A settlement Nortel Networks reached with shareholders irate over its accounting problems moved closer to payout on Wednesday when the Brampton, Ontario, telecommunications equipment vendor brought Canadian plaintiffs in on the deal.
Nortel settled a class-action lawsuit in February in U.S. federal court by agreeing to pay shareholders US$575 million, issue almost 630 million common shares and hand over half of any money it got out of its own suits against former executives. Among other things, that deal depended on Nortel getting buy-in from the plaintiffs in Canadian shareholder class actions. That hurdle has been cleared, the company announced on Wednesday.
Under President and Chief Executive Officer Mike Zafirovski, Nortel is trying to dig its way out from under years of accounting problems that resulted in embarrassing restatements and the firing of its chief executive officer, chief financial officer and controller in 2004.
The settlement, which still requires court, securities regulator and stock exchange approvals, encompasses most of the pending and proposed shareholder class actions against it, the company said. As part of the deal, Nortel would not admit any wrongdoing. Investigations by U.S. and Canadian securities regulators and law enforcement agencies are separate from the settlement and Nortel will continue to cooperate with them.
The proposed settlement is huge: The shares to be issued would represent about 14.5 percent of Nortel's current equity and at the company's share price of US$2.09 midday Wednesday, they would be worth about US$1.3 billion.