U.S.-based Nortel Networks Limited, and its Canadian subsidiaries, the former telecommunications giant, announced Wednesday morning that they will be initiating financial restructuring procedures using the Chapter 11 clause of the U.S. Bankruptcy code.

The Canadian subsidiaries applied for creditor arrangement protection under Canada’s insolvency law, the Companies’ Creditors Arrangement Act, proceedings will be heard today in Ontario’s Superior Court. European subsidiaries are expected to make file proceedings within Europe.

“Nortel made this decision with the unanimous authorization of its Board of Directors after thorough consultation with its advisors and extensive consideration of all other alternatives. This process will allow Nortel to deal decisively with its cost and debt burden, to effectively restructure its operations and to narrow its strategic focus in an effective and timely manner,” said Nortel’s press release.

Of course, for a business-to-business company such as Nortel, being in the process of restructuring may make it difficult to convince customers to place large orders, or otherwise adopt their technologies over that of their competitors - a factor which may cause Nortel to suffer further in the months to come.

Nortel’s stock price was frozen at 32 cents this morning as trading was prohibited after the announcement.

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