Chapter 10, in Which Nortel Mulls Chapter 11
by John Paczkowski
Posted on December 10, 2008 at 2:48 AM PT
A few weeks back, RBC Capital Markets analyst Mark Sue warned that Nortel (NT) is facing a very bleak future. “Considering the worsening macro environment, Nortel’s challenged industry position, and concerns related to liquidity while the capital markets are basically closed, we think bankruptcy is a distinct possibility down the road,” Sue wrote in a note to investors.
Looks like Sue was right, and the road to which he referred was a short one. The struggling telecom company has hired counsel to explore a bankruptcy filing, The Wall Street Journal reports. Nortel, well aware what such reports can do to investor confidence, insists that no such filing is imminent. The company does, however, acknowledge that it has engaged advisers to help it weather the current economic storm. Just who has Nortel hired? Word on the street says Lazard Ltd. and law firm Cleary Gottlieb Steen & Hamilton.
Grim news for Nortel, which has spent the past several years trying to recover from the general downturn in the telecom industry and a nasty accounting scandal. With apparently very little success.
In a statement Wednesday, the company said, “Nortel is hard at work reshaping the business to even better serve our customers. There are those who fuel negative speculation, but there are many more who believe that Nortel has put in place the necessary plans to strengthen our financial footing and reset our cost base.”
Follow John on Twitter | Follow AllThingsD on Twitter
Comments
Hey John.
=======
Looks like Sue was right, and the road to which he referred was a short one.
=======
Don’t you think that’s a bit of a jump from what the WSJ article says: Nortel “has sought legal counsel to explore bankruptcy-court protection from creditors in the event that its restructuring plan fails, according to people familiar with the situation.”
That is a far cry from implying an imminent Nortel bankruptcy. In fact in the WSJ story the Nortel spokesperson says that “no bankruptcy filing is imminent.”
A few more Nortel comments on the WSJ article can be found on this Nortel blog: http://tinyurl.com/58sybq
Posted by Bo Gowan at December 10th, 2008 at 12:03 pmI didn’t imply Nortel was about to file bankruptcy. I said it’s been reported that the company has hired counsel to consider it. Moreover, I specifically noted in the post that the company claims no such filing is “imminent,” which in this case is a very interesting choice of words.
If Nortel wasn’t considering bankruptcy protection, wouldn’t it have said so definitively?
Saying “no filing is imminent” is essentially like saying “we’re not filing for bankruptcy tomorrow.” And it offers no guarantees whatsoever about what might happen the day after.
Posted by John Paczkowski at December 10th, 2008 at 12:51 pmIt is apparently the end of the ’short road’ since Nortel filed for Chapter 11 today. Imminent, as you pointed out, does not mean the same as ‘never’ or ‘in the near future’. It simply means not at this moment, but we make no promises.
Posted by Carolynn Ramsey at January 14th, 2009 at 9:57 am