Nortel exploring bankruptcy protection scenario

Shares in Canadian kit vendor Nortel took a beating this week after it emerged that the company was seeking legal advice in anticipation of a possible bankruptcy protection filing.

Despite the company reassuring investors that no such bankruptcy protection filing is imminent, the troubled firm is studying a scenario in the event that its restructuring plans falls through.

One potential option is for Nortel to seek assistance from the Canadian government.

Last month, Nortel announced plans to cut 1,300 positions as part of its strategy to, “Flatten the corporate structure; eliminate or consolidate executive and management positions company-wide.”

The troubled company reported a 14 per cent year on year decline in third quarter revenue to $2.3bn, and a whopping net loss of $3.4bn, compared to a profit of $27m last year. The hits are largely attributed to an allowance against deferred tax assets of $2bn and a write off of goodwill of $1bn.