Nortel Throws a Hail Mary

Updated from 11:15 a.m. EST

Beleaguered telecom equipment manufacturer Nortel Networks(NT) has filed for bankruptcy protection in a last-ditch attempt to put its troubled house in order.

Nortel's bankruptcy petition comes just a day before the firm was due to repay a $107 million interest debt on bonds and follows months of speculation about the company's future.

The Toronto, Ontario-based firm's stock has plummeted recently amid falling sales and was even threatened with delisting from the NYSE.

The company's stock plunged even further in pre-market trading Wednesday, tumbling 77% to 7 cents.

Nortel will now seek creditor protection under the Companies' Creditors Arrangement Act (CCAA) in Canada, and its American subsidiaries have filed for Chapter 11 with the U.S. Bankruptcy Court for the District of Delaware. Some of the firm's European subsidiaries are also expected to file for bankruptcy, according to Nortel.

"Nortel must be put on a sound financial footing once and for all," explained the company's president and CEO Mike Zafirovski, in a statement early Wednesday. "I am confident that the actions we're announcing today will be the fastest, most effective means to translate our improved operational efficiency, double-digit productivity, focused R&D and technology leadership into long-term success."

The application under the CCAA will be heard later today by the Ontario Superior Court of Justice, although Nortel says that its day-to-day operations should continue without interruption.

Nick of Time for Nortel

The bankruptcy filing comes just a month after Nortel was granted a 30-day waiver by its largest creditor, Export Development Canada, and four months after the company, scrambling for cash, said it was seeking buyers for some of its key businesses.