Where Was Nortel Management Before Bankruptcy Filing?
Significant patent value was not something that Nortel senior management apparently believed it was sitting atop when it filed for bankruptcy reorganization under Canadian and U.S. laws.
Could management have sold, borrowed against or otherwise leveraged the value of its vast patent portfolio and prevented the bankruptcy that will leave shareholders with pennies on the dollar?
What ever happens in the Nortel patent auction this week, whether reported contenders Google, Apple, Ericsson, RPX or Research in Motion win it, and for how much, Nortel shareholders will be getting the short end of the stick.
Common stock holders are typically the most subordinated party in a bankruptcy. They are the last to get paid, behind secured debt holders, trade and other creditors and lower on the totem pole than even unsecured junk bond holders. But with a family of some 6,000 timely mobile and telecom patents worth at least $900 million and as much as $1.5 billion, one has to wonder: Where was management regarding the IP value when equity holders needed them?
If Canadian bankruptcy laws are anything like the U.S.’s in a best case scenario expect investor to get a few shares in a new entity which may or may not succeed going forward.
A summary of the Nortel patent scenario can be found on paidContent.
According to AmLaw Daily Nortel lawyers have reported that: “Previous Nortel patent sales have yielded a combined total of some $3 billion for the bankrupt company’s estate.”
The publication also stated that “As of April 30, (law firm) Cleary had billed $128 million in fees for its work on the Nortel matter, with a bankruptcy court filing showing some 300 lawyers from the firm racking up hours on the effort.”
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Although thought to be the frontrunner it will be a surprise if Google wins the auction. It certainly has the cash and could make use of the huge portfolio, but it has other exclusivity issues to deal with at the moment, including an anti-trust investigation that resembles Microsoft’s. Last week Google bought Admeld for $400m.
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