(Adds CBC report of Board meeting in paragraph 5, updates share price in paragraph 6)

By Wojtek Dabrowski

TORONTO, Jan 13 (Reuters) - Shares of Nortel Networks Corp (NT.TO: Quote, Profile, Research)NT.N fell more than 20 percent on Tuesday, two days before the struggling Canadian telecom equipment maker is due to make an interest payment of about $107 million.

North America's biggest maker of telephone gear had about $2.3 billion in cash and cash equivalents at end of September, suggesting it would have no difficulty in making the payment.

Even so, Duncan Stewart, an analyst at DSAM Consulting in Toronto, said: "The issue is not whether or not they can pay it. ... It's the idea of: if you know you're eventually going to default anyway, why not do it now and keep the ... interest payments you would have shelled out?"

A Nortel spokesman declined to comment on whether the company would make the payment. "It is our policy to not comment on our creditor obligations other than what we disclose in our public filings," he said.

CBC News reported that Nortel's board of directors would meet on Tuesday evening to decide whether or not to make the interest payment.

Nortel's shares closed down 24.5 percent at 38.5 Canadian cents on the Toronto Stock Exchange. In mid-2000, they were worth more than C$1,100 each, adjusted for a stock consolidation that took place in late 2006.

RBC Capital Markets analyst Mark Sue said bankruptcy was a "distinct possibility" for Toronto-based Nortel and that it could collapse under its debt load before 2011.