UPDATE 2-Nortel creditors file objections to unit's sale

* Nortel's creditors, suppliers oppose Nokia Siemens deal

* Key lender touts reorganization plan, over asset sales (Adds details on objections filed, background)

By Euan Rocha

TORONTO, June 26 (Reuters) - Creditors and suppliers of Nortel Networks (NRTLQ.PK) (NT.TO) filed a series of objections on Friday to the proposed sale of a unit of the bankrupt telecom equipment maker to Nokia Siemens Networks. [NSN.UL]

MatlinPatterson, a major bondholder and Nortel creditor, said restrictive conditions imposed by the current bidding process may prevent, rather than promote, a valid competing bid to emerge for the unit, which makes advanced wireless technology.

"These restrictions serve only to permit Nokia-Siemens to effectively lock down these valuable core assets," said the creditor in a U.S. court filing.

In a bankruptcy case, when debtors lack the ability to repay creditors, the creditors have the option either to break up the company and monetize the assets, or to run the company as a going concern and take equity in lieu of their claims.

MatlinPatterson argues that the current bidding process fails to pay sufficient attention to the "going concern" option.

The firm said it has begun preliminary discussions with other creditors and is considering supporting a Chapter 11 reorganization plan in the United States, in lieu of the proposed sale.

Last week, Nokia Siemens Networks -- a joint venture of Nokia (NOK1V.HE) and Siemens (SIEGn.DE) -- said it would buy Nortel's advanced wireless technology business for $650 million.

The deal would allow Nokia Siemens to expand its presence in North America and make it a leading supplier of wireless infrastructure products in the region.

A spokesman for Nortel was not immediately available for comment.

Toronto-based Nortel, once the largest North American telecommunications equipment manufacturer, filed for bankruptcy protection in Canada and the United States in January, blaming the economic crisis for derailing a turnaround effort that began in 2005.

MatlinPatterson also said it is seeking an extension of the sale process, arguing that two weeks longer would harm no one.

"MatlinPatterson is not prepared to give up on its investment in Nortel or in the potential in the company," it said. "It believes there may be more value to be achieved."

OTHERS OBJECT TO DEAL