It fits into the EDC’s mandate to “support their international transactions: to pay for the up-front costs associated with the production of a large export order, to expand into new markets or to respond to a buyer’s request for financing”. EDC also provides financing for foreign firms looking to purchase “Canadian goods and services through loans, guarantees and lines of credit.
So, it’s interesting and somewhat puzzling to discover the EDC provided $300-million of a $400-million credit facility that Nokia Siemens Networks is tapping to buy Nortel’s wireless assets. EDC is justifying the deal by suggesting it will ensure that about 800 R&D jobs remain in Canada.
“Nokia Siemens has been expanding its presence in Canada for many years and this transaction will further its North American expansion,” said Paul Day, Vice-President, Information and Communication Technology with EDC. “EDC’s participation in this transaction will help ensure that we keep Canadian know-how and capability in Canada.”
EDC’s support for Nokia Siemens emerged just five months after EDC entered into a new and modest $30-million “support facility” with Nortel after the company filed for bankruptcy protection. At the time, EDC and Nortel said they would “continue to work together to see if a longer term arrangement, acceptable to both parties, can be reached”.
There are critics who are now suggesting EDC may have blow a major opportunity to manage Nortel’s restructuring process - and thereby protecting Canadian R&D jobs and Canadian pensioners - by demanding changes within Nortel’s senior executive ranks.
Instead, EDC provided a modicum of support while the Canadian government refused to provide Nortel with a financial bail-out even though it’s been handing out billions of dollars to auto makers.
The big question is why did the Canadian government and a Canadian Crown Corporation decline to save Nortel as we know it? Was it a lack of faith in senior management? The lack of a viable restructuring plan?
If you’re a conspiracy theorist, you could easily argue that Nortel had no plans to restructure itself after filing for bankruptcy protection. Instead, the asset sale had been decided upon, and it was only a matter of time before it was executed.