Bloomberg News

Nortel Judge Orders Mediation on Rules to Divide $4 Billion

June 20, 2011

(Updates with excerpt of judge’s order in third paragraph.)

June 20 (Bloomberg) -- Nortel Networks Corp.’s units in North America and Europe must go before a mediator to try to resolve their differences over what process to use to divide among about $4 billion, a judge ruled.

U.S. Bankruptcy Judge Kevin Gross in Wilmington, Delaware, didn’t rule on the dispute among the bankrupt company’s units over whether judges in the U.S. and Canada or a private arbitrator should decide how to split up money.

“The risk of inconsistent decisions and the uncertainty of the appellate process (with the further risk of inconsistent decisions) may additionally delay and complicate the progress of the cases,” Gross wrote in an order issued June 17.

Nortel said in a statement that the same order was issued by Ontario Superior Court Judge Geoffrey Morawetz, in Toronto.

Nortel, once the biggest maker of telecommunications equipment in North America, put its units into bankruptcy in the U.S., Canada and the U.K. in 2009. Since then it has raised $3 billion for creditors by auctioning its technologies and businesses. The last major auction will raise at least $900 million from the sale of 6,000 patents, according to court documents.

Nortel’s European units, which are under the jurisdiction of a bankruptcy court in the U.K., claims the U.S. and Canadian units promised to allow a private arbitrator to decide how that money will be allocated to the various units. Those units would then distribute their share to creditors, including bondholders.

Nortel’s North American units say they never agreed to private arbitration and asked Gross and Morawetz to decide how to split the cash.

The case is Nortel Networks Inc., 09-10138, U.S. Bankruptcy Court, District of Delaware (Wilmington).

--Editors: Fred Strasser, Charles Carter

To contact the reporter on this story: Steven Church in U.S. Bankruptcy Court in Wilmington, Delaware, at schurch@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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