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Nortel’s Bankruptcy Continues to Yield Large Fees

January 20, 2016 | Posted in : Bankruptcy Fees / Expenses, Fee Allocation / Fee Apportionment, Fee Dispute

A recent American Lawyer story, “Nortel Fee Bonanza Continues as Creditors Square Off in NY” reports that seven years to the day after Canadian telecom giant Nortel Networks filed for bankruptcy protection in three countries, lawyers for the companies warring creditors assembled in New York on Thursday in a last-ditch attempt to resolve the global feud over $7.3 billion in spoils.

Nortel’s insolvency proceedings have now lasted nearly twice as long as those of Lehman Brothers Holdings, the largest bankruptcy in U.S. history.  The two-day meeting that began Wednesday is the fourth court-ordered mediation so far aimed at brokering a deal to divide Nortel’s remains.

If no settlement is reached, the mammoth case could grind on for years and generate hundreds of millions of dollars in additional professional fees, according to attorneys involved.  “It’s hard to see how we could go to a round five of mediation,” one of the lawyers said.

Close to two dozen law firms have been feasting richly on the Nortel cases.  Combined fees for the firms; Ernst & Young, which is handling proceedings in Canada and the U.K.; and other professional services firms have now topped $1.6 billion, according to court and administrator records and professionals involved.  (The record for the most bankruptcy fees—more than $2.2 billion—is still held by the Lehman proceedings, but the Lehman cases involved vastly larger assets.)  

Cleary Gottlieb Steen & Hamilton, which represents Ontario-based Notel’s U.S. unit, has billed $284 million to date.  Akin Gump Strauss Hauer & Feld, counsel to the official unsecured creditors committee, has billed $63 million.  The Canadian and U.K. proceedings are generating similarly high fees.