Nortel recoveries achieved

The Trustee of the UK Nortel Pension Scheme is delighted to announce that it has recovered sufficient funds to be able to secure benefits better than those provided by the PPF.

The background

It is nine years since global communications giant Nortel entered world-wide insolvency followed by years of what the Courts described as "scorched earth litigation".

The UK pension scheme was the Nortel Group's single largest creditor in the global insolvency. There were some 40,000 members of the UK pension scheme and it had a £2.1 billion deficit on a buy-out basis, when Nortel went down in 2009.

The Trustee pursued its claims on the worldwide Nortel assets for more than eight years, through litigation in Canada, the US, the UK and France. It emerged successful from the main trial in May 2015, only to be faced by multiple appeals against the decisions which had gone in its favour.

After a further year of negotiations, consensus was finally reached in October 2016 and the "Lockbox" containing $7bn of residual Nortel assets was at last able to be opened and money able to be distributed to creditors.

What this means in practice for members

The estimated recovery means that, over and above the compensation that members would have been expected to receive from the PPF, the Trustee will have available an additional amount of some £550 million for members' benefits.

The buy-out process is now underway.

David Davies, Chair of the Trustee, commented:

"Our total recovery will amount to some £1.2bn and almost guarantees that we will have sufficient assets to fulfil our dream of being able to buy benefits (for our members) greater than those which would have been provided by the PPF and proceed to buyout with our chosen insurance partner(s).

"In chess parlance, the opening and middle game period have come to an end after 9 long years and we are now in the end game; we have reached the beginning of the end!

"It is therefore appropriate to mark this milestone by thanking everyone who has been involved in this struggle: to my fellow Trustees who stuck with the arguments and persevered to get the best deal for our members; to the PPF, who stuck by us and went the extra mile in an effort to secure better terms all round; and to our advisers, particularly those in the UK--Hogan Lovells and PwC who guided us through the enormously complicated legal and financial framework of this case."

Angela Dimsdale Gill, Head of Hogan Lovells Pension Litigation Practice and Lead Counsel for the Nortel Trustee, added:

"This is one fewer scheme the PPF will have to absorb and shows that there can still be good news stories for members of pension schemes.

"The present recoveries were made possible by the ground-breaking judicial decisions that Nortel creditors everywhere would share the $7bn residual assets sitting in the Lockbox, pro rata according to their creditor claims, on an equal footing.

"It was the Trustee who put forward this proposed solution at trial. It was the first time that assets in an international insolvency had been ordered to be distributed in this way.

"The trial decisions of 2015 remain a unique and important precedent in both pensions and international insolvency law."

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