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The Actuary The magazine of the Institute & Faculty of Actuaries

The long arm of TPR nabs Nortel

The Pensions Regulator (TPR) is now engaged in a uniquely difficult task of seeking additional funding for the Nortel UK Pension Plan. The North American company went into a situation of creditor protection for its businesses last year which included a ‘stay’ on legal proceedings. It has subsequently received a claim, a Financial Support Directive (FSD) of £2.1bn from TPR seeking to support the pension scheme trustees.

In the Ontario Superior Court of Justice, Judge Geoff Morawetz has declared that the UK FSD process breaches the ‘stay’ and ordered that any outcome of it will be null and void in the Canadian insolvency process.

In the US Bankruptcy Court for the District of Delaware, Judge Kevin Gross has made an order against the trustees and the Pension Protection Fund (PPF) declaring that their participation in the regulator’s proceedings (in respect of Nortel US entities involved in the Chapter 11 process) would breach the stay. The trustees and PPF have filed a leave to appeal.

TPR says it was surprised by the decisions of the US and Canadian courts at the end of February. “We have filed our motion for leave to appeal in Canada where the regulator is a party to the case. On the basis of the order made, we believe that The Pensions Regulator’s Financial Support Direction process has been misinterpreted as a judicial process which creates a new claim.”

The case may turn on special facts relating to Nortel, but will be closely watched by UK pension funds and their advisers for possible lessons and application in other troubled situations.