DBRS Assigns B (low) Rating to Nortel’s $500 Million Notes Issue
DBRS has today assigned a rating of B (low) to the recently announced $500 million notes issue by Nortel Networks Corporation (Nortel or the Company), which is to be issued at its operating subsidiary, Nortel Networks Limited. The trend is Stable.
The notes are expected to be issued in the United States pursuant to Rule 144a, under Regulation S outside the United States and by way of private placement in Canada. The notes will be issued as additional notes to its existing $450 million 10.75% notes, which mature in 2016 and were issued under its July 5, 2006, indenture.
The new notes will be fully and unconditionally guaranteed by Nortel and initially guaranteed by Nortel Networks Inc. As such, the notes will rank pari pasu with the Company’s senior unsecured debt obligations.
DBRS expects Nortel to use the proceeds from this issuance to refinance a majority of its $675 million in convertible notes, which mature in September 2008. DBRS notes that these notes can currently be called by the Company at par.
DBRS believes that the new debt issue and the subsequent redemption of the remainder of its 2008 convertible notes will successfully complete Nortel’s proactive efforts to term out its maturity profile. DBRS notes that these efforts by the Company began more than two years ago.
DBRS notes that the refinancing results in an improved debt maturity profile, with no debt maturing until 2011, at which time $1.0 billion of notes matures. Following 2011, no more than $575 million of debt matures in any 12-month period until 2016. Furthermore, the Company’s liquidity remains adequate, with $3.2 billion in unrestricted cash on its balance sheet at March 31, 2008.
Note:
All figures are in U.S. dollars unless otherwise noted.
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