The U.S. unit of Nortel Networks Corp., the defunct telecommunications company, asked a judge to schedule a November trial on whether to throw out $2.67 billion in claims filed on behalf of 38,000 U.K. retirees.
The request in U.S. Bankruptcy Court in Wilmington, Delaware, came after a mediator gave up on settlement talks last month, saying bondholders, retirees and other creditors failed to agree on how to split $9 billion in cash.
Nortel Networks Inc. asked the judge overseeing its slice of the multicountry bankruptcy to first decide whether the U.K. retirees have a legitimate claim to the money before deciding how best to divide it. Retiree representatives asked the judge to first decide how to split cash among Nortel’s units in the U.S., Europe and Canada.
Nortel’s proposed schedule is “consistent with the court’s previous suggestion that if mediation failed, it would impose a greatly accelerated discovery schedule,” the U.S. unit said yesterday in court papers, referring to the process by which adversaries in a case exchange information.
Groups of creditors have been fighting over a shrinking pile of cash that won’t cover all of the debts owed by Nortel and its units. Creditors have presented more than $36 billion in claims in Canada, according to a status report filed in a Toronto court in October.
Nortel, based in Mississauga, Ontario, filed for bankruptcy in 2009 in Toronto, Delaware, the U.K. and France, with various units under the control of separate teams of lawyers and under the jurisdiction of different courts.
The U.K. retirees are represented by bankruptcy administrators overseeing the liquidation of Nortel’s European units. Those administrators say Nortel’s U.S. unit owes the retirees money to cover the cost of pensions.
The $9 billion should be divided among all of Nortel’s units first, to make settling disputes about individual claims, like the retirees’, easier to settle, the European administrators told U.S. Bankruptcy Judge Kevin Gross.
Nortel’s U.S. unit raised most of the $9 billion by selling assets it had under its control, including a portfolio of thousands of patents.
The case is Nortel Networks Inc., 09-10138, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Steven Church in Wilmington, Delaware, at firstname.lastname@example.org.
To contact the editor responsible for this story: John Pickering at email@example.com.