Thursday, 24 January 2013
The NRPC Comments on the Nortel
TORONTO, Ontario - For release
January 24, 2013 at 6:00 pm
Today, the Honourable Justice Warren Winkler released a statement
that he had not been able to reach a mediated consensus on the
distribution of over $9B US in assets from the Nortel estate. The
NRPC and the court-appointed representatives of Nortel's former and
disabled employees are disappointed that no settlement was reached,
and on behalf of the nearly 20,000 Canadian retirees, terminated,
deferred pensioners and disabled employees whose interests they
represent, extend their thanks to Justice Winkler for his
Canadian employees of Nortel were the primary builders of the bulk of
Nortel's patents and the once global company. They are prepared to
wait until an equitable share of the assets is allocated to them.
Sproule, President of the NRPC spoke out. "For four years, our
retirees and former employees have been fighting for a fair share of
the pie. We have been treated as pawns in this game by vulture bond
funds. We will continue the battle. Canadian pensioners and disabled
employees have already taken their hit financially with the cutback
of pensions and loss of long-term disability income, as well as all
other medical and insurance. Nortel pensioners in the USA and UK have
suffered no such cutbacks.
Mills, age 77, with 34 years of service at BNR/Nortel is adamant that
he will continue to fight for a decent result. "I'd rather end up
on welfare than give our hard-earned assets to these vultures." One
of the biggest injustices here is that the bondholders want interest
from the date of the CCAA filing on bonds purchased at substantially
less than the face value of the claim. "That money would have to
come straight out of our pockets," he added.
NRPC and the court-appointed representatives would also like to
express their outrage that the world's top insolvency professionals,
who after more than four years and with hundreds of millions of
dollars in professional fees, have again failed to resolve the
allocation issues that continue to stand in the way of payments to
their constituents. Notwithstanding the above, the NRPC and the
court-appointed representatives also wish to thank our advisor team
who has been exemplary in their dedication to our cause.
Clark-Stewart, NRPC Director, Media Relations
Last Updated ( Thursday, 24 January 2013 )
Saturday, 02 July 2011
For Release: July 02, 2011
On June 30, 2011, Nortel Networks announced the sale by auction of its Intellectual Property (IP). Once closed, the sale will contribute $4.5B US to the Nortel bankruptcy assets.
Reacting to the anticipated IP sale announcement, Don Sproule, National President for the Nortel Retirees and former employees Canada stated: "Since Canada was a major contributor to the creation of Nortel's Intellectual Property, we are very pleased with this sizeable sale." He went on to state: "Focus will now shift towards resolving how those and other asset sales will be distributed among the various global estates including Canada's".
One day earlier, the Canadian and US bankruptcy courts had appointed the Chief Justice of Ontario, the Hon Warren K Winkler, to provide a mediated solution for the global division of assets. In his supporting statement announcing the appointment of a mediator, Justice G. Morawetz highlighted that because of the complicated multi-jurisdictional issue, "there is no simple solution to the legal predicament".
On the appointment of a mediator, Mr Sproule stated that "we are pleased with the appointment of Chief Justice Winkler". He went on to state that Judge Morawetz's announcement "specifically mentioned that while there are few secured Canadian Debtors, there are significant unsecured creditors, most of whom are individuals who are employed or were formerly employed by Nortel". Mr. Sproule went on to say that "I am further pleased that in his announcement, Justice Morzwetz singled out the many pensioner claims for both pension and medical benefit"
Last Updated ( Monday, 04 July 2011 )
Tuesday, 22 February 2011
Media Release Feb 17, 2011
For immediate release
OTTAWA: On Feb 15th, Bill C-501, sponsored by MP John Rafferty (NDP), was stripped of any reference to pensions and pension under-funding during the Clause-by-Clause review in the Industry Committee. As it now stands, Bill C-501 will provide protection solely for termination and severance pay. NDP and Liberal Committee members voted to retain pensioner protection but did not have the numbers to overcome the combined vote of the Conservative and Bloc members. What happened in the Committee was a travesty of justice which is creating three classes of employees in bankruptcy, with pensioners pushed even lower to the bottom of the heap. While the Nortel Pensioners and former employees Protection Canada (NRPC) support the need for this protection when a company goes bankrupt, we do not support the current game playing that is going on in Committee hearings related to bankruptcy law.
"The elimination of all clauses in Bill C-501 relating to pension funds is a devastating blow for Justice-in-Bankruptcy." said Bob Dowson, a nortel pensioner living in Iroquois, Ontario, who has attended all the C-501 Committee meetings with his wife Marilyn. "We are facing the loss of our home while these guys play fast and loose with our lives. Would they still behave this way if their own parents were involved?"
It's about time the Government decided to stop abusing and attacking seniors and decide what they are going to do to help Nortel retirees. Sabotaging Private Members bills is a nasty game that has to stop!
Anne Clark-Stewart NRPC Director, Media Relations
Last Updated ( Tuesday, 22 February 2011 )
Friday, 03 September 2010
Media Release: To be released: Tuesday, August 31, 2010 at 3 p.m.
Don't wind up our pension plans!
OTTAWA - On August 24, Ontario Finance Minister Dwight Duncan announced new rules for managing the funding levels of Defined Benefit (DB) pension plans, coupled with increased employer contributions to the Province's Pension Benefits Guaranty Fund (PBGF). While the NRPC agrees with Minister Dwight Duncan that the PBGF should be put on a sound financial footing, it views the approach as a modest step in improving the long-term outlook for pensioners.
The NRPC believes that there is a better way to reduce the load on the PBGF when the government is faced with a severe economic crisis and major pension plan failures. The NRPC's proposal will significantly benefit pensioners in a bankruptcy situation and thereby diminish the need for higher corporate premiums to the PBGF. As an added advantage for the long-term health of private sector DB pensions, it will provide greater predictability for companies concerned about the effect of the government's pension valuation system on their cash flow.
One of the key recommendations of the 2008 Expert Commission on Pensions was to avoid winding up stranded plans through the creation of an Ontario Pension Agency*. With support from its financial and actuarial advisers, the NRPC has developed a similar, but private sector approach, known as the Financial Sponsorship Model (FSM). This approach also discards the rote assumption that winding up a pension plan requires conversion of the pension assets into annuities. Instead, FSM looks to the capital markets to take on the continuing obligations of a failing plan. It not only avoids the punitive costs of wind-up-by-annuity, but also offers some potential for investment growth. Pensioners will likely receive higher incomes, so the load on the PBGF and Provincial social programs will be reduced. In discussions with Ministry officials, the NRPC has indicated that the FSM could save $100M in PBGF obligations for the Nortel insolvency alone.
"Wind-up-by-annuity adds unnecessary expense and uncertainty for everyone" stated Don Sproule, National Chair of the NRPC, "There is no worse time to buy annuities than in the current economic conditions". He went on to say "On top of that, the $2.5B Nortel pension funds may cause a systemic failure of the Canadian annuity market, which can only cope with around $500M per year. There is no way we can expect robust competition in the conversion of our pension assets to annuities. Prices will go through the roof."
Thomas D. Levy, Chief Actuary for The Segal Company, noted "It is now apparent that the Ontario pension system is setting up itself, pensioners and the Ontario taxpayer for future failures. We need look no further than the Nortel pension plan catastrophe, the PBGF deficit and the unwillingness of Ontario employers to continue to ride the cash volatility roller-coaster of the current Defined Benefit valuation and funding systems."
Initial engagement by NRPC with the capital markets in Canada has generated major interest in FSM. Done properly FSM would create a significant win-win, for pensioners at large and the Ontario taxpayers. It will also give the province of Ontario a leadership role in safeguarding the future of Defined Benefit pension plans in Canada.
*Recommendation 5-2, Report on the Ontario Expert Commission on Pensions,
Harry Arthurs, November 2008.
Last Updated ( Friday, 03 September 2010 )
Saturday, 29 May 2010
On May 21, 2010 the Financial Post published an Opinion article"Preferred creditor status for pensions would weaken their sponsors" authored by former Deputy Prime Minister, John Manley. Mr. Manley was a Director of Nortel Networks from 2004 to 2009, and is now chief executive officer of the Canadian Council of CEOs. His article contained a number of misleading statements about the proposal to give preference to claims of pensioners over those of bondholders in the bankruptcy court. On behalf of NRPC, Don Sproule responded with the following statement. (Part of his statement was also published as a letter to the editor of the Financial Post on May 29, 2010)
Pensioners need Bankruptcy Reform not Empty Promises
Donald Sproule, National Chair of Nortel Retirees and Former Employees Protection Canada
In a recent Opinion piece, John Manley, currently chief executive of the Canadian Council of Chief Executives, wrote that "preferred creditor status for pensions would weaken their sponsors". He apparently believes that it is good business practice to promise a pension and health benefits as part of an employee's compensation package but to renege when times get tough.
Mr. Manley speaks from first hand experience. Following his departure from federal politics, from 2004 until 2009 he was on the Board of Directors of Nortel Networks. Mr. Manley must have had a good view of the decision-making process that led to Nortel's descent into junk bond financing and its eventual filing for bankruptcy protection in January 2009. The company left behind a massive deficit in its pension plan, an under-funded Health and Welfare trust for its long-term disabled employees and thousands of laid-off workers who were given no severance pay. Since then these unfortunate people have discovered how much power Canadian bankruptcy law gives to junk bondholders and how little it protects them.
Who are the junk bond lenders? They are sophisticated financiers who specialize in risky investments and charge a high price for their loans. They play an important role in financial markets, and in the past at least, have reaped rewards from helping struggling companies turn themselves around. Today, with the advent of the unregulated credit default swap (CDS) and in a country with weak laws like Canada, bondholders can also make money by pushing a company over a cliff, into a so-called strategic bankruptcy.
Canada's archaic bankruptcy laws make this all too easy. The claims of bondholders, suppliers and employees are all considered to be unsecured. As stated in the laws this allows "for a fair and orderly treatment of creditors". The Nortel liquidation process demonstrates how false this has become. Pensioners, and other employee claimants like the long-term disabled and the laid-off, have no means to protect themselves in the bankruptcy process and fall to the bottom of the heap. They and the taxpayer, because of the costs to EI and social programs, end up paying the bills.
This is what happens in a modern bankruptcy. The junk bondholder purchases a CDS to insure his investment. When a credit "event", occurs, such as the company filing for bankruptcy protection, the bondholder is paid off for his "loss" yet retains his bonds for a second claim in the bankruptcy process. The net result can be a handsome profit, especially as in the Nortel situation, the bondholders can put claims against both the Canadian and US estates.
Again in the Nortel case, large suppliers have demonstrated their leverage by negotiating full settlements of their claims from the purchasers of the company's businesses. Even small business creditors are in a better position to protect themselves than retirees and workers. They can choose not to do business with companies with shaky credit or insist on pre-payment. They can even purchase accounts receivable insurance to protect themselves.
To add insult to injury during the liquidation process, the executives of the company with the support of the bondholders, are permitted by the court to pay themselves huge bonuses for successfully selling off the company. Pensioners and the other employee claimants can only watch the assets disappear and wait for the axe to fall on their incomes.
Mr. Manley's resumé includes 16 years as a federal Liberal MP and stints as Minister of Industry, Minister of Finance and Deputy Prime Minister. According to published Nortel information, in 2006 alone he received $165,000 in Director fees. He is reported today as having directorships with 10 different companies.
By contrast Nortel pensioners with 30 years of service receive an average monthly payment of less than $1500. A pensioner's widow typically gets about $900. At the end of September this year, these modest pensions will be cut by at least 30% because of the pension deficit. And all health, dental and life insurance benefits will also disappear.
To learn about the importance and ease of protecting employees and pensioners, Mr. Manley and his fellow CEOs need only look at the G7 nations and the rest of the OECD. The great majority of these developed countries provide either generous state-funded pension systems, pension guarantee programs or some kind of preference for employee and retiree claims in the bankruptcy process. They have been able to achieve this without damaging their economies or capital markets! Does Canada really need to build its own economic success on the backs of the elderly and the disadvantaged?
Shame on you, Mr. Manley! Protecting employees and pensioners isn't a new problem. It has been addressed successfully elsewhere and preferred status in bankruptcy is one of the practical solutions. Here in Canada there is no need for further contemplation and delay. It's time for making a decision so we can finally have justice in bankruptcy.
Last Updated ( Tuesday, 08 June 2010 )
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