2012 Sponsor Nortel Files For Bankruptcy Protection

Telecommunications giant Nortel Networks, a Tier One sponsor of the London 2012 Olympics, has filed for bankruptcy protection as the global economic recession continues to take its toll on corporate businesses.

Under US Chapter 11 bankruptcy protection law, a firm can keep trading while it aims to sort out its finances.

The move by the firm, based in the Canadian city of Toronto, was made while it had sufficient funds to run operations and to cover restructure costs.

Nortel said that the bankruptcy protection was intended to help it ’emerge from this process as a more focused, financially sound and competitive company’.

The filing was made a day before the firm was due to make a $107m interest payment on outstanding loans.

Nortel employs about 30,000 people worldwide, including about 2,000 in the UK. Its deal with the London 2012 Olympic organising committee LOCOG is believed to be worth about £40m in cash and services towards the Games.

The telecoms giant is also a sponsor of the 2010 Winter Olympics to be held in Vancouver.

The news comes as a blow to LOCOG which had been progressing well in signing up commercial partners with seven domestic Tier One sponsors and three Tier Two sponsors tied in to the Games.

A LOCOG spokesperson said that the organising committee was monitoring the situation with Nortel closely.

Nortel said it had been in the process of revamping the firm since late 2005, the firm said, but that the global financial crisis and recession had ‘compounded its financial challenges and directly impacted its ability to complete this transformation’.

The recession has hit global spending on information technology, while tight credit markets have made it more tricky to sell off parts of the business.