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Nortel Wins Approval of Deal With Disabled Former Workers

Feb. 14 (Bloomberg) -- Nortel Networks Inc., the defunct telecommunications company, won preliminary court approval to settle a dispute over medical benefits with disabled former employees for about $28 million.

U.S. Bankruptcy Judge Kevin Gross in Wilmington, Delaware, approved Nortel’s request to send details of the proposed accord to about 200 former U.S. workers. The company will return to court in a few months to ask for final approval of the settlement.

“We are all not overly happy, but we are glad that we moved to somewhere in the middle,” Lisa M. Schweitzer, a lawyer for Nortel, said in court today.

The settlement, negotiated with a committee of disabled ex-employees, is the third Nortel has reached with different groups of former U.S. workers. The company last month agreed to resolve a dispute with retirees by paying $66.9 million for medical and other benefits.

To help the disabled ex-workers get paid as soon as possible, the committee agreed to sell their $28 million claim in the bankruptcy case to an investment fund, said attorney Rafael X. Zahralddin-Aravena of the law firm Elliott Greenleaf. The fund will try to collect as much as $28 million from Nortel that would have gone to the former workers once the bankruptcy case is over.

Cash Payment

Zahralddin-Aravena declined to identify the fund or say how much the committee received for selling the claim. Should the deal win final approval, the former workers will get a single cash payment based on an actuarial formula, he said.

The money is meant to help cover medical benefits until the former workers reach 65, when they will be eligible for the federal Medicare program.

Nortel, based in Mississauga, Ontario, filed for bankruptcy in the U.K., France, Canada and the U.S. in 2009. Since then the company has been selling assets and negotiating with bondholders, former workers and other creditors about how to split $9 billion in cash.

The money won’t cover all of Nortel’s debts. Creditors have filed claims valued at about $36 billion in the company’s Canadian bankruptcy case.

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 schurch3@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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