Nortel Networks Corp. retirees, who saw their pensions slashed after the onetime telecom giant went into bankruptcy protection, are vowing to keep fighting the company’s bondholders after talks on dividing Nortel’s remaining assets collapsed.
The failure of the marathon mediation effort led by Ontario Chief Justice Warren Winkler on Thursday throws the tangled crossborder battle over Nortel’s remaining $9-billion (U.S.) back into bankruptcy courts in the U.S., Canada and elsewhere, with potentially years of expensive litigation on the horizon.
Since insolvency proceedings began in 2009, Nortel has spent $755-million on lawyers and consultants. It’s a number that outrages its Canadian retirees, whose pensions were reduced by up to 50 per cent, and disabled former employees, who were left with just 35 per cent of their benefits.
“I don’t know how all of the creditors can’t see that the longer they delay the distribution of the assets, the more legal and financial costs are going to be pulled out of the pot,” said Nortel retiree committee spokeswoman Anne Clark-Stewart, 66, who worked at the company for 42 years. “And if they have already done three-quarters of a billion dollars in four years – heaven knows.”
The battle, which some fear could outlast many of the company’s aging pensioners, pits the Nortel’s former employees against the hedge funds that bought $4.5-billion worth of Nortels bonds at steep discounts after the company went into bankruptcy protection. In addition to face value on their bonds, the bondholders group, which includes George Soros’s Quantum Partners and Centerbridge Partners, wants $1-billion in interest.
In a press release from the Canadian retirees’ committee, 77-year-old Frank Mills, who worked at Nortel for 34 years, puts the pensioners’ resolve in stark terms: “I’d rather end up on welfare than give our hard-earned assets to these vultures.”
The Canadian Auto Workers union, which also represents a group of Nortel pensioners and former workers on long-term disability, blamed the collapse of the mediation on the greed of “junk-bond speculators” trying to profit from “utter misery.”
CAW lawyer Barry Wadsworth said in an interview that participants in Chief Justice Winkler’s talks were not allowed to reveal anything that went on inside them. But he said the only way a deal could have been made was if bondholders backed off their demands.
“It sucks enough money out of the system so that nobody else can get enough to satisfy their needs in order to make a deal,” Mr. Wadsworth said, arguing that if all sides compromised, they could walk away with 60- to 75-per-cent of what they want.
He also called the $755-million in legal and other consulting fees “disgusting,” saying he is paid by the CAW and hasn’t charged any expenses or fees to Nortel.
But Mr. Wadsworth did say it was important for the non-union majority of retirees, who are represented by Koskie Minsky LLP, to have their lawyers paid for. Otherwise, they would not be able to afford representation, he said. Bondholders looking for billions in profits should be paying their own way, he argued.
Representatives of the bondholders’ group declined to be interviewed on Friday. But in an e-mailed statement, the group said the allegation their stubbornness killed the talks was “simply false.”
“The bondholder representatives were not the ones that walked away from this mediation,” the statement reads. “It is unfortunate that others appear to have chosen litigation rather than a consensual resolution that would get distributions out to creditors.”