CAW President Ken Lewenza said the attempt to divide more than $9 billion in Nortel's remaining assets were derailed by bondholders who wanted to be paid in full on the bonds plus interest.

"I struggle to imagine a more unjust situation in the case of a bankruptcy, where bondholders expect more than full payment," Lewenza said in a Friday statement, adding that CAW members have dealt with more than 50% cuts to their pensions.

Chief Justice of Ontario Warren K. Winkler ended the mediation on Thursday, Jan. 24.

Brian Maddox of FTI Consulting, who is advising the bondholders, said: "The bondholder group was disappointed that the mediation failed to result in a successful resolution of the allocation dispute among the Nortel estates. However, the statements by some parties that blame the bondholders for that failure are simply false. The bondholder representatives were not the ones that walked away from this mediation. It is unfortunate that others appear to have chosen litigation rather than a consensual resolution that would get distributions out to creditors."

CAW said that it "sees the potential for extended litigation before bondholders agree to a fair settlement or Canadian courts take jurisdiction over the entire Nortel case and force a resolution."

The debtor's affiliates, unsecured creditors, and bondholders were ordered to mediation originally on June 17, 2011, to establish an allocation protocol for roughly $3.7 billion in sale proceeds.

Mediation counsel Paul Le Vay of Stockwoods LLP declined to comment.

Nortel did reach an agreement with its official committee of retired employees on Dec. 28, where it will pay $66.88 million to terminate the benefits on May 31.

Nortel, the U.S. arm of Canada's Nortel Networks Corp., filed for Chapter 11 on Jan. 14, 2009, one day before its parent was due to pay about $107 million in interest on its debt. On the same day, Norton Networks Corp. of Mississauga, Ontario, and affiliates including Nortel Networks Ltd., sought Chapter 15 protection in Delaware and applied for CCAA protection from creditors in the Ontario Superior Court of Justice. Its U.K. units were placed into administration proceedings that day in the High Court of England and Wales as well.

The telecom's French unit, Nortel Networks SA, followed, filing a liquidation proceeding in the Commercial Court of Versailles, France, on May 28, 2009.

Although Nortel initially hoped to reorganize, the company later shifted tactics and began to sell off its businesses one by one.

James Bromley, Lisa Schweitzer, Paul Shim, Paul Marquardt and Daniel Ilan are debtor counsel for Nortel Networks Inc. at Cleary Gottlieb Steen & Hamilton LLP. Eric Schwartz and Annie Cordo of Morris, Nichols, Arsht & Tunnell LLP are debtor co-counsel.

Michael Lang of Ogilvy Renault LLP represents Nortel Networks Corp.