Ernst & Young to work with Nortel teams on restructuring process that will affect 5,000 staff in Europe

January 16, 2009

3 Min Read
Nortel Appoints EMEA Administrator

Accountancy giant Ernst & Young LLP has been appointed as the administrator to Nortel Networks Ltd. 's 19 separate operations in Europe, Middle East, and Africa (EMEA) as part of the Canadian vendor's global restructuring process that saw it file for protection from its creditors in North America earlier this week. (See Nortel Files for Bankruptcy Protection, Nortel Restructures, Spooky Nortel Anagram, Nortel: Lights Out, Nortel Gets CCAA Protection, and Should Nortel Be Sold for Parts?)

In a statement released late Thursday, Ernst & Young said Nortel Networks UK Ltd. had "entered into administration," and that as the U.K. operation was the main operation in the region, the other 18 EMEA operations "fall under the jurisdiction" of the main Administration Order, so bringing together "a number of legal entities under a common reorganization process."

Nortel, which has 30,000 employees globally, has 5,000 staff in EMEA, of which 2,000 are based in the U.K. Of that 2,000, 1,200 are located at Nortel's European headquarters in Maidenhead, U.K.

The remaining 3,000 EMEA staff are located in Austria, Belgium, Czech Republic, Finland, France, Germany, Hungary, Ireland, Italy, Netherlands, Poland, Portugal, Romania, Slovenia, Spain, and Sweden, according to Ernst & Young.

Ernst & Young said the administration process will allow all the EMEA operations to "continue to operate while a restructuring plan is completed... The process of Administration is expected to have no immediate impact on the company’s day-to-day operations including employee pay and benefits, or on customer obligations."

Nortel had no further comment to add to the administrator's statement, though the company has reiterated its support for the London 2012 Olympic Games. (See Nortel for the Long Jump?)

The appointment of an EMEA administrator comes as a number of companies (and one individual) have voiced their support for Nortel as it seeks to restructure its business and sort out more than $4 billion of unsecured debt. (See Bookham Comments on Nortel, XETA Comments on Nortel, Arthur Pewty Comments on Nortel, Cox: We Still Love Nortel , Canadian Gov't Supports Nortel, and Web.alive Stays Alive.)

And according to reports from Dow Jones Newswires, Judge Kevin Gross, who is presiding over Nortel's hearing at the U.S. Bankruptcy Court in Wilmington, Del., has approved an intra-company loan that will allow Nortel's Canadian operations to borrow an initial $75 million of a potential $200 million from the vendor's U.S. operations to help fund the company's restructuring plans.

According to the Dow Jones report, Nortel's lawyer told the court that the Canadian operation has about $127 million in cash, but needs to pay supplier Flex (Nasdaq: FLEX) about $50 million with almost immediate effect, as well as fund its restructuring plans.

In India, meanwhile, outsourcing services firms Infosys Technologies Ltd. (Nasdaq: INFY) and Wipro Ltd. (NYSE: WIT), both of which are Nortel suppliers, have been telling reporters they don't expect Nortel's situation to have a meaningful impact on their revenues. See this report from Reuters for the full details. (See Wipro Soars on Outsourcing.)

— Ray Le Maistre, International News Editor, Light Reading

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