High Court of Justice of England and Wales, Chancery Division, Companies Court Case number 539 of 2009

Transcription

1 TO ALL KNOWN CREDITORS Nortel Networks S.A. (In Administration and Liquidation Judiciaire) (the Company ) High Court of Justice of England and Wales, Chancery Division, Companies Court Case number 539 of February 2018 Dear Sirs Report of Conflict Administrator appointed 2 June 2015 This report forms an adjunct to the eighteenth report to creditors issued by Messrs Bloom, Harris, Hill and Hudson ( the Joint Administrators ) on 08 February 2018 covering the period from 14 July 2017 to 13 January 2018 (the Main Report ). It is issued to provide specific information concerning the role and activities of the Conflicts Administrator and should be read together with and in the context of the Main Report. As noted on page one of the Main Report, I was appointed Conflicts Administrator on 2 June The Lockbox Proceeds As I reported in my letter to all creditors dated 11 August, I negotiated a settlement ( the October 2016 Settlement ) of the sums held in escrow following the global sale of the Group s business and assets in 2011 (the Lockbox ). I provided more details in my reports dated 9 February 2017 and 11 August Next steps As indicated in my previous report, there have been, and continue to be, several complex matters that need to be resolved before a distribution to creditors can be made. The most significant are the following:

2 Agreement and payment of remaining liabilities to certain French employees and other potential priority claims (Section 3 below) Agreement of a final figure for tax arising (if any) in the post filing period and in particular the tax arising on the lockbox proceeds (Section 4). Developing the most effective and efficient way of handling the circular distribution of funds to NNF and back into NNSA for distribution to other creditors. (Section 5) Settlement of certain high value, disputed unsecured claims against the company. (Section 6). I set out below more details against each of these headings. 3. Employee and other priority Claims The claims of the French employees have been noted in previous reports. Certain of these claims were disputed. As noted in the Main report, agreement was reached with the employees over the summer of 2017 thus enabling the Secondary Liquidator to pay a substantial number of employee claims. There remains an issue in respect of certain employees who did not enter into the full settlement and who have reserved their rights against both the Main and Secondary proceedings. Their estimated total claim is around 3.6m. In addition to the employees, another potential priority creditor yet to be settled may be a claim of the French tax authorities for tax on profits in the eight years prior to the filing in This has been in part a matter that involved the Canadian tax authorities. The Secondary liquidator is leading on these discussions but reports that no agreement has yet been reached. 4. Post filing tax As noted in my previous report, there may be tax to pay on the receipt of lockbox funds by NNSA. Discussions with the French Tax authorities are continuing to examine the extent to which the significant earlier losses incurred by the company can be offset against this receipt. Any amount of tax payable may have a direct and significant impact on the likely distribution to creditors. 2

3 5. Nortel Networks France ( NNF ). As noted in my report of 11 August 2017, NNF is another company in the Nortel EMEA family. It is indirectly owned by NNSA through an intermediary company called Northern Telecom France S.A. ( NTL ). Mr Bloom and his colleagues were appointed Joint Administrators over NNF at the same time as they were appointed over NNSA. At meetings of creditors and members held on 11 May 2017, they were also appointed as supervisors in a CVA for NNF. NTL is in solvent liquidation in France (La liquidation amiable). M Cosme Rogeau is the Liquidateur. I have been advised by the supervisors of the NNF CVA that they have made an interim distribution of 95% to the creditors of NNF and they believe that they will be able to pay the balance shortly. This will leave an amount that is payable by NNF to its parent and ultimately to NNSA. The supervisors have been unable to confirm to me the exact amount that will be paid. This amount may be supplemented by an amount that NNF may itself receive as its share of the distribution that NNSA will make to its unsecured creditors. As noted in my earlier reports NNF has an undisputed claim of 50.6m against NNSA The October 2016 Settlement brought to an end the long running dispute between the Main and Secondary proceedings as to which would receive the benefit of the assets of NNSA. Under this Settlement any receipts from NNF will be divided equally between the two proceedings Because of the potential for conflicts of interest of both the Main and the Secondary office holders, I am involving myself closely in the discussions to find the most effective and efficient way of returning this money to the other unsecured creditors. This may require recourse to further procedures in France. 6. Disputed Claims There are certain high value claims against NNSA that will materially impact on the total value on unsecured creditors and therefore on the dividend payable to these creditors. Discussions have taken place with these parties to try and resolve the most material ones prior to the opening of CVA proceedings for NNSA. The advantage of doing so is that it will enable the CVA proposal to give a more accurate estimate of the outcome for creditors and prevent further delays to distributions (including the distribution to NNF). 3

4 These discussions have not yet concluded. If sufficient progress is not being made in the next two months, the office holders in the Main procedure may take the view that they will proceed with the CVA without agreement. 7. The Secondary Process and French Priority Creditors As noted above, the Liquidator in the Secondary process is continuing to seek agreement of residual priority creditors in his estate. The Secondary liquidator informs me that it is still too early to be certain whether there will be any surplus to be paid from the Secondary to the Main Proceedings. 8. The Main Process and General Unsecured Creditors It remains the intention of the Administrators that the distribution to unsecured creditors will be carried out under the auspices of the English jurisdiction. The Joint Administrators and I wish to minimise the process requirements, where appropriate, for creditors in claiming in the CVA. We are aware that claims have been submitted by creditors in the secondary proceeding and that many have been admitted as valid in the French courts. We are aware that there are also a number of disputed unsecured claims and the resolution of these disputes will have a material impact on the size of a dividend to creditors. The timetable for the CVA process includes certain statutory time periods that are required to enable creditors to understand, approve and take part in the CVA. Taking these time periods into account, we hope to be able to make a first distribution to creditors in the last quarter of Further information on the intended CVA process is to be found in section 1 of the Main Report 9. Estimated Outcome for Unsecured Creditors of NNSA As noted in sections 3 to 6 above, there are a number of significant matters that remain under discussion. My estimate of the range of total unsecured creditor claims remains between 56m and 90m. This excludes the NNF creditor distribution, which, as noted in Section 5 above, is expected to be offset against itself. However, a bar date has yet to be set, which means further claims may be received. 4

5 At this point, taking into account all the variables, I am unable to provide a meaningful estimate of the likely total distribution to unsecured creditors I am aware that some creditors have been approached by potential buyers of their claims. Creditors are advised to take careful professional advice before agreeing to any transaction. Please also note the disclaimer at the end of my report and in the Main Report. 10. Conflict Administrators Remuneration and other payments My remuneration is set on the basis of my time spent on the affairs of NNSA and is approved by the Creditors Committee. In the period from 27 June 2017 to 11 January 2018 ( the Reporting Period ) I have incurred time costs totalling of which has been drawn to date. Additionally, I have received expenses mainly in respect of travel amounting to I am pleased to report that since the settlement of the lockbox, the amount of time I am spending on this matter, and therefore my fees, have reduced significantly. As already reported to the Creditors Committee, the average number of hours per month spent on NNSA has been as follows: June to December 2015 January to December 2016 January to December hours 44.1 hours hours While retaining the option to engage the services of separate legal counsel for those matters where, in my opinion, it is not appropriate to use the services of Herbert Smith Freehills (Counsel to the Joint Administrators) or Foucaud Tchekoff Pochet et Associes (Counsel to the Secondary Liquidateur), I am pleased to report that I have not found it necessary to do so in the reporting period. 11. Other Matters Further background to the NNSA Administration is given in Section 1 to the Main Report. The day to days affairs of the Administration and all bank accounts are managed by the Joint Administrators. Details of their Receipts & Payments account are provided in Appendix 2 of the Main Report. I continue to liaise with the four members of the Creditors Committee. The present members of the Committee are: 5

6 M. Simon Le Wita of De Pardieu Brocas Maffei, Avocat representing the Landlord creditor Mdme Patricia Simonin, representing Orange France M Reinhard Dammann of Clifford Chance Europe LLP, Avocat, representing an employee creditor Martine Schariciki representing GDFSuez Yours faithfully For Nortel Networks SA in Administration and Liquidation Judiciaire Stephen J Taylor Conflicts Administrator The Institute of Chartered Accountants in England and Wales in the UK authorises A R Bloom, S J Harris, C J W Hill and S J Tayl o r to a c t a s I n s o lve n c y P ra c t i t i o n e r s u n d e r s e c t i o n A ( 2 ) ( a ) o f t h e I n s o lve n c y Ac t a n d t h e A s s o c i a t i o n o f Chartered Certified Accountants in the UK authorises A M Hudson to act as Insolvency Practitioners under section 390A(2)(a) of the Insolvency Act The affairs, business and property of Nortel Networks S.A. are being managed by the Administrators, A R Bloom, S J Harris, A M Hudson, C J W Hill and S J Taylor who act as agents of Nortel Networks S.A. only and without personal liability. Nortel Networks S.A. was placed into French liquidation judiciaire on 28 May The business and assets of the company that are situated in France are now under the control of la liquidateur judiciaire. We advise that this report is provided pursuant to our appointments as Joint Administrators of the Company. It is provided solely for the purpose of informing creditors of certain aspects of the current status of the Administration. As this report is only an interim indication of the overall position of the Company, and not a valuation of the current or future value of any particular item of debt, and is liable to change, it should not be relied upon as an indication of the final return to creditors and, in particular, neither we nor the Company shall have any responsibility to any person who relies on our report for the purpose of trading in debt of the Company. 6