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Nortel and Lehman win landmark pension case 24 July 2013

The UK Supreme Court today (24 July) ruled in favour of bankrupt companies Nortel Networks and Lehman Brothers in a landmark decision over the Pension Regulator’s (TPR) rights concerning the assets of liquidated companies.

Administrators for both Nortel and Lehman appealed a 2011 judgment that TPR should be given priority over all other creditors.

Today the Supreme Court ruled there is no longer a risk that pension schemes could have super priority status in corporate insolvencies.

It said that by issuing a financial support directive (FSD), TPR was entitled to take priority over other creditors in reclaiming money to pay off underfunded pension schemes.

Lehman and Nortel had pension deficits of £130 million and £2.1 billion respectively at the time of liquidation.

The lawsuit was brought originally by the UK Pensions Regulator towards the end of 2010, when it sought to prove that UK law requires pension funds to rank first, giving them super priority status above banks and unsecured lenders.

Nick Moser, head of the restructuring and corporate recovery group at international law firm Taylor Wessing, said: “This case threatened to reduce access to affordable finance for companies across the UK because of the risk of pension schemes having super-priority in corporate insolvencies.

“As a result, today’s judgment will be welcomed by financial institutions who are now reassured that the risk profile of companies is more predictable.

“Businesses who would otherwise have struggled to raise credit will now have a better chance of achieving financial stability. Therefore, today’s judgment is good news for the economy as a whole.”

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