Court Lets Nortel Push Out Restructuring Again

Surprise, surprise. Bankrupt Nortel Networks in Canada has received yet another restructuring extension and creditors will have to keep waiting for their money.

Nortels last deferral was granted in April, good through July 22. But late last week, the telecom equipment maker received permission to stretch out that timeline yet again, through Oct. 29. Nortel, in a press release, said it needed the stay to provide stability to the Nortel companies to continue with their divestiture and other restructuring efforts.

Since declaring bankruptcy in January 2009, Nortel has auctioned off its wireless, optical and enterprise units, as well as joint ventures and other properties. The once-venerable company has pocketed more than $3 billion from those sales, yet it still hasnt repaid creditors and is stripping retirees and other pensioners of their health and insurance benefits. Former Nortel employees in Canada will lose their company-funded payments at the end of the year.

All of that is despite Nortels cash reserves. In its July 13 report the 50th such document since January 2009 Nortels court-appointed monitor Ernst & Young said Nortel held $5.7 billion in cash as of June 26.

But not all of that money is readily available to Nortel. For example, about $10 million of the cash sits in an escrow account for lawsuit settlements; $2 million is set aside for benefits paid through the Health and Welfare Trust; another $2 million resides in escrow for a certain real estate lease; and yet another $2 million is in an escrow account for a supply agreement with Jabil Circuit.

Nortel does, though, have available cash of $216.1 million; as Ernst & Young said in its report, it appears [Nortel has] sufficient cash resources to fund operations through Oct. 30.

In the meantime, Nortel continues to assess whether it should liquidate or license its patents, the last high-value assets it holds. Nortel also hasnt sold its giant Carling Campus in Ottawa and is working to field offers from qualified potential buyers, a difficult feat in a depressed real-estate market.

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