2 Reasons Nortel is Exploring Bankruptcy Protection

| About: Nortel Networks (NT)

There’s an interesting article in the Wall St. Journal looking at why Nortel (NT) is exploring bankruptcy protection even though it has enough cash to last until 2010.

The two big issues are access to debtor-in-possession financing, and the pension-fund deficit, which could climb as high as $2.6-billion from $1.1-billion at end of 2007.

UBS Securities analyst Nikos Theodosopoulos said the inability to access the DIP market is a huge issue. Among the companies with cash that still filed for bankruptcy protection was Tribune Co.

“If you are Nortel and you want to preserve the company, you should file earlier so you can keep the company running and renegotiate with debt holders, and not run out of cash and be forced to sell assets and liquidate,” he told the WSJ.