Join Our Plan for the Nortel Terminated Employees to Gain Leverage in the CCAA Proceedings

Media/Press

• Juroviesky and Ricci LLP - Nortel Announcement - May 28, 2009
• JR Media Release - Nortel Terminated Employees Protecting Their Severance and Adding Value During CCAA - March 24, 2009 [PDF]
• BNN - A bankruptcy court has given Nortel the thumbs up to pay eight senior executives retention bonuses. Former employees waiting for severance pay aren't too pleased. BNN speaks with the lawyer representing them, Henry Juroviesky, managing partner, Juroviesky and Ricci LLP.
• Toronto Star - Bonuses rile many but have their uses - March 21, 2009 [PDF]
• Globe and Mail - Court okays bonuses for Nortel chiefs - March 20, 2009 [PDF]
• Globe and Mail - Nortel executives win approval for $7.3 million in bonuses - March 20, 2009 [PDF]
• Canadian Press - Courts agree to include senior Nortel executives in incentive program - March 20, 2009 [PDF]
• National Post - Legal battle looms over Nortel exec bonuses - March 20, 2009 [PDF]
• Canada AM - Nortel seeks court approval to pay bonuses to execs - March 20, 2009 [PDF]
• CBC Newsworld - March 20, 2009
  Henry Juroviesky, of Juroviesky and Ricci LLP, is interviewed by journalist Andrew Nichols about Ontario Superior Court Justice Morawetz's decision to approve bonuses for the top 8 Nortel executives on March 20, 2009. Mr. Juroviesky expressed, on behalf of his Nortel terminated employee clients, that on principal his group is strenuously opposed to Nortel paying its top executive bonuses, while their severance pay has not been paid. He asked that the company reach a severance pay settlement so that the Nortel restructuring will go smoothly. He estimates that the terminated employees have the necessary 50.1% headcount amongst the creditors of Nortel to apply leverage to affect the outcome of the Nortel restructuring.
• CBC News at Six - March 20, 2009
  Eli Karp, lawyer from Juroviesky and Ricci LLP, representing Nortel terminated employees opposed Nortel's motion to pay bonuses to its 8 top executives. The reason for his opposition is that his clients are amongst 1100 terminated employees owed $100 million of severance pay. The $45 million being paid as bonuses to the top executives could have contributed to severance pay. Now the public employment insurance fund bears the cost of Nortel's terminations, while its top executives pay themselves large bonuses.
• CTV Canada AM - March 20, 2009
  Interview of Diane Urquhart, independent financial analyst. She said the Nortel plan will eventually cost Canadian taxpayers, but the effect is less obvious. "To cut costs you terminate employees and also to cut costs you don't pay those terminated employees severance pay. But clearly these employees still have monthly bills to pay and they're going to go on public employment insurance plans,"
  
  "Unlike in the AIG situation where there was American taxpayer outrage, this is a more subtle use of public funds that most people don't recognize is going on. However, we should be outraged. In this time economic stress, there are great strains on the employment insurance system of Canada."
• Maclean's - Pay up or get out - March 19, 2009 [PDF]
  

The Companies' Creditors Arrangement Act (“CCAA”) provides flexibility for debtors and creditors to work out their respective interests in the face of a company’s pending bankruptcy. This allows the debtors and creditors to reach an agreed upon plan of compromise as an alternative to bankruptcy. Generally, the creditor groups that have the most votes control the proceedings. The vote may occur with all creditors in one omnibus class, or there may be separate votes taken within separate creditor classes. Each class vote is two-part in nature: i) by dollar value, and ii) headcount. For example, a compromise plan under the CCAA will only be passed if 2/3 of creditors' dollar value and 50.1% of the creditors' headcount approve the plan. This is an “and” test in the sense that plan approval requires both 2/3 of the dollar value, as well as the majority of the creditors' headcount. Where the CCAA judge determines that there should be separate class votes, then any one separate class can cause the CCAA compromise plan to fail by insufficient yes headcount and dollar value votes within their separate class.

Nortel management, and some law firms friendly to Nortel and its large creditors, want you to believe that you have no power to get more than your pro-rata share of cash proceeds for your termination and severance pay in the CCAA proceedings. We feel it is imperative that you know this information is inaccurate. We estimate that the Nortel terminated Canadian employees are owed a minute 1% of the total value owed to all Nortel creditors. On the other hand, it is likely there are 1,100 Nortel terminated Canadian employees and this headcount exceeds the 50.1% headcount needed for approval of the Nortel restructuring plan. This headcount majority gives the terminated Canadian employees group leverage to achieve more than its pro- rata share of the value taken by the unsecured creditors, even achieving payment in full.

As terminated employees, you did not have the opportunity to assess the creditworthiness of Nortel, like the secured and unsecured creditors are expected to do before extending credit. The creditors are generally sophisticated investors or corporate suppliers, where bankruptcies and compromises are an expected risk. The terminated employees are unable to recover their damages, like the unsecured creditors can from future business opportunities with Nortel.

The pension fund members have a contingent liability in the future, but there are strong prospects for asset market value recovery and additional contributions from the ongoing restructured company. Also, the payment of termination and severance pay has strong benefits for the ongoing restructured company in terms of higher morale, lower turnover and increased effectiveness of active employees to make the ongoing restructured company successful in the future. Finally, the payment of the termination and severance pay claims will by no means adversely affect Nortel's ability to obtain successful restructuring within CCAA, since the severance dollar amount is likely only 1% of the total dollar value of credit being voted.

In our role as counsel for the retail noteholders of Non-Bank Asset Backed Commercial Paper, we represented less than 1% of the dollar value interest in the CCAA proceedings. Nonetheless, we were able to take advantage of our class having a headcount greater than the 50.1% needed in the omnibus class for approval of the compromise plan. This enabled our group to control the direction of the proceedings and the terms of the compromise plan. This resulted in one-hundred cents on the dollar recovery for the class, plus accrued interest and legal costs.

We are of the opinion, that the Nortel terminated Canadian employees should be removed from the unsecured creditor class and should formulate its own class for the purpose of voting due to recent termination pay and severance pay law amendments. So even if the CCAA judge decides to permit the Nortel pension fund members or the post retirement health beneficiaries to make individual votes on the compromise plan, the terminated employees' separate class can still stop the restructuring plan by indicating its intentions to vote no until a satisfactory cash offer is made for its claims.

Learn More About Our CCAA Plan by viewing our previously recorded Webinars

Henry Juroviesky and independent financial analyst, Diane Urquhart, have hosted a number of webinars to update you on the Juroviesky and Ricci LLP plan to accelerate and maximize the recovery of the termination and severance pay of Terminated/Severed Nortel Canadian Employees and to facilitate the creation of additional value for the Nortel estate.

The webinars can be viewed by visiting the following links:

• J&R Nortel Webinar Slides and Audio April 14, 2009 [WMV - 65MB]
• J&R Nortel Webinar Slides and Audio April 7, 2009 [WMV - 42MB]
• J&R Nortel Webinar Slides and Audio April 6, 2009 [WMV - 66MB]
• J&R Nortel Webinar Slides and Audio March 25, 2009 [WMV - 94MB]
• J&R Nortel Webinar Slides and Audio March 16, 2009 [WMV - 63MB]

**Note that the members of the Juroviesky and Ricci LLP Nortel Steering Committee are (1) Michael McCorkle; (2) Harvey Stein; (3) Paul Caldwell; and (4) Marie Lunney.