On August 10, 2009, when Mike Zafirovski stepped down, Nortel chose not to replace the CEO position. Instead, the Board of Directors (and the court appointed monitor) assigned Paviter Binning, Nortel’s CFO, as Chief Restructuring Officer (CRO).
Binning was one of four executives responsible to the Board of Directors, the monitor, and the proposed U.S. Principal Officer. He had accountability for all four of Nortel’s business units. The three other executives included George Riedel (corporate strategy), Joe Flanagan (Nortel Business Services), and John Doolittle (restructuring activities).
Binning joined Nortel in November 2007, at the age of 47, as Executive Vice President and CFO. He came to Nortel with a 25-year finance background, including the role of CFO at Marconi Corporation PLC, and finance positions at Diageo PLC and Hanson PLC. His terms of employment included a salary of CDN $683K, CDN $1.35M restricted stock units, annual bonus of up to 100% of base salary, and long-term
incentives of CDN $2.3M. Separation terms included 18 months of base salary, 36 months of benefits, and vesting of restricted stock units.
During Binning’s tenure, most of Nortel’s assets were sold off. The CDMA and LTE business sold to Ericsson for over $1B, while the Enterprise business was sold to Avaya for $900M. The Metro Ethernet Business was sold to Ciena corporation for almost
$800M and other components of the firm were either sold or on their way to being sold by March 2010, when Binning stepped down from the CRO role.
Due to creditor protection, Binning was not required to hold analyst calls. During his eight months of leadership, he was quoted in three news releases and issued ten employee emails, all of which were directly related to the sale of particular assets (see Table 20 for an example).
Table 20: Binning’s CEO Email on Enterprise Sale (December 12, 2009)
Today Nortel reached another important milestone by concluding the sale of substantially all of the assets of our Enterprise and Government Solutions businesses to Avaya. This is our second large-scale divestiture of assets, following the recent completion of the sale of our CDMA and LTE Access assets to Ericsson.
While its never easy to bid farewell to an important and successful part of the Nortel family, we remain proud of their reputation for excellence and for their contribution to preserving the value of our innovation and know-how in the enterprise marketplace. Furthermore, we are pleased to have secured employment for more than 6,000 Nortel employees, who today became a part of the Avaya team.
There has been tremendous effort on the part of the Enterprise and Nortel Business Services teams that has allowed us to get to this stage of our agreement with Avaya. NBS is ready to deliver on our obligations under the Transition Services Agreement. I appreciate the hard work and long hours that have made today's announcement possible. Nortel employees can keep up with their progress on the new Transition Services web page <http://navigate.us.nortel.com/imds?pg=/tsa>.
It is important that we remain vigilant in the days ahead when it comes to respecting Nortel's and Avaya's intellectual assets. In some instances, you may have former colleagues who share Nortel facilities, but who now work under the Avaya banner. We remain friends, but professionally please keep in mind that we're now in different companies.
I would like to thank those who are joining Avaya for your years of professional and dedicated service to Nortel. We wish all of you great success in the days ahead. To those of us remaining with Nortel, please accept my thanks for your continuing efforts at protecting the value of our know-how for ourselves, our customers, potential buyers and all stakeholders.
Pavi
Binning officially stepped down as CFO, CRO, and EVP on March 21, 2010, but stayed for a short period to assist in the transition to Doolittle, who assumed his
responsibilities as CFO. The CRO position was not filled. On April 12, 2010, George
Riedel became President of the business units, in addition to his role as Chief Strategy Officer.
4.9 Epilogue
By the end of 2010, Nortel had generated over $3B in net proceeds related to the divestiture of all its businesses (including the sale of its Ottawa R&D facility for over CDN $200M) and had generated about $620M in annual revenue (down from $3.5B in 2009). As part of continuing operations, the company paid out almost $100M in retention bonuses to key employees. Through the divestitures, just over half of the 30,000
employed on January 14, 2009, were offered positions of employment in the acquiring companies. Nortel continued to fund healthcare benefits for its Canadian pensioners and survivors until the end of the year, along with survivor and long-term disability benefits, the plans of which were then wound up; healthcare benefits ceased, while pension, survivor, and Long Term Disability (LTD) payments were dramatically reduced due to underfunded pension and LTD plans. (In other regions, some of these decisions remain before the courts). During this period, Nortel also paid terminated employees a $3000 advance on their claims, for a total of about $4M.
In 2011, the firm sold its 6000 patents for $4.5B to a consortium of companies that included Apple Inc., EMC Corporation, Ericsson, Microsoft Corporation, Research in Motion Limited and Sony Corporation. “The extensive patent portfolio touched nearly every aspect of telecommunications and additional markets as well, including internet search and social networking” (Nortel, 2001 Annual report, Management Discussion and Analysis). By mid-2012, Nortel had about 500 million shares outstanding and $8B in
escrow (proceeds from divestitures). In August 2012, with about $600M in cash and 500 employees, the firm announced that it would cease any further financial reporting.
17In light of the foregoing, the directors and officers of NNC and NNL have indicated that they will step down from their positions with NNC and NNL upon the issuance of a court order under the CCAA that the Monitor will be seeking to extend its powers. Such order would allow the Monitor to exercise any powers that may be properly exercised by a board of directors and to terminate the engagement of NNC and NNL’s external auditors.
Following the third quarter 2012 filing deadlines, as a means of keeping the public informed of material developments during the remainder of the CCAA proceedings, and until otherwise determined by the Monitor, we and NNL will endeavour to continue to comply with the material change disclosure requirements under Canadian securities laws, to the extent practicable in the circumstances, and to file on SEDAR18 (the electronic filing system of the Canadian Securities Administrators) all court reports of the Monitor except for such reports, or portions thereof, in respect of which confidential treatment has been requested. All other continuous and current disclosure filings of NNC and NNL will be discontinued.
(Nortel 8-K, August 9, 2012)
17 NNC=Nortel Networks Canada; NNL – Nortel Networks Limited (US); CCAA - Companies' Creditors Arrangement Act.
18 SEDAR stands for the System for Electronic Document Analysis and Retrieval www.sedar.com
In January 2013, Frank Dunn, Douglas Beatty, and Michael Gollogly were acquitted in Canada of any wrongdoing. As of May 2013, creditor proceedings for the disbursement of Nortel’s $8B remained before the courts.