By Tom Hals

WILMINGTON, Del. (Reuters) - The U.S. government's pension insurer said on Thursday it opposed a deal to divvy up $7.3 billion left from the liquidation of Nortel Networks, potentially complicating efforts to end a seven-year battle over the cash.

The Pension Benefit Guaranty Corp, an independent federal agency, said it did not support an agreement reached Wednesday because it would not receive the entire $708 million it says it is owed.

James Bromley, an attorney for Nortel, said he was disappointed in the agency's opposition. "They know full well this is an appropriate and reasonable settlement."

Nortel stumbled from ranking among the world's most valuable companies during the 1990s Internet bubble to bankruptcy in 2009 and liquidation.

The sale of Nortel's businesses raised billions of dollars, and Wednesday's agreement divided that cash among former Nortel businesses in Canada, the United States and Europe, ending years of cross-border court fights.

The PBGC was not a party to the settlement, which is subject to court approval in the United States, Canada and other countries.

The agency's claim stems from the termination of Nortel's underfunded pension plan in 2009, which at the time had 22,000 participants.

The PBGC said it did not expect the settlement or its opposition to the deal to impact benefits for participants in the terminated Nortel pension plan. The agency said if its claim is not fairly resolved, however, companies that pay a premium to the PBGC to fund the agency will have to "shoulder a greater burden in the coming years."

Wednesday's settlement will distribute cash that has been tied up for years in court fights, but not everyone was happy.

An adviser to a group of about 60 Nortel long-term disabled employees in Canada said her group also opposed the settlement, which would pay them about 40 percent of what they are owed while bondholders are likely to collect 90 percent.

"Bringing a mess to an end is a mess that never should have occurred," said Diane Urquhart, an independent financial analyst who has been working with the long-term disabled former Nortel employees in Canada.

Still, Urquhart doubted the small group would be able to derail the settlement, which also distributes cash to more than 20,000 Nortel retirees in Canada.

An official representative of the larger group of about 350 long-term disabled former employees in Canada signed onto the settlement agreement.

(Reporting by Tom Hals in Wilmington, Delaware; editing by Grant McCool)