Chapter 10, in Which Nortel Mulls Chapter 11

A few weeks back, RBC Capital Markets analyst Mark Sue warned that Nortel (NT) 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.

Looks like Sue was right, and the road to which he referred was a short one. The struggling telecom company has hired counsel to explore a bankruptcy filing, The Wall Street Journal reports. Nortel, well aware what such reports can do to investor confidence, insists that no such filing is imminent. The company does, however, acknowledge that it has engaged advisers to help it weather the current economic storm. Just who has Nortel hired? Word on the street says Lazard Ltd. and law firm Cleary Gottlieb Steen & Hamilton.

Grim news for Nortel, which has spent the past several years trying to recover from the general downturn in the telecom industry and a nasty accounting scandal. With apparently very little success.

In a statement Wednesday, the company said, “Nortel is hard at work reshaping the business to even better serve our customers. There are those who fuel negative speculation, but there are many more who believe that Nortel has put in place the necessary plans to strengthen our financial footing and reset our cost base.”