Toronto (Canada) – Nortel Networks Corporation, North America’s biggest maker of telephone equipment, today filed for bankruptcy protection due to the global economic downturn. Nortel was scheduled to make a $107 million interest payment, but was unable to do so.
Said Duncan Stewart, an analyst for DSAM Consulting, “Based on this filing, the board of directors must believe that not only is the fourth quarter bad, but that the first quarter is going to be just as bad or worse.”
Nortel’s shares have plunged 76% to just 7.5 cents Canadian in the electronic market trading. Nortel has major creditors totaling nearly $4 billion, according to the filing. In 2000 at the height of their business success when Nortel was the largest company in Canada, their shares were valued at $1,100 Canadian.
Nortel warned last month that its business was coming under increased pressure and that its cash position and liquidity were deteriorating. In November, Nortel reported $3.4 billion losses for Q3’2008. It sought to cut 1,300 jobs, roughly 5% of its workforce. It said it would also freeze salary increases, cut back on consultants and review its real estate portfolio.
This latest action, filed in U.S. District Court in Delaware, will severely limit Nortel’s actions in moving forward.