Eight years after first filing for Chapter 11 bankruptcy, Nortel Networks has finally been ordered to pay its creditors the $7 billion it raised by selling off its business segments.
Nortel Networks has finally been ordered by bankruptcy courts in the United States and Canada to pay over $7 billion to its creditors -- eight years after initially filing for bankruptcy in 2009.
According to a report by Reuters, Judge Kevin Gross of the United States Bankruptcy Court in the District of Delaware and Justice Frank Newbould of the Superior Court of Justice, Toronto, approved a plan by which the telecommunications equipment maker will pay its creditors.
Creditors of Nortel range from global businesses to government agencies, investment funds, and individual investors throughout Canada, the US, and the United Kingdom.
As the sixth-longest Chapter 11 bankruptcy case in history, Justice Newbould remarked that it was regrettable that the "case wasn't settled sooner without the added expense and delay caused by the litigation", according to Reuters.
The proceedings were carried out via video link between the Canadian and US courts, with the judges presenting a joint decision.
Nortel Networks filed for bankruptcy in January 2009, but was unable to restructure and continue its business thereafter.
The company proceeded to sell off its business units throughout the remainder of 2009: Ericsson bought its CDMA and LTE assets for $1.13 billion; Avaya -- which itself filed for Chapter 11 bankruptcy last week -- bought its Enterprise Solutions business for $900 million; Ericsson and Kapsch bought its GSM division for $103 million; Hitachi bought its Next Generation Packet Core assets; and Ciena bought the Ethernet networking division for $769 million.
Through its liquidation, Nortel raised a total of $7.3 billion -- which was then sought by its creditors through court battles in the US and Canada.
Reuters also reported that the case reached a total of $1.9 billion in legal fees.
Nortel Enterprise Solutions buyer Avaya similarly filed to restructure under Chapter 11 bankruptcy protection last week. It attained $725 million in debtor-in-possession financing via Citibank, which it said should reduce disruption and enable it to continue business operations.
While it decided not to sell off its contact centre as yet, saying this could hurt efforts to restructure its debt, it said it is undertaking negotiations for the monetisation of its other assets.
"This is a critical step in our ongoing transformation to a successful software and services business," CEO Kevin Kennedy said.
"Avaya's current capital structure is over 10 years old, and was put in place to support our business model as a hardware-focused company, which has evolved significantly since that time. Now, as a result of the terms of Avaya's debt obligations and the upcoming debt maturities, we need to recapitalise the company."
