CAW Calls on Government to Reform Bankruptcy Legislation for Equitable Treatment of Former Nortel Employees
April 25, 2012, 9:25 AM EST
Since Nortel entered bankruptcy protection in January 2009, its pension plans have been devastated; incomes for disabled and terminated employees have been lost, and the health benefits paid for with years of service have vanished. In the meantime, "vulture" investors have been arguing that not only are they entitled to enormous profits on their investment, but interest amounting to almost a billion dollars.
The CAW is calling on the federal government to review and amend the legislation that allows one creditor group to reap an enormous reward on a speculative investment while those who worked to build the company are treated as second class creditors.
"Amendments to the bankruptcy laws must ensure that all Nortel's creditors are treated equally and equitably," said CAW President Ken Lewenza. "Our bankruptcy laws fall far short and there is not a greater example of this injustice than that of Nortel."
Three years after first entering bankruptcy protection, almost all of Nortel's assets have been sold to international bidders and the proceeds, almost $7 billion, are sitting in a trust account awaiting some sort of plan to distribute them to the company's global creditors. The claims of those creditors are far greater than the amount available to pay them.
The bulk of Nortel's creditors are pensioners and former employees in Canada, the United States and the United Kingdom. Pensioners in Canada have seen their pensions reduced by up to 50 per cent and others will suffer a similar fate, given the massively underfunded status of Nortel's pension plans.
Financial speculators dealing in Nortel bonds, many of which were purchased for as little as 12 cents on the dollar after January 2009, are seeking not only the full value of those bonds, but interest as well. Some bond holders could receive 10 times the speculative investment because Canadian bankruptcy laws allow the recovery of interest for bond holders while pensioners and the disabled suffer personal and financial ruin.
On Monday Ontario's Chief Justice Warren Winkler began a court ordered mediation which could overcome the impasse that has kept billions of dollars locked away in a New York bank. However, unless the government acts now, the bond holders will persist with their demands for outrageous profits and the likelihood of success in the mediation will be dramatically reduced.
"It is time for the government to stand up for the most vulnerable in this dire situation," said Lewenza.