Analyst: Early Nortel bankruptcy might be smart

UBS analyst suggests declaring bankruptcy first thing next year "may make sense to maximize franchise value."

It might make sense for Nortel to declare bankruptcy sooner rather than later in an effort to be in as strong a position as possible when it happens, an industry financial analyst says.

Under the heading "Nortel: January bankruptcy filing?" UBS analyst Nikos Theodosopoulos suggests that declaring bankruptcy first thing next year "may make sense to maximize franchise value."

The global economic recession in conjunction with looming debt payments don't make for a promising 2009 for the company, which is already reported to have hired advice about declaring bankruptcy, Theodosopoulos says in an e-mail newsletter.

Nortel has an interest payment on debt due Jan. 15 between US$100 million and $120 million, and he thinks executives may decide to forego paying it as the better choice long-term.

The company had a tough time in the fourth quarter, the analyst says, following a $3.4 billion net loss in the third quarter. It's stock price today was 26 cents per share, and the company faces delisting from the New York Stock Exchange if it doesn't rise.

As time goes by, it may become more difficult for companies declaring bankruptcy to find financing to do so, Theodosopoulos notes. All that adds up to a hard decision.

"We believe a likely challenging 4Q08, weakening 09 outlook and tightening DIP financing may cause Nortel to withhold its interest payment and possibly pursue an early bankruptcy," he says.

Matters could become more complicated if Nortel has trouble finding a buyer for its metro Ethernet networking division and if it has trouble obtaining assistance from the Canadian government, he says.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags nortel

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Tim Greene

Network World
Show Comments

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Laura Johnston

MSI GS65 Stealth Thin

If you can afford the price tag, it is well worth the money. It out performs any other laptop I have tried for gaming, and the transportable design and incredible display also make it ideal for work.

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?