Analyst: Nortel Bankruptcy Rate May Soar

“Bankruptcy” and “distinct possibility.” Not the sorts of words a company hopes to see in its press coverage, but precisely the ones Nortel has been confronted with today. Describing the telecom equipment manufacturer as “overwhelmed with debt and burning cash,” RBC Capital Markets analyst Mark Sue cut his price target on Nortel to $0 from $1.50 and warned that the company is facing a very bleak future.

“Considering the worsening macro environment, Nortel’s challenged industry position, and concerns related to liquidity while the capital markets are basically closed, we think bankruptcy is a distinct possibility down the road,” Sue wrote in a note to investors. “The world moved on while Nortel was stuck in restructuring mode, and the lack of financial flexibility means Nortel has to rely on asset sales to fund future operations.”

More ugly news for Nortel (NT), which just announced layoffs and seems to be slipping closer and closer to the abyss each day.