Nortel probably has the cash to cover the $107 million payment; it reported $2.3 billion in cash and equivalents for its third quarter, which ended Sept. 30.
A Reuters story today, though, notes that the ability to pay isn't the question. It quotes analyst Duncan Stewart of DSAM Consulting :
It's the idea of: If you know you're eventually going to default anyway, why not do it now and keep the... interest payments you would have shelled out?
The possibility of a Nortel bankruptcy has loomed for some time. The idea caught fire last month when it was reported that Nortel was investigating the possibility -- although, to be fair, you'd expect executives to be at least looking into the options for that route, even if it's one they don't plan to take. (See Nortel's Not Bankrupt Yet.)
Another option that analysts are taking seriously is a government bailout.
While it's easy to make fun of Nortel's predicament -- remember the beer-can email that circulated circa 2001? -- it's also a rather sad story. In fact, a sincerely voiced "sad" is the first word out of many analysts' mouths when we ask about the company.
Now you can put a human angle on that. On Monday, CBC radio reporter Julie Ireton filed a moving report where two current Nortel employees talk about the company's downfall. You'll find it in Part 2 of Monday's edition of the show, The Current.
It all makes the would-be sale of the Metro Ethernet Networking (MEN) unit look like small potatoes. There's no update on that front, beyond the recent rumors of a deal with Radware Ltd. (Nasdaq: RDWR). (See Nortel M&A Rumor Update.)
Nortel stock shot upward mysteriously in recent days, but it's headed back to earth today, down 23 percent to 32 cents per share.
— Craig Matsumoto, West Coast Editor, Light Reading