By Peg Brickley
A $1 billion pact between Nortel Networks Corp.'s U.S. unit and
bondholders won court approval Thursday over the protests of the
one-time Canadian technology giant.
The ruling from Judge Kevin Gross of the U.S. Bankruptcy Court
in Wilmington, Del., means distressed-debt investors could stand to
recover as much as $5 billion from Nortel's collapse in 2009,
including more than $1 billion in interest on $4 billion worth of
debt.
The Canadian parent company tried to derail the deal between
Nortel U.S. and bondholders, arguing the settlement was the product
of a defective process. The U.S. unit defended the settlement as a
compromise on a claim for interest that could have reached $1.6
billion.
Funds linked to George Soros, Goldman Sachs Group Inc. and
Centerbridge Partners L.P., among others, bought major stakes in
Nortel's debt after the company filed for insolvency protection in
Canada, the U.S., U.K. and other countries. After a long decline,
the telecommunications company was dragged under by the global
economic downturn.
The bond investors allied with Nortel U.S. in a dispute over
$7.3 billion in cash raised in the liquidation of the company's
business and patents. That fight has yet to be decided, and rulings
are expected from both Judge Gross in the U.S. and Justice Frank
Newbould of the Ontario Superior Court of Justice in Toronto.
Once the judges decide how to split up the sale cash among
Nortel's various national units, money may start flowing to
creditors.
Write to Peg Brickley at peg.brickley@wsj.com
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