Nortel is bankrupt

TORONTO (Reuters) – Nortel Networks Corp, North America's biggest maker of telephone equipment, filed for bankruptcy protection on Wednesday, as the global economic downturn further erodes its once high-flying business.

The filing came a day before the Toronto-based company was due to make an interest payment of about $107 million.

Nortel and a number of its affiliates filed for Chapter 11 bankruptcy protection in the United States, according to a court filing.

Its shares plunged more than 76 percent to 7.5 cents in electronic pre-market trading.

"Based on this filing, the board of directors must believe that not only is the fourth quarter bad, but that the first quarter is going to be just as bad or worse," said Duncan Stewart, an analyst at DSAM Consulting in Toronto.

"Although they have cash in the short term, even the medium-term outlook is not enough to make the company viable as a going concern."

According to the court filing in U.S. bankruptcy court for the district of Delaware, Nortel's major creditors include Bank of New York Mellon, with claims valued at nearly $4 billion.