Nortel Files for Bankruptcy in US and Canada

From having one of the most envied positions in the history of modern telecommunications to its current position as a company with a history of executive management problems, Canadian network solutions and wireless equipment manufacturer Nortel Networks has made the decision to file for bankruptcy after writing down massive amounts of losses due to a combination of poor performance and ten years of continual restructuring.

To compound the situation even further, the company reported 3rd quarter losses of $3.4 billion on top of the inability to sell off a division that it previously planned to sell in order to improve its business operations in September of last year.

The biggest issue facing the company is the eventuality that it may be liquidated instead of being allowed to restructure due to the almost predictable cycle of restructuring and acquisitions it entered into in the mid 90’s, with $4.5 billion in debt to show for the expansion and little cash on hand to settle expenses and debts.

The company entered into the bankruptcy filing to begin with in order to stave off another $107 million in interest payments due on current loans this Thursday, while claiming the global downturn as the main factor with the Bank of Canada offering some relief in the form of $30 million in emergency loans during the next month.  It remains to be seen whether the company will be allowed to operate in its current state or whether its core assets will be able to be sold to raise cash, with many analysts predicting difficulty in restructuring for the company as a result of its debt load.

Nortel is best known for manufacturing the equipment that makes up the current infrastructure that powers the internet, digital telephony, and many GSM-based cellular carriers, but came to be better known for crashing during the tech sector bust of 2001 and became involved in an accounting scandal that led to criminal charges against three of its former executives in the same year.