Nortel files for Chapter 11 bankruptcy protection

January 15, 2009 | 09:14

Tags: #bankruptcy #chapter-11 #nyse #shares #stock

Companies: #nortel #nortel-networks

The harsh financial conditions continue to take their toll on the tech sector, with telecommunications specialist Nortel Networks filing for Chapter 11 bankruptcy protection.

According to news published by CNet yesterday, the company has been struggling financially since the last economic downturn in 2001, with management recently having had to put large amounts of the company's assets up for sale to raise cash to cover debt repayments.

The company – which was once counted among the world's leading telecommunications equipment manufacturers, with equipment found in the racks of major networking sites the world over – is facing a massive bond debt of around $3.8 billion, which is bad news in the face of a global slowdown in spending. With only $2.6 billion in cash to fall back on, the company is unable to clear the debt – and faces massive interest payments.

The news gets worse for Nortel, with the New York Stock Exchange threatening to delist the company if shares don't rise above a $1 minimum; currently, Nortel shares are at a poor 32 cents and don't look likely to climb higher any time soon.

If the company is forced into Chapter 11 bankruptcy proceedings, it's likely that it will be broken into individual business units and sold on – which would spell the end for Nortel.

Does Nortel deserve to continue, or has it always been a provider of too-specialised equipment that never learned to diversify? Share your thoughts over in the forums.
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