Wilmington, Delaware: Nortel Networks Inc, the US unit of defunct Canadian telecom company Nortel Networks Corp, has agreed to pay up to about $1 billion (Dh3.67 billion) in interest that has accrued on the $3.9 billion it owes to its US bondholders, a court filing showed.
Thursday’s settlement comes as Nortel’s bankrupt units in Canada and Europe are fighting with the US unit over how to divide $7.3 billion raised by liquidating the global telecommunications company.
The settlement, if approved by US Bankruptcy Court Judge Kevin Gross in Wilmington, Delaware, could affect Nortel retirees in Canada and the United Kingdom. They argued that the bondholders should get $90 million in interest, or no interest at all.
Any funds that are left over in Nortel’s US bankruptcy after paying off the bondholders and other US creditors could be used to help to make up for pension shortfalls in Canada and the United Kingdom.
Under the proposed settlement, bondholders would be entitled to post-petition interest of $876 million, potentially increasing to as much as $1.01 billion if Nortel has not repaid them by June 30 next year.
Nortel said the settlement will help speed the resolution of its bankruptcy.
Nortel sought protection from creditors in courts around the world in 2009 and its businesses as well as its patents and patent applications were quickly sold, reducing a once global company to little more than a pile of cash. But it was never decided how to allocate the money raised between different insolvency and bankruptcy proceedings in different countries.
Gross and a Canadian judge held a simultaneous five-week trial, connected by video link, that ended in June over the question of how to divide the $7.3 billion. The judges have not ruled, and the US estate may not be allocated enough money to repay the bondholders’ $3.9 billion principal, let alone interest.
The monitor overseeing the Canadian bankruptcy did not join the settlement over the interest payments. An attorney for the monitor, Ken Coleman of Allen & Overy in New York, did not immediately return an email request for comment.
