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Sometimes it’s better to be lucky

Another look back at the events that ended my career at Nortel and its impact on me. More importantly, on many other folks (as I got out relatively safely, only losing a lot of stock and options). I wrote this on the day that Nortel declared bankruptcy. Folks at the time, said was only temporary, it wasn’t. These are my raw feelings on that day (January 15, 2009). It is better to be lucky in life.


With Nortel’s bankruptcy protection announcement yesterday, there is a sickening scenario for some very unlucky folks (many I know personally). Today’s title comes from one of my favourite expressions, “Sometimes it’s better to be lucky than talented,”. That is how I feel right now.

I  am OK

Nortel it is better to be lucky
Nortel Once a Giant Now Deceased High Tech Firm

As background, let me outline what has happened to me regarding my layoff.

Due to restructuring, I was notified of my redundancy on July 30th of 2008. This meant that I would still be on the Nortel payroll for the next TWO months. I would have access to my office and such, and I could look for jobs inside of Nortel. On July 30th, I was also given the specifics of my severance package. The severance was quite generous, pretty much a complete year of pay.

As part of the severance procedure, I had to take my entire severance payment (lump sum) on September 30th, or I could take some then and delay some until January 2nd 2009. The lump sum was payment was split and I received a part in September and a portion in January. This was done so I didn’t have a huge tax bill for 2008.

I also was given a choice to opt-out of the Nortel pension plan. I did so, and I received those funds just before Christmas as well.

All this means Nortel owes me no more money. There is a small caveat to this, which is not worth mentioning. Therefore Nortel filing for bankruptcy protection has no direct effect on me financially. Hence to comment about better to be lucky.

Some are Not So Lucky

Those notified of their redundancy after November 16th, 2008, are now in limbo (or possibly hell, I am not sure). I have heard from one former associate that his severance package is now “gone” because he has not received it yet.

I do not know if this is just hearsay, rumour or fact, but it is possible. The severance package becomes part of the liabilities Nortel owes. It may well be that these severance packages are now “unsecured debt” and must be dealt with as part of bankruptcy protection.

If these folks do not get their packages, this would be diabolical (in my opinion), and I hope this is not the case, but I suspect it is a real possibility. (it was, and many folks got little or none of the money they were owed).

As for pensioners (retirees from Nortel), I do not know where this leaves the pension plan, given it is underfunded and the repayment of the short-fall must be dealt with as part of the bankruptcy protection plan.
In terms of investors, anybody who still holds stock in Nortel is out of luck, the paper is worthless (at least that is my guess, I am willing to hear arguments to the contrary), and the Bondholders are now part of the bankruptcy protection plan as well.

I didn’t know that since Nortel was self-insuring, all folks on Long Term Disability were treated as creditors and lost their benefits.

Bad Day Financially and Other Ways too

A sad day for me, seeing a company that I worked for and enjoyed most every day there take another step toward oblivion. Many of my co-workers and former compatriots are in a “bad way” thanks to some very questionable decisions by the Senior Management Team.

I remember I was at a GIS where the present CEO, Mike Zafirofski , was attempting to put a friendly smile on the capping of the pension scheme. A former co-worker went up to the mic and criticized the CEO and asked the pointed question at the end, “… I don’t know how you sleep at night!” I wonder how Mike Zafirofski is sleeping these days?

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Nortel Teeters?

From the archives, I was writing quite often after I was laid off from Nortel, and this was on the day Nortel Declared Bankruptcy. In retrospective it was good that I got laid off, but the bankruptcy (January 2009) was horrible for many good people.

In the news the past few days have been talk of the former Telecom Juggernaut Nortel filing for Bankruptcy protection due to a loan repayment that may be due this week (there is no clear statement that this is actually the case).

What does this really mean?

To the folks still working there, not too much, life will go on and their jobs will most likely continue for now.

The concerns I am hearing are from an interesting cross-section of former and current Nortel employees:

  1. Folks who have just been notified of their redundancy, however they have not received their severance packages yet, if the company files for bankruptcy protection, what happens to these agreements
    • Unfortunately, folks with severance packages did not receive much money, and are owed millions.
  2. Pensioners, what happens to the pension plan which is already under funded? In bankruptcy protection what happens to the Pension liability?
    • Pensioners took a big hit, and lost their medical coverage as well.
    • Another area I didn’t know about was that those that were on long term disability lost their coverage, as Nortel was self-insuring.
  3. Current employees who were hoping to be laid off and getting a fair severance package? Rumor has it that lay offs are on hold, due to a lack of funds to pay them out? Sounds like an interesting rumor, but completely unsubstantiated as well.
    • There are a couple of employees that work for Nortel the company, but they are lawyers.

What did the Future Hold

Under bankruptcy protection a quick sale of Nortel may happen as well (it didn’t), and if that happens the creditors of the “old” Nortel may well have more issues dealing with the new owners as well.

Epilogue from a long time after: In hindsight Nortel was such a mess with its Pension under funding, and managerial blundering it was obvious (in hindsight) that it would never come out of bankruptcy protection (but that is with the aid of hindsight).

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Thoughts: Is it Safe?

After this week, the easy answer to my post, Is it Safe? is NO! That is for sure another terrible week on the Stock Market worldwide, and things are not looking up shortly. The S&P TSX Index had its second-worst percentage drop ever.

“…The S&P/TSX closed down 9.02 percent, or 765.80 points, to 7,724.76 as the oil price slid as low as $49.50 (U.S.) a barrel. It’s the first time the index has closed below 8,000 since December 2003…

  • Free Money Finance asks the question Who Gets to Keep The Ring When an Engagement is Called off? I can say in my case, I asked for it back, but I felt it was my right. I also got a full trade in value (back then People’s jewelers did that).
  • Michael James continues his graph work to illustrate why MER: Death by a Thousand Cuts . If you own Mutual Funds, you really need to look at this one.
  • Canadian Capitalist has some Ideas for your TFSA , which are quite good. I am still not sure what type of account we may open and how might use it, but we better decide soon, I guess.
  • Ellen Roseman writes about How to cut back and be frugal, I guess frugality is the new extravagance? Kind of like short is the new long? I never understand fashion metaphors.
  • Canadian Tax Resource suggests using RRSPs to Offset Capital Gains, which means the tax on the Capital gains. Be nice to have Capital Gains to worry about.

I am on Twitter for those who feel your life would somehow be fulfilled seeing my wit and commentaries as I think of them. Follow me.

I have ten followers for now, and I am still astounded. Anyone cares (although I follow Stephen Fry, so I guess I am no better).

As for the question, I was toying with having an Umpire picture with the caption “Not Safe.” Then I teased with a giant condom picture but figured that was a little vulgar (safe = prophylactic), so I ended up with this picture showing many dangerous things, and the answer, that it is not safe yet.

Have a safe weekend!

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Thoughts: Financial Extinction Week

Given the photo thematic premise of the week that is about as pithy a title as I could pull together for this week’s wander through the world of Financial Blogs.

What I wrote that Week

Figured I’d spice things up and add in what I wrote that week as well:

The Financial Apocalypse Has Been Delayed This Week

Well not really, given how badly the markets have been and how far the Canadian dollar has dropped, it has been a rough week for most folks, who are investing, and a good week for those who have cash.

  • Given this week I have been “piling on” about dinosaurs and my former employer, I’ll add another voice which is the Financial Post saying, Nortel’s New Target Price is Zero . It is not just me who is bitter and twisted on this subject, but now more than ever I want ALL my money out of them very soon.
  • For those of you wondering Has The Hadron Collider Destroyed the World Yet, the link will take you to the site to answer that question. If it answers yes, feel free not to read the rest of this posting.
  • Michael James asks the very good question Do Investors Need to Be Good at Math ? I think the answer in my mind is YES, but I have a Math degree as well.
  • Larry MacDonald found a very interesting Growth Stock for a Depression, however I would never have thought of this company.
  • The Canadian Capitalist mentioned about Discount Brokerage Fees especially with TD Canada Trust. I have noticed this one myself, and Nerd Money has also been talking about TD RRSP fees, as well.
  • That One Caveman points out the advantage of a Cash based Christmas , something I always espouse. Once you run out of cash, you have finished buying presents!
  • Preet over at Where Does My Money go announced His New Career , showing a lot of courage during an economic downturn, to decide to change careers. I wish him good luck, although it isn’t really a new career, just new ways of doing things, which is cool too.
  • Nancy Zimmerman points out that Canadian Spies are Paid Well . I hope so, I am hoping to get a job there, but I guess since I am talking about it, maybe I won’t be getting that job.
  • Promod over at the Riscario Insider talks about How an Actuary Invests, which is interesting because he is someone who knows his Math!
  • Canadian Tax Resource tells asks What are In-Trust Accounts (and answers the question too).
  • Money, Matter and More Musings points out that we are all Socialist when Poor, Capitalist when Rich , which I tried to explain to my kids, but they looked at me like I was from the U.S.S.R. !

Snow is promised soon in Ottawa, and my snowtires are not on as of yet, but with gas at 80 cents a liter, maybe I should put my tires on soon (snow tires give worse gas mileage, but compensate by allowing you to stop, instead of plowing into a tanker truck).

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Nortel a Dinosaur?

I wrote this article while there was still a small question about whether Nortel might survive (#SpoilerAlert they didn’t).

Nortel Announces More Cuts

The 3rd quarter results for Nortel came out a day ago. A new corporate model was where Nortel would set up three business units but cut 1300  more jobs.

Nortel will also be looking at their Real Estate holdings to see whether there is money in those areas to help the company survive. A freeze on salaries was announced, and a hiring freeze, which seems an obvious move. I have seen a few experts question whether this means a freeze on Executive compensation packages as well? John Chambers has taken a $1 in tough times at Cisco. Will Nortel leadership do the same?

Soon to be Extinct?
Soon to be Extinct?

Is Nortel a Dinosaur?

It does seem to be that maybe the problem with Nortel is not necessarily only its business models, but perhaps its markets are starting to dry up.

For the past few years, their cash cow, the CDMA Wireless business, has been starting to dry up for revenue. Now with Bell Canada and Telus announcing a shift by promoting an “overlay” GSM/UMTS (HSPA) network (shutting Nortel out of the contract), that may well be another sign of the coming extinction of this former Telecomm giant.

The splitting of the company into three distinct business units allow for quick and easy:

  • Sale of the division, if needed to raise cash
  • Shut down of the division if the business is unable to compete.

New Housing Price Increase Slows

Across the country, new house prices have increased by 2.1% year over year. In Ottawa year over year, the new house prices are up 4.3%, which is interesting. However, Edmonton seems to be having price drops of over 5% year over year as well. It depends on where you live, but buying a new home is increasing (but slower than before).

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