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Nortel prepares for Mobile World Congress by going bankrupt

by John Oates | posted on 14 January 2009

Nortel, plagued for months by rumours of serious financial problems, has filed for bankruptcy protection or Chapter 11.

The hundred year old Canadian giant only just escaped the same fate in the last downturn in 2001. It posted a loss of $3.4bn for its third quarter, which is bad, but not nearly as bad as the stonking $19.6bn it lost in three months of 2001

Nortel is seeking creditor protection in Canada, the US and Europe to give it a chance to review all its business and restructure its debt.

Mike Zafirowski, president and CEO at Nortel, said: "I am convinced that by choosing this path at this time, we can put Nortel on sound financial footing once and for all." He said the firm was "still very much in business and our commitment to our customers remains unwavering".

He said that day to day business will continue for the company which claims to have $2.4bn in the bank.

Nortel's application will be heard by the Ontario Superior Court of Justice later today. It has already filed for US Chapter 11 protection in Delaware and will make similar applications in Europe. The firm will also ask for certain restrictions on dealing in its shares.

Nortel has also made an agreement with its key supplier Flextronics to maintain inventory.

The full statement is online.