Nortel Stock Hit After Bankruptcy TalkNortel Stock Hit After Bankruptcy Talk

Nortel spokespeople have been quoted as saying the company isn't about to file bankruptcy, and the consultations are meant as a backup in case the company's current restructuring efforts fail.

Nortel's stock is falling this morning after the Wall Street Journal's report yesterday that Nortel officials had had consultations with bankruptcy attorneys. Nortel spokespeople have been quoted as saying the company has no immediate plans to file bankruptcy, and the consultations are meant as a backup in case the company's current restructuring efforts fail. Those efforts include laying off some 1,300 people and trying to sell Nortel's Metro Ethernet division.Mark Evans at All About Nortel makes the point that it's going to be that much harder to sell the Metro Ethernet division if potential buyers think they might be able to swoop into a bankruptcy scenario and get a better deal.

Mark also notes that Nortel is trying to get help from the Canadian government to survive.

With an ugly 2009 forecast for the industry as a whole, it's not looking good for Nortel. However, the Journal did note that Nortel's liquidity situation may not be at a crisis point yet, according to this account:

Update: Here's a good short post that, as the title suggests, runs the numbers and suggests that in a situation like Nortel finds itself, everybody has to envision what bankruptcy would look like for Nortel.Nortel spokespeople have been quoted as saying the company isn't about to file bankruptcy, and the consultations are meant as a backup in case the company's current restructuring efforts fail.