Nortel Networks was once a telecommunications equipment giant with a global operation and a workforce of 93,000. Now the former world-wide units of the bankrupt company are heading to court to battle it out for Nortel’s remaining $9 billion in cash. The decision when it finally arrives will determine who among the many retirees, governments, and investors gets the money.
Right now, the question is where the matter will be heard. Two judges, one in Delaware and one in Toronto, will jointly decide whether the cash will be allocated by the Delaware court, the Canadian court, or an arbitrator. Several prior attempts at mediation have already failed and the judge present at those talks said further mediation was not worthwhile.
Nortel’s assets were sold off to raise the $9 billion under discussion. However, there was no consensus reached as to how to divide that money up between the various Nortel units. Since some creditors have claims against multiple Nortel units, and some units have claims against other units, the whole matter has become increasingly complex. There are also international divisions between the European units and North American units on how to proceed.
Given the complex nature of this issue, it could spend years working its way through the courts. Transcripts from the last time courts heard arguments on the matter show that 78 lawyers appeared, which gives a sense of the chaos involved. If that situation repeats itself, it wouldn’t be surprising for most of Nortel’s money to end up in the pockets of lawyers and advisors, rather than the units.