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Nortel Networks Conversion Sought

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Liquidity Solutions (LSI) filed with the U.S. Bankruptcy Court a motion for entry of order (a) authorizing and directing Nortel Networks (NNI) to make interim distributions on allowed administrative, priority and unsecured claims or (b) converting the cases to a liquidation under Chapter 7, pursuant to section 1112(b) of the Bankruptcy Code.

The motion explains, “NNI recently reported that it has approximately $594.1 million in cash-on-hand. Even if NNI establishes a reasonable and conservative reserve of $100 million for future or unknown administrative or priority claims, NNI’s cash on hand is more than sufficient for NNI to (i) pay all of NNI’s allowed administrative and priority claims (which NNI has reported aggregate up to $173 million) and (ii) make a substantial ‘interim’ distribution of not less than $321 million3 on account of NNI’s allowed unsecured claims. Moreover, based on reasonable and conservative estimates regarding reconciliation of Nortel’s aggregate claims pool, LSI submits that NNI’s unsecured creditors are entitled to receive not less than approximately $1.9 billion of the escrowed $7.3 billion in proceeds generated from the Debtors’ asset sales (regardless of the outcome of appeals pending with respect to the Allocation Opinion),”

The motion continues, “Because Bond claims are only counted against the Canadian debtors’ estates (rather than NNI’s estate) for purposes of allocating the $7.3 billion of sales proceeds, NNI’s estate is not allocated any proceeds for distribution to NNI’s creditors on account of the approximately $4 billion of claims stemming from NNI’s guarantee of the Bonds. LSI respectfully submits that, if no value is allocated to NNI’s estate with respect to or payable on account of such Bond claims (i.e., the ‘numerator’ for creditor recovery purposes), such Bond claims should also not be taken into account or given effect when determining the NNI claims pool (i.e., the ‘denominator’ for creditor recovery purposes).”

Court-filed documents further explain, “An interim distribution to NNI’s creditors would help mitigate the prejudice that NNI’s creditors have experienced while various constituencies have fought for more than five (5) years over the $7.3 billion of sales proceeds….Alternatively, if an appropriate interim distribution cannot be made promptly to NNI’s creditors in accordance with the mechanism set forth herein, these chapter 11 cases should be converted to chapter 7 pursuant to Section 1112(b) of the Bankruptcy Code. The Debtors are not ‘reorganizing’ and have no hope for rehabilitation.”

The Court scheduled an April 19, 2016 hearing to consider the motion. Read more NNI bankruptcy news.

The post Nortel Networks Conversion Sought appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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