TORONTO – The Canadian Auto Workers union is blaming bondholders for the failure to come up with a plan for dividing up nearly $9 billion in assets from the now-bankrupt Nortel Networks Corp.
A spokesman for the talks said Thursday that Ontario Chief Justice Warren Winkler, who was leading the mediation efforts, had concluded that further efforts at mediation were no longer worthwhile. It was the third failed attempt.
The CAW responded on Friday by saying Canada’s bankruptcy laws allow for the unjust treatment of former Nortel workers, disabled employees and pensioners while allowing the current holders of Nortel’s debt to demand payment in full.
“As with two previous mediations, failure resulted because Nortel bondholders who bought their bonds for 20 cents on the dollar wanted not only the full value of the bonds, amounting to some $4.5 billion, but years of interest on top of that,” said CAW national president Ken Lewenza.
“I struggle to imagine a more unjust situation in the case of a bankruptcy, where bondholders expect more than full payment.”
The myriad of creditors include Nortel pensioners, disabled former employees, bond holders, trade creditors and governments. Although most of Nortel’s workforce was not unionized when the company collapsed, some units had collective agreements and some pensioners had been union members.
It was not immediately clear what next steps would be taken.
When Winkler was appointed to the role by courts in the U.S. and Canada, he admitted the complex negotiations would be difficult to resolve because the value of the claims exceeded Nortel’s residual assets.
At its height, the Ottawa-based equipment provider was worth nearly $300 billion and employed more than 90,000 people worldwide.
During the technology boom in 1999-2000, Nortel was considered one of Canada’s most valuable companies, with its shares peaking at $124.50.
In the years that followed amid an accounting scandal with its top executives, the company’s shares nosedived to penny-stock status.
In 2009, Nortel filed for bankruptcy in North America and Europe, shedding thousands of jobs.
Since then, it has sold its remaining businesses piecemeal to various buyers for more than to US$7.8 billion, one of largest asset sales in Canadian history.
Last week, the former top brass at Nortel were acquitted of fraud charges nearly a decade after being accused of falsifying financial records at the beleaguered company.
Ex-CEO Frank Dunn, ex-CFO Douglas Beatty and ex-controller Michael Gollogly had been fired in 2004 and accused of being involved in a book-cooking scheme to trigger $12.8 million in bonuses and stock payments to themselves.
But a judge found there was no evidence to support the charges of fraud against the executives.