MatlinPatterson Eyes Strategic Partners in Nortel Bid

TORONTO (Reuters) – MatlinPatterson is open to working with strategic partners in putting forward a comprehensive proposal to reorganize the businesses of bankrupt Canadian telecom equipment maker Nortel Networks, the U.S. private equity firm said on Wednesday.

MatlinPatterson, a major bondholder and Nortel creditor, has stated that it does not believe that the proposed sale of Nortel’s key wireless technology unit to Nokia Siemens Networks [NSN.UL] maximizes value for Nortel stakeholders.

“We welcome the opportunity to work with potential strategic partners to leverage Nortel’s resources and leading LTE technology long into the future,” said MatlinPatterson in a statement.

On Tuesday, Nokia Siemens’ head of U.S. operations, Sue Spradley, said a private equity-led reorganization would not solve Nortel’s problems because Nortel no longer has the scale necessary to compete successfully in the telecom equipment industry.

The industry has been consolidating and leaving only a few global players — market leader Ericsson (ERICb.ST), Huawei [HWT.UL], Nokia Siemens and Alcatel-Lucent (ALUA.PA).

If MatlinPatterson is able to partner with a strategic investor in its bid to reorganize Nortel, then analysts believe the bid would have a greater chance of success.

MatlinPatterson said it will propose an alternative that provides superior value and a better outcome for Nortel, its customers, suppliers, employees and other stakeholders.

Toronto-based Nortel, once the largest North American telecommunications equipment manufacturer, filed for bankruptcy protection in January, blaming the economic crisis for derailing a turnaround effort that began in 2005.

Duncan Stewart, an analyst at DSAM Consulting in Toronto said he expects MatlinPatterson to almost certainly hedge its risk by working with a syndicate on a plan to reorganize Nortel.

“They are presumably working with others and they might be the lead,” he said, in a recent interview.

TIME CONSTRAINTS

Time is running short for the private equity firm as it scrambles to put forward a proposal for Nortel. MatlinPatterson will have to submit a reorganization proposal, or any alternative bid, before July 21, which is the deadline set by the U.S. Bankruptcy Court in Delaware.

Last month, Nokia Siemens Networks — a joint venture of Nokia (NOK1V.HE) and Siemens (SIEGn.DE) — made a $650 million “stalking horse” bid to acquire Nortel’s advanced wireless technology business.

The Nokia Siemens bid sets a floor. If any competing offer tops it, Nokia Siemens will be given an opportunity to raise its bid.

Given the time constraints, MatlinPatterson may be forced to table a bid, or alternative proposal on its own and explore a tie-up with a strategic buyer at a later stage.

The advanced wireless technology business that Nokia Siemens has bid for consists of Nortel’s prized CDMA and LTE assets.

CDMA, or code division multiple access, is a wireless technology that lost the battle for global dominance but still has a strong position in some markets such as India and the United States. LTE (long term evolution) is a new high-speed wireless technology that is intended to replace current mobile networks.

MatlinPatterson has retained Dion Joannou, former president of Nortel North America, to head a team focused on tabling an alternative proposal for Nortel’s assets.

(Reporting by Euan Rocha; Additional reporting by Pav Jordan; editing by Peter Galloway)