Nortel’s Canadian pensioners ‘losing out’
Posted on August 4, 2009 at 11:42 amAs bankrupt Nortel continues talks about the sale of its businesses, its Canadian pensioners are growing increasingly uneasy about their compensation. The Pension Benefit Guaranty Corp.’s takeover of the telecom company’s U.S. estate on July 17 came as a good news to its pensioners stateside, but their roughly 17,500 Canadian counterparts say that development came at their expense.
Diane Urquhart, an independent financial analyst who is representing Nortel’s Canadian pensioners, has published a report on the bankruptcy situation and sent a letter to Ted Menzies, Parliamentary Secretary of Finance.
When one takes into account the prospects for the Nortel Canada estate having a much higher loss or compromise, at say, close to -$0.90 per $1.00 creditor claim compared to -$0.60 for the Nortel US estate, the difference in bankruptcy outcomes between the Nortel Canadian pensioners, long term disabled and terminated employees and the U.S. hedged bond owners with a profit of $0.28 per $1.00 face amount of debt, is flagrantly abusive and crass.
Nortel’s 17,500 Canadian pensioners, Urquhart said, are seriously disadvantaged relative to the other creditor groups in the Nortel realm:
The Nortel hedged bond owners are making an estimated profit of 28 percent. The majority of Nortel U.S. and U.K. pensioners are covered by robust public pension insurance plans; and the U.S. and U.K/EMEA unhedged and unsecured creditors are expected to have much higher recoveries due to their considerable power being used to deplete the Canada estate to date and to extract a considerable proportion of the pending cash proceeds from sale of the businesses.
