Nortel Seeks Protection Extension

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