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Nortel Pensioners Slammed Again?
Michael Lewis of the Toronto Star reports, Nortel pensioners slammed with pension cuts, claw backs:
Days
after a patent sale generated $4.5 billion (U.S.) for creditors of
insolvent Nortel Networks, its retirees are facing a huge cut in
pension income, along with a clawback of benefits paid out over the past
10 months.
“This is hitting our family very hard,” said Jayne
Price, whose 89-year-old father, John Price, supervised a staff of 300
Nortel engineers in Quebec until he retired in 1980.
John
Price and the other 12,000 or so Nortel pensioners in Canada began
receiving individual letters Wednesday from pension administrator
Morneau Shepell announcing “interim” cutbacks in benefits starting with
the Aug. 25 pension cheques.
Ontario estimates an average Nortel
non-union employee who worked in this province faces an 18 per cent
reduction in benefits. Workers who spent their careers outside of the
province, and were entitled to indexed pensions, will see average cuts
of 31 per cent for non-union staff and 25 per cent for unionized
employees.
The cuts are deemed interim
because benefits will be recalculated higher to reflect Nortel's
liquidation sale that yielded total proceeds of more than $7.6 billion,
far greater than the company had forecast.
Cash from the
auction, plus an estimated $1 billion Nortel still has on hand after
seeking creditor protection in 2009, will be split among bondholders,
suppliers and former employees in a global process that involves
conflicting and overlapping claims.
Nortel sought creditor protection under the strain of more than
$4 billion in bondholder debt, a legacy of its acquisition binge during the tech bubble of the late 1990s.
A
group called Nortel Retirees and Former Employees Protection Canada
has urged a forestalling of the benefit cut until the liquidation sale
proceeds could be distributed, at least for the most vulnerable
retirees.
But a spokesman for the
pension administrator said it will be the end of the year at the
earliest before the windup process is complete.
“We can't wait forever,” said Hamish Dunlop, a principal at Morneau in Toronto. “This could take years.”
The
Morneau letter cites “insufficient assets to fully satisfy benefit
requirements,” indicating that retirees on average will be paid 70 per
cent of their full pension entitlement in Ontario, and 59 per cent
outside of Ontario, where most Nortel pensions are indexed.
“We regret that such action is necessary in light of the pension plan underfunding,” the letter said.
And
since Nortel retirees had been receiving full pension benefits since
last October when the windup of the $5 billion Nortel pension plan
began, they must return overpayments.
For John Price, the cut in
pension amounts to $600 monthly, while he owes another $52 per month to
cover the benefit overpayment.
“We read about unbelievable
amounts of money for sales of Nortel patents. . . . Where is the money
for us? The frustration is overwhelming,” he said.
His daughter
added: “My mum is 81 (in long-term care in Toronto) so he's going to
have to sell his car so he can take the bus to see her every day.”
Anne
Clark-Stewart, a Nortel retiree representative, said many Nortel
pensioners will struggle with the immediate loss of income, while gains
from the asset sales won't appear until much later.
The Nortel
Retirees group says the average age of Nortel pensioners is 74, and 80
for their survivors. About 350 pensioners were older than 85 and two
were past the century mark at the most recent count in 2006.
The retirees include more than 1,200 widows and widowers whose pensions have averaged $9,800 per year, before the benefit cut.
Conversely,
the robust interest in the auction of Nortel wireless patent that
wrapped up July 1 means Nortel bondholders will be paid at least 100
cents on the dollar, and could even turn a profit on their investments.
“It's just not fair,” said Clark-Stewart. “Our pension laws are archaic; they put corporations before people.”
Ontario
Finance Minister Dwight Duncan said this month that the Nortel
pensioners will have the choice of opting out of the Nortel plan and
investing their reduced pensions in annuities, a choice retiree
advocates have lobbied for over many months.
“Nortel pensioners
asked for greater flexibility with their retirement funds, and the
McGuinty government has delivered,” Duncan said.
Clark-Stewart, a
former Nortel executive, noted that Ontario provides a pension top-up
to Nortel retirees' benefits up to $12,000 per year, but said the
provision through the Ontario Pension Benefit Guarantee Fund will be
paid back from Nortel assets in Canada before any money goes into
pension funds.
Paul Miller, the Ontario NDP's critic for seniors'
issues and pensions, said the Nortel episode points to the need for
pension reform in the province.
Former Nortel staff whose
careers included work in the United States and Britain may fare better
because those countries have pension insurance plans that cover up to
$60,000 of annual pension income.
It's amazing
how much damage Nortel continues to inflict on the lives of Canadians.
Not only did most Canadian investors, including our largest pension
funds that were loaded up to the hilt on Nortel stock, experience a huge
haircut after this company crashed during the tech meltdown, now we
have the aftereffects of bankruptcy hitting Nortel's pensioners and
especially Nortel's disabled which recently got screwed over by the Supreme Court of Canada.
Of course, don't worry about Nortel bondholders, they're sporting big smiles:
Even
Nortel’s investment bankers have admitted that the $4.5-billion (U.S.)
Canada's one-time star reaped in its patent auction “was higher than
any of us would have expected.”
Because
there has been so much surprise on the upside, bondholders now not
only expect to get their full value, but also what is known as
post-petition interest, or the interest that they would have earned
since the bankruptcy filing.
With so much hope, the
bonds have rallied significantly. According to Debtwire, some of
Nortel’s bondholders believe the company’s U.S. subsidiary, Nortel
Networks Inc., is solvent, which means they could get post-petition
interest on three U.S. dollar debt issues and up a recovery value of up
to 135 per cent.
At this
point that’s still viewed as egregious, but current trading levels do
imply that recovery plus some interest is expected. At the moment the
10.125 per cent bonds and the 10.75 per cent bonds are trading around
$108, up from around 80 cents on the dollar a year ago.
While Nortel’s patents were always expected to fetch some cash, the
bonds have rallied so much since the July 1 auction decision because few
observer expected them to be worth more than $2-billion. And on Monday
the big deal officially became a reality after U.S. and Canadian
judges approved the deal.
In total, Nortel has earned about
$7.7-billion from asset sales. Theoretically, that should spell good
news for pensioners as well, who have been locked in a big legal battle
with Nortel and its creditors. But now that bondholders are hoping for
post-petition interest, who knows what the workers will end up
getting.
Finally, don't forget about who's sporting the biggest smile of them
all, Nortel's former CEO, John Roth. He made off like a bandit, selling
all his shares at the top before retiring (talk about great timing!).
I
remember because at the time I was making money buying out-of-the-money
Nortel call options, listening to my Nortel analyst at the National Bank
Financial who was touting this company as the "next best thing." I
thought I was going to retire rich; instead I learned the most valuable
lesson of all, the value of losing money. Never trust what the weasels at the top say; always pay attention at what they're actually doing.
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Pensions doomed
Insurance dooooomed
Banking doooooooooomed
Derivatives dooooooooooomed
US Muni Debt doooooooooooomed
State Education doooooooooooooomed
State Healthcare doooooooooooooooomed
State Subsidised Transport dooooooooooomed
EU Countries doooooooooooooooooooooooooomed
US Government dooooooooooooooooooooooooooomed
Canadian Property doooooooooooooooooooooooooooomed
Leo's Green Investments doooooooooooooooooooooooooomed
All Western Institutions floating on ideaology rather than productivity dooooooooomed
...i had some good news today but forgotten it now!
It's John Price's own fault for violating the laws of nature and evolution. Most mammals die shortly after their reproductive systems shut down. In the case of humans, this should probably refer to their cash flow systems. Of course there are certain exceptions. David Rockefeller's cash flow system will never shut down, and he should rightly be kept alive to the ripe old age of 300, even if it requires daily transfusions of fetal blood.
...mmm...what happened to "We The people?"
Creditors seem to have made out like Banditos....Billions to celebrate....
However, I read in the early 1900s, the Supreme Court supremely wrote that pensions, retirment plans, etc were merely "gifts, not promises" that could be retracted at any time at the discretion of the employer.
Seems to be two extremes...these old disabled folks who get 'cut off" at one extreme and the other extrmeme of Califonria Lifeguards who ara handed $150,000 tp $200,000 a year salary and then retire at 90% of their salary at....you guessed it, 50 years old.
Seems that we need more fairness...balance, eh.
Yep, every few months I get a 'critical status' update on a pension I have 15 years credit in. It's ranked one of the worse. Can't believe I was stupid enough to listen to the union reps back in the day that convinced me saving for retirement was a stupid idea because we already have a pension. Sonofabitch! Thank god I was at least smart enough to pay off most of my debt. However here I sit at 40years old, no job, and all I hear from the union reps is 'keeping sending dues, things will get better next year'. This is the 3rd year in a row i've heard that, I actually withdrew a couple years ago and told them to go get fucked.
Of course the pensioners are getting screwed.
I bet back in 1981 these engineers had enough piss and vinegar to fight, but now that they are in their 80's, what are they going to do?
Ponzi, ponzi, ponzi - like most corporate pensions and governments.
Make promises you can't keep so people devote their lives to your service, than pull the rug out from under them when they are dead or too old to haul you off to the gallows or guillotine.
I'm coming around to the view that many pensioners need to wake up. If they actually spent a minute thinking, they would realize there is no way the promises can be delivered on. It's like being outraged because you were promised oceanfront property in Arizona and you can't get it. Penisoners need to accept that they got fleeced, and start rebuilding on honest foundations. Pensions need to cut the crap.
First principle: you don't need a pension to invest in sold safe stock that will give you 3% div plus capital appreciation. Put some money in bonds. The least pensions could do is be honest about what they can realistically deliver.
Second principle: if you feel the need to try and beat the sharks, don't count on a pension fund to do it.
The pension fund managers and actuaries projecting 8% returns need to be jailed for fraud.
The pension fund managers and actuaries projecting 8% returns need to be jailed for fraud.
No, they need to be out on their ass.
Show Me The Money!
Bond Holders?
Retired Employees?
Who gets it?
Hmmmm??? I wonder???
They all got screwed when Nortel went under. Stockholders, bondholders, pensioners, employees. That's what happens when entities go bankrupt. The only ones who profitted were the stockholders who sold before the tech collapse.
> The only ones who profitted were the stockholders who sold before the tech collapse.
...like the CEO for eg. Some years ago I worked for a company where the CEO (an ex Treasury secretary) got a golden handshake worth several millions of dollars for completely ruining a once great computer company.
Who can you blame but the stockholders who elected the BOD. All I can say it to do your due diligence. Anyone who has invested in stocks has been burned by bad management and BOD. Don't count on the regulators to protect you. The SEC, FBI, DOJ, Democrats, Republicans and everyone else is looking out for themselves. Sarbanes-Oxley did nothing to stop the fraud. You can pass a million more laws and it won't do any good.
Repeated, again: Defined Benefit Pensions are by definition, fraud. It is impossible to define the future and therefore financial returns or benefits. It was a scam at the beginning, not the end. It just took a long time for the fraud to be revealed.
It has been obvious to anyone with any intelligence that Nortel was getting steamrolled by Cisco. Ditto for Alcatel/Lucent. If it was 1999 and you were an old pensioner you may have wanted to take some of that Nortel pension and divert accordingly. Could have just bought some Nortel puts and retired in style!
So......maybe folks who are benefitting from the largesse of the US treasury or their state, or local government may want to go to school on this Nortel tidbit. Companies go broke and so do governments. Kick granny to the curb. Not right, but neither is any fraud.
That's what happens when you depend on a company or government for your retirement. If the company goes bankrupt, you lose your pension. If the government defaults, you lose your pension. Yet the socialists keep telling us that we should all of our eggs in one basket and the government will take care of all our needs. How did it work out for the old USSR pensioners? Watch as the Europeon default domino rolls across the continent. Anyone depending on social security to retire is fucked. In government we trust.
True true.
Seems like it's going to be a slow, almost loving, fucking for those in the west however. Those looking for mad max aren't likely to find it.
Not mad max, but hard times like Argentina from 1999-2002. We will see chaos and lawlessness in parts of the country. We have 42 million people on welfare, 50 million people on social security, and millions more working directly for the local, state, and federal government or as contractors.
Well then say a prayer that neither you, I, nor our neighbors need to revert to cannibalism!