Nortel Corp. has announced an agreement with Canadian plaintiffs in a class action law suit that paves the way for implementing an earlier settlement the company reached in the U.S.
The Brampton, Ont.-based telecom equipment vendor, in February, had settled “in principle” a class-action lawsuit in a U.S. federal court.
The proposed settlement was huge. Nortel agreed to pay shareholders US$575 million, issue nearly 630 million common shares, representing approximately 14.5 per cent of its equity (at the company’s share price of $2.09 midday Wednesday, they would be worth about $1.3 billion). Nortel also agreed to hand over half of any money it got out of its own suits against former executives.
This proposed deal, among other things, hinged on the resolution of Canadian shareholder class actions. That roadblock has been crossed as well, now that Nortel has reached an agreement with the Canadian plaintiffs.
However, there are a few more hurdles before the deal goes through. Nortel issued a statement yesterday noting that the settlement still hinges – among other things – on receipt of all court, securities, regulatory and stock exchange approvals. “Although settlement agreements have been entered into, at this time, there can be no assurance that such agreements will be satisfied.”
In its statement Nortel said it would “continue to cooperate fully with the U.S. and Canadian securities regulators and law enforcement authorities in their ongoing investigations relating to the Company’s accounting restatements.”
The settlement, it said, does not encompass a pending application in Canada to commence a recovery action.