EuroResource - Deals And Debt, May 2013

Europe, the U.S. and Canada—On 7 May 2013, the US Bankruptcy Court for the District of Delaware denied a motion by European creditors of Nortel Networks Corp. ("Nortel") to certify a direct appeal to the U.S. Court of Appeals for the Third Circuit of the bankruptcy court's 3 April 2013 ruling (In re Nortel Networks, Inc., Case No. 09-10138 (KG), 2013 BL 92666 (Bankr. D. Del. Apr. 3, 2013), denying a request to submit to arbitration a dispute over the allocation among creditors of US$7.3 billion in cash raised in Nortel's liquidation. According to the court, the appeal was "frivolous" because "the agreement at issue plainly did not call for arbitration and ... the circumstances dictate that the underlying dispute proceed" before it rather than before an international arbitrator. By finding the appeal frivolous, the court defeated arguments that it lacked jurisdiction over the liquidation proceeds pending a ruling from the court of appeals. In refusing to certify the appeal, the court sided with Nortel bondholders—principally US hedge funds—and against Nortel's European creditors, a group that includes retirees and disabled former workers. Bondholders, whose claims are against Nortel US and Nortel Canada, are seeking an expedited trial in the US and Canada to decide the proper allocation of the liquidation proceeds. European creditors argue that international arbitration, with limited appellate rights, is the better and faster alternative for resolving the dispute. The decision means that Nortel's international creditors will likely join issue in a January 2014 trial. Nortel, the Toronto-based former technology icon, filed for bankruptcy protection in a number of countries in January 2009. Nortel US fired the first volley in the fray on 14 May when it filed objections in the US bankruptcy court seeking to eradicate billions of dollars worth of claims filed by European entities, contending that the parties are trying to appropriate funds that should rightfully go to creditors of the defunct telecom's US unit. Nortel's British retirees responded on 21 May by asking the court to strike the objections, contending that they do not properly address any of the pension fund's allegations. The UK—On 9 May 2013, the UK Supreme Court handed down its highly anticipated ruling in BNY Corporate Trustee Services Limited v Eurosail and others [2013] UKSC 28, in which the court for the first time interpreted the balance sheet test for insolvency in Section...