Matlin Patterson Working on Buy-Out Proposal

By Mark Evans | Published: July 6, 2009

With Nortel on the cusp of completing the first phase of its asset (fire)sale (the $650-million sale of its CDMA wireless business and LTE R&D unit to Nokia Siemens), it looks like things are about to get a lot more interesting.

MatlinPatterson, a private equity firm that acquires distressed companies, issued a statement today that it doesn’t believe the Nokia deal “maximizes value for Nortel stakeholders, including its creditors, customers, employees and communities.”

Here’s the statement:

“Under the bankruptcy court-imposed timeline, MatlinPatterson is working to put forward a competing proposal that permits this critical part of Nortel to reorganize and emerge from bankruptcy as an independent, reinvigorated, stand-alone Canadian-based company.

MatlinPatterson’s objective is to present an alternative that not only exceeds the current bid in terms of value but also provides, on multiple fronts, a superior outcome for the company and all of its constituencies.

MatlinPatterson believes Nortel is a solid company with a valuable brand, talented employees and innovative technologies. It is interested in retaining, for current investors, the inherent value of the company rather than merely accepting a ‘fire sale’ of its core asset followed by the wholesale liquidation of the remaining businesses.

The firm has a proven track-record of leading successful reorganizations and is currently conducting due diligence and meeting with other potentially interested parties as part of our effort to prepare an alternative proposal.”

More: Reuters has a story on Matlin Patterson’s interest in Nortel.


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  • Moose_Chaser

    Yeah….and monkey's might fly out of my butt !!

    MC

  • ChaiTea

    >>It is interested in retaining, for current investors, the inherent value of the company rather than merely accepting a ‘fire sale’ of its core asset

    Does the scope of “investors” also include the shareholders of the now delisted stock, or is it just limited to the major creditors ?

  • trust_but_verify

    Apparently someone believes these guys have credibility as the offers to buy receivables from the pre-stay period have started coming fast and furious and are the percentage has increased several times over all of the sudden.

  • dljvjbsl

    Why would they give the shareholders any money. The shares are worthless. The company is bankrupt. Any value in it will now gotto pay off the creditors

  • oz_ex_nt

    A white knight? Or a wolf in sheep's clothing??

  • dljvjbsl

    There could be two theoretical ways of doing this:

    a) buy up shares and then give the company enough money to pay off the creditors

    b) buy the debt at pennies on the dollar and have the company restructured in bankruptcy so that current shareholders are eliminated

    It is pretty easy to see which option they will use

  • horace_grimswold

    Odd timing.

    Nortel posted bankruptcy January 14th. Following nearly 6 months of silence as a creditor, MatlinPatterson hurriedly it wants to make a bid. But the announcement only came after NSN put in an offer. Can anyone find any MatlinPatterson public comments about Nortel that are older than June 27 2009?

    Legitimate interest in resurrecting the company? Or mere posturing to get NSN to raise its ante?

  • trust_but_verify

    Offers on the debt are actually getting to pretty attractive levels. Far better than I would have expected.

  • protosphere

    Why did they wait until the last hour.

    I don't think they can swing it, which is too bad, they may have otherwise made a go of it a little longer.

  • NTblinker

    I think they really aware when they must involve Nortel' process and also know what to do later. Good luck to them against Nokia, Avaya or others. All of Nortellers must support them. i love Nokia but not the one that acquires Nortel's CDMA business:)

  • Just_Done

    Seriously, just let us move on – quit keeping us together because this company Board and Leaders couldn't make it work for the past 10 years. Since they were a creditor, they could have up heaved the Board back in the day – but seriously, let the PEOPLE move on to new companies – we're all just tired of waiting….

  • dljvjbsl

    The shares are worthless. The company is bankrupt.

    And the executives and employees are getting bonuses

  • bankrupt_bob

    “The Flight of the Phoenix, Chapter Onze”

  • scalppeeler

    It is the least they can do for the employees who have stuck it out and continue to work hard.
    Good for them.
    I hope they get bonuses for every quarter this year even after Nortel in name is done due to acquisition should it come to that.
    Good for the rank and file.
    Something for their suffering. In many cases.

  • painful_truth

    Interesting how MatlinPatterson believes in the brand, employees and technologies, but GE Gang —Mike-Z and Hackney beleive the employees are morons, there is no technology, other than a few GE Dim Light Bulbs…..

    MatlinPatterson believes Nortel is a solid company with a valuable brand, talented employees and innovative technologies.

  • horace_grimswold

    You got it.

    MatlinPatterson's underlying motives might be questionable, but they indeed 'get it' — that Nortel could be fixed by putting the Bored and Executive team into a wooden crate and sending them on a one way boat to China.

    Dunno if their solution will work, but they figured out the root cause failure mechanism.

    Glass is half full.

  • ExNtrl

    LOL I would pay good money to see Hackney (a GE monkey) do that flight.

  • NortelTragedy

    It would be nice to see NSN buy more of Nortel than CDMA/LTE. While MP does appear to have the right idea, I'm not sure what they'd do good for pensioners, employers or common stakeholders. They're looking out for creditors and will likely cut to the bone and not appreciate the value and potential seen by NSN.

  • ChaiTea

    Can you elaborate further please? any figures?

  • borissss

    To complete the shopping with cheapest prices.I believe MP is a better option than NSN,since Nortel name will not disappear.
    I think they can make Nortel competent again.

  • protosphere

    I think the name is a determent so jaded but do agree they have a better chance to keep it afloat. A plan to manage debt sounds exciting, especially in light of their recent decline. Lets hope the NSN stake isn't shaken to an unbearable gamble.

    If they are sure, they will have to put their money with their mouth is given they have 9 billion than risk others people's money again.

    I am not convinced of eventual outcome however without dramatic downsizing and focusing on emerging technologies outside maintaining their traditional revenue stream of the past. This might also encompass more risk in R&D injections above the already high financial burdens. I dunno… it remains a daunting task for no matter who takes over with so many heads having already tried in these hard to fill roles.

    They need a radical visionaries to save the day and miracles by definition aren't the norm for Nortel to rise from the ashes this late in the game.

  • protosphere

    “Legitimate interest in resurrecting the company? Or mere posturing to get NSN to raise its ante?”

    If NSN calls their bluff and walks away they would baghold, forced to resell at a loss. Is this loss worth the risk to get more I wonder?

    Do they think the EDC support is enough to bet NSN can afford to go higher?

    What will they do if they win and NSN calls their bluff I wonder, albeit you make an excellent point to the obvious here.

    Fascinating stuff to come in at the 12th hour too…again, good point

  • Go_David

    MatlinPatterson usually like to control the trouble company and make it through Cahpter 11. In that case, their debts and equity swap can worth more. Either way, won or lose, MatlinPatterson will profit. You got respect smart people.

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  • borissss

    It will be a tough challenge for them.Whether they are heros or wolves it doesn't matter.The critical point is not the owner of the company I don't care about the profit collectors.I hope this global giant exists as a competent player as before.

  • S_O_S_This_is_HMS_Nortel

    Any rescue plan has to include the removal and termination of Z, BoD, and all the ELT. They are the cancer in a dying patient.

  • XPM_guy

    Exactly! One of the main beefs against Mike Z and the BoD has been that they know nothing about the telecom equipment biz, so they've been blundering along trying to cut costs (except among the executive ranks and in the boardroom, of course) instead of coming up with a strategy for success in today's volatile telecom equipment markets around the globe.

    MatlinPatterson may be very good at generically cutting costs and reselling distressed companies, but cutting costs was supposed to be Mike Z's big claim to fame as well, and look how well that turned out! Unless MP can bring to the table a proven mgmt team as part of their offer, then they are merely proposing an extension of Nortel's death-throes (during which time MP execs will get huge bonuses, maybe). Remember that when he joined Nortel, Mike Z was also sold on the Nortel brand, employees & technology. Just words a suitor says while trying to close the deal (“Sure I'll respect you in the morning!”)…

    It's not likely that MP will be able to generate more money for the other creditors (e.g. pensioners & ex-employees owed severance), as everyone – except MP, which will get control of the actual assets and revenue streams – will be paid off just in new Nortel stock shares, which will then immediately begin to lose value for the same reason the stock has continually lost value in recent years: the folks at the top obviously don't have a clue how to run a telecom equipment company (as opposed to a generic widget manufacturer), so our brad & butter large telecom customers will continue to shy away from us, waiting for the inevitable collapse under gross mismanagement.

    Better to let NSN take over – I'm rooting for them to also buy the CVAS division and maybe MEN as well – at least that way the people and technology will have a chance to succeed after all…

  • XPM_guy

    Hear! Hear! Let's hope the next group of “leaders” (wherever they come from) includes some people who actually know the telecom equipment biz…

  • yes4aapl

    Yes
    Shareholders would get rid off that CEO and Directors by voting
    Nortel offers electronic voting system, Online Voting
    read

    Shareholders

    * Non-Registered (Beneficial) Shareholders

    * Registered Shareholders

    Electronic Delivery and Online Voting

    Nortel Networks is pleased to offer its shareholders the option of receiving Electronic Delivery of Shareholder Materials (Proxy Circular and Proxy Statement, and the Annual and Quarterly Reports to Shareholders) and the option to enroll for Online Voting.

    The advantages of these Online options include:

    * fewer documents delivered to your home
    * fast delivery of documents directly to your desktop
    * reduced printing/mailing costs for Nortel Networks
    * convenient online voting from your desktop

    To take advantage of these options, please click on the appropriate selection below.

    Non-Registered (Beneficial) Shareholders
    You are a Beneficial Shareholder if your shares are held through a Brokerage Firm Account. To enroll for electronic delivery or online voting, click on the appropriate link below. The proxy materials may be viewed from either of the two links.

    Beneficial Shareholders

    * View the Proxy Materials online
    * Enroll for electronic delivery – U.S. Brokerage Firm Account*
    * Enroll for electronic delivery – Canada Brokerage Firm Account*
    * Vote your shares online – U.S. Brokerage Firm Account*
    * Vote your shares online – Canada Brokerage Firm Account*

    Registered Shareholder
    You are a Registered Shareholder if you have your Nortel Share Certificates in your possession. To enroll for electronic delivery, online voting, or to view the proxy materials online, click on the appropriate link below.

    Registered Shareholders

    * Enroll for electronic delivery*
    * Vote your shares online*
    * View the Proxy Materials online

  • NTInfidel

    I really think MP is trying to get NSN to bid higher. Remember MP is a creditor. They would technically be bidding on what they already own a piece of. Kind of like me bidding on my own EBay auction to drive up the price.

    But MP taking over is nuts. They take companies and hollow them out until they look “profitable” then sell the remnants. Basically they do “Strip and Flips”. The big problem of trying this with Nortel is it already hollowed/stripped and isn't viable. There isn't more to strip. Actually too much has already been stripped. Aside from it's obvious financial collapse, internally there is workforce collapse, from destroyed morale, loss of many key employees etc. This can't be fixed by vultures and they would only accelerate the decline.

    MP clearly has no real clue about the internal issues that they will find themselves out of their depth trying to repair. They will only continue to drag down morale as they will want to continue under creditor protection while the continue to reorganize for at least another year, causing more employees and customers to flee.

    The only real hope for the ex-Nortel divisions is a white knight like NSN buying them and thus immediately move them out of creditor protection and providing stability for both employees and customers.

    Either way Nortel is dead. With asset sales to established telecoms, there is a chance for the employees at new companies. But with a Vulture like MP, there is only more spirit crushing death march into oblivion for Nortel and the employees as well.

  • How_long

    Nortel was pretty much all stripped out by the time Z appeared on the scene. Several more rounds of layoffs and you are left with a hollow shell. Revenue has fallen but costs have fallen more. MP must be hoping to run it at todays cost base or lower and reap the revenue while it lasts. A valid business model. I can think of others who did the same kinda thing. Long term solution: no.

  • yes4aapl

    MP clearly has no real clue about the internal issues that they will find themselves out of their depth trying to repair.
    ——
    re
    Be honest and admit that not only MP thinks that there is more value in Nortel as whole than sold piece by piece…
    The other group is Save Nortel group of ex Nortel's managers. You can not use your argument in that case, can you?
    What if both parties MP and Save Nortel unite in a bid?
    There is billions in deferred tax credits which is value_asset on its own.
    btw
    I would think that NSN deal if closed can bring new life for Nortel as whole.
    The problem is that MP ignores current shareholders. If there is value in Nortel as MP alleges, bring shareholders to the table and share food with them.

  • yes4aapl

    Revenue has fallen but costs have fallen more.
    How_long
    ==
    re
    that statement is disputable.

    what is your suggestion?

    I think your idea was that revenue is lower but costs are still high.
    Look at the reported numbers
    I know that as Q1 2009 report stated that revenue fell down 37 % and expenses were lower only 15% or so. In other words ?
    there was growing gap between rev and costs and the gap was 22% bigger in q1 2009 with a negative impact on profitability_earnings.
    Can you imagine what Q2 2009 report will look like?

  • trust_but_verify

    They now range from $.10 to $.40 on the dollar.

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  • cooluswiz

    It is not going to happen, they are liqudating Enterprise Data…wait for annoucements………….soon…..Employees need to wake up and buy out the company –if each one of us put 10K , we can generate approx 300 million $ and buy the company along with other investors to have better inside in decision making and get rid of all the fat managers….we need them out who are having hunting trips when we are all working to satisfy the remaining customers.

  • ChaiTea

    http://www.markit.com/assets/en/docs/products/d…

    Seems to imply that some Nortel bond debts (via CDS) were traded for 7.5 to 6.5 cents on the dollar. That's cheap isnt it?

  • ChaiTea

    FYI.

    Read Docket 1021 Exhibit A if you want more information on (I) procedure for Solicitation Of Initial Bids; (II) procedure for Public Auction And Sale Hearing etc.

    MP has a lot of work cut out in front of them. I wonder if they can finish the paperwork!!!

  • How_long

    I agree, the Q2 report will make interesting reading. There have been more staff losses in Q2, that was what I meant by costs have fallen more.

  • yes4aapl

    How_long
    re
    We call it the death spiral.
    Costs are reduced but revenues fall more than that
    The gap between revenue and costs is growing to the negative effect.

  • How_long

    I agree, the Q2 report will make interesting reading. There have been more staff losses in Q2, that was what I meant by costs have fallen more.

  • yes4aapl

    How_long
    re
    We call it the death spiral.
    Costs are reduced but revenues fall more than that
    The gap between revenue and costs is growing to the negative effect.

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