Back in 2011, when insolvent Nortel Networks Corp. raised about $4.5 billion by selling off many of its patents in a groundbreaking auction, it seemed like very good news for the company and its creditors. The sell-off of the failed telecom technology company’s businesses had brought in another $3.5 billion. “It was much more than could have been hoped for at the start,” says Herbert Smith Freehills litigation partner John Whiteoak, who represented Nortel’s European arms.
Then things turned ugly, as the various parts of the defunct company battled each other for their share of the proceeds. “There’s only one thing worse than a bankruptcy with not enough money,” says Jay Carfagnini, head of the restructuring practice at Toronto’s Goodmans, who represented the monitor for the Canadian debtor, Ernst & Young Inc. “That’s a bankruptcy with too much money.” The fight involved multiple mediations; a 21-day trial held simultaneously in American and Canadian courts via video link; almost $2 billion paid out in legal and other professional fees; and finally, in 2016, settlement. The Nortel saga, says bankruptcy partner James Bromley of Cleary Gottlieb Steen & Hamilton, counsel to the U.S. debtor, “is probably one of themost complicated international insolvencies to ever occur.”
