DBRS Assigns B (low) Rating to Nortel’s $1 Billion Convertible Notes Issue
DBRS has assigned a rating of B (low) to Nortel Networks Corporation’s (Nortel or the Company) recently announced $1 billion Convertible Notes issue. The trend is Stable.
The new issue, which will rank pari passu with the Company’s $2 billion senior unsecured obligations issued in July of 2006, is expected to be issued in two tranches and include: (a) a five-year tranche maturing in 2012; and (b) a seven-year tranche maturing in 2014. The notes will be guaranteed by two of Nortel’s operating subsidiaries, Nortel Networks Limited and Nortel Networks Inc., and allow the holders to convert into common equity of Nortel at specified conversion rates any time prior to maturity.
DBRS expects Nortel to use the proceeds from this issuance to help refinance a portion of its current $1.8 billion in convertible notes that mature in 2008, but become callable at par in September 2007.
DBRS believes that the new debt issue and the early redemption of a portion of its 2008 convertible notes will help the Company to proactively term out its maturity schedule. DBRS notes that Nortel’s liquidity remains strong with $3.5 billion in unrestricted cash on its balance sheet at December 31, 2006. The Company also recently completed its restatement of certain prior periods announced on March 1, 2007 and filed its 2006 10K on March 16, 2007.
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All figures are in U.S. dollars unless otherwise noted.
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