Olympics Organizers in Talks with Nortel After Bankruptcy

(ATR) Nortel Networks, the telecommunications equipment company, becomes the first major sponsor of the Vancouver 2010 and London 2012 Olympics to seek bankruptcy protection.

The Toronto-based company's U.S. subsidiary filed for Chapter 11 bankruptcy in Delaware Wednesday. The company said in a statement that it had filed for credit protection in Canada, the United States and Europe in order to restructure.

Nortel racked up a $6.3 billion debt through Sept. 30 and has nearly $12 billion in liabilities.

It became an official VANOC supplier of network communications equipment on May 1, 2007 in a deal worth up to $15 million. London 2012 signed Nortel as its network infrastructure partner last July, a top tier partnership contributing $58 million to LOCOG's $952 million sponsorship target.

Both VANOC and LOCOG said they were in talks with Nortel Thursday, while the telecommunications company has reaffirmed its commitment to its Vancouver 2010 sponsorship.

“Like many companies, Nortel is working through challenging economic times. Over the past years, Nortel has been an exceptional partner, and has demonstrated a strong commitment to VANOC and the Olympic Movement,” said VANOC chief information officer Ward Chapin in a statement.

“As a partner, they have kept us informed every step of the way. Much of Nortel's commitments to the Games have been delivered and will be in place by May.”

Around the Rings was unable to reach Dave Cobb, VANOC's marketing and communications chief, for comment.

Canada's Minister of Industry Tony Clement has agreed, through Export Development Canada, to provide Nortel a $30 million bailout loan, although he denied it was a bailout. “Nortel has stated that it has every intention of emerging from this restructuring under CCAA as a viable business,” Clement said.

London 2012 organizers are hoping Nortel can find a way out of its financial difficulties to deliver on its commitments to the Games $3 billion operational budget.

“We are aware of the situation and will work through it with them,” a London 2012 spokesman told ATR, adding that there was confidence the other six tier one sponsors were fully committed to the Games.

Last year LOCOG expressed satisfaction at filling its top tier sponsor categories before the onset of the economic downturn, touting the success of its “strategy to go early and aggressive” to secure sponsors.

London 2012 is three-quarters of the way towards its sponsorship target. Its seven tier one sponsors are British Airways, BP, Adidas, BT, EDF Energy, Nortel and Lloyds TSB.LOCOG chief executive Paul Deighton hopes Nortel's financial problems can be resolved so that London does not lose $58 million in sponsorship. (Getty Images)

But LOCOG chief executive Paul Deighton admitted last October that recruiting sponsors would be harder in 2009, saying that negotiations with some potential sponsors was being deferred until the economic situation was more favorable.

News of Nortel's financial problems came as London's Olympic organizers announced the signing of recruitment firm Adecco as its third tier two partner on Wednesday in a deal worth around $30 million; sweet manufacturer Cadbury's and financial firm Deloitte are the others.

Today, The Boston Consulting Group was unveiled as the first tier three sponsor for the 2012 Games. As the strategic consulting provider, it will advise on ticketing, merchandising, sponsorship and revenue strategies.

“The Adecco deal shows there is still commercial interest out there for London 2012,” said the London 2012 official.

At least two more tier three sponsors will be announced in the coming weeks, he confirmed. Deighton has said there will be more than 10 tier three supplier deals in total.

With reporting from Mark Bisson and Bob Mackin.

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