THE CANADIAN telecommunications equipment manufacturer Nortel Networks, which has plants outside Belfast and in Galway, has filed for bankruptcy protection in the US. The Toronto-based organisation which been struggling with mounting losses, debts and falling sales became the latest corporate victim of the downturn yesterday.
Nortel, which employs more than 500 people at its Monkstown facility in the North and approximately 300 in Galway, said it has now begun a “comprehensive business and financial restructuring” process. In a statement the Canadian group said its “normal day-to- day operations are expected to continue without interruption.”
The move to restructure came as Nortel was scheduled to pay $107 million of interest on its debt portfolio today.
Nortel Networks Corporation and several subsidiaries yesterday filed voluntary petitions in Delaware in the US under Chapter 11 of the US Bankruptcy Code which allows corporations to continue trading.
The group said that it and several Canadian subsidiaries also intended to apply for creditor protection under Canada’s Companies Creditors Arrangement Act.
Nortel said it should be in a position shortly to provide an update regarding “consequential filings” by certain of its European, Middle East and African operations.
The group has not specified which operations will be affected by this.
Nortel has told staff that the restructuring move will guarantee the Canadian group’s “long-term success” but it has sparked concerns among its workforce.
Nortel’s facility in Galway was set up in 1973 and has evolved from being a low-tech manufacturing plant to a world-class RD facility.
Its 34-acre facility in Monkstown is the headquarters of Nortel’s Europe, Middle East, Asia supply chain operations. There has been a telecommunications plant in Monkstown for nearly 50 years – Nortel acquired the site in 1991 from Standard Telephones and Cables.
Invest Northern Ireland, the economic development agency, said that since 1995/1996 Nortel has received financial assistance offers amounting to £24.13 million towards total planned investment of £190.56 million.
The agency said that given the long time-frame over which these offers extend the associated economic benefits have either accrued to the economy or been repaid to Invest Northern Ireland.
The Canadian corporation said it had taken the decision to move towards comprehensive restructuring despite currently having the necessary funds to continue operating.
In a statement the group said: “Nortel is taking this action now, with a $2.4 billion cash position, to preserve its liquidity and fund operations during the restructuring process.”
Mike Zafirovski, Nortel’s president and CEO also said Nortel had to be “put on a sound financial footing once and for all”.
Documents supporting Nortel’s Chapter 11 application in the US said Nortel Networks had more than $1 billion in assets and debt.
It also listed details of more than 25,000 creditors including Bank of New York Mellon, one of Nortel’s trustees.
Export Development Canada (EDC), Canada’s export credit agency, is also a major creditor.
The group’s Nortel Networks Capital division also has more than 100 creditors, including one of its major suppliers Singapore-based Flextronics.
Nortel said it has secured an agreement with EDC for an interim period of 30 days and reached an ongoing arrangement with Flextronics.
The group’s affiliates in Asia, the Caribbean and Latin America, as well as the Nortel Government Solutions business, are not included in the proceedings.
