Jan 14, 2009 : Nortel Files for Bankruptcy Protection
📅 - Canadian telecommunications equipment manufacturer Nortel Networks (nortel.com) reportedly filed for bankruptcy protection Wednesday, according to reports by The Globe and Mail.
On Wednesday morning, Nortel applied for court approval for creditor protection in Delaware, and was also expected to file in Toronto.
The company's board of directors met Tuesday evening to discuss its financial issues, as the ongoing recession has led to a significant decline in phone company clients.
In September, Nortel placed many of its divisions up for sale and still has yet to find any prospective buyers. The technology firm now faces the possibility of paying $107 million in debt interest on Thursday.
In addition to the hefty interest on its debts, Nortel also faces a Wednesday deadline of up to $750 million in credit payments from Export Development Canada, after the company was given a 30-day waiver on December 15 from the government agency.
Meanwhile, Nortel shares took a further dive Wednesday morning in European trading, with shares dipping as low as 35.41 cents Canadian on the Frankfurt Stock Exchange, before eventually moving up to 37.66 cents. On Tuesday, the company's total value of shares was worth $192 million.
Although the company is not yet bankrupt, it has reportedly used much of its cash and has $4.5 billion in long-term debt from major lenders like JPMorgan Chase, Citigroup and Royal Bank of Canada.
And while filing for chapter 11 gives Nortel more leeway in selling or restructuring its divisions, the company stands the risk of losing a considerable amount of business.
The company will now likely have to sell its divisions to decrease its debts under the supervision of a judge, including its Ethernet unit, its carrier networks unit and the enterprise division. Nokia Siemens Networks, Telefon AB LM Ericsson, Cisco Systems and China's Huawei Technologies are all speculated as potential buyers.
Though the telecom manufacturer has been struggling financially for quite some time, it was at one time considered one of the largest companies in the world.
Founded in 1895 as Northern Electric and Manufacturing, the company peaked in 2000 with a market value of $366 billion and 95,000 employees.
Today, the company has downsized its staff to almost a quarter of this with 26,000 employees on staff, after undergoing a series of layoffs over the past eight years.
The company has also had its share of controversy within the past decade. In June 2008, former Nortel CEO Frank Dunn and two former top finance executives were charged with fraud following a 2002 to 2003 accounting scam that took up tens of billions of dollars of stock market value.
On Wednesday morning, Nortel applied for court approval for creditor protection in Delaware, and was also expected to file in Toronto.
The company's board of directors met Tuesday evening to discuss its financial issues, as the ongoing recession has led to a significant decline in phone company clients.
In September, Nortel placed many of its divisions up for sale and still has yet to find any prospective buyers. The technology firm now faces the possibility of paying $107 million in debt interest on Thursday.
In addition to the hefty interest on its debts, Nortel also faces a Wednesday deadline of up to $750 million in credit payments from Export Development Canada, after the company was given a 30-day waiver on December 15 from the government agency.
Meanwhile, Nortel shares took a further dive Wednesday morning in European trading, with shares dipping as low as 35.41 cents Canadian on the Frankfurt Stock Exchange, before eventually moving up to 37.66 cents. On Tuesday, the company's total value of shares was worth $192 million.
Although the company is not yet bankrupt, it has reportedly used much of its cash and has $4.5 billion in long-term debt from major lenders like JPMorgan Chase, Citigroup and Royal Bank of Canada.
And while filing for chapter 11 gives Nortel more leeway in selling or restructuring its divisions, the company stands the risk of losing a considerable amount of business.
The company will now likely have to sell its divisions to decrease its debts under the supervision of a judge, including its Ethernet unit, its carrier networks unit and the enterprise division. Nokia Siemens Networks, Telefon AB LM Ericsson, Cisco Systems and China's Huawei Technologies are all speculated as potential buyers.
Though the telecom manufacturer has been struggling financially for quite some time, it was at one time considered one of the largest companies in the world.
Founded in 1895 as Northern Electric and Manufacturing, the company peaked in 2000 with a market value of $366 billion and 95,000 employees.
Today, the company has downsized its staff to almost a quarter of this with 26,000 employees on staff, after undergoing a series of layoffs over the past eight years.
The company has also had its share of controversy within the past decade. In June 2008, former Nortel CEO Frank Dunn and two former top finance executives were charged with fraud following a 2002 to 2003 accounting scam that took up tens of billions of dollars of stock market value.
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