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

Transcription

1 Ernst & Young LLP 1 More London Place London SE1 2AF Tel: Fax: TO ALL KNOWN CREDITORS 9 February 2016 Dear Sirs Ref: MLP/7E/SJH/DM/ST/LO3539/PCF16 Saskia Lawrence Direct line: +44 (0) NortelEMEA@uk.ey.com Nortel Networks S.A. (In Administration and in Liquidation Judiciaire) (the Company ) High Court of Justice of England and Wales, Chancery Division, Companies Court Case number 539 of 2009 We write, in accordance with Rule 2.47 of The Insolvency Rules 1986, to provide creditors with a fourteenth report on the progress of the Administration (the Report ). This Report covers the period from 14 July 2015 to 13 January 2016 and should be read in conjunction with the Joint Administrators previous reports dated 13 August 2009, 13 February 2010, 12 August 2010, 11 February 2011, 12 August 2011, 9 February 2012, 6 August 2012, 6 February 2013, 6 August 2013, 6 February 2014, 6 August 2014, 10 February 2015 and 11 August 2015 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: The Company entered administration (the Administration ) on 14 January 2009 when 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, were appointed to act as joint administrators (the Joint Administrators ) by an order (the Order ) of the High Court of Justice of England and Wales (the Court ), following an application made by the Company s directors. At the request of the Joint Administrators the court appointed Stephen Taylor as a further joint administrator to act as conflicts administrator ( Conflicts Administrator ) of the Company on 2 June This was part of a wider restructuring of the Nortel group of companies. Nortel Networks Corporation ( NNC ), the ultimate parent company of the Nortel group, Nortel Networks Limited ( NNL ) and certain of its other Canadian subsidiaries filed an application for creditor protection under the Companies Creditors Arrangement Act ( CCAA ) in Canada to facilitate a comprehensive business and financial restructuring. Nortel Networks Inc ( NNI ), Nortel Networks Capital Corporation and a number of other US Nortel group companies filed petitions in the United States under Chapter 11 of the US Bankruptcy Code. The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC and is a member firm of Ernst & Young Global Limited. A list of members' names is available for inspection at 1 More London Place, London, SE1 2AF, the firm's principal place of business and its registered office. Ernst & Young LLP is a multi-disciplinary practice and is authorised and regulated by the Institute of Chartered Accountants in England and Wales, the Solicitors Regulation Authority and other regulators. Further details can be found at

2 2 At the same time as the appointment of the Joint Administrators, the Court, following applications made by the directors of each company, made administration orders in respect of 18 other Nortel group companies based in the Europe, Middle East and Africa region ( EMEA ). Article 3 of the EC Regulation on Insolvency Proceedings 1346/2000 (the EC Regulation ), states that the relevant court of the EU Member State in which the centre of main interests ( COMI ) of a company is situated had jurisdiction to open main insolvency proceedings in respect of that company. In the case of the 19 EMEA group companies (the EMEA Companies ), the Court was satisfied that each had its centre of main interests in England and, as such, the Court had jurisdiction to open main insolvency proceedings, namely administration, in respect of each company. Details of all 19 companies that entered administration are provided 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 The conduct of the business significantly located in France, has, since May 2009, been under the control of Maître Cosme Rogeau (Liquidateur Judiciaire) (the Liquidator ) and Maître Frank Michel (Administrateur Judiciare), for the period of his appointment as such, (together the French Officeholders ). The Report does not seek to set out matters that are specific to the Secondary Proceedings, but sets out the progress of the wider Administration. The Report does not contain details of realisation of local assets, agreement of creditor claims or the wind down of the Company subsequent to the appointment of the French Officeholders, which is a matter for the French Officeholders in the context of their appointments.

3 3 1. Executive Summary of Progress of the Administration Purpose of the Administration The Joint Administrators continued to trade the Company's businesses with a view to achieving either a rescue of the Company as a going concern or a better result for the Company s creditors as a whole than would be likely if the Company were wound up. In 2009, it became clear that, owing to the financial and market pressures facing the Nortel businesses, the sale of each of the business lines would be necessary and a rescue of the Company as a going concern would not be possible. Sale of Businesses and Assets The disposals of the Group s global businesses and principal assets were completed in The headline aggregate gross sale proceeds of the global disposals, including the gross sale proceeds from the sale of the residual Intellectual Property, total approximately $7.5 billion (before transaction costs, adjustments and escrow balances) and in accordance with the agreed basis for the global disposals, the sale proceeds remain in escrow pending allocation within the Group. Next Steps The key remaining issues for the Company are to deal with the allocation of the sale proceeds amongst the Group ( PPA ), the Financial Support Direction ( FSD ) claims of the UK Pensions Regulator ( TPR ) asserted against the Company and certain of the EMEA Companies, the resolution of intra- EMEA claims, the winding-up of the affairs of certain of the Company s subsidiary companies in EMEA, including the return of surplus assets to the Company, and the development of an appropriate process to agree creditors claims and distribute available funds to them. The Joint Administrators have continued to work with the Liquidator and will continue to provide information to the Company s creditors committee (the Committee ) in order to update it on events and the strategy adopted. Further information is contained in the sections that follow.

4 4 2. Receipts and Payments Account Attached at Appendix 2 is the Joint Administrators receipts and payments ( R & P ) account for the period from 14 July 2015 to 13 January 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. The Joint Administrators maintain accounts in the UK on behalf of and in the name of the Company and the balance of those accounts at the time of the appointment of the French Officeholders was transferred to the accounts controlled by the French Officeholders. The R & P shows only the cash and transactions in the control of the Joint Administrators. The R & P account is a statement of cash received and cash paid out and does not reflect estimated future realisations or costs, including proceeds from the sales of businesses held in escrow pending allocation amongst the Group Companies. Further detailed notes are provided in Appendix 2.

5 5 3. Joint Administrators Remuneration It is the responsibility of the committee of creditors (the Creditors Committee ) that was formed at the creditors meeting held on 23 March 2009 to approve the Joint Administrators remuneration. During the period from 30 May 2015 to 27 November 2015 the Joint Administrators (not including the Conflicts Administrator) incurred time costs of GB 130, We continue to apportion between the EMEA Companies certain other time costs for workstreams undertaken for the benefit of all EMEA entities. During the period from 30 May 2015 to 27 November 2015, GB 177, has been allocated to the Company in respect of these apportionments. It is the intention that the Joint Administrators time costs in relation to purchase price allocation (see section 4) and claims against the US and Canadian estates will be shared amongst the EMEA entities in proportion to each entity s benefit resulting from the PPA, and claims settlements. As a consequence of the court decisions handed down by the US and Canadian courts in May in relation to PPA, the Joint Administrators undertook an interim true-up of those costs to ensure that the present burden of costs properly reflects the estimated outcome in accordance with the judgments. The allocation of costs will be subject to further true-ups when the ultimate outcome of PPA is known. As a result of the interim true-up the Company received a credit in respect of Joint Administrators PPA costs of 10,834, resulting in a refund to the company of 9,512, The Conflicts Administrator will wish to review this (see the Conflicts Administrator s report attached). An analysis of the time spent is at Appendix 3. Payments to Other Professionals The Joint Administrators continue to engage the following 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 July 2015 to 13 January 2016 the following has been paid: Herbert Smith Freehills LLP GB 288, (Legal Advisors) Betto Seraglini - US$34, (Legal Advisors) Lax O'Sullivan Scott Lisus LLP (Engaged by Herbert Smith Freehills LLP)- US$ 5, (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&Ps in Appendix 2 (which uses an average spot rate over the period 14 July 2015 to 13 January 2016). Since the Joint Administrators appointment, various professional costs (and in particular legal costs) have been incurred for the benefit of EMEA as a whole in respect of the various business sales and the PPA process. These costs have mainly been paid by Nortel Networks UK Limited ( NNUK ) and have not yet been charged to the individual entities. At the conclusion of the PPA process, it is intended that these costs will be apportioned between the EMEA entities in proportion to each company s benefit arising from the global sale proceeds and realisations from North American claims settlements.

6 6 The Conflicts Administrator will also wish to review this (see the Conflicts Administrator s report attached). 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. 4. Future Conduct of the Administration Purchase Price Allocation On 12 May 2015, the judgments of the US and Canadian Courts in relation to the allocation dispute were issued. Both judgments provide for the allocation of the c.us$7.3 billion lockbox proceeds to be apportioned amongst the various Nortel selling entities based on the ratio of each entity s pre-filing liabilities to the total level of such liabilities in the Nortel group (the pro-rata outcome ). The judgments can be found at Subsequently, certain of the US parties, including the Nortel US Debtor, filed motions in both the US court and the Canadian Court for reconsideration of the judgments issued by each of the Judges. The motions for reconsideration were heard on the 25 June 2015 and a memorandum order was issued by the Judges on 6 July 2015 which clarified certain aspects of the judgments of the US and Canadian Courts. Between 9 and 20 July 2015, the Company, the US Unsecured Creditors Committee, US debtors and the Crossover-bond holders filed notices to the US Court, appealing the allocation opinion and order dated 12 May 2015 and the memorandum order dated 6 July Cross-appeals have been filed by the Canadian Debtor, the Canadian Unsecured Creditors' Committee, the UK Pension Interests and the EMEA Debtors other than Nortel Networks S.A. Oral arguments on appeal are scheduled for 5 April The same parties appealing the US Court decision also requested leave to appeal in Canada on 16 July The Canadian Court has yet to confirm whether leave to appeal will be granted. On 25 September 2015, the US Court mandated the parties to take part in a fourth attempt to reach a mediated settlement before the appeal in the U.S Court is heard. The mediation was set to commence in October 2015 and to be completed by 13 November 2015 with a former US judge, Joseph Farnan, selected to act as mediator. The parties duly attended a mediation between 27 and 29 October in New York and although no settlement was reached, the parties have continued to meet thereafter and the US Court extended the mediation initially to run up to 25 November 2015 and then to 26 February 2016 in order to encourage the parties to attempt to reach a settlement before appeal. Conflicts Administrator Following an application to the High Court by the Joint Administrators, the High Court appointed Stephen Taylor on 2 June The role of the Conflicts Administrator is to act on behalf of the Company in conducting any appeal by the Company in respect of the PPA proceedings, 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.

7 7 A report by the Conflicts Administrator in respect of matters he has dealt with since his appointment is appended to this report. The Pensions Regulator in the UK TPR, a UK statutory body, has made claims against several Nortel group companies in EMEA, including the Company ( Target Companies ), and North America. Its Determinations Panel issued a decision in June 2010 that it would be reasonable to issue FSDs, which would require the Target Companies to provide financial support to the Nortel Networks UK Limited pension scheme (the UK Pension Scheme ). The UK Pension Scheme is estimated to have a deficit of c. GB 2.1 billion. The Joint Administrators of the Target Companies have referred the decision of the Determinations Panel to the Upper Tribunal (the Reference ). The Reference challenges this decision on behalf of the Target Companies over which the Joint Administrators are appointed. Pending a determination of the Reference by the Upper Tribunal, no FSD may be issued to the Target Companies. The Reference proceedings are currently stayed. Any liability in respect of a FSD or Contribution Notice issued against a Target Company would rank as a provable debt alongside those of unsecured creditors. It has not been determined that any Nortel entity in EMEA is under any obligation to make a contribution to the UK Pension Scheme by way of a FSD or a Contribution Notice. The Joint Administrators will continue to vigorously defend the Target Companies positions in the Reference and it is not at all certain that any FSDs or Contribution Notices will ultimately be imposed. The Joint Administrators of the Target Companies have engaged with TPR to ascertain the possibility of resolving certain of the FSD claims on a consensual basis. These discussions are ongoing and the Joint Administrators will update creditors as appropriate. Distributions to Creditors In light of the judgments handed down by the US and Canadian courts, the Joint Administrators consider that it is now the time to commence a formal process for the calling for and adjudication of claims. On 23 July 2015, the Joint Administrators received the permission of the English High Court of Justice to promulgate a Company Voluntary Arrangement ( CVA ) in respect of the Company. The CVA will, amongst other things, establish a bar date for the filing of claims and a mechanism for making distributions to creditors. The Joint Administrators plan to provide appropriate information to creditors in respect of the CVA (which will be subject to creditors approval) later in Before PPA receipts from the business disposal escrow accounts and the receipt of future intra-group dividends, the Joint Administrators anticipate that there will be, absent any unforeseen liabilities arising, a distribution to the creditors of the company. The Joint Administrators are, however, still neither able to confirm the quantum of the preappointment creditor claims nor the likely return for individual creditors or classes of creditor. These will be determined for the most part by the following key factors: a. Outcome of a formal proof of debt procedure;

8 8 b. The imposition of any FSD on the Company by TPR. As set out above, it is not certain as to whether any such FSD will actually be imposed, nor is there clarity as to the quantum of the potential liability being sought. It should be noted that the Joint Administrators continue to defend the Company s position in respect of the action by TPR. The Joint Administrators are hopeful that the imposition of any such FSD can be successfully resisted; c. Finalisation of quantum of certain complex liabilities and claims; d. Finalisation of ranking of creditor claims which will be determined as part of the distribution process; and e. The outcome of the PPA process.

9 9 5. Other Matters The Committee The Joint Administrators continue to provide detailed 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 will continue to keep the Creditors Committee apprised of developments. The Prescribed Part Section 176A of the Insolvency Act 1986 does not apply to this Administration as there is no qualifying floating charge security, and as such there is no Prescribed Part to be set aside for nonpreferential creditors. Liquidator in the Secondary Proceedings 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. Extensions of the Administration In December 2015, the administration order in respect of the Company was extended to 13 January 2018 by the High Court of Justice in England to allow the Joint Administrators to continue to administer the estate and achieve the purpose of the administration.

10 10 French Employee Claims Please note that the claims against the Company are being dealt with by the Liquidator in France. According to the information provided to us, certain former employees of the Company have brought claims against the Liquidator, before the Industrial Tribunal of Versailles (the Tribunal ), disputing their redundancies, claiming further damages for wrongful dismissal, and requesting payment of the deferred departure indemnity set out in the social plan (IAD Différée) (the "Deferred IAD"). By a decision of 10 December 2012 the Tribunal found for certain of the former employees and ordered the Company to record in its liabilities, damages due to these former employees for wrongful dismissal. The Liquidator of the Company appealed this decision. A similar decision in relation to certain other former employees of the Company was handed down on 14 October 2013 and an appeal was also been lodged. These claims are also stayed until the decision of the Supreme Court is given. The claims of a further number of former employees, on similar grounds, are scheduled to be heard by the Tribunal on 29 February Approximately 140 former employees of the Company have brought proceedings against the Liquidator, before the Commercial Court of Versailles. These proceedings include a request that the Commercial Court of Versailles orders the immediate payment of the Deferred IAD, and a request for a declaration that the secondary proceedings has the exclusive right to sums due to the Company from the sales of the businesses (see section 1 above). The Liquidator has included the Joint Administrators of the Company as further defendants to these proceedings (intervention forcée). The Joint Administrators contested the jurisdiction of the Commercial Court of Versailles to decide on these issues. At a hearing on 10 October 2013 the Commercial Court of Versailles decided, in a decision issued on 21 November 2013, to refer a number of questions to the Court of Justice of the European Union ( ECJ ) and to stay the proceedings pending the determination of such questions by the ECJ. A hearing took place in the First Chamber of the ECJ on 6 November 2014, at which the various parties, including the Joint Administrators, were represented. The opinion of the Advocate General was delivered on 29 January 2015, with a decision of the ECJ to follow in due course. The ECJ issued its decision on 11 June 2015 and the proceedings resumed before the Commercial Court of Versailles at the beginning of July At a procedural hearing of 15 October 2015, the Court fixed the following time-schedule for the parties to file their submissions following the ECJ decision. Employees' submission: 12 November 2015, Liquidator's submission: 10 December 2015, Joint Administrators' submission: 21 January The Employees and the Liquidator have filed their submissions in due time. The Joint Administrators will also file their submissions in accordance with the above schedule. The Liquidator was contemplating setting up a fiducie (or trust arrangement) for the purpose of financing the defence of the interests of the Company in the context of the PPA. An order of the Supervisory Judge of the Company dated 12 September 2012 authorised the fiducie arrangement on condition that the contract be ratified by the Commercial Court of Versailles. The attorney of certain of the former employees of the Company filed an opposition to this order. This opposition was dismissed by the Commercial Court of Versailles on 17 September This decision of the Commercial Court of Versailles has been appealed before the Court of Appeal of Versailles.

11 11 The attorney of certain of the former employees of the Company also filed a separate claim against the Liquidator alleging that the hearing before the Supervisory Judge of the Company for the approval of the fiducie never took place. The Court of Appeal of Versailles rejected this claim on 18 December This decision of the Versailles Court of Appeals has been appealed before the French Supreme Court (Cours de Cassation) by the attorney of the former employees. The former employees claimed before the Court of Appeal of Versailles that the pending proceedings should be stayed until the French Supreme Court issues its decision. The Court of Appeal of Versailles rejected this claim and decided that the case would be heard on 2 November In October 2015 the Liquidator filed a submission whereby he indicated that he waives the benefit of the order of the Supervisory Judge dated 12 September 2012 and of the judgment of the Commercial Court of Versailles dated 17 September 2013 so that the proceedings no longer had any relevance. Submissions were exchanged between the parties on this issue and the case was finally heard by the Court of Appeal of Versailles on 2 November In a decision dated 17 December 2015, the Court of Appeal of Versailles admitted the Liquidator's position and declared that the proceedings no longer had any relevance.

12 12 The Joint Administrators will report to creditors again in six months time or at the conclusion of the Administration, whichever is sooner. Yours faithfully for Nortel Networks S.A. (In Administration and in Liquidation Judiciaire) S J Harris Joint Administrator Enc: Company information Joint Administrators Receipts and Payments Account Summary of Joint Administrators Time Costs Joint Administrators Policy on Fees and Disbursements Conflict Administrators Report to Creditors Form 2.24B Administrators Progress Report For the Companies listed below, 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 and D M Hughes to act as Insolvency Practitioners under section 390(2)(a) of the Insolvency Act The affairs, business and property of the Companies are being managed by the Joint Administrators, A R Bloom, S J Harris, A M Hudson and C J W Hill who act as agents of the Companies only and without personal liability. The Companies are Nortel Networks UK Limited; Nortel GmbH; Nortel Networks France S.A.S.; Nortel Networks N.V.; Nortel Networks S.p.A.; Nortel Networks B.V.; Nortel Networks Polska Sp. z o.o.; Nortel Networks Hispania, S.A.; Nortel Networks (Austria) GmbH; Nortel Networks s.r.o.; Nortel Networks Engineering Service Kft.; Nortel Networks Portugal, S.A.; Nortel Networks Slovensko s.r.o.; Nortel Networks Oy; Nortel Networks Romania SRL; Nortel Networks AB; Nortel Networks International Finance & Holding B.V.. The affairs, business and property of Nortel Networks (Ireland) Limited are being managed by the Joint Administrators, A R Bloom and D M Hughes, who act as agents of Nortel Networks (Ireland) Limited only and without personal liability. The affairs, business and property of Nortel Networks S.A. are being managed by the Joint 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. 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.

13 Appendix 1 Appendix 1 Nortel Networks S.A. (In Administration and in Liquidation Judiciaire) 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 and S J Taylor of Insonomy Ltd, Leawood Hall, Mill Lane, Holloway, Matlock, Derbyshire, DE4 5AQ Date of appointment: 14 January 2009 By whom appointed: Court reference: Division of the Administrators responsibility: 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. 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.

14 Appendix 1 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 Darryl 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 Director 14/01/ Director 14/01/

15 Summary of Nortel Group Structure Appendix 1

16 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

17 Appendix 2 Appendix 2 Nortel Networks S.A. (In Administration and in Liquidation Judiciaire) Joint Administrators Abstract of Receipts and Payments from 14 January 2009 to 13 January 2016 Nortel Networks S.A. (In Administration and in Liquidation Judiciaire ) Administrators' receipts and payments account for the period: 14 January 2009 to 13 January 2016 Currency: USD Period 14 January 2009 to 28 May 2009 Opening balance 3,160,118 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 - 95,359,789 Payments 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 July 2015 Period 14 July 2015 to 13 January 2016 Total 28 May 2009 to 13 January 2016 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 1,153,135 (1,872) 1,151,263 - Dividend received - Carrier AG 150, ,533 - FX translation movement on FX transactions within the entity 88,407-88,407 - Bank interest 51,779 4,492 56,271 - Pre appointment intercompany - Nortel Networks Israel 21,500 21,500 - Pre appointment Intercompany Asia Pacific 1,156,133-1,156,133 - Intercompany 1,223,397-1,223,397 - True-Up Administrators Fees - 14,869,755 14,869,755 23,182,810 14,872,376 38,055,186 Payments - Following secondary proceedings Other: - Transfer to Liquidator's accounts (21,994,075) - (21,994,075) - Joint Administrators' fees and disbursements (13,092,296) (258,532) (13,350,828) - Legal fees (1,981,975) (487,875) (2,469,850) - Bank charges and interest (752) (128) (880) - Other taxes Conflict Administrator's Fees - (472,366) (472,366) - Conflict Administrator's Legal Fees - (2,077,333) (2,077,333) - Conflict Administrator's Bank Charges and Interest - (100) (100) (37,069,097) (3,296,334) (40,365,432) Closing balance 6,803,627 18,379,667 Account reconciliations: Administration accounts 6,803,627 18,379,667 6,803,627 18,379,667

18 Appendix 2 Nortel Networks S.A. (In Administration and in Liquidation Judiciaire) Joint Administrators Abstract of Receipts and Payments from 14 January 2009 to 13 January 2016 Nortel Networks S.A. (In Administration and in Liquidation Judiciaire ) Administrators' receipts and payments account for the period: 14 January 2009 to 13 January 2016 Currency: EUR Period 14 January 2009 to 28 May 2009 Opening balance 2,453,698 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 - Payments 72,101,019 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) - 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 July 2015 Period 14 July 2015 to 13 January 2016 Total 28 May 2009 to 13 January 2016 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 932, ,068 1,214,567 - Bank interest 36,431 4,067 40,498 - Pre appointment intercompany - Nortel Networks Israel 16,320-16,320 - Pre appointment Intercompany Asia Pacific 992, ,480 - Intercompany 852, ,858 - True-Up Administrators Fees - 13,461,923 13,461,923 Payments - Following secondary proceedings 17,049,428 13,748,057 30,797,485 Other: - Transfer to Liquidators accounts (15,247,381) - (15,247,381) - Joint Administrators' fees and disbursements (9,636,461) (234,055) (9,870,516) - Legal fees (1,535,015) (441,685) (1,976,699) - Bank charges and interest (566) (116) (682) - Other taxes 5,151-5,151 - FX translation movement on FX transactions within the entity (163,225) - (163,225) - Conflict Administrator's Fees - (427,643) (427,643) - Conflict Administrator's Legal Fees - (1,880,656) (1,880,656) - Conflict Administrator's Bank Charges and Interest - (91) (91) (26,577,497) (2,984,245) (29,561,742) Closing balance 6,082,814 16,846,625 Account reconciliations: Administration accounts 6,082,814 16,846,625 6,082,814 16,846,625

19 Appendix 2 Nortel Networks S.A. (In Administration and in Liquidation Judiciaire) Receipts and payments comments There has been a significant reduction in the receipts and payments activity during the interim period against prior periods. This is representative of the wind down position of the business. Notes to R & P Note 1 Account balances have all been reported in a 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 December 2015 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 July 2015 to 13 January 2016) have been converted at average spot rates over this period, which have been sourced from Reuters. 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. Foreign exchange translation movement The total FX translation movement to 13 January 2016 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.

20 Appendix 3 Appendix 3 Nortel Networks S.A. (In Administration and in Liquidation Judiciaire) 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 2,227, Transaction time costs The Joint Administrators have incurred fees in respect of the global business and asset sales. Apportionment rates have been applied to these fees, based on a provisional purchase price allocation ( PPA ) scenario, and the respective portions have been charged to each entity in EMEA, including the Company. In the fullness of time, there will be a true up of transaction time costs in accordance with actual PPA to each EMEA entity. Total transaction time costs across all EMEA entities for the period were GB 4, Total time costs for the Administration in respect of the period from 30 May 2015 to 27 November 2015 Time costs for the Administration for the period 30/5/2015 to 27/11/2015 Administration time costs 130, Reallocation of time costs 177, Transaction time costs - Total time costs 307,939.23

21 Appendix 3 Nortel Networks S.A. (In Administration and in Liquidation Judiciaire) Summary of Joint Administrators time costs in respect of the period from 30 May 2015 to 27 November 2015 (GBP) Excluding core M&A transaction time Hours Partner / Executive Assistant Total sum of Average hourly Time costs for Time costs for the Adminstration Activity Director Director Director Manager Executive Analyst hours rate period to date Strategy , ,351, Tax , , Finance, accounting and administration , Creditors , , Suppliers , Employees , Legal , , Statutory , , Cash forecasting , Customers , Fees , , Debtors , Trading , Other assets , Day , Directors , Property , M&A , Pre administration , Estimated outcome , Communications , Pensions , Non COMI countries Grand Total , ,935, Average hourly rate Time costs for the period 54, , , Time costs for the Administration to date 1,922, , , , , , 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.

22 Appendix 3 Administration fee analysis (GBP) Summary of total reallocated time costs for all EMEA filed entities in respect of the period from 30 May 2015 to 27 November 2015 Activity Partner Director / Executive Director Assistant Director Hours Manager Executive / Assistant Executive Analyst Total sum of hours Average hourly rate ( ) Total reallocated time Total reallocated time costs for the Period costs to ( ) 27 November 2015 ( ) PPA, Claims & Strategy , , ,619, IT , ,437, Finance, Accounting & Administration , ,371, EMEA tax & VAT advisory , ,992, Creditors , , ,080, Trading ,794, Exit Strategy , ,752, Transfer Pricing ,745, Customers ,446, Debtors ,077, Canada / USA ,005, Progress Reports , , Intellectual Property Portfolio , Estimated Outcome Statement , Branches & equity interests , , EMEA billing , , CVA Planning , , France settlement , Grand Total , , , ,227, ,668, Average hourly rate ( ) Total reallocated time costs for the Period ( ) 521, , , , , , Total reallocated time costs to 27 November 2015 ( ) 6,187, ,096, ,060, ,178, ,315, ,829,091.99

23 Appendix 3 Administration fee analysis (GBP) Summary of total core M&A transactions time costs for all EMEA filed entities in respect of the period from 30 May 2015 to 27 November 2015 Hours Activity Partner Director / Executive Director Assistant Director Manager Executive Analyst Total sum of hours Average hourly rate ( ) Total transaction Total transaction time costs for the time costs to Period ( ) 27 November 2015 ( ) 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 ( ) - 4, Total transaction time costs to 27 November 2015 ( ) 2,559, ,178, ,962, ,874, ,639, , Note Time costs in respect of transactions for the period from 30 May 2015 to 27 November 2015 have been apportioned on a provisional basis, having regard to the nature of the work done and the extent of progress made in respect of some, but not all, core M&A transactions. The allocation is provisional and will change as the transactions progress and the outcome of the PPA is clear. Please note the Joint Administrators have only apportioned core M&A transaction time costs in respect of those transactions that have made sufficient progress. Therefore further core M&A transaction time costs will be apportioned in due course to the Company, and reapportioned as the outcome of the PPA process becomes clear.

24 Appendix 4 Appendix 4 Nortel Networks S.A. (In Administration and in Liquidation Judiciaire) Office Holders Charging Policy for Fees The statutory provisions relating to remuneration are set out in Rule of the 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 Insolvency Practitioners Association at (follow Regulation and Guidance then Creditors Guides to Fees ), or is available in hard copy upon written request to the Administrators. The creditors have determined that the Administrators remuneration should be fixed on the basis of time properly spent by the Administrators and their staff in attending to matters arising in the Administration. The Administrators have engaged managers and other staff to work on the cases. The work required is delegated to the most appropriate level of staff taking account of the nature of the work and the individual s experience. Additional assistance is provided by accounting and treasury executives dealing with the Company s bank accounts and statutory compliance diaries, secretaries providing typing and other support services and filing clerks. Work carried out by all staff is subject to the overall supervision of the Administrators. All time spent by staff working directly on case-related matters is charged to a separate time code established for each case. Each member of staff has a specific hourly rate, which is subject to change over time. The average hourly rate for each category of staff over the period is shown in Appendix 3, as are the current hourly rates used. The current hourly rates may be higher than the average rates, if hourly rates have increased over the period covered by this report. Office Holders Charging Policy for Disbursements Statement of Insolvency Practice No. 9 ( SIP 9 ) published by R3 (The Association of Business Recovery Professionals) divides disbursements into two categories. Category 1 disbursements comprise payments made by the office holders firm, which comprise specific expenditure relating to the administration of the insolvent s affairs and referable to payment to an independent third party. These disbursements can be paid from the insolvent s assets without approval from the Committee. In line with SIP 9, it is our policy to disclose such disbursements drawn but not to seek approval for their payment. Category 2 disbursements comprise payments made by the office holders firm which include elements of shared or overhead costs. Such disbursements are subject to approval from Creditors Committee as if they were remuneration. It is our policy, in line with SIP 9, to seek approval for this category of disbursement before they are drawn.

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30 Rule 2.47 Form 2.24B The Insolvency Act 1986 Administrator s progress report 2.24B Name of Company Company number Nortel Networks S.A. FR / In the High Court of Justice of England and Wales, Chancery Division, Companies Court Court case number 539 of 2009 We A R Bloom, A M Hudson, S J Harris, C J W Hill and S Taylor Ernst & Young LLP, 1 More London Place, London, SE1 2AF administrators of the above company attach a progress report for the period From to 14 July January 2016 Signed Joint Administrator Dated 9 February 2016 Contact Details: You do not have to give any contact information in the box opposite but if you do, it will help Companies House to contact you if there is a query on the form. The contact information that you give will be visible to searchers of the public record Usman Rafiq Ernst & Young LLP, 1 More London Place, London, SE1 2AF Tel: +44 (0) DX Number: DX Exchange: Companies House receipt date barcode When you have completed and signed this form please send it to the Registrar of Companies at: Companies House, Crown Way, Cardiff, CF14 3UZ DX Cardiff