Nortel Gets More Time to Restructure

Nortel Networks has been granted a three-month extension to the bankruptcy protection order granted by the Ontario Superior Court of Justice. The firm now has until July 30th to put together its restructuring plan for approval by the court.

The company also announced that it has secured a further US$30 million of export guarantees from Export Development Canada (EDC). The amendment also clarifies that going forward, the charge over certain of Nortel's assets in favour of EDC will only extend to new support provided after January 14, 2009 and rollovers or extensions of pre-existing support made before April 14, 2009. The amendment and extension of the support facility has been approved by the Canadian Court. Nortel and EDC continue to work together to see if a longer term arrangement, acceptable to both parties, can be reached.

Nortel filed for bankruptcy in January in the USA and Canada after losing almost US$7 billion since 2005. Since the bankruptcy protection order was granted, there have been persistent rumours that the company may seek to break itself up rather than restructure.

The company is also facing a cash flow problem as much of the R&D costs occur in Canada, whilst the revenues accrue in the USA. Under the US court order, cash flows from the USA to Canada are currently frozen to protect US creditors. The creditors have agreed to an interim transfer of US$157 million to the Canadian division, although this is awaiting court clearance.

Posted to the site on 29th April 2009