PREVIEW-UK pensions case could shift creditor rankings

* Case a test on the pension regulator's powers, remit

* Pension schemes' claim could jump creditors queue

* Verdict could hurt administrators' advisory fees

By Cecilia Valente and Sarah White

LONDON, Nov 23 (Reuters) - A UK court case involving Lehman Brothers and Canadian telecoms firm Nortel could have dramatic consequences for the ranking of creditors in a corporate bankruptcy.

The case, which starts on Wednesday, will look at whether pension funds should rank above other creditors, including the fees paid to the administrators of failed companies.

The outcome will be key for the way insolvent companies tackle pension deficits. Lehman's deficit stood at 148 million pounds ($234.9 million) when it filed for bankruptcy, and Nortel's at 2.1 billion pounds.

The ruling could also have a big knock-on effect for administrators and their incentives for taking on cases.

One possible outcome could see pension fund claims classed as an expense that arose in the course of the administration -- meaning it would rank ahead of administrator fees.

It's a nightmare scenario for administrators, who would lose all certainty of being paid for their work if unexpected claims like these arise.

"That (ruling) would give a claim like this super priority, which would be the worst possible outcome for insolvencies generally," said one person close to the proceedings, who declined to be named.

The case involves the UK division of collapsed investment bank Lehman Brothers and Canada's communication equipment company Nortel, which filed for bankruptcy protection in 2008 and 2009 respectively.

The UK pension regulator's bid to recoup funds from both these companies is being challenged in the High Court case.

Paying out Nortel's huge pension deficit first would shrink the pot of funds available to other creditors and their administrators -- a lesser problem in the case of Lehman.

"Lehman has billions of dollars of cash, so this is a point of principle and precedent but not one that will have a big material impact," the same source said.

The case will also throw fresh light on the remit of the pension regulator, whose powers to enforce payments in bankruptcy cases are a moot point. Lehman and Nortel are the first to question this officially.

In terms of administrator fees, PricewaterHouseCoopers, the administrator of Lehman's European arm, has already received 262 million pounds ($419.6 million) over the last two years.

In total, fees paid out to lawyers and accountants for unwinding Lehman were close to $2 billion in September.

Either way, the court ruling is likely to spark a barrage of appeals from whichever side gets hit, people close to the parties involved said.

($1=.6300 Pound)

(Editing by Jane Merriman)