Nortel Networks Files For Financial RestructuringNortel Networks Files For Financial Restructuring

Nortel Networks on Wednesday filed bankruptcy proceedings in Canada and the United States, hoping to put an end to its financial agonies.

The action had been expected ever since Nortel hired bankruptcy lawyers last month. The company had $107 million in debts coming due this week.

The Toronto-based telecommunications company sought creditor protection through the Canadian Companies' Creditors Arrangement Act and through Chapter 11 of the U.S. Bankruptcy Code. Some of the company's subsidiaries overseas are expected to make similar financial protection filings in Europe.

Nortel, which had been struggling for years with a series of accounting scandals and then with the downturn that hit all telecom infrastructure suppliers, said it expects its "day-to-day operations to continue without interruption." Financial sources in Toronto said they expect the company to be broken up eventually.

The bankruptcy filing was also a personal blow to CEO Mike Zafirovski, who took over the reins at the struggling company and tried to turn it around in 2005.

However, the global financial crisis and recession have "compounded Nortel's financial challenges and directly impacted its ability to complete this transformation," the company said in its filing.

The company noted that it has $2.4 billion in the bank -- it didn't reveal its liabilities in the Wednesday announcement -- and said the bankruptcy filings will enable it to preserve its liquidity during a restructuring process.

"Nortel must be put on a sound financial footing once and for all," Zafirovski said in a statement. "These actions are imperative so that Nortel can build on its core strengths and become the highly focused and financially sound leader in the communications industry that its people, technology, and customer relationships show it ought to be."

"I am confident that the actions we're announcing today will be the fastest, most effective means to translate our improved operational efficiency, double-digit productivity, focused R&D, and technology leadership into long-term success. I want to reaffirm Nortel's dedication to delivering world-class solutions and services to customers."

Zafirovski took over as CEO of Nortel after he was passed over for the top job at Motorola, where he had a history of improving the operations under his management.

Nortel said some of its affiliate operations in Asia, the Caribbean, and Latin America are expected to operate as usual because they aren't included in the bankruptcy filings. Nortel said also it has arranged a deal with Flextronics, its key supplier, to ensure its product supply chain will continue.