Nortel gets extension till May on bankruptcy protection

Insolvent telecom equipment company Nortel Networks says it has received a bankruptcy protection extension to May 1 from the Ontario Superior Court of Justice.

The extension of protection under the Companies' Creditor Arrangement Act 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 late Tuesday.

In a related development, Nortel said the court also approved an amended financing deal with Export Development Canada to give the company access to $30 million US of export-related financing help up to May 1.

Meanwhile, Nortel and its subsidiaries obtained a court order allowing the company to postpone its annual meeting beyond a June 30 deadline.

"The postponement will allow Nortel's senior management to fully focus on the preparation of Nortel's comprehensive restructuring plan and avoid the significant costs associated with annual shareholders' meetings during this period," the company said.

The bankruptcy extension comes as a filing from Ernst & Young, Nortel's court-appointed monitor, says the company's new restructuring process puts nearly every aspect of the business on the table and will involve further job cuts around the world.

The filing says the maker of telecom gear is reviewing the strategic and economic value of its assets and looking at reworking supplier and customer contracts as it continues to bleed cash under bankruptcy protection, the Globe and Mail reported Tuesday.

The filing says initiatives include "a detailed plan for the reduction of its global workforce" and "a review of real estate and other property leases."

The filing offered no details on the restructuring plan, saying it would take some time to develop.

Last September, Nortel announced plans to reorganize itself into three divisions, which analysts said would pave the way for the breakup of the company. Executives also said they were looking for a buyer for Nortel's Metro Ethernet Networks unit, which includes cutting-edge optical Ethernet products and is responsible for about 14 per cent of overall sales. But asset sales are now on hold as Nortel reviews its options.

Nortel filed for creditor protection Jan. 14 in Canada and the United States and got an initial 30-day protection period.