Nortel Networks’ controversial $57 million pension deal with former employees could be in jeopardy.
That’s because major Nortel creditors in the United States say they need the money, especially if Canada changes its insolvency laws. The creditors include Bank of New York Mellon, which it says is owed about $4 billion; Flextronics, the company that manufacturers most of Nortel’s equipment; and the Pension Benefit Guarantee Corp., which represents about 30,000 Nortel pensioners in the United States.
The fear is that if Nortel pensioners in line for the $57 million force Canada’s feds to change insolvency laws, the money that would have gone to the creditors would instead go to the former employees. And right now, Nortel’s assets – and the money reaped from sales of those assets – only promises to cover between 50 and 70 percent of claims.
The pension case is scheduled for a March 3 hearing in Ontario Superior Court. As the deal stands, the $57 million would cover pension, health care and long-term disability benefits through the end of the year. The money also would pay about 1,200 workers fired without severance in the past year $3,000 each.