Thank you, Mr. Chairman. Merci, monsieur le président.
I'm Don Sproule, and I'm the national chair of the Nortel Retirees and former employees Protection Canada. I represent some 17,500 pensioners and 1,500 former employees, and we're located all across Canada: London, Calgary, Toronto, Belleville, Kingston, Montreal, Halifax, and points in between. With the layoffs that are now under way at Nortel, we expect the pensioner numbers to increase to around 20,000 Canadians.
Nortel filed for creditor protection in January 2009, and by June 2009 it was patently clear that Nortel was not going to restructure. In fact, they were going to proceed to wind up.
In January of last year, I woke up to the fact that my pension was not secure. I just did not believe it. I read several statutes and thought I'd found umbrage in the WEPPA legislation, only to find out that unpaid contributions are not protected under bankruptcy laws. In our case, there is an underfunding of the pension plan of about $1.1 billion. That means that when the cutbacks happen to the Nortel pensioners, we'll be cut back to something like 69% of our pension plan.
On September 30 of this year, the pension plan will be handed over to the provincial government, to FSCO, and probably cut back to the 69% level. In December of this year, our health plans will be cut back--terminated, in fact--so the combined cutback to Nortel pensioners will be in the order of a 40% haircut in terms of our payments from Nortel.
So how did we arrive at this situation? As I said, many people were surprised that we were not protected under bankruptcy, and many of our friends and families were equally surprised. We had no inkling that pension deficits were unsecured claims on the estate.
On deeper analysis, we found out that, as unsecured creditors, we're going to be pitted against the junk bond holders and foreign government agencies. We consider this to be a grossly unfair playing field, and if you look at the situation, the bondholders worry about a company going bankrupt. They actually say, “Is Nortel going to go bankrupt? If it is, I'll shorten the duration of the bonds I'll sell them; I'll raise the interest rates. In fact, I'll protect myself by actually cross-licensing my bonds between Canada and the United States in terms of the Nortel estate.”
They are skilled money managers, and they can buy a form of insurance called a “credit default swap”. If anybody's been reading the press lately, they'll know about the credit default swap and what it's doing to countries like Greece.
Credit default swap is a form of insurance, but it's not just like any insurance. You can actually go and buy.... It's like buying insurance on your neighbour's house and worrying--or maybe hoping--that your neighbour's house is going to buy down. That's the nature of the marketplace.
I, as a Nortel pensioner, will never be able to prove that there is a linkage between the credit default swap market and Nortel's demise. It's a very opaque marketplace. But I do believe there is something happening in terms of what's caused Nortel's demise, and I do believe that the junk bond holders are going to make out like bandits in terms of Nortel's demise, and they'll do it on the back of Nortel's former employees, both pensioners and people who were terminated without severance.
If you think about the pensioners on the other hand, the bondholders look at risk and they manage risk. The pensioners took a pension to avoid risk. My concern was, “Am I going to live too long?”, because--