Nortel files for bankruptcy protection

Nortel Networks yesterday filed for bankruptcy protection, citing the global financial crisis and recession as reasons that compounded its financial challenges and directly impacted the company’s ability to complete the transformation programme underway since 2005.

Nortel owes more than US$3.6 billion in bonds, with US$1 billion in debt coming due over the next two years

Last month Comm. reported how Nortel had received notice from the New York Stock Exchange that the vendor’s stock had fallen below the continued listing standards. Nortel’s average closing price on the exchange had been under US$1.00 for 30 consecutive trading days and as such the company needed to either remedy this or face the possibility of being delisted. Shares in Nortel closed January 13 at US$0.32 cents, having fallen 97 per cent over the past 12 months.

Nortel said that it owed more than US$3.6 billion in bonds. Those bondholders are being represented by the Bank of New York Mellon as a trustee. Nortel is also seeking bankruptcy protection in Canada, while certain of the company’s EMEA subsidiaries are expected to make consequential filings in Europe. More than US$1 billion in debt is coming due over the next two years, a situation which was also a factor in Nortel seeking bankruptcy protection at this time.

“Nortel must be put on a sound financial footing once and for all,” said Mike Zafirovski, Nortel’s CEO, in a statement. “These actions are imperative so that Nortel can build on its core strengths and become the highly focused and financially sound leader in the communications industry that its people, technology and customer relationships show it ought to be.”

Nortel said that it has US$2.4 billion in cash on hand to finance its operations.