Nortel wins Chapter 11 extension, considers bailing out of Korean JV

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Nortel Wins Chapter 11 Extension

Troubled Canadian kit vendor Nortel, presently sheltering in Chapter 11, was on Tuesday awarded a further extension, giving it longer to come up with a plan to ease its predicament.

The three month extension gives Nortel until the end of July to benefit from bankruptcy protection, and was granted by the Ontario Superior Court of Justice.

The firm said that the purpose of the stay is to allow Nortel to develop a restructuring strategy to the satisfaction of its creditors and the Canadian Court.

Last month the company reported a whopping $5.8bn loss for 2008, up from a $957m loss in 2007. Fourth quarter losses more than doubled from $844m to $2.1bn in the final three months of 2008.

Annual revenues remained almost flat at $10.4bn, and dipped slightly in the fourth quarter to $2.7bn. As expected, there were a lot of goodwill write downs, which took their toll on the company’s finances. Total goodwill write downs for the year amounted to $2.4bn, alongside tax hits of over $3bn.

One strategy the company is looking at is asset stripping. This week rumours have circulated suggesting that the firm is considering selling its controlling stake in Korean joint venture LG-Nortel, in which it is a partner with local manufacturer LG Electronics, for anything up to $1bn.

It is also thought the company is still considering the sale of its crown jewels – its Metro Ethernet unit, which it took off the market in February.