Defunct telecoms company Nortel Networks Inc reportedly reached a deal to cut over $3 billion in claims by its former European entities. A Reuters report said the deal would mark a significant milestone for Nortel towards ending its five-year bankruptcy.

As part of withdrawing their claims, the insolvent Nortel entities' administrators in Europe and a UK pension trustee will each give high-priority administrative claims amounting to $37.5 million, based on a court filing on Tuesday.

The U.S. Bankruptcy Court filing in Wilmington, Delaware read, "The settlement agreement represents a critical step forward by the parties to resolve the costly and contentious litigation amongst the Nortel affiliates."

The parties reportedly agreed to work together in order to resolve the division of $7.5 billion in cash raised from the liquidation of the former Canada-based telecommunications equipment maker, according to court documents.

The deal, said Reuters, ends the long-running and lengthy court fights over which entity of Nortel gets to own what, which stemmed from the complexity of unscrambling Nortel, which was once worth $250 billion and employed 93,000 people worldwide.

Bondholders, retailers and suppliers had been wanting to get repaid, said the report, which was in billions of dollars. The legal battles had been argued in various jurisdictions with a variety of law applications, making a finite court resolution happening, said the report. Moreover, several mediation rounds did not also achieve a resolution regarding the claims.

The deal on Tuesday resolved a pension trustee claim, who said that Nortel did not put not enough money for its retirees in the UK. The trustee was seeking over $1 billion from two Nortel entities located in North America.

Ad administrator who oversaw failed European Noterl entities sought hundreds of millions in dollars based on the theory that the bankrupt company was a shadow director, and therefore was ultimately responsible for the failure of its Nortel businesses outside the US.

The agreement as a result had withdrawn three of the four largest claims against the US estate of Nortel, which further reduced unpaid bills by $5.14 billion.