Usual Formula [Unsecured Claim + Bankruptcy = You Lose] Doesn’t Apply (the Nortel Networks Bankruptcy, Part six)

By: Donald L Swanson

Unsecured Claim + Bankruptcy = You Lose.

I came up with this formula back in 1983, while preparing for a seminar presentation on basic bankruptcy law.  I was trying to come up with something creative to say.  And . . . I must confess . . . I thought it was pretty clever at the time.

And now . . . I’m more-than-a-little pleased and proud [or as people say these days, “humbled”] that the formula proves to be accurate in the vast majority of all bankruptcy cases.

But what’s true in the vast majority of all bankruptcy cases has little to do with the Nortel Networks bankruptcy.

And so it is with my little formula — it has nothing to do with the Nortel Networks bankruptcy case.  Nothing.

Get this!

Back in July of 2015 (when total professional fees expended in the battle are only $1.3 billion), the Bankruptcy Court makes this finding:

–“A pro rata distribution would result in all Creditors receiving an approximate 71% return on their Claims.”

Say what?!  A 71% return?!

All this fighting has now cost $2 billion in professional fees.  And it’s over the last 29% of recovery?!

. . . Oh, my.

Unsecured creditors in nearly all bankruptcy cases would exult over a 71% return.

But no.  Not for Nortel Networks creditors.  “A 71% return” are fighting words.

“Don’t be settling these disputes in mediation,” seems to have been the battle cry.

Nortel Networks creditors apparently hope to dissipate the entire pot of gold — or at least most (or a large percentage) of it — to prove a point . . .  of some sort or other . . .  that is known only to themselves.

Here’s guessing that the continuing fight has a net-negative impact on everyone.  No one will ultimately win.

Surely there is a lesson in this for the rest of us?