Nortel Bonds Still Hot

by Jordan Richardson on January 31, 2011

Even with Nortel Networks essentially kaput, their bonds are still hot commodities.

Outstanding bonds are trading at about 88 cents on the dollar, which has investors thinking the cash generated will be able to pay off some claims. The patent portfolio still has to be moved, too, and final bids are due any day now.

Last Tuesday, the Wall Street Journal reported that Nortel dominated credit trading with over $125 million in bonds moving around. This distinction made Nortel the most “actively traded junk credit of the session.” Says Matt Wirz: “Nortel’s benchmark $450 million 10.75 percent bond due in 2016 hit a high of 87.125 cents on the dollar yesterday. It’s up roughly four percent on the month.”

Nortel, of course, filed for bankruptcy two years ago, but the creditors have had a little trouble deciding what to do with the remains. The gargantuan portfolio of patents has a lot to do with this seeming indecision, with 4,000 or more patents adding up to around $1 billion. Back in December, Reuters reported that the patents had been divided into “buckets” of related technologies for ease of bidding and division.

Now the patents do represent quite a bit of power here, mainly because of the large amount of them but also because of the specifics. Wireless handsets, infrastructure, networking, internet, and other components are all a part of the party, with major players in the industry expected to be making bids on third and fourth generation technology.

Because of this scenario and the likelihood that the Nortel gear is bound to fetch a pretty penny, stakeholders have been reluctant to close up shop fully because they’re waiting on value for the company’s intellectual property. An auction date for the intellectual property has yet to be set, so we can expect the bonds to remain as they are for the next while.

It’s interesting to consider a company fetching such value when they’re essentially a non-entity, but such is the game at this point. The value of the bonds is essentially drawn out because of the potential value of the assets remaining, which puts Nortel’s stakeholders in a very unique position.

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{ 1 comment }

Orie Zavadiuk February 1, 2011 at 5:34 pm

Message here is that the Name Nortel Networks is still well recognized throughout the World. Perhaps some thought should be given for the Company to reposition itself as an International Consulting Futures Identity on the strength of its Name with Excellence status , Huge well Recognized Customer base, Holding Patents as well as its Total Communications Systems experience image Identity. If such an Expertise was ever needed it is Now because of the multiple varied systems being introduced and marketed today withou any proven aged certification. No doubt the established Huge Customer Base will support such an identity.

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