Nortel files for bankruptcy ahead of interest payment
Nortel Networks, North America's biggest maker of telephone equipment, filed for bankruptcy protection this afternoon as the global economic downturn further erodes its once high-flying business.
The company employs 300 staff at its Galway offices in Mervue Business Park and 1,200 staff at its Belfast office in the Monkstown Industrial Estate.
The filing came a day before the Toronto-based company was due to make an interest payment of about $107 million.
Nortel and a number of its affiliates filed for Chapter 11 bankruptcy protection in the United States, according to a court filing.
Its shares plunged more than 76 per cent to 7.5 cents in electronic pre-market trading. Nortel’s spokesman in Ireland David Silke, was not immediately available for comment.
According to the court filing in US bankruptcy court for the district of Delaware, Nortel's major creditors include Bank of New York Mellon, with claims valued at nearly $4 billion.
Nortel's shares have tumbled along with the company's fortunes, sinking into penny-stock territory in recent months. In mid-2000, at the zenith of the company's success, they were worth more than C$1,100 each, adjusted for a stock consolidation that took place in late 2006.
"It's obviously a remarkable transformation from where it was as the largest company in Canada worth about 35 percent of the TSX in 2000," said Gavin Graham, director of investments at BMO Asset Management.
"But this is a reflection of the way that the telecommunications industry has changed."
Nortel has faced intense competition from North American and European rivals such as Alcatel-Lucent, as well as low-cost Asian vendors such as Huawei Technologies.
The company has also suffered as telecom companies scale back spending on the equipment that Nortel makes.
The global economic slowdown has exacerbated Nortel's problems, leading it to warn last month that because of current conditions, its business was coming under increased pressure and its cash position and liquidity were deteriorating.