member of the NRPC-US would have to personally file their own claims, but they will have the information from Segal to use in presenting proof of claim.
The NRPC-US have not yet finalized the details of how this would work but are working to complete the agreement and should have some information sent to their membership in the next few days. Please check www.nnra.org for developments.
For those of you who are not paying members of the NRPC-US and who wish to participate in this process, please check the same website for information on how to join. Because of the shortness of the time frame before the bar date, Sept 30th, the NRPC-US will probably set a deadline beyond which they can’t accept any more members, so that they can have Segal complete the work. Please tell your colleagues to check www.nnra.org or this blog to keep abreast of developments.
This is probably the best way to have a claim made on Nortel that will not be rejected in court. Let’s hope that all the details can be worked out between Nortel and Segal quickly so that we can make this process work for us.
If the person submitting the claim agrees with Nortel’s estimate, I think the claim will then be fully accepted. If not, it is unclear what the next steps will be, but I think it will require some legal representation to present the basis for the claim before the court.
The NRPC-US steering committee has been negotiating with Nortel’s law firm and Segal to obtain agreement to transmit information from Nortel to Segal so that they can determine the claim amount for each individual. This process would only apply to the paying membership of the NRPC and if successful would mean that the factors used in the calculation would be agreed to before hand by Nortel’s actuaries and Segal’s actuaries. Hence the claim should be the same as what Nortel would estimate. Each individual member of the NRPC-US would have to personally file their own claims, but they will have the information from Segal to use in presenting proof of claim.
The NRPC-US have not yet finalized the details of how this would work but are working to complete the agreement and should have some information sent to their membership in the next few days. Please check www.nnra.org for developments.
For those of you who are not paying members of the NRPC-US and who wish to participate in this process, please check the same website for information on how to join. Because of the shortness of the time frame before the bar date, Sept 30th, the NRPC-US will probably set a deadline beyond which they can’t accept any more members, so that they can have Segal complete the work. Please tell your colleagues to check www.nnra.org or this blog to keep abreast of developments.
This is probably the best way to have a claim made on Nortel that will not be rejected in court. Let’s hope that all the details can be worked out between Nortel and Segal quickly so that we can make this process work for us.
Monday, August 17, 2009
Claims against Nortel Process
In an earlier post I stated that I had received 3 different bar-coded claim forms from Epiq last Friday. In discussions with an Epiq representative this morning (Aug 17th 2009) he told me that two of the three schedule numbers were actually just data base references and that I should file the claim with the schedule number that is listed on their docket 801. He didn’t know why I had received the additional forms but basically told me to forget about them and focus on the one that is recorded.
I took the opportunity to ask him about filing claims for health care and other benefits. He could not give me any specific direction on this, but said that if I thought that I had a claim against Nortel I should file it.
I then asked if there was a process to be followed if Nortel disputed a claim. He told me that Nortel would review all the claims and would then contact the claimant if they disagreed. I asked if any claims were ever rejected outright and he said there have been cases like that but generally the debtor (IE Nortel) would review the claim and contact the claimant if there was disagreement. Given Nortel’s lack of communications with us so far I’m not sure how that will happen.
Following my discussion with Epiq I spoke with a lawyer at Akin Gump, the court appointed legal firm representing all unsecured creditors. He said that he couldn’t give any legal advice but was willing to speak with me in an unofficial capacity and address non specific questions. I asked him about filing for health care, long term care, and insurance now, even though Nortel had not yet ceased those programs. He was not able to state directly what I should do but said that if I felt I had a claim against Nortel I should file it. I asked if Nortel would reject such claims at this point and he said that it would be up to Nortel but at least the claim would be on file.
I then asked it there had ever been a case where a new bar date had been set for different claims and he told me that he had seen that happen before. So it is possible that a different bar date would be established for claims relating to benefits other than pension, or specific compensation such as severance etc.
This chapter 11 process is intentionally vague, loose, and relaxed. Given all this lack of direct advice it seems that there is no clear process in order to keep the creditors in the dark and give the debtor an advantage. Bankruptcy is meant to help the bankrupt company not the creditor so don’t be surprised when Nortel and their lawyers present all sorts of arguments against your claim to try to avoid paying it.
I took the opportunity to ask him about filing claims for health care and other benefits. He could not give me any specific direction on this, but said that if I thought that I had a claim against Nortel I should file it.
I then asked if there was a process to be followed if Nortel disputed a claim. He told me that Nortel would review all the claims and would then contact the claimant if they disagreed. I asked if any claims were ever rejected outright and he said there have been cases like that but generally the debtor (IE Nortel) would review the claim and contact the claimant if there was disagreement. Given Nortel’s lack of communications with us so far I’m not sure how that will happen.
Following my discussion with Epiq I spoke with a lawyer at Akin Gump, the court appointed legal firm representing all unsecured creditors. He said that he couldn’t give any legal advice but was willing to speak with me in an unofficial capacity and address non specific questions. I asked him about filing for health care, long term care, and insurance now, even though Nortel had not yet ceased those programs. He was not able to state directly what I should do but said that if I felt I had a claim against Nortel I should file it. I asked if Nortel would reject such claims at this point and he said that it would be up to Nortel but at least the claim would be on file.
I then asked it there had ever been a case where a new bar date had been set for different claims and he told me that he had seen that happen before. So it is possible that a different bar date would be established for claims relating to benefits other than pension, or specific compensation such as severance etc.
This chapter 11 process is intentionally vague, loose, and relaxed. Given all this lack of direct advice it seems that there is no clear process in order to keep the creditors in the dark and give the debtor an advantage. Bankruptcy is meant to help the bankrupt company not the creditor so don’t be surprised when Nortel and their lawyers present all sorts of arguments against your claim to try to avoid paying it.
Friday, August 14, 2009
Instructions to Board of Directors on how to ruin a great company in 5 easy steps.
1. Take a great company and put in place a CEO who is greedy and arrogant. Allow him to go on a wild buying spree without a clear strategy, thereby using up the accumulated cash on useless and worthless purchases.
2. Let CEO get rid of all the strategic assets by outsourcing them indiscriminately to foreign corporations in a tricky strategy disguised as a means of reducing costs, and then let him leave with a tremendous bonus.
3. Replace CEO with a series of incompetents who have no knowledge of the core industry. Let them steal the company blind and run it into the ground with frivolous marketing and technology decisions.
4. Declare bankruptcy protection to allow the surreptitious division of the company into chunks that can be sold off piecemeal to previous competitors at bargain basement prices.
5. And as a final icing on the cake, ensure all employees and retirees are victimized by eliminating promised benefits, and under funding all trust funds so that they will lose most of their earned benefits.
I’m sure American and Canadian business schools will be using the example of Nortel’s mismanagement for decades and possibly centuries to come. It’s too bad that the board of directors of Nortel were so inept and unable to control the people who took over the reins of the company, once it had become a major world player. Nortel’s loss is not just Canada’s loss; it is also North America’s loss. With Lucent owned by Alcatel, and Nortel gone, there are no major N.A. players who can truly call themselves telecommunications giants. How shortsighted is that?
2. Let CEO get rid of all the strategic assets by outsourcing them indiscriminately to foreign corporations in a tricky strategy disguised as a means of reducing costs, and then let him leave with a tremendous bonus.
3. Replace CEO with a series of incompetents who have no knowledge of the core industry. Let them steal the company blind and run it into the ground with frivolous marketing and technology decisions.
4. Declare bankruptcy protection to allow the surreptitious division of the company into chunks that can be sold off piecemeal to previous competitors at bargain basement prices.
5. And as a final icing on the cake, ensure all employees and retirees are victimized by eliminating promised benefits, and under funding all trust funds so that they will lose most of their earned benefits.
I’m sure American and Canadian business schools will be using the example of Nortel’s mismanagement for decades and possibly centuries to come. It’s too bad that the board of directors of Nortel were so inept and unable to control the people who took over the reins of the company, once it had become a major world player. Nortel’s loss is not just Canada’s loss; it is also North America’s loss. With Lucent owned by Alcatel, and Nortel gone, there are no major N.A. players who can truly call themselves telecommunications giants. How shortsighted is that?
Tuesday, July 14, 2009
Bankruptcy impact on disability payments.
When I worked at Nortel during their healthy years, I was pretty happy with the benefits package offered. It was very comforting to know that if you were sick you could go to the doctor and take a few days off to recover without losing income. Even if you became seriously ill and needed a lot of time to recover there was a long term disability benefit which provided income.
During my career at Nortel I heard of a number of people who fell ill or were injured so badly that they couldn’t return to work, but at least they were covered by the long term disability benefit and could survive without falling into poverty.
When Nortel declared chapter 11 and entered bankruptcy protection I was more concerned with continued pension payments and the loss of other pension or severance related income. However, at the recent webinar held by the Canadian NRPC group and hosted by Diane A. Urquhart, Independent Financial Analyst, Mississauga, Ontario, I was astounded to find out that the long term disability payments are in jeopardy. You can watch the video of this webinar at http://ismymoneysafe.org/video/FixBIANow.wmv.
The disability payments made by Nortel had been funnelled through Sunlife Insurance Company. However it was not an insurance policy. Nortel had self funded the plan and were simply using Sunlife as their agent for disability payments. Disabled former employees face income losses of up to 90%. It is shocking that Nortel self-funded its long term disability benefits rather than through an insurance company.
At this point the payments are being made since Nortel is still operating. If it sells off all its assets and liquidates, the trust fund is woefully underfunded and will not support continued payments. It was estimated by the Canadian NRPC that there is only enough money to fund about 10% of the promised payments. This is disgraceful! People on disability have no opportunity to go back to work and recoup their losses. Those receiving LTD will become unsecured creditors with no priority.
It would seem reasonable that a case could be made that the directors are liable for misrepresentation on the security of the long term disability income, and that they failed to ensure there were no omissions or misrepresentations in Nortel's and its Administrative Services Organization Sunlife's long term disability plan literature.
A group representing ex-Nortel employees on Long Term Disability exists in Canada. Sue Kennedy a representative of that group spoke at the Webinar on July 8th and may be contacted at kennedy.robinson@rogers.com.
During my career at Nortel I heard of a number of people who fell ill or were injured so badly that they couldn’t return to work, but at least they were covered by the long term disability benefit and could survive without falling into poverty.
When Nortel declared chapter 11 and entered bankruptcy protection I was more concerned with continued pension payments and the loss of other pension or severance related income. However, at the recent webinar held by the Canadian NRPC group and hosted by Diane A. Urquhart, Independent Financial Analyst, Mississauga, Ontario, I was astounded to find out that the long term disability payments are in jeopardy. You can watch the video of this webinar at http://ismymoneysafe.org/video/FixBIANow.wmv.
The disability payments made by Nortel had been funnelled through Sunlife Insurance Company. However it was not an insurance policy. Nortel had self funded the plan and were simply using Sunlife as their agent for disability payments. Disabled former employees face income losses of up to 90%. It is shocking that Nortel self-funded its long term disability benefits rather than through an insurance company.
At this point the payments are being made since Nortel is still operating. If it sells off all its assets and liquidates, the trust fund is woefully underfunded and will not support continued payments. It was estimated by the Canadian NRPC that there is only enough money to fund about 10% of the promised payments. This is disgraceful! People on disability have no opportunity to go back to work and recoup their losses. Those receiving LTD will become unsecured creditors with no priority.
It would seem reasonable that a case could be made that the directors are liable for misrepresentation on the security of the long term disability income, and that they failed to ensure there were no omissions or misrepresentations in Nortel's and its Administrative Services Organization Sunlife's long term disability plan literature.
A group representing ex-Nortel employees on Long Term Disability exists in Canada. Sue Kennedy a representative of that group spoke at the Webinar on July 8th and may be contacted at kennedy.robinson@rogers.com.
Monday, July 13, 2009
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.
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.
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