The grim reaper of bankruptcy moved closer to Nortel Networks Wednesday, even as the firm continued its month-long restructuring plan. The Wall Street Journal reported that the firm has hired attorneys to explore bankruptcy court protection if the restructuring plan doesn't work as hoped.

The Canadian firm said "no bankruptcy filing is imminent" and pointed to a Standard & Poor's Ratings Services report Nov. 21 that stated Nortel could sustain adequate levels of liquidity for the next 12 to 18 months. "We remain focused on carrying out the restructuring we outlined on Nov. 10 to cut costs," said a Nortel spokesman.

In its third-quarter report last month, Nortel reported a whopping net loss of $3.4 billion compared with a $27 million net income gain in the previous year's third quarter. Nortel also cited a "challenging economic environment, competitive pressures, and reduced spending by carrier customers" that have been weighing down the company.

Nortel said it planned to cut 1,300 jobs and added that several top executives would leave the firm in 2009. The cuts were expected to produce $400 million in savings, Nortel said.

Telecommunications equipment providers have been hit across the board in recent months by declining sales and profits. In that regard Nortel joined Alcatel Lucent, Motorola, and 3Com as they continue to struggle with lower orders from service providers.

Nortel has suffered a triple whammy -- it tanked when the telecom bubble deflated in the early 2000s, then it was racked by a series of accounting scandals, and now it is dogged by the global economic meltdown.

Once Canada's largest company, with a market capitalization over $250 billion, Nortel is currently teetering below a $250 million valuation. Nortel is said to be holding out hope that the Canadian government will step in to help rescue it.