Talks to divide $9 billion raised from the sale of businesses of Nortel Networks, the telecoms equipment maker that went bankrupt in 2009, ended without agreement, and the mediator said on Thursday further discussions were no longer worthwhile.
The failure of nearly two weeks of talks in Toronto raises the prospect that disputes among various creditors and retirees around the world could lead to years of litigation over how to divide the cash.
Nortel (Mississauga, USA) was once the largest telecoms equipment maker in North America with a market value of $250 billion, but it never recovered from the burst of the 1990s technology bubble.
After the company filed for bankruptcy in 2009, it decided to wind down operations. The cash raised from selling its various businesses are now at the center of the dispute.
However, while the businesses were sold on a global basis, the question of how to divide that money among U.S., Canadian and European bankruptcy and insolvency proceedings was left unresolved.
The mediator who oversaw the Toronto talks, Warren Winkler, the chief justice of Ontario, had called Nortel's insolvency "one of the most complex transnational legal proceedings in history.
His three-sentence statement on Thursday merely said the mediation ended and he did not think further talks were worthwhile.
Winkler warned when he initiated the mediation in April that if talks failed, it could lead to years of litigation with courts in different countries coming to contradictory rulings on the same issue.
Despite Nortel's huge pile of cash, it is overwhelmed by the value of claims. More than $20 billion of claims are outstanding against Nortel's Canadian estate alone.
The creditors of various Nortel estates have been waiting for four years for their payout.
Retirees in Canada and the UK have been fighting for a larger portion of the cash against the company's U.S. bondholders, who have been resisting attempts to prevent them from collecting interest that has accrued on their securities since Nortel filed for bankruptcy.
NRPC, which represents nearly 20,000 Canadian retirees and other former employees, expressed disappointment and anger that no settlement was reached.
"For four years, our retirees and former employees have been fighting for a fair share of the pie," NRPC president Don Sproule said in a statement, adding that they have been treated "as pawns in this game by vulture bond funds."
Retiree Frank Mills, 77, was among those ready to continue the fight.
"I'd rather end up on welfare than give our hard-earned assets to these vultures," Mills said in the statement.
The former Canadian unit of Nortel Networks said further delays in the resolution of the claims could have ramifications.
"Such delays would result in a corresponding significant delay in the timing of distributions to holders of validated claims of the various estates," the Canadian estate said in a statement.
A spokesman for the U.S. bondholders declined to comment and a lawyer who represents Nortel's U.S. estate did not immediately respond to an email seeking comment.
(Reporting By Tom Hals in Wilmington, Delaware; Editing by Leslie Adler)