WILMINGTON, Del., Dec 22 (Reuters) - Former telecommunications equipment maker Nortel Networks Inc and the U.S. pension insurer have reached a deal that clears the way for the company to end its eight years in bankruptcy.
A trial had been set for January over the U.S. Pension Benefit Guaranty Corp’s claims against the company, which stem from the termination of Ontario, Canada-based Nortel’s underfunded pension plan in 2009, which at the time had 22,000 participants. The PBGC has said it believes it is owed $708 million.
According to court papers filed Wednesday, Nortel agreed the PBGC could receive up to $565 million once creditors start getting repayments. In return, the agency agreed to support Nortel’s bankruptcy plan.
Nortel’s legal team is still awaiting the outcome of a creditor vote on the plan, which would also have to be approved by U.S. and Canadian judges next month.
If approved, the plan would distribute more than $7 billion to noteholders, vendors, government agencies and retirees around the world.
Nortel stumbled from ranking among the world’s most valuable companies during the 1990s internet bubble to bankruptcy in 2009. The company was liquidated and by 2011 about $7.3 billion had been raised, sparking a complex, cross-border fight among former Nortel businesses in Canada, Europe and the United States over the money.
Those former Nortel units agreed in October on a plan to divide the cash, ending a dispute which drove the cost of administering Nortel’s failure to around $2 billion.
The PBGC was not part of the settlement and had said it would oppose Nortel’s bankruptcy plan unless it received the money it was due.
The PBGC has said that if its claim were not fairly resolved, companies that pay a premium to the PBGC to fund the agency would have to “shoulder a greater burden in the coming years.” (Reporting by Tom Hals in Wilmington, Delaware; Editing by Andrew Hay)