Lehman Pensions Don’t Get Priority Over Creditors, Court Says
The U.K. Supreme Court said that about 43,000 former employees with pensions at Lehman Brothers Holdings Inc. and Nortel Networks Corp. (NRTLQ) should be treated the same as other unsecured creditors of the bankrupt firms.
The ruling overturned a lower court verdict that pension holders should get priority over unsecured creditors in the insolvency cases. The U.K. pension regulator sought 125 million pounds ($192 million) from Lehman and 2.1 billion pounds from Nortel to cover shortfalls in their plans.
“There seems no particular sense” in a pension plan’s trustees “having any greater or any lesser priority than the rights of any other unsecured creditor,” Judge David Neuberger said in a ruling today in London.
Lehman Brothers filed the largest bankruptcy in U.S. history in September 2008, and its U.K. unit is being liquidated by PricewaterhouseCoopers LLP. Internet provider Nortel and affiliates filed for bankruptcy in January 2009.
PwC, which has a role in both companies’ administrations, said in a statement that the ruling was the “fairest result.”
“This is also a great result for members of pension schemes and in some cases will make a real difference to their pension in the case of an administration,” Jonathon Land, partner at PwC and adviser to the trustees of the Nortel Networks UK Pension Trust Ltd., said in the statement.
The Supreme Court ruling in favor of the Lehman and Nortel administrators will help companies, lenders and insolvency experts, said Devi Shah, a lawyer at Mayer Brown LLP in London. Previously, restructuring professionals “had to consider potentially large pension deficits when assessing the prospects of companies on the verge of insolvency, making rescue of the enterprise a risky and uncertain business.”
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