Nortel Seeks Approval Of Deal To Settle Retiree Benefits Claims For $66.87M

by Tara Arick on January 4, 2013 · 0 comments

in Bankruptcy

- From LexisNexis® Mealey’s™ Daily Legal News.

Bankrupt Nortel Networks Inc. on Dec. 31 moved in the U.S. Bankruptcy Court for the District of Delaware for approval of a deal with the committee representing retired employees that would terminate retiree welfare plans and would pay the Official Committee of Retired Employees (Retiree Committee) $ 66,879,000 to resolve all claims against Nortel related to retirement benefits (In Re: Nortel Networks Inc., No. 09-10138, Chapter 11, D. Del. Bkcy.). Nortel Networks filed for Chapter 11 bankruptcy in 2009.

11 U.S. Code Section 105

Nortel argues that pursuant to 11 U.S. Code Sections 105(a), 363 and 1114(e)(1)(B) and Federal Rule of Bankruptcy Procedure 9019, the Bankruptcy Court should approve a settlement agreement with the Retiree Committee regarding the termination of Nortel’s retiree welfare plan.

Under the terms of the proposed settlement agreement, Nortel would terminate the retiree welfare plans as of May 31 and would pay the Retiree Committee $ 66,879,000 in settlement of all claims related to the retiree welfare plans.

The settlement payment would be allocated by the Retiree Committee or its successors among the holders of retiree claims and holders of retiree claims would release Nortel from further liability related to retiree claims.


The Retiree Committee has determined that it intends to allocate the settlement amount, minus the settlement administration costs, to all eligible holders of retiree claims based upon each holder’s pro rata share of the aggregate value of all retiree claims.

Nortel tried to terminate the retiree welfare plans in 2010, at which time the company proposed the plans would be terminated and a health insurance company would provide retirees with replacement medical coverage that was not readily available on the open market.

The Nortel US Retirement Protection Committee, an ad hoc steering committee of retired Nortel executives, moved for authorization to form a voluntary employee benefit association as an alternative option for providing health insurance.

Benefit Termination

Nortel argued that through the years, it has always had the right to amend or terminate the welfare benefits.

The Retiree Committee has asserted that, among other things, Nortel did not preserve a right to unilaterally terminate the retiree welfare plans.

Nortel argues that it has continued to provide benefits under the retiree welfare plans, at an approximate cost of $ 28 million to their estates.

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