Nortel Networks Corporation, once the largest company in Canada, today  announced that Nortel Networks Limited and certain of its other Canadian subsidiaries has sought bankruptcy protection in Canada, the US and Europe.

The company said it has filed for creditor protection under the Companies' Creditors Arrangement Act in Canada and under Chapter 11 for some of its US subsidiaries, including Nortel Networks Inc. and Nortel Networks Capital Corporation while some of its EMEA subsidiaries are expected to make consequential filings in Europe.

Nortel, however, assures customers that its day-to-day operations and services will continue without interruption. ''Nortel remains 100 per cent focused on serving customers worldwide through continued R&D investments and support of its product portfolio to fulfill customer needs,'' the company said in a release.

Nortel said the company's board unanimously made the decision after thorough consultation with its advisors and extensive consideration of all other alternatives. ''This process will allow Nortel to deal decisively with its cost and debt burden, to effectively restructure its operations and to narrow its strategic focus in an effective and timely manner,'' it said. 

Nortel said while the company commenced a process to turn around in late 2005, and made important progress on a number of fronts, the global financial crisis and recession have compounded Nortel's financial challenges and directly impacted its ability to complete this transformation.

Nortel said it has $2.4 billion in cash to preserve its liquidity and fund operations during the restructuring process.  

"Nortel must be put on a sound financial footing once and for all," said Nortel president and CEO Mike Zafirovski. "These actions are imperative so that Nortel can build on its core strengths and become the highly focused and financially sound leader in the communications industry that its people, technology and customer relationships show it ought to be.  I am confident that the actions we're announcing today will be the fastest, most effective means to translate our improved operational efficiency, double-digit productivity, focused R&D and technology leadership into long-term success. I want to reaffirm Nortel's dedication to delivering world-class solutions and services to customers," he said.

The application in Canada will be heard later today by the Ontario Superior Court of Justice. The voluntary petitions under Chapter 11 was filed with the United States Bankruptcy Court for the District of Delaware.  Nortel said it expects to be in a position shortly to provide an update regarding the consequential filings by certain of its EMEA subsidiaries.

The Company's affiliates in Asia, including LG Nortel and in the Caribbean and Latin America, as well as the Nortel Government Solutions business, are not included in these proceedings and are expected to continue to operate in the ordinary course, the release said.

The company will also request the courts to impose certain restrictions on trading in the company's common shares and Nortel Networks Limited's preferred shares in order to preserve valuable tax assets in the US.