Nortel plans further restructuring
Posted February 11, 2009
Research Triangle Park, N.C. — Workers at Nortel (NYSE: NT) are bracing for another round of job cuts.
In a bankruptcy case update, which it filed in Canada on Feb. 5 and which the media reported earlier this week, Ernst & Young, the court appointed monitor of Nortel’s bankruptcy filing, said further restructuring and other cost-cutting are under consideration.
Late Tuesday, Ernst & Young said the Ontario Superior Court of Justice had extended bankruptcy protection to May 1. Nortel had received a 30-day protection period when it filed for bankruptcy on Jan. 14. Nortel was due to make a debt payment of $107 million.
The extension will "provide Nortel with an opportunity to develop a comprehensive business and financial restructuring plan for consideration by their creditors and the Canadian court," the company said.
Nortel employs some 2,000 people at its Triangle campus.
Nortel said the court also approved an amended financing deal with Export Development Canada to give the company access to $30 million of export-related financing help up to May 1.
Nortel and its subsidiaries also obtained a court order allowing the company to postpone its annual meeting beyond a June 30 deadline.
Nortel also has grounded two private jets, one of which was used largely by Chief Executive Officer Mike Zafirovski. The jets cost the company some $1 million a month, but Nortel can escape its lease agreements because of the bankruptcy.
In the update it gave the court, Ernst & Young said Nortel is considering “a detailed plan for the reduction of its global work force” and “a review of real estate and other property leases” plus “a review of information system equipment leases, contracts and licenses.” The company also is developing “a detailed plan” to reduce “discretionary spend.”
Other steps include the termination of a joint agreement with the company Alvarion to develop and sell WiMax network technology. Nortel sent a "notice of repudiation” of that deal on Jan. 29, according to the filing.
Nortel also is reviewing its “many subsidiaries.”
As for the annual meeting, it "would be a distraction to both management and other company resources at a time when they are required to be focused on stabilizing and restructuring the business," Ernst & Young said in a report posted on its Web site.
Other initiatives the company said it is investigating include a "detailed plan" to reduce its global work force, reviewing its real estate, supplier and customer contracts and looking more closely at cutting its discretionary spending.
"Although a comprehensive restructuring plan is still at a preliminary stage, Nortel believes these initiatives are essential to reducing costs and preserving existing cash resources," the report said.