TORONTO, CANADA – The Nortel Networks Corporation, North America's largest developer of telephone equipment and services, has filed for Chapter 11 bankruptcy protection.
The Toronto-based company, with more than $1 billion in assets and debt, filed the motion Wednesday in Wilmington, Del. The company said several of its Canadian affiliates will also seek court protection, while affiliates in Asia, the Caribbean and Latin America and the Government Solutions unit are apparently not affected.
The company was due to make a debt payment of $107 million on Thursday.
"Nortel must be put on a sound financial footing once and for all," said Nortel President and CEO Mike Zafirovski in a press release. "These actions are imperative so that Nortel can build on its core strengths and become the highly focused and financially sound leader in the communications industry that its people, technology and customer relationships show it ought to be. I am confident that the actions we're announcing today will be the fastest, most effective means to translate our improved operational efficiency, double-digit productivity, focused R&D and technology leadership into long-term success. I want to reaffirm Nortel's dedication to delivering world-class solutions and services to customers."
Sales have declined since Nortel sold its high-speed mobile-phone unit to Alcatel for $320 million in 2006 to focus on a newer wireless technology called WiMax. Last November, the company announced plans to cut 1,300 jobs in the face of the recession.
As of Sept. 30, 2007, Nortel's debt amounted to $6.3 billion, including adjustments for operating leases, pension deficits and other items. The company has $1 billion in bonds that come due in 2011. Total liabilities amounted to almost $12 billion.
Nortel Networks said in its chapter 11 filing that it has more than 25,000 creditors and expects to make a distribution to those creditors that are unsecured. Nortel Networks Capital has more than 100 creditors owed $100 million to $500 million, according to court papers.
Nortel's healthcare division offers core network deployment for hospitals and other healthcare providers, as well as multimedia contact center solutions. In the past two years, the company has deployed an enhanced E-911 solution for the Inova Health System in northern Virginia, a patient-discharge solution at the M.D. Anderson Cancer Center in Orlando, Fla., a wireless tracking and patient management system at Memorial Hospital of Gulfport, Miss. and a communications setup for the radiology department at Baylor University Medical Center in Dallas.
