Nortel plants in Belfast and Galway put in administration

NORTEL NETWORKS has placed the majority of its European operations, including its plants in Monkstown in Belfast and Galway, in administration.

It follows the decision by the Canadian telecommunications equipment manufacturer to file last week for bankruptcy protection in the United States.

Nortel Networks and several of its Canadian subsidiaries also applied for creditor protection under Canada’s Companies Creditors Arrangement Act.

The Toronto-headquartered group has appointed Ernst Young as administrators to Nortel Networks UK Limited and 18 of its other European, Middle East and African (EMEA) operations.

Its plant in Galway, which employs approximately 300 people, is included in the administration order.

The administrators have sought to reassure Nortel employees that the process is “expected to have no immediate impact on the company’s day-to-day operations including employee pay and benefits”.

But there have been concerns voiced about the current state of Nortel’s global pension funds. Its UK pension fund is in deficit.

The UK’s Pension Protection Fund, a statutory fund, was informed about Nortel’s move into administration and the fund is now assessing whether Nortel Networks UK Pension Plan may be eligible for compensation.

Alan Bloom, Stephen Harris, Chris Hill and Alan Hudson of Ernst Young have been appointed joint administrators for Nortel companies across Europe, Middle East and Africa.

Mr Bloom and David Hughes have also been specifically appointed as joint administrators of Nortel (Ireland) Ltd.

In a statement the administrators said the adverse economic conditions had made the current capital structure of Nortel Networks “unsustainable”.

“It is imperative that the group addresses its financial position and the legacy costs burdening its balance sheet, to overcome current challenges and reposition itself for the future.

“The administration orders for Nortel Networks UK and certain EMEA entities were sought by the company after full consideration of all other alternatives and in light of actions being taken in Canada and the USA.”

They added in the statement that the administration order would allow Nortel’s EMEA companies to continue to operate while a “restructuring plan is completed”.

No details of the possible restructuring plan have been disclosed yet by the administrators or the impact it could potentially have on Nortel’s Galway staff or its 500 employees in the North.