‘Significant’ Nortel settlement gets court approval

Defunct telecoms equipment maker Nortel Networks Inc. received court approval on Tuesday for a US$75-million deal it called a “significant milestone” in ending its five-year bankruptcy.

In return for the payment, insolvent Nortel affiliates in Europe will drop claims seeking more than $3 billion from Nortel’s U.S. bankruptcy proceeding.

“I am intimately familiar with the claims being settled, and it gives me great comfort in approving this,” said Kevin Gross, a U.S. Bankruptcy Court judge in Wilmington, Del.

Nortel’s global business, once worth $250 billion with 93,000 employees, collapsed in January 2009. Its businesses and patents were quickly auctioned off, raising $7.5 billion.

Tuesday’s settlement resolves some of the biggest claims against the U.S. estate, including that it allegedly short-changed a pension in Britain. The agreement does not affect a looming fight over how to divide the billions in cash among insolvency and bankruptcy proceedings in different countries.

The Canadian estate has claimed it should get the lion’s share of that cash because Nortel’s intellectual property was developed in Canada, a claim disputed by the other estates. A trial is scheduled for May.

A side agreement in Tuesday’s settlement pledges that Nortel’s U.S. and European estates will work together to try to form a common position on dividing the pile of cash ahead of the May trial.

Gross, the Delaware bankruptcy judge, overruled an objection to Tuesday’s settlement from the Canadian estate, which argued the side agreement might be used to change the trial protocol.

“Courts should encourage the parties to try to sit down and settle,” he said.

The case is  re Nortel Networks Inc., U.S. Bankruptcy Court, District of Delaware, No. 09-10138

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