Nortel Networks Corporation announced that it will seek creditor protection under the Companies' Creditors Arrangement Act ("CCAA") in Canada. As well, certain of the Company's U.S. subsidiaries, including Nortel Networks Inc. and Nortel Networks Capital Corporation, have filed voluntary petitions in the United States under Chapter 11 of the U.S. Bankruptcy Code, and certain of the Company's EMEA subsidiaries are expected to make consequential filings in Europe.
The company's normal day-to-day operations are expected to continue without interruption.
Nortel made this decision with the unanimous authorization of its Board of Directors after consultation with its advisors and extensive consideration of all other alternatives. This process will allow Nortel to deal with its cost and debt burden, to effectively restructure its operations and to narrow its strategic focus in an effective and timely manner.
The company commenced a process to turn around and transform Nortel in late 2005, and the Company made progress on a number of fronts. However it says the global financial crisis and recession have compounded Nortel's financial challenges and directly impacted its ability to complete this project.
Nortel is taking this action now, with a US$2.4 billion cash position, to preserve its liquidity and fund operations during the restructuring process.
"Nortel must be put on a sound financial footing once and for all," said Nortel President and CEO Mike Zafirovski. "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."
The Company's affiliates in Asia, including LG Nortel and in the Caribbean and Latin America, as well as the Nortel Government Solutions business, are not included in these proceedings and are expected to continue to operate in the ordinary course.
Also announced was an amendment to arrangements with its key supplier, Flextronics. These amendments give Nortel confidence that Flextronics will continue to maintain the supply chain following commencement of the announced proceedings.