OTTAWA (Reuters) - The federal government pledged on Wednesday to help Nortel Networks Corp, North America’s biggest telephone equipment maker and major source of Canadian R&D spending, as it seeks to emerge from bankruptcy protection.
“The government of Canada appreciates the importance of the telecommunications industry to our economy and will continue to work with Nortel during its restructuring through Export Development Canada (EDC),” Industry Minister Tony Clement said in a statement.
EDC, a government agency, has agreed to provide up to C$30 million ($24 million) in short-term financing through an existing bonding facility.
In addition, Clement said EDC is open to discussing financing for Nortel in conjunction with other financial institutions.
The Conservative government has traditionally opposed using public money to rescue ailing companies but announced C$4 billion in emergency loans to the auto industry last month and has said extraordinary times require extraordinary measures.
The government resisted characterizing its position on Nortel as a bailout, insisting that whatever EDC did was on a commercial basis.
“I don’t see us in this particular instance picking a winner or loser,” Clement told Reuters in an interview.
All the language was geared, however, to the idea making sure Nortel and the industry as a whole survived rather than died.
“We have a very competitive and very viable telecoms industry in this country, and our government is committed to ensuring that that continues to be the case,” he said.
In his statement, he said: ”The decision to file for creditor protection was made by its board of directors in an effort to turn the company around...
“It is important to note that Nortel is filing for court-supervised restructuring under the CCAA (Canada’s Companies’ Creditors Arrangement Act), not bankruptcy. Nortel has stated that it has every intention of emerging from this restructuring under the CCAA as a viable business.”
Clement told Reuters that typically a company takes 12 to 18 months to emerge from CCAA and he said many currently successful Canadian companies, for example Essar Steel Algoma Inc., have done so.
“There’s no immediate threat anymore,” he said noting that the immediacy was a $107 million interest payment that was due on Thursday. “Now that that is dealt with through the court protection process, they do have some breathing room.”
EDC spokesman Phil Taylor said the agency’s risk tolerance was higher than that of banks, but added: “EDC always operates on the basis of commercial principles. From the EDC perspective, there are no bailouts, no handouts. There has to be a viable plan.”
Additional reporting by Louise Egan; editing by Jeffrey Hodgson