Creditors of Nortel Networks, the defunct telecommunications company, failed to agree on how to divide about $9 billion in cash, the Canadian judge overseeing the mediation said Thursday.
The news angered retirees in Canada.
“For four years, our retirees and former employees have been fighting for a fair share of the pie. We have been treated as pawns in this game by vulture bond funds,” Don Sproule, president of the Nortel Retirees and former employees Protection Canada, said, according to The Star newspaper in Toronto.
“We will continue the battle,” he said.
Sproule pointed out that Canadian retirees have already taken a financial hit, while their counterparts in the United States and United Kingdom have not.
Nortel has already struck tentative deals with U.S. retirees and disabled workers in U.S. bankruptcy court.
Mediator Warren K. Winkler, the chief justice of Ontario,“has concluded that further efforts at mediation are no longer worthwhile,” according to an e-mailed statement.
The mediation involved Nortel’s Canadian, U.S. and European entities and their creditors, including retirees. The European group, led by bankruptcy administrators in the U.K., is seeking a share of the cash on behalf of 38,000 pensioners.
“When you know that litigation can take years and delay recoveries for everyone, you would think the parties could figure something out,” Kevin Starke, a senior analyst with CRT Capital Group Inc., said in a telephone interview.
The groups have been fighting over a shrinking pile of cash that won’t cover all of the debts owed by Nortel and its units. Creditors have presented more than $36 billion in claims in Canada, according to a status report filed in a Toronto court in October.
Bankruptcy administrators in the U.K. are demanding $2.67 billion from Nortel’s main U.S. unit, claiming the money is needed to pay the retirees, according to court documents.
The talks were designed to prevent court battles in Canada, the U.S., the U.K. and France, where conflicting rulings by different judges would be “a catastrophic outcome,” Winkler wrote in April, when the current mediation started. The first two mediation efforts failed.
Nortel, based in Mississauga, Ontario, filed for bankruptcy in 2009 in Toronto, Delaware, the U.K. and France, with various units under the control of separate teams of lawyers and under the jurisdiction of different courts.
James L. Bromley, who was lead attorney for Nortel’s U.S. bankruptcy, didn’t return e-mail and phone messages seeking comment on the talks.
U.K. bankruptcy officials claim Nortel’s U.S. and Canadian units siphoned money from the European units for years, leaving them unable to pay pensioners and other creditors.
To determine whether that is true, courts would have to dissect thousands of financial transfers made among the various Nortel units, CRT Capital’s Starke said. For each transfer, courts will have to determine whether the companies involved were solvent at the time the money moved.
Starke said he had expected the parties to avoid fighting in court by settling.
“I find it all a little surprising,” he told Bloomberg news.
The company at one time employed some 8,000 people at its campus in RTP.
[NORTEL ARCHIVE: Check out a decade of Nortel stories as reported in WRAL Tech Wire.]
(Bloomberg news contributed to this report.)