Nortel Networks said on Jan. 14 it filed for bankruptcy protection in the U.S. and Canada in an effort by the once high-flying telecom giant to weather the financial crisis and restructure its debt. Once Canada's largest company, Nortel has been struggling since the dot-com collapse and a shifting of the telecommunications landscape. It was facing a payment of $107 million in interest on its debt.
The company, one of the world's biggest makers of telecom equipment, said it would seek creditor protection under the Companies' Creditors Arrangement Act in Canada and the U.S. bankruptcy code's Chapter 11.
The company lost US$3.4 billion in the third quarter as revenues fell 14%. Last year, Nortel said it was slashing 2,100 job mostly in North America and would transfer another 1,000 jobs to lower-cost countries, following deep losses.
"The company's normal day-to-day operations are expected to continue without interruption," Nortel said. "Nortel remains 100% focused on serving customers worldwide through continued R&D investments and support of its product portfolio to fulfill customer needs."
"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," said chief executive Mike Zafirovski.
Nortel said the filings came as its reorganization plan started in 2005 ran into problems. "However, the global financial crisis and recession have compounded Nortel's financial challenges and directly impacted its ability to complete this transformation. Nortel is taking this action now, with a $2.4 billion cash position, to preserve its liquidity and fund operations during the restructuring process."
A series of petitions filed in a Delaware U.S. federal court included one from the parent Canadian firm that listed assets and liabilities both exceeding one billion dollars.
Nortel said it would make similar filings in European courts. It said affiliates in Asia, including LG Nortel and in the Caribbean and Latin America, as well as the Nortel Government Solutions business, were not included in the proceedings.
Nortel, which does business in 150 countries and has 30,000 employees, traces its history back to 1882 as the mechanical department of Bell Telephone Canada. It was later known as Northern Electric and Northern Telecom before changing its name in 1999 to Nortel Networks Corp.
Nortel was selected to be the official network supplier tor the Vancouver 2010 Olympic and partner for the London 2012 Olympic Games, providing network communications equipment.
Copyright Agence France-Presse, 2009
