No one should expect a settlement anytime soon in the battle over Nortel’s billions.

The drawn-out battle for assets of bankrupt telecommunications firm Nortel apparently will continue for the rest of this year as the U.S. business unit asks a bankruptcy judge for a trial to deal with U.K. pension demands.

On Monday, Nortel asked a judge to schedule a November trial on whether to throw out $2.67 billion in claims filed on behalf of 38,000 U.K. retirees.

Nortel reportedly has nearly reached agreements to settle with U.S. pensioners and disabled workers. But many other matters remain unresolved.

The request in U.S. Bankruptcy Court in Wilmington, Delaware, came after a mediator gave up on settlement talks last month, saying bondholders, retirees and other creditors failed to agree on how to split $9 billion in cash.

Nortel asked the judge overseeing its slice of the multicountry bankruptcy to first decide whether the U.K. retirees have a legitimate claim to the money before deciding how best to divide it. Retiree representatives asked the judge to first decide how to split cash among Nortel’s units in the U.S., Europe and Canada.

Nortel’s proposed schedule is “consistent with the court’s previous suggestion that if mediation failed, it would impose a greatly accelerated discovery schedule,” the U.S. unit said yesterday in court papers, referring to the process by which adversaries in a case exchange information.

Groups of creditors 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.

Four Countries

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.

The U.K. retirees are represented by bankruptcy administrators overseeing the liquidation of Nortel’s European units. Those administrators say Nortel’s U.S. unit owes the retirees money to cover the cost of pensions.

The $9 billion should be divided among all of Nortel’s units first, to make settling disputes about individual claims, like the retirees’, easier to settle, the European administrators told U.S. Bankruptcy Judge Kevin Gross.

Nortel’s U.S. unit raised most of the $9 billion by selling assets it had under its control, including a portfolio of thousands of patents.
The case is Nortel Networks Inc., 09-10138, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Fighting on in Canada

Meanwhile, retirees in Canada haven’t given up in their battle for Nortel pensions.

“The only option left appears to be litigation,” the Brampton Guardian newspaper reports. “It is estimated that that process will take years to resolve and by that time, if costs keep going up, little of the $9 billion will be left. In the meantime, things don’t get easier for Nortel pensioners many of whom are in their seventies.”

(Bloomberg news contributed to this report.)