Nortel granted reorganization extension: Bankruptcy plan now due May 1

Nortel Networks Corp. will have more time in its efforts to develop business and financial restructuring plans that will be considered by creditors and a Canadian court as part of the company’s bankruptcy proceedings.
The beleaguered company was given 30 days to come up with a plan after it filed for bankruptcy Jan. 14 to seek protection from creditors in Canada, the United States and Europe. On Tuesday, the Ontario Superior Court of Justice extended the deadline to May 1.
With the extension Nortel will be protected from collection activities on any debt or claim that arose before the filing of bankruptcy, according to Nortel officials. New claims sought after Jan. 14 cannot proceed without court approval.
The Canadian telecommunications giant had been reeling financially in the months before the company decided to file for bankruptcy. The company’s stock has also been suspended from the New York Stock Exchange as a result of the filing.
The company was granted court approval to postpone its annual meeting with shareholders past the statutory deadline of June 30. Nortel said the postponement will allow company executives to fully focus on restructuring the company.
Analysts are unsure how Nortel will emerge from bankruptcy and some suspect the company may sell pieces of its business.
The company has already dissolved its WiMAX business unit and has been trying to sell its Metro Ethernet division.
Along with the court orders, Nortel also has amended its agreement with Export Development Canada. Nortel will be able to continue to use the government performance-related facility up to May 1 and receive a maximum of $30 million of support.
Since 2005, officials at Nortel have been trying to transform the company. The company’s financial distress was apparent when it posted $3.4 billion in losses for the third quarter of 2008. Since then, Nortel’s credit ratings have been downgraded by numerous rating services and its stock has been in steady decline.