Telecommunications equipment maker Nortel Networks Corp. filed for bankruptcy protection in Canada and the US on Wednesday, becoming the first major technology company to take that step in this global downturn.
Facing a sharp drop in orders from phone companies, Nortel filed for court protection a day before it was due to make a debt payment of $107 million. Protection from its creditors would give the company more opportunities to explore restructuring options or sell off assets. Some help already is coming from the Canadian government.
The long-struggling Toronto-based company said in a release that it had been in the process of a turnaround since late 2005, but "the global financial crisis and recession have compounded Nortel's financial challenges and directly impacted its ability to complete this transformation."
"Nortel must be put on a sound financial footing once and for all," Nortel's chief executive, Mike Zafirovski, said in the statement.
As of its last quarterly filing, Nortel had $4.5 billion in debt and $2.4b. in cash. Nortel said Wednesday its cash position remains $2.4b., but it did not immediately reveal its total assets or its debt load.
The filing in Delaware revealed that The Bank of New York Mellon Corp. is a trustee on nearly $4b. of debt. Nortel's other creditors include the contract manufacturer Flextronics International Ltd.
During the 1990s telecom and Internet boom, Nortel had more than 95,000 employees and a market capitalization of $297b. At one point in 2000 it accounted for one-third of the market value on the entire Toronto Stock Exchange.
When trading closed Tuesday, before the bankruptcy filing, Nortel's market value was just $155m. Its work force was down to about 26,000 people.
Trading resumed late Wednesday morning and the stock dropped 66 percent in Toronto.