The collapse of mediation efforts to divide Nortel Networks Corp.’s remaining assets was caused by bondholders demanding full value plus interest on their investments in the now bankrupt former telecom giant, according to the Canadian Auto Workers union.
“As with previous mediations, failure resulted because Nortel bondholders who bought their bonds for 20 cents on the dollar wanted not only full value of their bonds amounting to $4.5 billion, but years of interest on top of that,” said Ken Lawenza, CAW national president in a statement issued Friday. During the company’s heydays in the mid-1980s, CAW represented no less than 5,000 Nortel workers in five locations.
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On Thursday, Nortel’s creditors, the company’s representatives and former employees including retirees and laid off workers sat down to decide how the remaining $9 billion in assets of Nortel should be divided among them.
Prices on $1.675 billion of Nortel bonds plummeted as much as four per cent after the announcement by mediator Warren K. Winkler, the chief justice of Ontario, that negotiations collapsed.
Previous talks among the groups have collapsed. Among the chief difficulties is that the remaining assets is not enough to cover the more than $36 billion in claims.
The network equipment provider was worth nearly $300 billion and had more than 90,000 employees worldwide, when it was at the height of its profitability. Up to 2000, Nortel was considered one of Canada’s most successful companies and it shares traded at a peak of $124.50,
CAW also took a stab at Canada’s bankruptcy laws, saying they left many Nortel pensioners at a disadvantage.
“It is inconceivable that junk-bond speculators can reap unconscionable profits from utter misery,” said Jerry Dias, Lawenza’s assistant. “Sadly, our federal government, who could reform the existing laws and regulations, is allowing this to happen because it is ,more interested in protecting financial opportunists that the Canadian workers who built Nortel…”