Nortel Networks Corp. (NRTLQ:US), the biggest maker of telecommunications equipment in North America, paid $45.5 million to settle a lawsuit brought by creditors of the once-bankrupt fiber-optic company 360networks Corp.
The accord, approved by a U.S. bankruptcy court in Manhattan, ends a suit in which Toronto-based Nortel was accused of wrongly taking about $100 million in payments from 360networks before that company sought bankruptcy protection, Norman Kinel, a creditors' attorney, said today in a statement. The settlement was paid in July.
Payments to vendors made as much as 90 days before a company files for bankruptcy are evidence of favoritism under U.S. law, and creditors may try to recover them.
``After more than four years of litigation, we are pleased to have obtained through settlement what is believed to be one of the largest amounts ever recovered in a single preferential- transfer action,'' said Kinel, of the New York law firm Dreier, who represented the creditors.
Nortel spokesman Mohammed Nakhooda declined to comment on the settlement.
The suit was filed in connection with closely held 360networks' financial restructuring. The bankruptcy case began in 2001, and the company emerged from court protection in 2002. Nortel sold equipment to 360networks for the construction of what was intended to be a global fiber-optics network.
The same group of creditors reached a similar deal last week with Sycamore Networks Inc. (SCMR:US), in which the Massachusetts maker of networking software agreed to pay $9.9 million for accepting payments from 360Networks shortly before the bankruptcy, according to Kinel.
That settlement was submitted in the same court to Judge Martin Glenn on Sept. 28 and is expected to win approval shortly, Kinel said in the statement.
The bankruptcy case is In re 360networks, 01-13721, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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