Nortel granted approval of Pension Benefit Guaranty Corp. settlement

By Caroline Salls

Pittsburgh, Jan. 6 – Nortel Networks Inc. received court approval of a claim settlement reached with the Pension Benefit Guaranty Corp., according to an order filed Friday with the U.S. Bankruptcy Court for the District of Delaware.

Nortel said the settlement resolves one of the largest claims filed against it and furthers its efforts to confirm a Chapter 11 plan and wind down its estates.

Under the settlement, the PBGC will have a single $624.6 million claim against each of the Nortel debtors, subject to a cap on the PBGC’s right to receive distributions on the allowed claims in the maximum total amount of $565 million.

According to the motion, the PBGC filed in excess of $700 million in claims against the Nortel debtors.

As part of the settlement, the PBGC has also agreed to support the approval of Nortel settlement and support agreement and to vote in favor of the company’s first amended joint Chapter 11 plan.

“By striking the balanced and reasonable compromises in the settlement agreement that fall well within the range of reasonableness, the debtors eliminate costly and likely protracted litigation over the PBGC’s sizable claims and are able to further focus their resources and attention on the remaining steps necessary to obtain approval of the SPSA and confirmation of the plan,” Nortel said in the motion.

Nortel, a Brampton, Ont.-based manufacturer and supplier of telecommunications networking equipment, filed for bankruptcy on Jan. 14, 2009. Its Chapter 11 case number is 09-10138.

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