The UK Court of Appeal is currently
considering the case of Nortel & Lehman Brothers v The
Pensions Regulator [2010] 999 PBLR (052);
[2010] EWHC 3010, a case which has the potential to become a
pivotal interpretation of UK law for both insolvency
practitioners and lenders. The case hinges on the
question of where a company's pensioners rank amongst
creditors in the event of a bankruptcy. The Pensions
Regulator has sought to prove that, under UK law, pension
funds will always rank first, ahead of banks, bondholders and
unsecured creditors. In December 2010 this view was
upheld by the High Court in a ruling against which the
administrators acting for the estates of Lehman Brothers and
Nortel Networks now appeal.
Although the financial stakes in this
case are high (Nortel's pension deficit is estimated at £2.1bn
and Lehman's at £130m), the monetary element of this decision
is dwarfed by the potential impact of the case which many
commentators believe may lead to a significant reluctance of
banks to lend to companies with pensions deficits and
a resultant increase in the cost of credit.
