Nortel Networks Corp. and its bankrupt units in Canada and the U.S. are preparing to fight their European affiliates over billions of dollars the company collected while liquidating.

A group of European units in bankruptcy in the U.K. claimed Nortel owes them C$9.8 billion ($10.2 billion), according to court papers filed in Toronto, where the parent is in bankruptcy.

[Nortel at one time employed some 8,000 people at its campus in Research Triangle Park, N.C.]

The European units agreed to file a similar set of claims by June 1 against the U.S. operating company, Nortel Networks, Inc., in U.S. Bankruptcy Court in Wilmington, Delaware, a company attorney, James Bromley, said today in court.

Judges in the U.S. and Canada will decide whether the European claims are legitimate and how to divide about $3 billion the company raised by auctioning its businesses since filing for bankruptcy in 2009.

Until those disputes are resolved, U.S. and Canadian bondholders won’t be paid anything, bondholder attorney Thomas R. Kreller said in an interview after today’s hearing. The disputes will probably be heard by the courts in September and December, Kreller said.

“I would hope that given the size and complexity of the case the time is coming to make some distributions,” U.S. Bankruptcy Judge Kevin Gross said today in court.

Since filing for bankruptcy in the U.S., Canada and the U.K., Nortel has sold almost all of its businesses, raising about $3 billion to distribute to creditors.

Nortel Networks Claims

Creditors of the company’s main U.S. unit, Nortel Networks, claimed they were owed $16.3 billion, according to court documents.
Derek Adler, an attorney for the Nortel European units, declined to comment after the hearing. The European units claim in court papers that inter-company agreements entitle them to payments from Nortel Networks Corp., the parent; Nortel Networks Inc., the main U.S. company; and other U.S. and Canadian subsidiaries.

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