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What is the CCAA?
The Companies' Creditors Arrangement Act (CCAA) is a piece of Canadian federal insolvency legislation. The CCAA allows companies who are experiencing financial difficulties to file for and obtain court protection from their creditors.This allows the company an opportunity to restructure its business in a process overseen by the Court.

What is the usual outcome for companies that undergo a restructuring under the CCAA? What will happen to Nortel?
Each CCAA restructuring is distinct. The outcome could be that Nortel continues as a smaller entity, is sold in parts or as a whole, or is liquidated in bankruptcy. There is no one likely or predictable outcome at this time.

How long will Nortel's CCAA process take?
This is unknown. Nortel's counsel has indicated that the process could take at least eighteen months.

Who is the Monitor and what are they responsible for?
The Court has appointed Ernst & Young as the Monitor in Nortel's CCAA proceedings. The Monitor will supervise Nortel's business activities and will provide reports to the Court on the status of Nortel's restructuring.

How can I access the Monitor's Reports and the Court documents?
A complete set of monitor's reports, and in fact all Nortel public documents are available on the Ernst & Young web site.

Is there a Monitor in the US?
There is a different process under the Bankruptcy Code in the United States. Canadian and U.S. courts have a cross-border protocol in place to co-ordinate their activities.

Is Koskie Minsky launching a class action in the CCAA proceedings?
No. There is a CCAA "stay of proceedings" in effect, meaning that a class action (or any other court action outside of the CCAA proceeding)cannot be launched against the company. NRPC and Koskie Minsky want to organize former Nortel retirees in order to create a unified voice and put forward all of their claims.

Now that Nortel has started the Canadian claims process, do I need to make an application?

The September claims deadline only applies to bondholders and trade creditors.  A separate process is being developed to handle former employees, current employees and directors and no date for these claimants has yet been set.  

Currently, the Monitor and our advisors are discussing a simpler process for former employees which will be used to calculate individual claims, based on Nortel's records for each claimant.  Once the model has been developed and data provided by Nortel, KM will then prepare individual claims based on entitlements.  The individual claim will be forwarded to each former employee to ensure the Nortel data is correct.

Further details can be found on the Koskie Minsky site at:  

Has the Court granted and order allowing Nortel the option to stop making payments such as severance pay and Transitional Retirement Allowance (TRA)?
The Court has granted an order stating that Nortel is not required to make severance payments. The TRA is funded through general company funds. Nortel has chosen not to pay this liability, with Court approval.We have been advised by Nortel counsel that severance pay and the TRA are unsecured claims in Nortel's CCAA proceedings. The same is true of Excess Pension Plan payments and SERP payments.

Where in the CCAA "pecking order" do the unsecured creditors fall?
There are no secured creditors in Nortel's CCAA proceedings. All o fNortel's creditors including bondholders, fit into one class of unsecured creditors. No one creditor will have priority over another. If Nortel becomes bankrupt, we will need to negotiate with the Court to determine a payout for unsecured creditors. In the event that Nortel emerges from the CCAA proceedings, there may be a Claims Process where all creditors will share equally.

Is there any protection in place to prevent Nortel's current senior management from giving themselves a preference?
The Court-appointed Monitor is there to watch Nortel and ensure that this does not happen.

Can Nortel shift assets?
The courts have tied Nortel's hands and control the movement of funds and assets.The big issue for Canada is that liabilities exceed assets located in Canada.

What are the risks of allowing a US company like JP Morgan to be the guardians of the lock box of proceeds from the sales of Nortel's assets? Since the proceeds are in a US jurisdiction, what assurances are there that they cannot be "expropriated" by a US interest such as the IRS?

The terms of the United States and Canadian Court orders are that none of the escrow funds can be released without Court approval in both jurisdictions and consent is required of the Canadian monitor as well as the US creditors committee and the UK estate administrator. Where the funds are held is not particularly relevant, what matters is reaching agreement on how they should be allocated given the location of the various physical assets sold, who funded the intellectual property development costs for IP that is sold and the value of other intangible assets being sold. This will be a complicated process in which Koskie Minsky play a role. Court approval for such allocations is also required. Koskie Minsky and their financial advisers are also advised by Nortel counsel that the US Bankruptcy Code precludes the IRS from taking these funds, and indeed any liability to the IRS would come out of the US Nortel estate. There are currently negotiations underway in the US to settle the liability of the IRS. For the most part, the actual "deal making" and auctions for assets sales, and the key players on the purchasers' side of the major transactions are based in the US and that is where the proceeds of these sales involving assets in many countries are held, but the location of the assets does not determine their allocation. We have previously raised the question of where assets are held with the Court when the Ericsson sale was announced, and  the Canadian judge supervising the proceeding was satisfied that there are sufficient safeguards in place to ensure that funds belonging to the Canadian estate will end up here.


I understand unlike all other creditors bondholders can claim from both the Canadian and US estates.  Can you please explain?

Almost all of the bonds were issued with a term which in default allowed the bondholders to claim from both the US and Canadian estates. An example shows how this will work, with values just to indicate the process.  Actual values will not be known until all of the assets are sold and all of the credit claims verified - a lengthy process.


Ibondholders are owed $4B and the US pays 60 c/$, they get $2.4B from the US estate.  However they are still short $1.6B and they can claim this off the Canadian estate.  If Canada pays 40 c/$ they then get another $0.64B from Canada.  So in total they get $3.04B, or 76 c/$, obviously a better return than any other Canadian or US creditor can expect.