Telecoms kit vendor Nortel is reportedly exploring bankruptcy protection and government bailout scenarios, prompting fears that the current restructuring plan underway at the company could fail. Ronald Alepian, a spokesman for Nortel, told the Wall Street Journal that “no bankruptcy filing is imminent,” but added that the company has appointed several advisers to map out future options. The report, citing people familiar with the situation, claimed the Toronto-based company was seeking legal counsel regarding bankruptcy-court protection from its creditors, and exploring the possibility of aid from the Canadian government.

In a wide-ranging cost-cutting plan announced last month, Nortel said it was planning to reduce annual gross costs by approximately US$400 million next year. The strategy includes plans to reduce its workforce by approximately 1,300, freeze salaries and extend its existing hiring freeze through 2009. The plan was announced on the back of Nortel’s largest net loss in the last seven years – US$3.4 billion for the third quarter. The huge loss included a US$3.2 billion expense to write down the value of part of its business and deferred tax assets. Third-quarter revenues of US$2.32 billion decreased 14 percent year-on-year.