Nortel Wins Approval to Sell Internet Phone Unit

Nortel Networks Corp. (NRTLQ), once North America’s biggest maker of telecommunications equipment, won bankruptcy court permission to sell its Internet phone business for $282 million to Genband Inc.

At joint hearing of courts in the U.S. and Canada, the judges overseeing Nortel’s liquidation approved the sale, which would bring about $182 million to the company and is the last major unit the company has left to sell.

At the start of Nortel’s bankruptcy, “I said this is not about the end of Nortel, this is about the beginning of a new Nortel,” company lawyer Derrick Tay said. “I was wrong.”

“We can’t save this company,” Tay said.

Months after it sought court protection from creditors in January, 2009, Nortel began auctioning its assets. The company has raised about $3 billion from the sales, Nortel has said in court papers.

The company, at its peak in 2000, was valued at $250 billion and employed more than 90,000 people. There are about 500 people left, Tay said.

The sale to Genband came after Nortel canceled an auction for the unit, according to court records.

“We had two other potential bidders show up and take a look at the business but ultimately no other offers were submitted,” company attorney Lisa Schweitzer said in court today.

Sale Approved

U.S. Bankruptcy Judge Kevin Gross in Wilmington, Delaware, approved the sale today as part of a joint hearing with Ontario Superior Court Judge Geoffrey Morawetz in Toronto.

Earlier today, Morawetz rejected a request from a group of about 30 former Nortel workers to delay consideration of an agreement to settle outstanding health, pension and severance payments owed to employees.

Under the deal, Nortel agreed to create a C$57 million fund to pay long-term disability benefits and provide health, life, dental and pension benefits to the end of the year.

Without the deal, Nortel would stop payments at the end of the month, Tay said. The fund also includes severance and termination payments, to a maximum of C$3,000, to fired Nortel workers.

Joel Rochon, lawyer for the group of former workers on long-term disability who oppose the deal, urged the judge to delay consideration of the approval of the agreement for 45 days, saying the workers haven’t had enough time to analyze the proposal.

Morawetz said the risk of the loss of the benefits to other former workers was too great to grant the request.

The case is Nortel Networks Inc., 09-10138, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporters on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net; Joe Schneider in Toronto at jschneider5@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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