EY reaches settlement over long-running $7.3bn Nortel Networks bankruptcy saga
A settlement has been reached in the long-running global insolvency of Canadian telecoms giant Nortel Networks' European-based companies.
Three groups of creditors, including 33,000 UK pensioners, Canadian pensioners and US bondholders, had been unable to agree who gets what from the $7.3bn (£6bn) to be distributed since the company’s collapse seven years ago.
The battle has been over whether Nortel’s US units have to share the money – which they raised by selling assets after the bankruptcy was filed in 2009 – with UK and Canadian divisions.
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The settlement will enable substantial distributions to be made to creditors of each of these European entities.
Nortel Canada will receive 57 per cent of the sale proceeds in escrow, worth approximately $4.14bn on 31 July. The agreement also releases another $237m to Nortel Canada for other sale proceeds and a payment of $35m for reimbursement costs in connection with the asset sales.
The settlement is conditional on various steps being taken, including court approvals in the US, Canada, UK and France.
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In April this year, EY had already banked more than $500m from the 2009 Nortel bankruptcy, while the total fees to all legal parties had climbed to $1.87bn.
John Whiteoak, partner at Herbert Smith Freehills, said: "Herbert Smith Freehills are incredibly proud to have been able to work for EY in this important and seminal mandate. We are very pleased to have assisted the client in bringing about this very significant settlement which, if the conditions are satisfied, will result in significant returns to the creditors of the European Nortel companies and has led to ground-breaking developments in international insolvency and pensions law."