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Deal comes at the price of an acknowledgment that the claims of Nortel pensioners, former employees and employees on Long-term Disability are unsecured, and rank in equal priority to those of all other unsecured creditors, including the bondholders.
Ottawa (9 February 2010) – Former Nortel employees have negotiated a $57-million deal with the bankrupt company to extent the funding of pensions, health and disability benefits from the end of March to the end of December 2010.
Under the agreement, Nortel has agreed to fund medical and life insurance benefits for pensioners and their survivors until December 31, 2010. In addition, the terminated employees are to receive a payment up to $3000 for lost severance benefits. Long-term disabled employees will have their wage-replacement benefit and medical and life insurance benefits continued until December 31, 2010.
The agreement was reached after negotiations with the Court appointed representatives for the pensioners, former employees and employees on Long-term Disability. The deal is subject to Ontario Superior court approval March 3
Don Sproule, chair of the national organization NRPC which represents Nortel retirees and former employees, was quoted in the Ottawa Citizen as saying, “This does not diminish our resolve to push for changes to the Bankruptcy Insolvency Act, which is the primary vehicle by which we will receive preferred status and all affected employees will receive justice in this bankruptcy.”
"This is a slow-motion train wreck and we know that we're about to hit the brick wall. There are a couple of switchmen in the federal government who could save us (by changing bankruptcy rules), but they've gone on a coffee break. This deal buys some time."
The deal also blocks the former Nortel employees from suing the company and its directors over the administration or funding of Nortel pension, health and welfare trusts unless they can prove fraud. They also dropped an appeal to the Supreme Court of Canada seeking enforcement of provincial minimum standards rules on severance payments.
Yesterday the Ontario government announced that it will now meet its obligations regarding the Pension Benefit Guarantee Fund (PBGF) to ensure that Nortel pensioners will receive the first $1000 per month of their pension.
Opposition parties accused the Liberals of timing the announcement to a March 4 Ottawa area provincial by-election month, home to thousands of Nortel pensioners and former employees.
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