Defined Benefit  

Nortel to exit pension lifeboat after lengthy litigation

Nortel to exit pension lifeboat after lengthy litigation

The UK pension scheme of collapse Canadian telecoms firm Nortel will leave the Pension Protection Fund (PPF) after nine years of litigation.

The defined benefit (DB) scheme, which had more than 40,000 members and a buy-out deficit over £2bn in 2009, when it went into an assessment period at the PPF.

The trustees of the scheme have now recovered sufficient funds from Nortel’s global insolvency to exit the PPF, which is expected to happen in October.

Article continues after advert

PwC, the financial adviser to the trustees, made the announcement today (28 March) after nearly a decade of mediation, negotiation and litigation.

Jonathon Land, head of PwC’s pensions credit advisory practice and adviser to Nortel’s UK pension trustees, said the turning point in the litigation was a recent decision by judges in the US and Canada on the basis for allocating US $7bn (£4.9bn) of residual assets.

He said: "The trustees should be very proud of their achievements and this excellent result.

"They could easily have stepped back when the group entered insolvency, but instead were determined to have an equivalent seat at the table to other stakeholders and secure a better outcome for the schemes’ members.

"It is particularly pleasing that the many years of hard work will enable extra money to be placed into the pockets of pensioners, who helped to generate Nortel’s assets."

Trustees retained control of the scheme and have been paying benefits at PPF levels since then.

The pension scheme will receive an estimated £550m to spend on benefits above PPF level for members, some of whom have had their benefits cut.

Nortel Networks collapsed into insolvency in January 2009, with its European, US and Canadian entities making simultaneous insolvency filings in London, Delaware and Toronto.

Nortel’s business was hugely integrated, and PwC said there was "significant difficulty" in realising assets on a country-by-country basis.

A spokesperson for the PPF said: "We have been closely working with the trustee and other parties since 2009 to reach an outcome that was in the best interests of scheme members and our levy payers.

"During this time Nortel pension scheme members have had the reassurance that they have been protected by the safety net of the PPF.

"We are pleased that a settlement was agreed that provided sufficient recoveries to offer members benefits above PPF compensation levels and ensure no claim on the PPF."