"Buying opportunity" is almost always a trap, but this may be one. Currently trading down 7%.
Nortel Nears $2.5 Billion Settlement
Wednesday February 8, 8:22 am ET
Nortel Nears $2.5 Billion Settlement of Shareholder Lawsuits Over Accounting Scandal
NEW YORK (AP) -- Telecom-equipment maker Nortel Networks Corp. said Wednesday it has reached a tentative agreement to pay $2.47 billion in cash and stock to settle two shareholder class-action lawsuits over the company's accounting scandal.
Nortel, which has been working to recover from the scandal that forced it to restate previous financial results and terminate several senior executives, said it wants avoid being tied up in prolonged litigation. Shareholders filed numerous lawsuits against Nortel for allegedly violating U.S. and Canadian securities laws after it issued revised financial expectations for the 2001 fiscal year.
Under the proposed settlement, Nortel said it would pay $575 million in cash, issue 628.7 million shares, or 14.5 percent of its current equity, and contribute half of any funds it recovers from suits against former senior officers whom the company fired in April 2004.
Nortel said the stock portion of the payment would result in a $1.9 billion charge, based on Wednesday's closing price of $3.02 for Nortel shares. In total, on an after-tax basis, Nortel expects to incur a charge of $2.47 billion, or 57 cents per share, that will be recorded in its 2005 results.
"Our intent is to achieve a fair resolution of these lawsuits and avoid a prolonged, uncertain and costly litigation process," Nortel Chairman Harry Pearce said in a statement.
The proposed settlement hinges on several other terms, including that Nortel resolve other shareholder litigation involving its past financial guidance and restatement in 2003. The settlement also hinges on the parties coming to an agreement over corporate governance and insurance-related issues. Nortel said it has agreed to discuss governance issues with the plaintiffs.
In addition, the proposed settlement must get court, regulatory and stock exchange approvals.
Nortel said it is still negotiating toward a definitive settlement agreement, but it can't guarantee that one will be reached.
In September, Nortel disclosed that it was negotiating a potential settlement of the suits, and that the federal court in the Southern District of New York appointed a judge to mediate confidential talks.
Nortel shares fell 3 cents to $2.99 in pre-market trading. |
