TELECOM REPORTER
Nortel Networks Corp. NT-T is in advanced negotiations to sell off most of its assets but it appears that the insolvent company will not be able to fully repay creditors.
Nortel says the deal to sell its wireless assets to Nokia Siemens Networks NOK-N for $650-million (U.S.) will expedite the sale of the rest of the company, after hitting numerous delays while in creditor protection. At the same time, the company said it continues to look to Ottawa for assistance in winding down its operations.
"Many suitors have been knocking at our doors," said Samih Elhage, the senior executive for Nortel in Ottawa. "This process is not an easy decision for all of us at Nortel. It's not an easy decision by which we are seeing Nortel, as an icon in the industry, end up where we are at this point in time. But at the same time, we have to recognize the realities that we are in."
Nortel is close to making a deal to sell its enterprise unit, which makes network equipment for businesses and other organizations, for about $500-million. The favoured bidder is Avaya Inc., a New Jersey-based equipment maker owned by two private equity firms, Silver Lake Partners and TPG Capital. Alternatively, Siemens Enterprise Communications could emerge as the buyer if Avaya pulls out, a source familiar with the situation said.
Nortel's metro Ethernet networks unit, which makes gear for carrying video and Internet data within cities, has drawn interest from nine companies. As business terms are finalized, the selling price has remained stable over the past couple of months at about $750-million, the source said.
If the company is able to close deals raising approximately $2-billion for the three units, it will still face a shortfall of several billion dollars. At the end of March, Nortel reported liabilities of $11.7-billion and assets of only $8.1-billion.
Nortel appealed to Ottawa for financial assistance beginning late last year. On Friday, Export Development Canada said it will provide $300-million toward a credit facility for Nokia Siemens's purchase of Nortel's wireless assets, in return for preserving some jobs in Canada. Mr. Elhage said Nortel continues to look to Ottawa for further help selling assets.
EDC spokesman Phil Taylor, however, would not say whether the agency will guarantee loans to other bidders. The agency will weigh options on a case-by-case basis.
Simon Beresford-Wylie, chief executive officer of Nokia Siemens, said in a conference call that its deal with Nortel will involve transferring about 2,500 Nortel employees, about a third of whom are in Canada.
While the Finnish-based company's promise to preserve Canadian jobs won it EDC's financial support, publicly there is no detail on how long those jobs must be kept, or whether Nokia Siemens is required to invest a minimum amount in local R&D. But Mr. Taylor said EDC remained "very comfortable" with Nokia Siemens' commitment to the Canadian market.
Nokia Siemens officials also confirmed that they do not expect to assume any of Nortel's massive pension obligation as part of the deal.
© The Globe and Mail
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