Nortel Networks files for bankruptcy protection

Special to The Canadian

Once a high-flying darling of the technology sector and a stock market heavyweight, Nortel Networks filed for bankruptcy protection on 14 January 2009 in both Ontario, and south of the border, in Delaware.

The move came a day before the Canadian telecommunications company was due to make a $107-million interest payment on its debt.

The board of directors of North America's largest telecom equipment maker met in Toronto on Tuesday night to discuss the company's financial options. In a release, the company said the decision to file for protection was a unanimous move by its board.

The company said the process will allow it to deal with its cost and debt burden, restructure its operations and narrow its strategic focus.

While Nortel said it has about $2.3 billion in cash, it owes about $4.5 billion US in long-term debt.

"Nortel must be put on a sound financial footing once and for all," said president and CEO Mike Zafirovski.

"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," he said in a release.

Federal Industry Minister Tony Clement said the government will continue to work with Nortel during its restructuring through Export Development Canada, the government's export financing arm.

EDC has agreed to provide up to $30 million US in 30-day financing, although that hinges on a court granting EDC some security over the assets of Nortel's Canadian units.

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