affords a premium of hundreds of millions of dollars to U.K. creditors.
And if the case does not settle soon, it
is virtually certain to surpass Lehman’s
As of the last public disclosures
early this year, the Nortel estate had
paid $1.89 billion in professional fees,
including more than $500 million to
Ernst & Young as Canadian monitor
and U.K. administrator; $316 million
to Cleary Gottlieb Steen & Hamilton as
U.S. debtor’s counsel; and $205 million
to Herbert Smith Freehills as counsel to
the U.K. administrator. According to the
UCLA-LoPucki Bankruptcy Research
Database, which aggregates large cases
completed through 2007, a bankruptcy
of Nortel’s size would be predicted
to cost only about one-third as much
(without regard to its length).
THE CLOSEST COMPARISON IS
Lehman’s bankruptcy of the following
year. The last widely reported figure
for Lehman fees was $2.2 billion in September 2013 (well after Chapter 11 plan
confirmation). But as a proportion of
cash available for distribution, Nortel is
already an order of magnitude costlier.
The Lehman estate paid professionals
$2.2 billion (2 percent) of its $93 billion in assets, and took three-and-a-half
years to emerge from court protection.
The Nortel estate has already paid professionals $1.89 billion ( 18 percent) of its
$10.5 billion in assets. It’s been under
court protection seven-and-a-half years
Urquhart calculates that Nortel’s
fees will set the new record in April
2017, absent a settlement.
But there’s another, even more
obscene, cost. By May 2015, Judge Newbould counted 6,800 Canadian pensioners who had died before the bankruptcy
could be resolved.
Despite the estate’s fine work in
maximizing its IP assets and coordinating a cross-border trial, and despite the
judges’ embrace of a novel and equitable legal theory, Urquhart says the
money for professionals was poorly
spent. “It’s unconscionable,” she says.
“Vulnerable people who have a few
years left to live deserve to live in dignity without the professionals taking 20