Nortel News: M&A Rumors, Two Approaches to Bankruptcy Protection, Employee Lawsuits

M&A Rumor Recap

With the Wall St. Journal reporting last week that Nortel (NRTLQ.PK) was exploring the idea of selling its wireless and enterprise businesses, the M&A rumors are flying fast and furious.

Here’s a recap:

• The Financial Times is reporting that several private equity firms are looking at Nortel and Motorola’s assets as part of deal to create a new wireless entity.
• The Financial Post reports Aastra is not likely to make a bid for Nortel’s enterprise business.
• Ciena may be interested in the Metro Ethernet Network business, although nowhere near the $1-billion to $1.5-billion that some people thought when Nortel put MEN on the block last September.
• Gerson Lehman Group suggest Ericcson could preempt Ciena’s interest in MEN

Two Approaches to Bankruptcy Protection

The Financial Post has an interesting article looking at how two companies - Nortel and Smurfit-Stone - are taking different approaches to bankruptcy protection.

While Nortel has decided not to make severance payments to employees it has eliminated, the FP reports that Smurfit-Stone has paid out millions of dollars in severance.

For Nortel, the issue of severance looks like it’s going to be a legal and moral bee’s nest judging by the number of lawsuits emerging.

In particular, Nortel is going to have to deal with the sticky problem that it laid off a lot of people in the months before the bankruptcy protection, who were expecting severance payments as part of the process. When Nortel filed for bankruptcy protection on Jan. 14, all deals - severance and benefits - were off the table.

For some employees, what was particularly troubling was Nortel’s refusal pre-filing to make lump-sum severance payments. Instead, they were forced to wait 60 days for the cash on the premise that the company could find another spot within the organization for them - something that wasn’t going to happen.

Here Come the Lawsuits

It sure doesn’t take much time before the vultures start circling the carcass. Over the past couple of weeks, a number of law firms have emerged representing or looking to represent the needs of former Nortel employees who have or may have grievances against the company.

The newest participant is Juroviesky and Ricci LLP, which is seeking to represent all former Nortel employees denied severance payments as a result of Nortel filing for CCAA protection (Canada’s version of Chapter 11)

In a press release, Juroviesky and Ricci said it has put together a strategy to use CCAA provisions to “negotiate a value-added settlement” for Nortel employees who were let go, and that it hopes to reach a settlement will see “severed employees will receive more than their pro-rata share of the value taken by the unsecured creditors, even potentially achieving payment in full”

Comments

[MarvinMBA:]

Nortel has given stockholder heartburn for a a long time now. I think it should be sold off piecemeal to the highest bidder and the company closed down. After screwing the stockholders and paying massive fines, Nortel has had it as far as I'm concerned. Its too bad that half of Canada thought Nortel was going to be the foundation of their retirement and my heart goes out to them...MarvinMBA

Mar 17 11:05 AM