Nortel Networks S.A. (In Administration and Liquidation Judiciaire) (the Company )

Transcription

1 Ernst & Young LLP Tel: More London PlaceFax: London SE1 2AF To All Known Creditors 11 August 2017 Ref: MLP/5W/SJH/DM/SL/LO3559/PCF16 Telephone: +44 (0) claims@emeanortel.com Dear Sirs 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 2009 / CR We write, in accordance with Rule 18.3 of The Insolvency (England and Wales) Rules 2016, to provide creditors with a seventeenth report on the progress of the Administration (the Report ). This Report covers the period from 14 January 2017 to 13 July 2017 and should be read in conjunction with the Joint Administrators previous reports as well as the Joint Administrators Statement of Proposals dated 23 February Additional copies of this Report, and the previous reports referred to, can be made available on request or can be obtained at the following address Statutory information about the Company, the Administration and the office holders is given at Appendix 1. The Nortel group of companies (the Group ) reports in US dollars ( US$ ), and accordingly all amounts referred to in this report are in US$ unless otherwise stated. The official version of this report is in English. In the event of a conflict between the English version and any translated version, the English version shall be the definitive version to rely upon. Please refer to the disclaimer at the end of the principal section of this report. Secondary Proceedings In order to facilitate the progress and purpose of the administration, the Joint Administrators made a request to the Commercial Court of Versailles, resulting in the placing of the Company into liquidation judiciaire on 28 May 2009 (the Secondary Proceeding ). The conduct of the business located in France, has, since May 2009, been under the control of Maître Cosme Rogeau (Liquidateur Judiciaire) (the Liquidator ) and for the period of his appointment as such Maître Frank Michel (Administrateur Judiciare) (together the French Officeholders ). The Report does not seek to set out matters that are specific to the Secondary Proceeding, but sets out the progress of the wider Administration. The Report does not contain details of realisation of local assets or agreement of creditor claims by the Liquidator in the Secondary Proceeding.

2 The report does set out steps that are being taken to distribute the assets of the Company as being subject to the English law Administration (the Main Proceeding ) and co-ordinate certain aspects of the final stages of the Administration with the Liquidator and the Secondary Proceeding. Conflicts Administrator Following an application by the Joint Administrators, the English Court appointed Stephen Taylor of Isonomy Limited as the Conflicts Administrator on 2 June The role of the Conflicts Administrator has been to act on behalf of the Company in conducting any appeal in the US and Canada in relation to the PPA dispute (described below) by the Company, bringing any claim the Company may have against another EMEA Company and any other matters that may be agreed in writing with the Joint Administrators. A report by the Conflicts Administrator in respect of matters he has dealt with since his appointment is appended to this report. The Conflicts Administrator will continue to be involved in the Administration of the Company and will also be proposed as one of the Supervisors of the Company Voluntary Arrangement ( CVA ) (an English law process for finalising claims and making a distribution to creditors in the Main Proceeding). 1. Progress of the Administration Brief Background The Company was placed into Administration on 14 January 2009, together with a number of other European Nortel entities. On the same day, other principal companies in the Nortel Group (based in the US and Canada) also commenced insolvency proceedings. Following the appointments, it was determined that it was in the best interests of the Nortel Group for the entities to collaborate in selling the assets of the Group in a coordinated manner in order to maximise sales proceeds. In order to facilitate the progress and purpose of the Administration, the Joint Administrators made a request to the Commercial Court of Versailles, resulting in the placing of the Company into liquidation judiciaire on 28 May 2009, under the control of the Liquidator. Following the successful sale of the global businesses and associated group assets during , approximately US$7.3bn (net) was placed into escrow. The different Nortel Group companies were unable to reach agreement on the allocation of the sales proceeds. A period of extensive negotiation, mediation and litigation followed. On 12 October 2016, the Joint Administrators, the Conflicts Administrator and Liquidator entered into arrangements with companies in the wider Group, including those in Canada and the USA and with certain other major stakeholders, to initiate steps to end and settle the purchase price allocation ( PPA ) dispute (the Settlement ). These arrangements were conditional on certain formal steps being taken. The Joint Administrators are pleased to announce that these formal steps have been completed and that the Plans Effective Date occurred on 8 May As such the Settlement agreed in October 2016 is now fully effective. The Nortel entities received funds from the business disposal escrow accounts in May The Company received its share being US$220,000,000, which after payment of certain costs and other payments, was apportioned 50:50 between the Main Proceeding and the Secondary Proceeding. The Joint Administrators consider this to be another major milestone, very welcome and extremely good news for the Company s creditors.

3 CVA On 23 July 2015 the English Court granted the Joint Administrators liberty to propose a CVA in respect of the Company. We previously reported that the proposal for a CVA would be issued in spring However, on further review of the factual matrix it was concluded that launching a CVA absent resolving certain disputed claims and enabling a good dovetailing with the Secondary Proceeding, may be a suboptimal route. It is currently anticipated that the proposal for the CVA will be issued during the course of autumn 2017 with an initial distribution (if the CVA is approved) paid in spring The CVA if approved, will provide a mechanism to distribute cash to CVA Creditors as quickly as possible. The main objectives of the CVA will be: - to implement a date by which claims of CVA Creditors must be submitted to enable the assets of the Company to be distributed as quickly as possible; - to provide a mechanism to facilitate payment by the Company to its CVA Creditors; and - to provide a framework for certain releases that are customary in complex insolvency proceedings. The proposal for the CVA will, when it is issued, be sent to all known and potential creditors and also made available online for creditors to consider and vote on. The Joint Administrators wish to minimise process requirements, where appropriate, for creditors claiming in the CVA and we are currently reviewing whether it is possible to use information provided by creditors to the Secondary Proceeding in the proof process, in an effort to keep any administrative burden for creditors to a minimum. Next Steps The key remaining issues for the Company are to complete the winding-up of the affairs of the Company s subsidiaries Northern Telecom France S.A. and Nortel Networks France S.A.S. (including the return of any surplus assets to the Company) and propose a CVA to, amongst other things, agree creditors claims and distribute available funds to them. In addition, the Joint Administrators plan to make an application to the English High Court to establish a process for dealing with liabilities which may rank as administration expenses (see below for further details). 2. Distributions to Creditors The officeholders of the Main Proceeding (including the Conflicts Administrator) and the Secondary Proceeding are working to finalise certain complex liabilities and also to ensure an efficient and streamlined process for the payment of dividends to creditors (expected to be made by both the Secondary Proceeding and the Main Proceeding). Creditors may file claims in both Proceedings (subject to relevant bar dates for doing so). In addition to a bar date for unsecured claims, it is currently intended that the Joint Administrators will make an application to the English Court (the Expense Application ). The Expense Application will seek an order requiring creditors who consider that they have a claim against any of the Company that ranks as an administration expense (a claim for payment of a debt or liability arising after 14 January 2009 as an expense of the Administration as a matter of English law) (an Expense Claim ) to submit a written demand setting out that claim before a certain date. The failure to submit an Expense Claim before the specified date may result in that claim not being paid. Further information on any such application will be made available at The key matters which must be finalised before we can determine the final return for creditors are: a. the proposal of the CVA and decision of creditors whether to approve the CVA;

4 b. the Expense Application to the English Court in relation to Expense Claims; and c. subject to the successful completion of the above, finalising the adjudication and quantification of claims submitted before the bar date and resolving any dispute as to asserted Expense Claims. An estimated outcome for creditors is set out at Section [3] of the Conflict Administrator s report, appended to this report. 3. Receipts and Payments Account Attached at Appendix 2 is the Joint Administrators receipts and payments ( R & P ) account for the period from 14 January 2017 to 13 July The R & P is separated between the pre and post Liquidation periods. Control of the Company s assets situated in France passed to the French Officeholders upon the opening of the Liquidation. As at 13 July 2017, the Company held cash of US$61.95m. It is anticipated that distributions to creditors will be made in Euros and as such the majority of currency not previously held in euro has now been converted to Euros. The R & P account is a statement of cash received and cash paid out, and does not reflect estimated future receipts or payments. Further detailed notes are provided in Appendix Joint Administrators Remuneration It is the responsibility of the Creditors Committee that was formed at the creditors meeting held on 23 March 2009 to approve the Joint Administrators remuneration. The Creditors Committee has been provided with full details of the Joint Administrators time costs for the periods to 2 September 2016 and these have been approved by the Creditors Committee. During the period from 28 November 2016 to 27 May 2017 the Joint Administrators incurred Administration time costs of GB 75, We continue to apportion between the EMEA Companies certain other time costs for workstreams undertaken for the benefit of those EMEA entities. During the period from 28 November 2016 to 26 May 2017 GB 167, has been allocated to the Company in respect of these apportionments. As such, total time costs incurred in respect of the Company for the period from 28 November 2016 to 26 May 2017 were GB 242, The Joint Administrators have also incurred CVA Planning time costs in respect of the Company for the period 28 November 2016 to 26 May 2017 of GB 123, An analysis of the time spent is at Appendix 3. The statutory provisions relating to remuneration are set out in Part 18 of the Insolvency (England and Wales) Rules Further information is given in the Association of Business Recovery Professionals publication A Creditors Guide to Administrators Fees, a copy of which may be accessed from the web site of the Institute of Chartered Accountants in England and Wales at or is available in hard copy upon

5 written request to the Joint Administrators. Please note that the references in the Guide to fee estimates do not apply to administrations, such as this one, which started before 1 October In certain circumstances, creditors are entitled to request further information about our remuneration or expenses, or to apply to court if they consider the costs to be excessive (Rules 18.9 and of the Insolvency (England and Wales) Rules 2016). Further information is provided in A Creditors Guide to Administrators Fees referred to above. 5. Payments to Other Professionals An apportionment process has been completed between the relevant EMEA entities in respect of legal costs relating to the various business sales and the PPA process now that these workstreams have been concluded. These costs were mainly paid by Nortel Networks UK Limited ( NNUK ) and have now been apportioned in accordance with the Settlement. The Company s share of these legal costs is US$38,184, which was split equally between the Main and Secondary Proceedings. The Joint Administrators continue to engage professional advisors to assist them in the Administration. These professionals work on a time cost basis and internal review processes are undertaken to assess their invoices. During the period from 14 January 2017 to 13 July 2017 the following has been paid: Herbert Smith Freehills LLP GB 70, (Legal Advisors) Herbert Smith Freehills LLP (Paris) EUR 80, (Legal Advisors) Please note the above legal fees figures have been converted using monthly spot rates. As such, there may be a minimal difference between these figures and the figure reported in our R & P (which uses an average spot rate over the period 14 January 2017 to 13 July 2017). The costs of professional advisors who assist the Company with discrete matters in the usual course of business (for instance, debt collection proceedings) are not included above. 6. Other Matters The Committee The Joint Administrators together with the Conflicts Administrator continue to provide information to the members of the Creditors Committee as the Administration progresses and matters evolve (including an analysis of their time costs for approval). The Joint Administrators and the Conflicts Administrator will continue to keep the Creditors Committee apprised of developments. Liquidator in the Secondary Proceeding Creditors will be aware that the Company is subject to both the Main and Secondary Proceedings. Creditors may file claims in both Proceedings (subject to relevant bar dates for doing so). The Liquidator, Maître Cosme Rogeau, manages the affairs, business and assets of the Company that are situated in France. Maître Rogeau can be contacted at 26 rue Hoche, Cedex 3533, Versailles CX, France. Former Employee Claims We are pleased to report that settlement has now been agreed and approved by the French Court with 176 former employees of the Company pursuant to which these former employees agreed to withdraw their claims against the Company, Nortel Networks UK Limited and Nortel Networks Limited. Further information is provided in the Conflict Administrator s report, appended to this report.

6 The Joint Administrators will be updating the websites: and The Joint Administrators will also submit further progress reports in six months time. Yours faithfully for Nortel Networks S.A. (In Administration) S J Harris Joint Administrator Enc: Company information Joint Administrators Receipts and Payments Account Summary of Joint Administrators Time Costs Report of the 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 Taylor to act as Insolvency Practitioners under section 390(2)(a) of the Insolvency Act 1986 and the Association of Chartered Certified Accountants in the UK authorises A M Hudson to act as Insolvency Practitioners under section 390(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. 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. The Joint Administrators may collect, use, transfer, store or otherwise process (collectively, Process ) information that can be linked to specific individuals ( Personal Data ). They may Process Personal Data in various jurisdictions in accordance with applicable law and professional regulations including (without limitation) the Data Protection Act 1998.

7 Appendix 1 Nortel Networks S.A. (In Administration) Company Information Registered number: FR / Company name: Registered office address Previous names: Nortel Networks S.A. Centre d Affaires Parc Lumiere, 46 Avenue des Freres Lumiere, F Trappes, France Nortel Matra Cellular Details of the Administrators and of their appointment Administrators: A R Bloom, A M Hudson, S J Harris and C J W Hill of Ernst & Young LLP, 1 More London Place, London, SE1 2AF; Date of appointment: 14 January 2009 Office holder number(s): 6462, 9200, 8624 and 6726 By whom appointed: Court reference: Division of the Administrators responsibility: Conflict Administrator: The appointment was made by the High Court of Justice, Chancery Division, Companies Court on the application of the Company's directors. High Court of Justice, Chancery Division, Companies Court - case 539 of 2009 Any of the functions to be performed or powers exercisable by the administrators may be carried out/exercised by any one of them acting alone or by any or all of them acting jointly. S J Taylor of Isonomy Ltd, Leawood Hall, Mill Lane, Holloway, Matlock, Derbyshire, DE4 5AQ Date of appointment: 2 June 2015 Statement Concerning the EC Regulation on Insolvency Proceedings 2000 The EC Council Regulation on Insolvency Proceedings 2000 applies to this administration and the proceedings are main proceedings. This means that this administration is conducted according to English insolvency legislation and is not governed by the insolvency law of any other European Union Member State.

8 Share Capital Class Authorised Issued & Fully paid Number Number Ordinary 91,308, ,963, ,308, ,963, Shareholders Nortel Networks International Finance & Holding B.V % Nortel Networks Limited % Nominee Shareholders (1 Share each) 0.002%: Jean Marie-Lesur Darry Edwards Michel Clement Jean-Luc Khayat Directors (current and for the last three years) and company secretary (current) Name Director or secretary Date appointed Date resigned Current shareholding Sharon Rolston Simon Freemantle Michel Clement Director 14/01/ Director 14/01/ Director 15/01/

9 Summary of Nortel Group Structure Appendix 1

10 Appendix 1 The EMEA Companies in English administration proceedings Legal Entity Nortel Networks UK Limited Nortel Networks S.A. Nortel Networks France S.A.S. Nortel Networks (Ireland) Limited Nortel GmbH Nortel Networks Oy Nortel Networks Romania SRL Nortel Networks AB Nortel Networks N.V. Nortel Networks S.p.A. Nortel Networks B.V. Nortel Networks International Finance & Holding B.V. Nortel Networks Polska Sp. z o.o. Nortel Networks (Austria) GmbH Nortel Networks s.r.o. Nortel Networks Engineering Service Kft Nortel Networks Portugal, S.A. Nortel Networks Hispania, S.A. Nortel Networks Slovensko s.r.o. Country of Incorporation England France France Ireland Germany Finland Romania Sweden Belgium Italy Netherlands Netherlands Poland Austria Czech Republic Hungary Portugal Spain Slovakia

11 Appendix 2 Appendix 2 Nortel Networks S.A. (In Administration) Joint Administrators Abstract of Receipts and Payments from 14 January 2017 to 13 July 2017 Nortel Networks S.A. (In Administration and in Liquidation Judiciaire ) Administrators' receipts and payments account for the period: 14 January 2009 to 13 July 2017 Currency: USD Period 14 January 2009 to 28 May 2009 Notes Opening balance 3,160,118 1, 2, 3 Receipts Trading: - Post appointment sales 42,402,340 - Other receipts 162,505 Other: - Pre appointment sales 52,243,000 - FX translation movement 549,387 - Bank interest 2,557 - Asset sales - Payments 95,359,789 Trading: - Payroll, employee benefits, and payroll taxes (27,317,197) - Accounts payable - inventory related (18,147,777) - Property costs (4,876,015) - Intercompany (4,528,064) - Other taxes (3,714,687) - Pension contributions (3,303,123) - Other payments (2,047,145) - Trade payables (1,358,315) - FX translation movement on FX transactions within the entity (139,457) - Utilities (18,301) Other: - Transfer to Liquidators accounts (9,934,495) - Joint Administrators' fees and disbursements (1,374,017) - Legal fees (882,896) - Other professional services costs (124,946) - Restructuring costs (50,811) - Bank charges and interest (12,745) (77,829,991) Closing balance 20,689,915 Receipts - Following secondary proceedings Period 28 May 2009 to 13 January 2017 Period 14 January 2017 to 13 July 2017 Total 28 May 2009 to 13 July 2017 Other: - Overpayment refunds 364, ,176 - US settlement allocation on claims 10,763,492-10,763,492 - Transfer from Liquidator's accounts 8,210,260-8,210,260 - FX translation movement 1,148, ,022 1,998, Dividend received - Carrier AG 150, ,533 - FX translation movement on FX transactions within the entity 88,407-88,407 - Bank interest 110,788 51, ,885 - Pre appointment intercompany - Nortel Networks Israel 21,500-21,500 - Pre appointment Intercompany Asia Pacific 1,415,157-1,415,157 - SPSA locked box proceeds - 110,000, ,000, Intercompany 1,223,397-1,223,397 - True-Up Administrators Fees 15,846,638-15,846,638 Payments - Following secondary proceedings 39,343, ,901, ,244,261 Other: - Transfer to Liquidator's accounts (21,994,075) (14,523) (22,008,598) - Joint Administrators' fees and disbursements (14,008,049) (6,220,019) (20,228,068) 5 - Legal fees (3,414,078) (180,252) (3,594,330) - Bank charges and interest (1,456) (356) (1,812) - PPA Legal Fees - (19,092,224) (19,092,224) 4 - Payment under March 2017 Settlement Deed - (21,886,000) (21,886,000) 4 - Residual Profit Share - (14,262,388) (14,262,388) 4 - Other taxes (1,751,772) 833,843 (917,930) 4 - Other Professional Fees (66,751) (74,918) (141,670) - Conflict Administrators Fees (1,040,468) (288,890) (1,329,358) 5 - Conflict Administrators' Legal Fees (5,432,096) (12,119) (5,444,215) - Conflict Administrators' Bank Charges and Interest (100) - (100) - Other Payments (41,386) (40,760) (82,146) (47,750,231) (61,238,606) (108,988,838) Closing balance 12,282,826 61,945,339 Account reconciliations (Cash in transit relating to payment of legal fees) Administration accounts 12,282,826 61,945,339 12,282,826 61,945,339

12 Appendix 2 Nortel Networks S.A. (In Administration) Joint Administrators Abstract of Receipts and Payments from 14 January 2017 to 13 July 2017 Nortel Networks S.A. (In Administration and in Liquidation Judiciaire ) Administrators' receipts and payments account for the period: 14 January 2009 to 13 July 2017 Currency: EUR Period 14 January 2009 to 28 May 2009 Notes Opening balance 2,453,698 1, 2, 3 Receipts Trading: - Post appointment sales 32,217,041 - Other receipts 123,544 Other: - Pre appointment sales 39,758,490 - Bank interest 1,944 - Asset sales - 72,101,019 Payments Trading: - Payroll, employee benefits, and payroll taxes (20,767,848) - Accounts payable - inventory related (13,806,539) - Property costs (3,706,981) - Intercompany (3,118,759) - Other taxes (2,824,084) - Pension contributions (2,511,193) - Other payments (1,556,339) - Trade payables (1,032,696) - FX translation movement on FX transactions within the entity (108,758) - Utilities (13,913) Other: - Transfer to Liquidators accounts (7,557,840) - Joint Administrators' fees and disbursements (1,044,594) - Legal fees (671,220) - Other professional services costs (94,990) - FX translation movement (79,761) 6 - Restructuring costs (38,629) - Bank charges and interest (9,690) (58,943,834) Closing balance - 28 May ,610,883 Receipts - Following secondary proceedings Period 28 May 2009 to 13 January 2017 Period 14 January 2017 to 13 July 2017 Total 28 May 2009 to 13 July 2017 Other: - Overpayment refunds 265, ,651 - US settlement allocation on claims 7,851,537-7,851,537 - Transfer from Liquidator's accounts 5,989,056-5,989,056 - Dividend received - Carrier AG 112, ,595 - FX translation movement 1,622,015 (1,882,796) (260,780) 6 - Bank interest 90,535 46, ,148 - Pre appointment intercompany - Nortel Networks Israel 16,320-16,320 - Pre appointment Intercompany Asia Pacific 1,227,574-1,227,574 - SPSA locked box proceeds - 100,345, ,345, Intercompany 852, ,858 - True-Up Administrators Fees 14,348,554-14,348,554 32,376,695 98,509, ,886,429 Payments - Following secondary proceedings Other: - Transfer to Liquidators accounts (15,247,381) (13,248) (15,260,629) - Joint Administrators' fees and disbursements (10,472,588) (5,674,123) (16,146,711) 5 - Legal fees (2,840,508) (164,433) (3,004,941) - Other Professional Services Costs (60,779) (68,343) (129,122) - Bank charges and interest (1,210) (324) (1,534) - PPA Legal Fees - (17,416,607) (17,416,607) 4 - Payment under March 2017 Settlement Deed - (19,965,188) (19,965,188) 4 - Residual Profit Share - (13,010,658) (13,010,658) 4 - Other taxes (1,612,332) 760,661 (851,671) 4 - FX translation movement on FX transactions within the entity (163,225) - (163,225) - Conflict Administrators Fees (947,723) (263,535) (1,211,258) 5 - Conflict Administrators' Legal Fees (4,958,832) (11,055) (4,969,888) - Conflict Administrators' Bank Charges and Interest (91) - (91) - Other payments (38,213) (37,183) (75,396) (36,342,881) (55,864,037) (92,206,918) Closing balance 11,644,697 54,290,394 Account reconciliations (Cash in transit relating to payment of legal fees) Administration accounts 11,644,697 54,290,394 11,644,697 54,290,394

13 Appendix 2 Nortel Networks S.A. (In Administration) Notes to R & P Notes to the Joint Administrators receipts and payments account for the period 14 January 2017 to 13 July 2017 Note 1 Account balances have all been reported in the local currency, EUR, in addition to a common currency across all entities, USD. Opening balances have been converted using January 2009 month-end spot rates and closing balances converted using June 2017 month-end spot rates which have been provided by the Company. This approach is in line with the Company s internal reporting procedures. Transactions that have taken place through the accounts over the course of the reporting period (14 January 2017 to 13 July 2017) have been converted at average spot rates over this period, which have been sourced from Reuters. Consequently, foreign exchange movements have occurred in the period as a result of fluctuations in currency conversion rates. These are translation movements only and do not reflect an actual receipt or payment. Note 2 The numbers used to prepare the receipts and payments summary have been provided by the Company and are unaudited. Material items have been reviewed for accuracy and reasonableness. Note 3 The amounts reported are inclusive of sales tax where applicable. Note 4 SPSA Locked box proceeds reflect the gross amount received by the NNSA Main Proceedings from the locked box, in respect of the global business and intellectual property sales, as agreed inter alia under the Settlement Plans Support Agreement ( SPSA ), the NNSA Settlement Deed and the UKPI Settlement Deed. Net locked box proceeds totalled $55,677,317, reflecting gross locked box proceeds of $110,000,000, adjusted for the following deductions/receipts, under the NNSA Settlement Deed, which were accounted for at source: - A deduction of $19,092,224 relating to the Main Proceedings 50% contribution towards Nortel Networks UK Ltd s ( NNUK ) legal fees incurred in relation to the global business and intellectual property sales; - A deduction of $2,400,000 relating to the Main Proceedings 50% contribution towards the 2009 Residual Profit Share payment to NNUK; - A positive of $917,930 reflecting the repayment of the Secondary Proceedings 50% contribution towards post-petition tax expenses already met by the Main Proceedings; - A deduction of $21,886,000 relating to a settlement payment to the Secondary Proceedings under the NNSA Settlement Deed; and - $11,862, relating to the Main Proceedings payment of the 2010 Residual Profit Share to NNUK.

14 Appendix 2 Note 5 In the period there has been a final true up in relation to the Company s share of Joint Administrators PPA time costs which contributed to, along with time costs approved by the Creditors Committee in the period and subsequently drawn, a payment from the Company of 4,098, to Nortel Networks UK Limited. This can be seen in the Joint Administrators fees and disbursements line. Note 6 The total FX translation movement to 13 July 2017 is a result of the fluctuations in exchange rates against the USD. As such the interim FX translation movement does not represent a true monetary gain or loss.

15 Appendix 3 Appendix 3 Nortel Networks S.A. (In Administration) The Joint Administrators fees comprise the following three elements: Administration time costs Administration time costs are those fees incurred by the Joint Administrators in respect of the overall management of the Administration of the Company. They do not include core fees in relation to the sales of the businesses nor any reallocation of centrally incurred costs. These time costs are categorised into various workstreams and detailed in a table in accordance with the Statement of Insolvency Practice 9, an English regulatory requirement. These workstreams include, amongst others, creditors, employees, property, pensions and statutory. Reallocated time costs Throughout the Administration process, certain fees of the Joint Administrators have been charged centrally, for activities relating to all EMEA filed entities. Appropriate apportionment rates have been applied to these fees and the costs are apportioned accordingly between the various EMEA entities, including the Company. Please note, not all workstreams are apportioned to all EMEA entities. Total reallocated time costs across all EMEA entities for the period were GB 2,035, Transaction time costs The Joint Administrators have incurred time costs in respect of the global business and asset sales. No transaction time costs were incurred across all EMEA entities for the period. Apportionment rates have been applied to these time costs, based on the PPA receipts and the benefits that each company received from the North American settlements claims. The amount of transaction and PPA related time costs apportioned to the Company to 26 May 2017, as a result of the final true up following the Settlement, was 9,086, Total time costs for the Administration in respect of the period from 28 November 2016 to 26 May 2017 Time costs for the Administration for the period 28/11/2016 to 26/05/2017 Administration time costs 75, Reallocation of time costs 167, Transaction time costs - Total time costs 242,962.09

16 Nortel Networks S.A. (In Administration) Summary of Joint Administrators time costs in respect of the period from 28 November 2016 to 26 May 2017 (GBP) Excluding core M&A transaction time Hours Activity Partner / Executive Director Director Assistant Director Manager Executive Analyst Total sum of hours Average hourly rate Time costs for period ( ) Time costs for the Adminstration to date ( ) Fees , , Strategy , ,482, Creditors , , Tax , , Statutory , , Finance, accounting and administration , , Cash forecasting , Legal , Non COMI countries Pensions , Employees , Business purcharser enquiries Suppliers , Property , Estimated outcome , Pre administration , Communications , M&A , Customers , Day , Debtors , Trading , Directors , Other assets , Grand Total , ,271, Average hourly rate Time costs for the period ( ) 20, , , , , Time costs for the Administration to date ( ) 2,032, , , , , , Time costs for the Administration to date may show minor variances from one progress report to the next, owing to timing differences and adjustments being made to prior period time reports. This information should not be considered definitive and is provided to creditors only for guidance.

17 Administration fee analysis (GBP) Summary of total reallocated time costs for all EMEA filed entities in respect of the period from 28 November 2016 to 26 May 2017 Activity Partner Hours Director / Executive Director Assistant Director Manager Executive / Assistant Executive Analyst Total sum of hours Average hourly rate ( ) Total reallocated time costs for the Period ( ) Total reallocated time costs to 26 May 2017 ( ) Estimated Outcome Statement , , ,095, EMEA tax & VAT advisory , ,122, Finance, Accounting & Administration , , ,347, PPA, Claims & Strategy , ,175, Exit Strategy , ,998, EMEA billing , , Progress Reports , , Creditors , ,332, IT , ,411, Branches & equity interests , CVA Planning , Trading ,794, Transfer Pricing ,745, Customers ,446, Debtors ,077, Canada / USA ,005, Intellectual Property Portfolio , France settlement , Grand Total , , , , ,035, ,146, Average hourly rate ( ) Total reallocated time costs for the Period ( ) 262, , , , , , Total reallocated time costs to 26 May 2017 ( ) 6,966, ,682, ,089, ,670, ,223, ,514,100.86

18 Administration fee analysis (GBP) Summary of total core M&A transactions time costs for all EMEA filed entities in respect of the period from 28 November 2016 to 26 May 2017 Activity Partner Hours Director / Executive Director Assistant Director Manager Executive Analyst Total sum of Average hourly rate hours ( ) Total transaction time costs for the Period ( ) Total transaction time costs to 26 May 2017 ( ) M&A / Transitional Services ,054, Purchase Price Allocation ,328, M&A / Equinox ,526, M&A / Netas ,197, M&A Snow ,799, M&A / GSM ,584, M&A / Carrier ,326, M&A / Passport ,120, Other Assets , M&A , M&A Iceberg , M&A / Velocity , Grand Total ,779, Average hourly rate ( ) Total transaction time costs for the Period ( ) Total transaction time costs to 26 May 2017 ( ) 2,559, ,178, ,962, ,874, ,639, ,395.50

19 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 2009 Date 11 August 2017 Dear Sirs Report of Conflict Administrator appointed 2 nd June 2015 This report forms an adjunct to the seventeenth report to creditors issued by Messrs Bloom, Harris, Hill and Hudson ( the Joint Administrators ) on 11 th August 2017 covering the period from 14 th January 2017 to 13 th July 2017 (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 nd June The Lockbox Proceeds As I reported in my letter to all creditors dated 15 November, I negotiated a settlement (the 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 report dated 9 February 2017 and outlined the legal steps that were then outstanding. I am pleased to report that all legal steps have been taken successfully and as a result the Company received its share of the Lockbox on 18 May As indicated in my report of 9 February 2017, the allocations was subject to several deductions and was then split into a part for the Secondary Process and part for the Main Process The actual proceeds received were calculated as follows:

20 Total Main Secondary Notes $k $k $k Lockbox proceeds PPA Legals contribution RPS Net Proceeds post petition tax paid by Main : post petition tax paid interco expense payables RPS NNF on account dividend ( 20m) amounts transferred to proceedings from lockbox Notes: 1. The NNSA share of the gross lockbox was agreed as $220m 2. NNSA agreed to take its share of the legal costs incurred by the Nortel Networks UK Limited in proportion to its relative share of the gross lock box proceeds. This share amounted to 17.22% 3. In the period prior to the sale of the business in 2010 the Nortel entities operated under an agreement to share profits ( the Residual Profit Share or RPS ) and this required money to be transferred between group companies in respect of the post -filing period. As part of the global settlement, it was agreed that the relevant amount for 2009 ($4.8m) would be borne as a top slice from the lock box proceeds and the 2010 amount ($11.9m) would be borne solely by the Main Proceedings 4. An adjustment was made to recompense the Main Proceedings for certain tax payments made by the Joint Administrators 5. As part of the Global settlement it was agreed that the net proceeds would be shared equally between the Main and Secondary Proceedings 6. The Secondary process has discharged expenses incurred by it during the post filing period. 7. As set out in section 5 of this report, NNF is both the largest creditor of NNSA and its indirect subsidiary company. NNF will have money to distribute to its shareholders. So that the Secondary Process can deal with its priority creditors without delay, the Main Process agreed to advance funds to the Secondary. 2

21 2. Post filing tax As a consequence of the global settlement there may be tax to pay on the receipt by NNSA. There are various factors that influence the amount of any tax. Certain tax payable is expected to be a deduction from the amounts received prior to distribution to pre-petition creditors and to this extent it has been agreed that these deductions will be divided equally between the Main and Secondary Proceedings. For the purposes of this report, the present estimate of the tax liability, without prejudice to further negotiation and/or recovery, is 19.3m leading to a deduction of 9.6m from each process. 3 The Secondary Process and French Priority Creditors As previously reported and as set out in the NNSA agreement, the Secondary Process will use the proceeds of the lock box to meet outstanding expenses and then to make distributions to creditors with priority under French law. In the event of a surplus arising after such distributions that surplus will be transferred to the Main for distribution to the unsecured creditors. The French priority creditors include certain claims by the employees and the tax and social authorities. As noted in my report of 9 February (section 5) certain former employees of the Company have brought claims against the Liquidateur ( Prud homme claims ), before the Industrial Tribunal of Versailles (the Tribunal ) on various grounds. These had the potential to delay the distributions to all creditors. I am pleased to report that this matter has now been settled on the following basis: Amounts to be paid litigant employees 3,546 Amounts to be paid as contribution to their legal costs 636 Amounts paid to all employees as an acceleration of Protocol d Accord de Fin de Conflit agreement 39,100 Total settlement 43,282 k 3

22 The settlement also included various releases against NNUK and other Nortel entities. These arrangement and amounts have been approved by the French Court and will be deducted from the sums held in the Secondary process. The French priority creditors that then need to be paid are estimated as follows: Pre-filing tax liability (provisional not yet agreed) Pre-filing social deductions k Total It is too early to be certain whether there will be any surplus to be paid from the Secondary to the Main Proceedings. 4. The Main Process and General Unsecured Creditors As previously reported it is the intention that the Main Process will handle the distribution to unsecured creditors using an English process called a Company Voluntary Arrangement ( CVA ). It had been expected that this process wold have been started by now but because of the uncertainties, especially in respect of the French employee claims, it was considered better to wait for more clarity. It is not expected that this delay in starting the process will have any material impact on the timing of distributions. 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. Further information on the intended CVA process is to be found in section 2 of the Main Report 4

23 5. Nortel Networks France ( NNF ) 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 As a result of the Settlement, it is expected that NNF will be able to pay all its liabilities and will, therefore, be able to make a distribution to NTL which in turn can make a similar sized distribution to NNSA The exact size of that distribution is not yet clear. Like NNSA, NNF needs to ascertain the quantum of pre-petition claims and also confirm the level of post-petition claims,. However, based on discussions with the Joint Administrators, I estimate that the equity benefit to NNSA from the Lockbox proceeds received by NNF to be approximately 15m to be split equally between the Main and Secondary Proceedings. Greater certainty in this respect will be available in the autumn. As noted above NNF is both the largest single creditor of NNSA and an indirect subsidiary. Its claim against NNSA is an undisputed 50.6m. I am in discussions with the Administrators of NNF to identify the most efficient way to prepare for the return of funds to NNSA. I do not expect that the Secondary Proceedings will require its share of this creditor distribution in order to settle its French priority creditors and therefore the whole of this Creditor distribution is expected to return to the Main. 5

24 6. Estimated outcome for Unsecured Creditors of NNSA There remain certain matters to resolve but I estimate that the sum available for distribution to creditors will be as follows: Lockbox proceeds after deductions ($55.678m) Estimated closing cash Interco receivables NNF net Equity Benefit m Surplus from Secondary Proceedings not known Less: share of post-filing tax payable (9.634) Assets for distribution to General Unsecured Creditors As noted in section 4 above, there are a number of creditor claims of significant value that remain in dispute. On present figures, the range of total creditor claims is likely to be 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. On this basis I now expect that the distribution to General Unsecured creditors to be in the range % This represent a significant improvement on the projection made at the time of my last report reflecting significant progress made on several fronts. It remains subject to a number of material matters and therefore subject to further revision. 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 the main section of the report. 7. 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. 6

25 In the period from 14 th January 2017 to 26 June 2017 ( the Reporting Period )I have incurred time costs totalling xxx of which 80% ( XXX) has been drawn to date. Additionally, I have received expenses mainly in respect of travel amounting to xxx I have also continued to engage the services of separate legal counsel for those matters where in my opinion it was not appropriate to the services of Herbert Smith (Counsel to the Joint Administrators) or Foucaud Tchekoff Pochet et Associes (Counsel to the Secondary Liquidateur). I have used Skadden, Arps, Slate, Meagher & Flom LLP (in US and UK) and Stikeman Elliott LLP (in Canada) for this purpose. These firms have been paid a total of CAD $12k in respect of their services and expenses in the Reporting Period with and additional US$693k, relating to the period 1 October 2016 to 31 March 2017, having recently been paid. 8. 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 Section 3 of the Main Report. I continue to liaise with the Creditors Committee. In order to improve its input into the process the number of official members was increased from three to four with effect from 14 December The present members of the Committee are therefore: M. Simon Le Wita of De Pardieu Brocas Maffei, Avocat representing the Landlord creditor Mdme Brode Comeres, Juriste, representing Orange France Martine Schariciki representing GDFSuez With the addition of : M Reinhard Dammann of Clifford Chance Europe LLP, Avocat, representing an employee creditor 7