Time to turn the page on some of Nortel’s legal woes after Mr. Justice Warren K. Winkler of the Ontario Superior Court of Justice approved an estimated $2.5 billion settlement last weeks that resolves seven lawsuits in the United States, Ontario, Quebec and British Columbia over whether Nortel misled investors during two separate class periods. The decision follows the approval of the settlement in the two U.S. class actions last month by U.S. District Court Judges Richard Berman and Loretta Preska.
Under the settlement, Nortel will pay $575 million in cash and issue common shares representing 14.5% of its current equity, worth approximately $1.7 billion based on its current share value. The settlement also includes $228.5 million in payments from Nortel’s insurers. Nortel has also agreed to contribute one half of any recovery in existing litigation by Nortel against former senior officers (Frank Dunn, Dough Beatty and Michael Gollogly) who were terminated for cause in April 2004.
In approving the settlement, Justice Winkler said the settlement was “fair, reasonable and in the best interests of the class (of Nortel investors)” and provides “the maximum available amount for satisfaction of the claims in total, short of trial”.