ANALYSIS - Plan to recapitalize Nortel a tough sell

By Pav Jordan

TORONTO (Reuters) - A plan by U.S. creditors to reorganize and revive Canada's bankrupt Nortel Networks, once one of the world's biggest makers of telecom equipment, will be a tough sell to investors and clients, but it is not without precedent.

MatlinPatterson Global Advisors, a private equity firm specializing in distressed investments, and a major bondholder and Nortel creditor, said on Monday it would present a proposal to reorganize the businesses of the failed telecoms giant, which filed for creditor protection in January.

Analysts say the company, which has proposed a deal to sell its CDMA and LTE wireless technology businesses to Nokia Siemens Networks for $650 million, would be worth about $3 billion if sold in one piece.

Nortel is North America's biggest maker of telephone equipment, but it has been steady decline since the tech bubble burst in 2000.

Repeated attempts at a comeback have failed, losing it credibility in an industry where supply and technology agreements imply billions of dollars of investment and sometimes decades of commitment.

"It's very much a Humpty Dumpty story and we're beyond the point at which anyone can hope to keep all of the various pieces together under Nortel's banner," said Carmi Levy, an independent technology analyst based in London, Ontario.

"I think what they (Matlin) are trying to do is they are trying to measure the market for what the potential value would be for wireless, for Metro Ethernet and for enterprise," said Levy.

Nortel is still looking for serious bidders for the enterprise unit -- which makes networks and gear for large corporate clients -- and the Metro Ethernet Networks unit, which makes Internet infrastructure and includes its optical and carrier ethernet technology.