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MatlinPatterson submits $725m bid for Nortel businesses

The distressed debt specialist has plans to buy various Nortel assets out of bankruptcy and run them as a reorganised company. A separate Nortel division is currently being pursued by Avaya, which is owned by Silver Lake and TPG.

MatlinPatterson has submitted a rival, $725 million bid for wireless technologies businesses of bankrupt Nortel Networks that is part of an overall plan to pull the company out of bankruptcy as a going concern.

The firm’s bid will compete with the “stalking horse” bid for $650 million submitted by Nokia Siemens earlier this year for the businesses. A bankruptcy auction is set for Friday and a final sales hearing for next week.

Earlier this week, Avaya, a telecom company owned by Silver Lake and TPG, offered $475 million for Nortel’s enterprise solutions business, which makes telephone systems for companies. Avaya’s bid also is a “stalking horse” bid and can be trumped by other bidders.

“MatlinPatterson is confident that the CDMA and LTE Access assets can emerge from bankruptcy as a reinvigorated, independent company. We are unwilling to accept and will actively take steps to prevent a ‘fire sale’ of Nortel’s core assets followed by the wholesale liquidation of the remaining businesses,” the firm said in a statement.

MatlinPatterson is one Nortel’s largest creditors, holding about $400 million of the company’s debt. The firm will look to partner with existing Nortel management if its bid is successful, and also look to acquire additional Nortel assets “as they become available during the … Chapter 11 cases”, MatlinPatterson said.

MatlinPatterson has teamed up with various “industry experts” led by former Nortel executives for the past few months analysing various deal alternatives.

“MatlinPatterson determined that these assets can form the basis of a stand-alone enterprise with long-term viability that will meet the needs of all stakeholders,” the firm said. “This independently-held business would provide a range of opportunities – from additional bolt-on acquisitions to partnerships to reinvention and new ideas from within the technology asset base.”

The bid is coming from MatlinPatterson Global Opportunities Partners III, which closed on $5 billion in 2007. The firm manages about $9 billion between its private equity and hedge fund platforms.

MatlinPatterson has been active in the distressed environment, sinking $250 million in struggling Flagstar Bancorp in December. The US government injected about $266 million in the bank as part of the deal.

Nortel, once North America’s biggest telephone equipment maker, filed for bankruptcy in January under increasing liquidity pressure from the global financial meltdown.