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NY-based private equity firm may lead rescue bid for Nortel

6 Jul 2009

MatlinPatterson Global Advisors, a New York-based distressed private equity firm, is considering leading a bid for ailing Canadian telecom equipment maker Nortel Networks, according to reports.

A source told the Financial Times that the firm, which is one of Nortel’s biggest creditors owning around ten per cent of the company’s debt, is attempting to create a consortium of investors to fund a recapitalisation on Nortel, which is currently operating under bankruptcy protection.

Nortel, one of the largest sponsors of the London 2012 Olympics, filed for Chapter 11 bankruptcy protection in January. The company said in its court filing that it needed a break from creditors to reorganise itself.

The Delaware bankruptcy court has set a 24 July deadline to consider a $650m bid by Nokia Siemens Networks for most of Nortel’s wireless equipment operations.

MatlinPatterson
tried and failed to secure an extension for the deadline in order to put together a counter proposal. The firm argued in a court paper that the imminent deadline could “seal Nortel’s fate by limiting the rights of current creditors (and other prospective bidders) to propose options less drastic than a wholesale liquidation of one of the world’s telecommunications giants”.

It also noted that Nortel was “accumulating, not hemorrhaging cash”, having increased its cash reserves to $2.7bn as of 6 June.

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