Aug. 8 (Bloomberg) -- The judge overseeing Nortel Networks Inc.’s bankruptcy said he may pressure creditors fighting over $7 billion to reach a deal in a closed-door meeting.
U.S. Bankruptcy Judge Kevin Gross in Wilmington, Delaware, told U.S. bondholders and a monitor for Nortel’s Canadian parent in a court hearing today that he wants to meet with them for several hours and proposed an October date.
Gross said the meeting in his chambers won’t be a formal mediation session. “I am going to provide some direction and perhaps some pressure,” the judge told lawyers.
The monitor for the bankrupt parent company and creditors in Canada and the U.K. have been fighting with U.S. bondholders and the bankrupt U.S. unit over how to split $7 billion in cash raised as Nortel liquidated its assets since filing bankruptcy in 2009.
A few minutes after the hearing ended, the company’s 10.125 bonds that were due last year fell almost 1 percent to 116 cents on the dollar, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.
Gross said the meeting would be the night before a still unscheduled court fight between the bondholders and the Canadian monitor over a proposal to pay the bondholders as much as $1 billion in interest. He said the interest proposal marks a “significant movement” in the case and should be used as a chance “for additional settlement talks that are not taking place and that I think should be taking place.”
The monitor is fighting the proposal to pay extra interest to U.S. bondholders. Reducing the interest going to them would leave money for the parent company, which could then distribute it to Canadian creditors, including the company’s retirees.
The groups ended a six-week trial in June over how to split the $7 billion among Nortel’s parent in Canada, the U.S. unit and European units. Gross and a Canadian judge in Toronto jointly presided over the trial and haven’t issued a ruling.
Canadian and U.K. pensioners say they deserve a slice of the $7 billion. U.S. bondholders argued that the assets that generated the cash belonged to the U.S. unit and should be used to settle U.S. debts.
The case is Nortel Networks Inc., 09-bk-10138, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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