Nortel trading temporarily ceased in light of financial filing default

By Caroline Salls

Pittsburgh, Dec. 11 - Nortel Networks Corp. and Nortel Networks Ltd. said a temporary cease trade order has been issued by the Ontario Securities Commission as a result of Canadian financial statement filing defaults.

According to a company news release, the Nortel entities did not file their unaudited financial statements and related disclosure filings for the third quarter by the filing deadlines because their Canadian court-appointed monitor determined that future periodic reporting by both companies could no longer be justified and would be discontinued.

The cease trade order prohibits all trading in securities of both Nortel Networks Corp. and Nortel Networks Ltd., effective immediately.

Exceptions to the order include trades made for nominal consideration to allow a securityholder to crystallize a tax loss and trades in notes of either Nortel Networks Corp. or Nortel Networks Ltd. to an entity that qualifies as an "accredited investor" under applicable Canadian securities laws.

Nortel said the exceptions are subject to further qualifications that, in the case of a tax loss trade, a copy of the cease trade order is provided to the purchaser and the seller receives a written acknowledgement from the purchaser that the securities acquired remain subject to the order, and, in the case of an accredited investor trade, the purchaser will be deemed to have received notification of the terms of the order and deemed to have acknowledged to the seller that the notes acquired remain subject to it.

The Nortel entities said the temporary cease trade order is scheduled to expire 15 days from the date of its issuance, unless extended by the OSC.

The companies said the commission will hold a hearing before the expiration date of the cease trade order to make the order permanent.

Nortel said it expects other Canadian provincial or territorial securities regulators to issue similar cease trade orders.

Nortel, a Brampton, Ont.-based manufacturer and supplier of telecommunications networking equipment, filed for bankruptcy on Jan. 14, 2009 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 09-10138.

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