Private equity firm proposes to keep Nortel intact

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Private equity firm proposes to keep Nortel intact

By CAROLINE GABRIEL

Published: 7 July, 2009

READ MORE: Nortel Networks

Just as it seemed inevitable that Nortel would be broken up, a private equity firm has come up with a proposal that would keep the Canadian vendor intact, and could scupper Nokia Siemens' bid for the CDMA and LTE wireless assets (and a likely bid by Avaya for the enterprise business).

US firm MatlinPatterson Global Advisors, a specialist in 'distressed investments', confirmed yesterday that it plans to submit a proposal to reorganize Nortel in a way that would generate more value than selling the wireless infrastructure activities to NSN. MatlinPatterson is a major bondholder and Nortel creditor, and said it was interested in retaining the "inherent value" of Nortel for current investors, rather than accepting a "fire sale" of its core asset, followed by liquidation of many remaining businesses.

It argues that the restrictive conditions of the current bidding process could work against a valid competing bid to that of NSN. Nortel, worth US$250bn at its peak, is expected to raise less than $2bn if it sells off its assets in bankruptcy court.

"Under the bankruptcy court-imposed timeline, MatlinPatterson is working to put forward a competing proposal that permits this critical part of Nortel to reorganize and emerge from bankruptcy," the firm said in a statement. It will seek to put together a group of investors to support its plan and recapitalize the bankrupt firm. Such a bid would entail a debt-for-equity swap and must be submitted by July 24, the date set by bankruptcy courts to consider NSN's $650m 'stalking horse' bid.

"MatlinPatterson believes Nortel can survive as a free standing company and does not need to be auctioned off in pieces," a source told the London Financial Times.

A previous plan by former Nortel executives to buy the troubled company out failed to raise the requisite funds.