TORONTO, June 10, 2011 /CNW/ - During argument before Ontario's
Commercial Court earlier this week, the Canadian Auto Workers union,
along with other parties representing Canadian employees and their
benefit and pension plans, took the position that the only way to
appropriately distribute proceeds from the sale of Nortel's world-wide
assets is to share them pro-rata among the claims of its creditors.
This method of distribution, a form of global substantive consolidation,
reflects the integrated and interdependent nature of Nortel's
world-wide operations before January of 2009, when it filed for
bankruptcy protection in Canada, the United States and other
jurisdictions around the world.
If accepted by the court when a trial is conducted, likely later this
year, pro-rata distribution will result in a fair distribution of the
sale proceeds among all of the creditors and a just resolution for the
employees who have lost their jobs, retirees facing reductions in their
pensions and disabled employees who have lost the incomes and benefits
on which they depended.
Although Nortel's headquarters was situated in Canada, before its
insolvency it distributed sales proceeds among its global entities to
reduce its overall tax burden, with the effect that most of its assets
were located outside Canada. However, most of Nortel's debts were
either situated in or guaranteed by the Canadian headquarters. As a
result, creditors of Nortel's entities around the world are not only
making claims in their own jurisdiction, but also against any assets
flowing into Canada from the sale of its global business interests.
This, essentially, gives them two ways of recouping losses; something
which the Canadian only creditors, including those represented by the
CAW, do not have.
Pro-rata distribution is not a new concept in insolvency proceedings.
It has been used to deal with similarly integrated companies in both
Canada, the United States, and the UK, and is proposed as a resolution
by major creditors in the U.S. proceedings involving Lehman Brothers,
another globally integrated company. As such, the proposed pro-rata
distribution of Nortel's assets has a reasonable chance of success,
giving not only fairness, but also justice to those who have suffered
most from Nortel's meltdown.
During the height of Nortel's success in the 1980s, the CAW represented
5,000 Nortel workers.
SOURCE Canadian Auto Workers
For further information:
please contact CAW Legal Department Associate Counsel Barry E. Wadsworth 416-495-3776 or CAW Communications Shannon Devine (cell) 416-302-1699