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The recent sale of Nortel’s patents and other assets brought in $7-billion, boosting what’s left of Nortel to about $9-billion. But that is nowhere near the up to $25-billion that remains in unpaid bills.

NATHAN DENETTE/THE CANADIAN PRESS

Over the next five days, a group of more than 100 lawyers and number-crunchers from around the world will converge on a downtown Toronto hotel where Ontario's Chief Justice Warren Winkler will try to broker an enormously complex deal to divvy up the $9-billion that remains of Nortel Networks Corp.

The once-mighty Canadian telecommunications giant went into bankruptcy protection four years ago to the day on Monday, leaving tens of thousands of its former employees, long-term disabled employees and pensioners in Canada with deeply slashed benefits.

Since then, in tangled overlapping court proceedings in Canada, the U.S., and elsewhere, lawyers acting for those employees and Nortel's other former staffers around the world have been trying to fight for a bigger share of what's left. Arrayed against them are lawyers for the company's other creditors, including the hedge funds – George Soros's Quantum Partners is one of them – that bought up Nortel's risky distressed bonds and are now looking for their interest payments.

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Two previous attempts at a mediated solution have failed. But since April, Chief Justice Winkler – appointed by courts in Canada and the U.S. – has been meeting with parties and poring over their demands. Starting on Monday, the veteran mediator who oversaw resolutions to Ontario's Walkerton tainted-water crisis and Air Canada's insolvency will try to work out a compromise.

Spokesmen for the bondholders' group declined to comment. Mark Zigler, a Toronto lawyer with Koskie Minsky LLP who acts for most of Nortel's former Canadian employees and pensioners, said the mood going into the talks is cautiously optimistic: "I suppose if they could solve the U.S. 'fiscal cliff' negotiations and the NHL lockout, maybe some people will come to their senses and try to solve this one."

At first glance, the Nortel dispute looks as tough to resolve as those two battles combined. The recent sale of Nortel's patents and other assets brought in $7-billion, boosting what's left of Nortel to about $9-billion. But that is nowhere near the up to $25-billion that remains in unpaid bills.

There is also the issue of the "burn rate." As the dispute has dragged on, Nortel has bled millions of dollars in fees to lawyers and other advisers.

The proceedings are dogged by the clash of different insolvency laws in different countries, which rank creditors differently, and the fact that no single court could ever claim jurisdiction over everyone. Participants have not been able to agree on how the assets should be divided by country, let alone among creditors.

The mediation also just suffered a blow from the sudden loss of Chief Justice Winkler's lead counsel, well-known Toronto lawyer Randy Bennett, who died on Jan. 3 after a heart attack. Toronto lawyer Paul Le Vay was asked to serve in his place.

For many of Nortel's beleaguered former Canadian staff, who suffered steeper cuts to pensions and benefits than their U.S. counterparts, these closed-door sessions may be their last chance. As Chief Justice Winkler pointed out in an April speech launching the mediation effort, the alternative to success is a "catastrophic outcome," with years of litigation in multiple courts ending in contradictory and unenforceable judgments. Many more of Nortel's aging pensioners would likely die with no resolution in sight.

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