TORONTO, Nov 13 (Reuters) - Nortel Networks Corp will have to rely on asset sales to fund its battered operations and risks running out of money and collapsing under its debt load before 2011, an analyst warned on Thursday. "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," RBC Capital Markets analyst Mark Sue wrote in a note that also cut the target price on Nortel's shares to zero.
His remarks come days after Nortel -- North America's biggest maker of telephone equipment -- posted a $3.4 billion loss and announced another round of sweeping cost cuts that included 1,300 layoffs, or about 5 percent of its 30,000-strong work force.
The Toronto-based company is also trying to sell its Metro Ethernet Networks unit, which includes its optical and carrier ethernet technology, but has thus far been unable to find a buyer.
"Assets sales couldn't have come at a worse time, and due to Nortel's distressed situation, potential bidders for the company's Metro Ethernet assets may offer subsequently distressed prices," Sue wrote.
He also estimated Nortel could face a pension deficit of as much as $2.8 billion because of the downturn in global stock markets.

"Our cash flow analysis points to an increasingly challenging outlook," Sue said. "Without government intervention or major financial sponsors, Nortel may run of out cash before its $1 billion 2011 bonds mature."
Nortel shares were up 9 Canadian cents to 78 Canadian cents on the Toronto Stock Exchange on Thursday morning. In mid-2000, they were worth more than C$1,100 each, adjusted for a stock consolidation that took place in late 2006.
($1=$1.23 Canadian)

(Reporting by Wojtek Dabrowski; editing by Peter Galloway) Keywords: NORTEL/ (wojtek.dabrowski@reuters.com; +1-416-941-8009; Reuters Messaging: wojtek.dabrowski.reuters.com@reuters.net)

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