Nortel Networks’ court-appointed monitor says the bankrupt telecom equipment maker has left a pensioners’ benefits trust account $37 million short.
But, said Ernst & Young in court documents, Nortel is not legally obligated to fund the gap, under a 30-year-old Canadian law.
That’s problematic for Nortel’s 11,900 pensioners in Canada, whose average age is 72. Now, the most they can get in replacement coverage is a “very basic” health-care plan, Don Sproule, a spokesman for Nortel pensioners, told The Ottawa Citizen. Nortel’s failure to put money in the trust account puts those recipients “in a very difficult position,” Sproule said.
The fund was created for medical, dental and life insurance, as well as some income. Interestingly, Ernst & Young valued the Nortel trust account at $78 million at the end of December. But the firm said the fund has “sufficient assets … to pay the present value of all the benefits … nor was it legally required to do so,” according to court documents obtained by The Ottawa Citizen.
The shortfall was disclosed as Nortel prepares to go to court on March 3 for approval of a controversial $57 million deal with pensioners. Some pensioners don’t like the terms, which end benefits later this year, and some major creditors oppose the proposal because they fear losing out on the millions – or, in some cases, billions – Nortel owes them.