Tech giant Nortel files for bankruptcy protection
Nortel Networks Corp. is seeking creditor protection in Canada and has filed for Chapter 11 bankruptcy protection in the United States, the company announced Wednesday.
The move comes just one day before the telecom firm was due to repay a $107-million interest debt on bonds, which would have amounted to about 10 per cent of the company's North American cash reserves.
"Nortel must be put on a sound financial footing once and for all," Nortel President and CEO Mike Zafirovski said 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."
Nortel's future in Ottawa
A spokesperson for Nortel's Ottawa operations says although the tech firm plans to move quickly, there's no exact timetable on when Nortel will move forward with restructuring and cutbacks.
"It was a tough decision. Restructuring is really a challenge and you know it impacts jobs and I think that will be a tough message to employees today," Ann Fuller told CTV Ottawa.
In the meantime, Fuller says no changes will be made to Nortel's day-to-day operations in Ottawa. She says no layoff notices will be issued, employees will continue to be paid, and the company will continue to deal with customers.
Industry holds out hope
Meanwhile, the head of Ottawa's Centre for Research and Innovation says while it's likely Nortel will cut more staff and face the tough decision of cutting some of its business lines, he's also hopeful the process will help the company finally put themselves back on track.
"What's going to happen in Ottawa -- we don't know. It all depends on how they restructure," said Jeffrey Dale.
Still, Dale says Nortel's Ottawa offices bode well as a centre for research and development, and he's hopeful the capital will be the least affected by the cutbacks.
Industry Minister Tony Clement said the federal government is willing to provide financing to assist during the company's restructuring phase.
"The government of Canada appreciates the importance of the telecommunications industry to our economy and will continue to work with Nortel during its restructuring through Export Development Canada," Clement said in a statement.
"EDC has agreed to provide up to $30 million in short-term financing through its existing bonding facility and is open to discussing with Nortel post-filing financing in conjunction with other financial institutions."
Meanwhile, Ontario Premier Dalton McGuinty said the province has $2 billion available in various programs to help struggling companies. However, he said Nortel hasn't applied for any money yet.
"We'll see how things shake out in the end and what it means specifically for jobs in Ontario," McGuinty said Wednesday.
"I remain hopeful that Nortel will experience ultimately a renaissance of some kind and that will be of benefit to the Ontario economy and to Ontario workers."
Once Canada's most valuable company, Nortel stocks traded as high as $124.50 a share during the tech boom in 2000. On Tuesday, the stock closed at 38.5 cents a share.
After the telecom bubble burst, the company failed to re-establish itself and was plagued by accounting scandals and weakening demand.
The company has gone through a series of restructuring efforts, cutting 125 Ottawa employees in the latest round of layoffs. Nortel still employs about 4,200 people in the capital.
With a report from CTV Ottawa's Paul Brent and files from The Canadian Press