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Nortel Seeks Protection Extension

Ray Le Maistre

Nortel Networks Ltd. is seeking to extend its period of protection from creditors to the end of July, according to a document filed by the vendor's bankruptcy "Monitor," Ernst & Young, with the Ontario Superior Court of Justice on April 24.

Nortel announced in January it was initiating bankruptcy protection proceedings so that it could restructure its operations; since then it has reported deteriorating trading conditions and sold a small part of its business. (See Nortel Files for Bankruptcy Protection, Nortel Appoints EMEA Administrator, Nortel Loses Billions & Plans Bonuses, Nortel to Offload Data Gear to Radware, and The Decline & Fall of Nortel Networks.)

According to the latest filing, which provides an update of Nortel's attempts to achieve solvency, Nortel is seeking an extension to its protection until July 30. Its current period of protection expires on May 1. (See Nortel Gets a Stay.)

Ernst & Young notes that "the restructuring of Nortel will require significant additional time to formulate an agreed upon restructuring strategy... [the extension] is necessary for the restructuring strategy and plan to be fully developed."

Ernst & Young also notes that Nortel is "working diligently and in good faith towards developing a restructuring strategy to address its financial and strategic issues in the context of a complex multijurisdictional set of insolvency proceedings," and that the vendor "would have sufficient available cash resources" to get it through to the end of July. Nortel is looking for various ways to reduce its costs, including cutting staff and reducing its real estate commitments. (See Nortel Cuts 3,200 Jobs.)

The filing shows that Nortel had nearly US$2.6 billion in cash assets "held globally in various Nortel entities and joint ventures" as of April 11, but that about $525 million of that was tied up in joint ventures and in "restricted" assets that could not be used. "Available cash" amounted to just more than $2 billion, including $859 million in North America and $700 million in Europe.

The filing does not, however, provide any clues as to whether an asset sale agreement is imminent. (See Nortel M&A Plot Thickens, NSN Linked to Nortel Asset Bid, and Is Ciena Ogling MEN? )

— Ray Le Maistre, International News Editor, Light Reading

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User Rank: Light Beer
12/5/2012 | 4:06:04 PM
re: Nortel Seeks Protection Extension
Nortel mgmt simply does not care about the impact of not giving severances. This extension to July 1 is buying time to complete the dismantling of the company. By yearend the company will not exist. All its parts will have been sold or shutdown. So you can have a pile of folks pissed off about not getting proper severance and/or losing their pensions, but they will be pissed off at a company that no longer exists and mgmt that has retired. All the illwill they are creating has no consequences.
User Rank: Light Beer
12/5/2012 | 4:06:04 PM
re: Nortel Seeks Protection Extension

With all that cash in hand one would have thought that Nortel could have paid some severance packages. They didn't (at least, not in the UK). Instead, they had money for the manager bonuses. In Nortel farm all animals are equal but some animals are more equal than others.


User Rank: Light Beer
12/5/2012 | 4:06:03 PM
re: Nortel Seeks Protection Extension

The Ernst and Young statetment is telling: "...an agreed upon..." This is classic Nortel infighting. It must be nice to watch the game as the various divisions torpedoe each other for survival.

Nortel is just buying time. Aquirers are patiently waiting for Chapter 7, knowing this is the only way to "fix" the culture at Nortel. The fires of Chapter 7 are sure to remove entrenched undesirables.

Given the economic  outlook, Nortel must be praying for the easter bunny, the tooth ferry and many other mythical creatures.

It is hard to figure out what is funniest, the fact that Nortel is this deeply clueless as to it's irrelevance, or the hopeless legal game that only forestalls the inevitable.

One thing is certain: once there is no more money to pay the lawers, the selling will begin in earnest.

Did anyone find the "I believe" and Nortel downfall parts 1-12 videos on YouTube fitting? The "I believe" video was excrutiating to watch, the line that Nortel will be around in one or two years was over the top. The six sigma ninja black belts was also priceless.

However it happens, the end of Nortel will be a reflection of how they lived: clueless to the last, underhanded and ultimately self-defeating. They have been true to form so far.

Cheers Nortel!

User Rank: Light Beer
12/5/2012 | 4:06:03 PM
re: Nortel Seeks Protection Extension
It may seem like this is not the right thing in the people's eye but Nortel does need this extension to achieve solvency. There seems to be a lot of details that needs to be worked out
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