Nortel files for bankruptcy

Nortel Networks Corp. spent years ringing up multiple rounds of layoffs as it tried to fix big problems in its business. But it couldn’t ward off the recession.

The telecommunications equipment maker filed for bankruptcy protection in Canada and the U.S. on Wednesday, becoming the first major technology company to take that step in this global downturn.

The filing came a day before Nortel was due to make a debt payment of $107 million.

Facing a sharp drop in orders from phone companies, Nortel used the bankruptcy filings to buy time to explore restructuring options such as selling off assets. Some help already is coming from the Canadian government.

The Toronto-based company said it had been in the process of a turnaround since late 2005, but “the global financial crisis and recession have compounded Nortel’s financial challenges and directly impacted its ability to complete this transformation.”

“Nortel must be put on a sound financial footing once and for all,” Chief Executive Mike Zafirovski said.

As of its last quarterly filing, Nortel had $4.5 billion in debt and $2.4 billion in cash. Nortel said Wednesday that its cash position was still $2.4 billion, but it did not immediately reveal its total assets or its debt load.

Canadian Industry Minister Tony Clement said the government was willing to help Nortel restructure as a viable company by providing as much as $24 million in short-term financing and was open to discussing other loans.