Nortel CEO Mike ZafirovskiPUNIT PARANJPE
Nortel Networks is being eyed for a rescue bid by MatlinPatterson Global Advisors, according to the private equity firm.
A source linked to the New York-based company has confirmed it is trying to put together a consortium of investors to fund a recapitalization of the debt-riddled Canadian telecommunications equipment maker.
Company spokesman Mohammed Nakhooda declined to comment on the situation, saying Nortel doesn't comment on rumours and speculation.
Any rescue bid would require a debt-for-equity swap and would need to be tabled by July 24, the date set by the bankruptcy courts to consider the $650-million (U.S.) "stalking horse" bid by Nokia Siemens Networks for most of Nortel's core and profitable wireless equipment operations, the Financial Times said.
A source who spoke to Reuters could not be identified because they were not authorized to speak to the media.
Toronto-based Nortel, once the largest North American telecommunications equipment manufacturer, filed for bankruptcy protection in Canada and the United States in January, blaming the economic crisis for derailing a turnaround effort that began in 2005.
Nokia Siemens Networks - a joint venture of Nokia and Siemens - struck a deal last month to buy Nortel's advanced wireless technology business for $650-million.
But creditors and suppliers of Nortel filed a series of objections to that sale.
MatlinPatterson, a major bondholder and Nortel creditor, said at the time that restrictive conditions imposed by the current bidding process may prevent, rather than promote, a valid competing bid to emerge for the unit, which makes advanced wireless technology.
In a bankruptcy case, when debtors lack the ability to repay creditors, the creditors have the option either to break up the company and monetize the assets, or to run the company as a going concern and take equity in lieu of their claims.
MatlinPatterson argued that the current bidding process failed to pay sufficient attention to the "going concern" option. The firm said it had begun preliminary discussions with other creditors and was considering supporting a Chapter 11 reorganization plan in the United States, in lieu of the proposed sale.