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What follows is a summary of the current state of affairs in the Nortel CCAA proceedings. It has been prepared and published by Barry Wadsworth, Associate Counsel for the CAW in September 2012. To make the document meaningful to the broader NRPC audience, a few minor editorial changes have been included in the section about handling address changes. The document is only available in English.
UPDATE SEPTEMBER 20, 2012
THE FOLLOWING IS A BRIEF SUMMARY - DETAILED INFORMATION CAN BE FOUND BELOW
Stay of Proceedings & Expected Distributions
Nortel recently received an extension of its CCAA stay of proceedings until October 31, 2012. The company continues to work through the many issues that must be resolved prior to the completion of the Nortel wind-down. It is uncertain how long this will take. We have started to receive questions about when to expect the next cash distribution from Nortel. Unfortunately there is no scheduled distribution and we do not expect one in the near future. There will not be a final distribution from Nortel's Health and Welfare Trust (HWT) or from the Nortel estate in respect of your Compensation Claim at least for the rest of this calendar year and quite likely longer.
It is particularly difficult to estimate when there will be a distribution from the Nortel estate, because the ultimate wind-up of the Canadian estate is dependent on complex estate allocation issues which are the subject of an international mediation that started in April of 2012. It could be a significant period of time before these complicated issues are resolved through the mediation process that is currently proceeding with the assistance of Mr. Justice Warren Winkler.
Changes to the Hardship Fund criteria
On July 27, 2012 the Court approved the expansion of the scope of the Hardship Fund to include Nortel pensioners and survivors, allowing them to apply for a payment from the Fund for circumstances which satisfy the requirements. Payments from the Hardship Fund are treated as an advance on future distributions, so any amount awarded will be deducted from the recipient's ultimate Compensation Claims recovery from the Nortel estate.
Previously Nortel pensioners and survivors were ineligible under the original version of the Hardship Fund Eligibility Criteria. Since the pension cutbacks last summer, however, the Court-appointed Representatives became aware of situations of serious financial hardship among pensioners and sought the expansion that was approved by the Court on July 27.
If you are a Nortel pensioner or survivor and you are in a position of immediate financial hardship, you may request a payment from the Fund by completing a Hardship Payment Application. Koskie Minsky can help you complete this form. This will be a private and confidential process, and you will not be required to share your personal information with anyone other than the Monitor, who is responsible for assessing your application, and your Representative Counsel.
Note: The maximum amount that will be payable to you under the expanded criteria is $5,000. It is not guaranteed that you will be approved for a payment, and if you receive a payment it may not be for the maximum $5,000 amount. Any amount that you do receive will be subject to applicable taxes, and the payment will be a lump sum advance on your distribution from the Nortel estate. To be clear, your ultimate distribution from the Nortel estate will be reduced by any amount that you are awarded from the Hardship Fund.
The updated Eligibility Requirements and the Hardship Payment Application Form will be available through the Monitor's website at www.ey.com/ca/nortel.
Update on Compensation Claims Process
The Monitor has been reviewing the Requests for Correction and Proofs of Claim received. There were a total of approximately 2000 Requests for Correction and Proofs of Claim received. The process of review consists of identifying the requested corrections or claim, reviewing supporting documentation and communicating with the claimants for additional clarification or documentation where necessary. This detailed process is necessary to ensure the Requests for Correction and Proofs of Claim are accurately and fully understood before any determinations are made regarding the claims.
In order to expedite matters, the Monitor is not waiting until responses to all 2000 of the Requests for Correction and Proofs of Claim have been prepared to begin responding. The Monitor will be responding to the balance in similarly sized batches over the next number of months.
PLEASE NOTE: YOU DO NOT HAVE TO DO ANYTHING IF YOU FILED A REQUEST FOR CORRECTION OR A PROOF OF CLAIM. THE MONITOR WILL RESPOND IN DUE COURSE. THE FACT THAT SOME PEOPLE WILL RECEIVE A RESPONSE BEFORE OTHERS HAS NO SIGNIFICANCE.
DETAILED INFORMATION
CONSOLIDATED CASH POSITION AND LIQUIDITY AS AT JUNE 30, 2012
As at June 30, 2012 the consolidated cash balance for all Nortel entities was approximately $10.2 billion, including $2.8 billion of total treasury cash. Nortel's consolidated cash balance in held globally in various Nortel entities and joint ventures. The following is an overview of Nortel's consolidated cash position as at June 30, 2012.
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As at June 30, 2012, Nortel Canada had cash available for operations and post-filing intercompany settlements of approximately $256 million.
The U.S. entities had cash available for operations and post-filing intercompany settlements of approximately $984 million. NNI's Restricted Cash relates to $1 million held in escrow for the benefit of utility providers in accordance with the First Day Order.
The Joint Administrators on behalf of NNUK and the other Europe/Middle East Debtors had available cash for operations and post-filing intercompany settlements of approximately $746 million. The EMEA non-filed entities had available cash of approximately $15 million which is expected to be used primarily to fund their in-country operations and intercompany settlements.
Nortel entities in the Asia/Pacific region had approximately $257 million of available cash for operations and intercompany settlements. As a result of the regulatory regime in the People's Republic of China, the funds in Greater China of approximately $81 million are generally only available to fund operations within Greater China and intercompany settlements.
Caribbean and Latin America entities had available cash of $86 million and $43 million, respectively. This cash is expected to be used to fund their domestic operations and intercompany settlements.
Proceeds from the sale of Nortel's assets of approximately $7.3 billion are being held in escrow by various escrow agents. As at June 30, 2012, the funds held in escrow included:
a. Approximately $7.3 billion held in escrow by JPMorgan Chase Bank, N.A. ("JP Morgan") until an agreement is reached or determination made regarding allocation of these proceeds among the various Nortel legal entities, including Nortel Canada. The current divestiture proceeds held in escrow include: (i) $4.454 billion from the sale of Nortel's patent portfolio and related assets (the " Residual IP"); (ii) $1,053 billion from the sale of CDMA/LTE Access assets: (iii) $18 million from the sale of the Layer 4-7 business: (iv) $10 million from the sale of the Next Generation Packet Core business: (v) $857 million from the sale of Enterprise assets; (vi) $625 million from the sale of the MEN assets; (vii) $113 million from the sale of GSM/GSM-R assets; (viii) $145 million from the sale of DVAS assets; and (ix) $46 million from the sale of MSS assets;
b. $22 million held by CitiBank relating to the sale of MEN assets. These divestiture proceeds include $8 million being held in support of the related TSA and $14 million being held subject to certain succession tax and other adjustments;
c. $1 million held by Wells Fargo relating to the sale of DVAS assets. These divestiture proceeds are being held subject to resolution of certain tax liabilities in EMEA; and
d. $1 million held by JP Morgan relating to the sale of MSS assets. These divestiture proceeds are being held in support of the related TSA.
Other unavailable funds include $35 million transferred from the CDMA/LTE Access asset divestiture proceeds escrow to a separate trust account.
STATUS OF THE APPLICANTS' CLAIMS PROCESS AND CROSS-BORDER CLAIMS MATTERS
To date, 1,065 claims with a cumulative value of approximately CAD 36 billion have been filed against the Nortel Canada pursuant to the Claims Procedure Order and the EMEA Claims Procedure Order. This includes potential duplicative claims filed against multiple Nortel companies and claims filed subsequent to the Claims Bar Date.
STATUS OF THE EMPLOYMENT RELATED CLAIMS PROCESS
To date, the Monitor has issued Information Statement Packages to over 14,000 individuals representing a claim value of approximately $1 billion. The Claims Procedure Order established a bar date of January 6, 2012 for Identified Claimants and a Rolling Bar Date for those who cease employment after December 31, 2010 and who received an Information Statement Package to:
a. Return any Requests for Corrections; and/or
b. File a Form C Proof of Claim in respect of any other compensation related claims.
The Monitor has received approximately 1,500 Request for Corrections forms and approximately 780 Poofs of Claim forms from approximately 2,200 claimants. The Monitor continues to provide copies of these requests and claims to Representative Counsel and counsel to the CAW, as appropriate.
Since the January 6, 2012 bar date, the Monitor has been reviewing the Requests for Corrections and Proofs of Claims received. The process consists of reviewing supporting documentation, identifying the requested corrections or claim and communicating with the claimants for additional clarification or documentation. This detailed process is necessary to ensure the Requests for Corrections and the Proofs of Claims are accurately and fully understood before any determinations are made regarding the claims. Once the review has been finalized, Mercer, the actuary, will be requested to revalue the claim based on the accepted changes.
The Monitor has concluded its review of Requests for Corrections for approximately 850 individuals. These individuals have received one of the following notices:
a. Notice of Acceptance - if all requested changes to personal date points were accepted but did not have any effect on the dollar value of the Compensation Claim;
b. Revised Information Statement - if the Monitor has accepted all the requested changes to personal data points and a change in the dollar value of the original Compensation Claim results. These Revised Information Statements set out the final dollar value of the Compensation Claim in accordance with the Methodology based upon the corrected changes to the personal data;
c. Notice of Disallowance - if all requested changes to personal data points were disallowed;
d. Notice of Partial Disallowance - if some requested changes to personal date points were accepted and others were disallowed. These individuals will have 28 days from the date of the notice to file a Notice of Dispute. If the Monitor does not receive a Dispute Notice within the 28 day period, the Monitor will provide these individuals with a Revised Information Statement as discussed above or, if applicable, will notify the individual that the changes to personal data points did not have any effect on the dollar value of the Compensation Claim; or
e. Monitor Corrected Personal Information - if as a result of the acceptance of one or more of the requested changes to a personal data point provided by the individual claimant, the Monitor made additional/related changes to other data points. These individuals will have 28 days from the data of the Monitor Corrected Personal Information to make changes to the corrections made by the Monitor. If the Monitor does not receive any further changes from the individual within the 28 days period, the Monitor will provide these individuals with Revised Information Statements as discussed above or, if applicable, will notify the individual that the changes to personal date points did not have any effect on the dollar value of the Compensation Claim.
The Monitor also has been reviewing Form C Proofs of Claim. The Monitor has concluded its review of 63 Form Cs and has issued Notices of Disallowance. These individuals have 28 days from the date of the notice to file a Notice of Dispute.
The Monitor has received over 70 Notices of Dispute.
Updating Your Address with CAW, the Monitor and Morneau Shepell
It is very important that Koskie Minsky, ... Ernst & Young and Morneau Shepell have your most current address on file. If you have recently moved, you will need to change your address with either, Koskie Minsky, ... or Ernst & Young, and with Morneau Shepell. If you change your address with either, Koskie Minsky, ... or Ernst & Young, then whichever organization you file your address change with will inform the other one of the change. Morneau Shepell, which administers pension benefits from Nortel's registered pension plans, must be contacted separately.
To change your address with ... the Monitor, you need to fill out a Compensation Claims Process Proof of Address Form, available from the Monitor ....
If you do not have access to the internet, contact us and we will send a change of address form to you by mail.
If you need to change your address with Morneau Shepell, you should contact them directly. Their contact information can be found at the end of this Report. Even though many LTD Beneficiaries are not yet in receipt of their Nortel pension, it is still important that Morneau Shepell have your most recent address on file. Since the registered pension plans are being wound-up, there may be option statements or other important correspondence sent to you by Morneau Shepell in the coming months.
STATUS OF THE HEALTH AND WELFARE TRUST
By a series of Court Orders dated December 15, 2010, May 2, 1011, June 21, 2011 and March 2, 2012, the Court approved interim distributions from the HWT to Income Beneficiaries. Cumulative interim distributions in the amount of approximately $34.4 million were made to 761 Income Beneficiaries (including 344 LTD Beneficiaries, 80 SIB Beneficiaries and 337 STB Beneficiaries) during the period from January 2011 to June 2012.
The Court approved a fourth interim distribution from the HWT to LTD Beneficiaries on account of their LTD Life and LTD Optional Life Benefit. The Fourth Interim Distribution, in the amount of approximately $1.9 million, was made to 351 beneficiaries on or about September 30. 2011.
By Court Order dated November 8, 2011, the Court approved a fifth interim distribution from the HWT to individuals on account of Pensioner Life. The Fifth Interim Distribution, in the amount of approximately $21.2 million, was made to 8,783 individuals (including 330 LTD Beneficiaries 8,154 Pensioners and others) during the period from November 2011 to June 2012. There remains a degree of uncertainty regarding the final amount that will be available to distribute from the HWT.
A number of matters impact on the final amount available for distribution from the HWT including the treatment of stale-dated cheques. Sun Life had advised that as of May 31, 2012 there are 5,146 stale-dated cheques outstanding dating from January 1997 onward, with a total value of $1,037,495. Sun Life has advised the Monitor it has a process in place for replacing stale-dated cheques in the normal course when payees come forward and make such a request.
In order to provide greater certainty as to the ultimate cash available for distribution from the HWT, to reduce administration efforts and costs dealing with potential claims of a large number of holders of small value Stale-Dated cheques and given the low level of activity related to clearing of Stale-Dated cheques, the Court has approved the following process for dealing with the remaining Stale-Dated cheques:
a. All Stale-Dated cheques issued prior to September 1, 2003 will be included in the HWT as trust property to be administered by the Monitor and available for distribution to the Participating Beneficiaries.
b. All Stale-Dated cheques issued on or subsequent to September 1, 2003 for an amount less than $100 or payable to a third party medical practitioner will be included in the HWT as trust property to be administered by the Monitor and available for distribution to the Participating Beneficiaries.
c. A reserve will be established for all Stale-Dated Cheques issued on or subsequent to September 1, 2003 in an amount of $100 or more to be administered by the Monitor or the trustee upon direction of the Monitor.
OTHER FACTORS RELATING TO THE HWT DISTRIBUTION
In determining the amount actually remaining in the HWT, the following are some of the other unresolved issues which must be clarified:
a) Investment returns;
b) Treatment of stale-dated cheques;
c) The actual amount of Pensioner Life premiums paid during 2010;
d) The treatment of costs related to expenses incurred prior to the termination of the HWT but not submitted by February 28, 2010;
e) Taxes and administrative costs; and
f) Any fees paid from HWT assets pursuant to the Settlement Agreement with respect to any dispute or litigation regarding the HWT.
There are also uncertainties with respect to the liabilities of the HWT, as previously reported, which include:
a) Changes to the estimated actuarial value of benefits as a result of status changes occurring with respect to the individual, such as recovery or death;
b) The resolution of contingencies: and
c) Updating of data to December 31, 2010.
STATUS OF ALLOCATION MATTERS AND MEDIATION
Orders were issued by this Court and the U.S. Court dated June 17, 2011 pursuant to which various parties interested in the allocation of the Nortel global asset sale proceeds were ordered to mediation in an attempt to find a resolution.
The Honourable Warren K. Winkler, Chief Justice of Ontario, is to serve as mediator.
On August 3, 2011, the U.S. Court entered an order requesting the appointed mediator to consider the postponement of the mediation until after the U.S. Court's decision on motions to dismiss the claims of the EMEA Debtors against the U.S. Nortel entities.
The U.S. Court hearing with respect to the EMEA Debtors' claims took place October 14, 2011. It was not until March 20, 2012, that the U.S. Court entered an order granting some but not all of the U.S.'s motions.
On March 26, 2012 all parties to the mediation, received a letter from the Mediator indicating that they were to file new or revised mediation briefs by April 16, 2012. The Canadian Creditor groups representing employees and pensions filed a confidential brief with the mediator.
A meeting of the parties to the mediation was held on April 24, 2012 in Toronto, Canada. Mediation discussions and information exchanged with the Mediator or among the parties to the mediation is confidential. As such, there is to be no discussions as to the content of the mediation but meetings are being held with the mediator and discussions between the parties have been occurring.
GLOBAL MEDIATION INFORMATION
The Canadian Press
Date: Tuesday Apr. 24, 2012 12:04 PM ET
TORONTO - Mediation over the distribution of almost $9 billion in assets belonging to bankrupt Nortel Networks began Tuesday in one of the most complicated proceedings of its kind.
The effort at settling the myriad creditor claims from Canada, the U.S. and around the world kicked off with Ontario's top judge warning of the pitfalls of failure.
If the parties resort to litigation, Chief Justice Warren Winkler told a room full of high-priced bankruptcy lawyers, it would deplete much of the money now available to creditors, who include pensioners of the one high-flying high-tech company.
"The alternative to a mediated outcome is a lengthy litigation process," Winkler said.
"This would be a catastrophic outcome for some, and unsatisfactory for most of those affected by this case."
The bankruptcy proceedings over Nortel's business lines and intellectual property involve companies in 20 countries on every continent except Antarctica.
Besides Nortel pensioners, others looking for a share of the assets include disabled former employees, bond holders, trade creditors and governments. Legal proceedings are underway in the U.S., U.K., and Canada.
"The Nortel insolvency is one of the most complex trans-national legal proceedings in history," said Winkler, who was appointed mediator by courts in Ontario and Delaware.
"The complexity of this case would make even a conflict-of-laws- professor cringe."
Winkler acknowledged the hurdles he faces; especially since the value of the claims far exceed the residual assets. In addition, two previous efforts at mediating a settlement failed.
Originally founded in Canada in 1895 as an equipment provider for Canada's telephone system, Nortel expanded into a global digital and network powerhouse starting in the mid-1980s.
By 2000, Nortel had $30 billion in annual revenues and employed nearly 93,000 people. The empire began crumbling with the burst of the "dot-com bubble" in early 2001.
In 2004, it was forced to restate its financial results due to accounting irregularities and became the target of shareholder lawsuits. Creditors finally pushed the company into bankruptcy in 2009.
Hard-hit Nortel pensioners, whose pensions have been slashed by 30 per cent in some cases, have resorted to demonstrations, legal action and pressing for tougher legislative protections.
Because no single court has the ultimate authority over the issue, Winkler warned that litigation could lead to conflicting results and endless appeals.
As a result, he said, mediation is essential to a resolution.
He promised a fresh approach - something different from gathering all the parties together to try to hammer out a deal. Instead, he pledged to meet with the various parties individually in an effort to find common ground on which to build a settlement.
STATUS OF FOREIGN PROCEEDINGS
Chapter 11
The following is a summary of the court orders that have recently been issued in the U.S. Chapter 11 Proceedings:
a. On April 18, 2012, the U.S. Court entered an order appointing Richard Levin as a neutral mediator concerning the modification or termination of the Nortel Retiree Welfare Plans and the Nortel LTD Plans;
b. On May 24, 2012, the U.S. Debtors obtained an order authorizing and approving procedures to resolve or otherwise settle claims of employees terminated by the U.S. Debtors after the Petition Date;
c. On July 11, 2012, the U.S. Debtors obtained an order authorizing and approving the Fourth Estate Settlement Agreement;
d. On July 11, 2012, the U.S. Court entered an order requiring the Nortel Networks U.K. Pension Trust Limited (as Trustee of the Nortel Networks U.K. Pension Plan) and the Board of the Pension Protection Fund to file amended claims against the Debtors on or before September 5, 2012 and to attach supporting documentation for such claims.
FINANCIAL SUPPORT PROGRAMS
ONTARIO DISABILITY SUPPORT PROGRAM (ODSP) provides eligible disabled individuals and their families with income support and disability support including prescriptions, dental, extended health coverage, and medical supplies. People receiving CPP Disability and their dependants automatically qualify. The family can have a house, and a car, but there are maximum limits for the family's income and assets.
Ministry of Community and Social Services ODSP
351 Preston Street, 2nd Floor, Ottawa, ON K1S 3H8
General Inquiry: (613) 234-1188 / Toll Free: 1-800-267-5111 / TTY: (613) 787-3959
Fax: (613) 783-5958
Click here to visit the website.
CPP DISABILITY
We were in contact with the Director of the CPP Disability program regarding the program and how the termination of the LTD plan might impact our members. In our discussions, it was suggested that those who are not in receipt of CPP disability benefits should reapply as there might have been a change in circumstances which would result in a granting of benefits. It was also suggested that those who have not done so call CPP to ensure that they are receiving the maximum CPP disability benefit available.
Call: 1-800-277-9914 and is accessible from anywhere in Canada - TTY: 1-800-255-4786
Or cick here to visit the website.
TRILLIUM DRUG PROGRAM
In addition, the Government of Ontario established the Trillium Drug Program (TDP), which is intended for those who have high prescription drug costs in relation to their net household income. The TDP contact information is:
P.O. Box 337, Station D
Etobicoke, Ontario
M9A 4X3
Tel : 416-642-3038
Fax : 416-642-3034
Toll-Free : 1-800-575-5386
E-mail :
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Other provinces may have similar programs, which will likely be administered through their respective Health Ministries.
INFORMATION SOURCES
The CAW-Canada Nortel website
If you are a CAW-Canada member who is currently at work or on LTD, or if you are currently retired and were formerly represented by the CAW-Canada AND YOU SIGNED A RETAINER AGREEMENT WITH THE CAW - you can provide us your e-mail address and receive future correspondence by e-mail -
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The Monitor's web-site
The Nortel Retirees and Former Employees Protection Committee -http://www.nortelpensioners.ca/
Yours sincerely,
Barry E. Wadsworth
Associate Counsel
CAW-Canada Legal Department
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