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Nortel Closes New US$1.3 Billion Credit Facility to Refinance Bond Maturity
Toronto (ots/PRNewswire) - Nortel(x) Networks Corporation (NYSE/TSX: NT) today announced that the Company's indirect subsidiary, Nortel Networks Inc. ("NNI"), has entered into the US$1.3 billion one-year credit facility arranged by J.P. Morgan Securities Inc. and Citigroup Corporate and Investment Banking, or their affiliates, in accordance with the terms of the binding commitments previously announced on February 1, 2006. NNI borrowed the full US$1.3 billion under the facility on February 14, 2006. The proceeds of the facility will primarily be used to refinance the outstanding US$1.275 billion aggregate principal amount of 6.125% Notes due February 15, 2006 of the Company's principal operating subsidiary, Nortel Networks Limited ("NNL").
As previously announced, the facility consists of (i) a senior secured one-year term loan facility in the amount of US$850 million and (ii) a senior unsecured one-year term loan facility in the amount of US$450 million, and was extended by JPMorgan Chase Bank, N.A., Citigroup Corporate and Investment Banking, Royal Bank of Canada and Export Development Canada and will mature in February 2007. The US$850 million secured loan will initially bear interest at 6.875% (LIBOR plus 2.25%), and the US$450 million unsecured loan will initially bear interest at 7.625% (LIBOR plus 3%).
The secured loan is secured by a first priority lien on substantially all of the US and Canadian assets of the Company, NNL and NNI. NNL's US$200 million 6.875% Notes due September 1st, 2023 and amounts outstanding under NNL's US$750 million EDC performance-related support facility ("EDC Support Facility") are equally and ratably secured with the secured loan. NNI's obligations under the secured loan are guaranteed by the Company and NNL, and amounts outstanding under the EDC Support Facility are guaranteed by the Company and NNI during the term of the secured loan. As of January 31, 2006, there was approximately US$168 million of outstanding support utilised under the EDC Support Facility.
The loan documentation contains representations, warranties, covenants and events of default customary for financings of this type, including a minimum Adjusted EBITDA covenant for the secured loan and a covenant applicable to both loans that unrestricted cash and cash equivalents of NNC on a consolidated basis must at all times exceed US$1.0 billion. NNI is required to prepay the facility in certain circumstances, including in the event of certain debt or equity offerings or asset dispositions of collateral by the Company, NNL or NNI. The loan documentation permits the lenders, in consultation with the Company, to further syndicate the facility. As previously announced, the Company and NNI have agreed to a demand right exercisable at any time after May 31, 2006 pursuant to which they would be required to take all reasonable actions to issue senior unsecured debt securities in the capital markets to repay the credit facility.
Nortel is a recognised leader in delivering communications capabilities that enhance the human experience, ignite and power global commerce, and secure and protect the world's most critical information. Our next-generation technologies, for both service providers and enterprises, span access and core networks, support multimedia and business-critical applications, and help eliminate today's barriers to efficiency, speed and performance by simplifying networks and connecting people with information. Nortel does business in more than 150 countries. For more information, visit Nortel on the Web at www.nortel.com. For the latest Nortel news, visit www.nortel.com/news.
Certain information included in this press release is forward-looking and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events to differ from current expectations include, among other things: the outcome of regulatory and criminal investigations and civil litigation actions related to Nortel's restatements and the impact any resulting legal judgments, settlements, penalties and expenses could have on Nortel's results of operations, financial condition and liquidity, and any related potential dilution of Nortel's common shares; the findings of Nortel's independent review and implementation of recommended remedial measures; the outcome of the ongoing independent review with respect to revenues for specific identified transactions, which review will have a particular emphasis on the underlying conduct that led to the initial recognition of these revenues; the restatement or revisions of Nortel's previously announced or filed financial results and resulting negative publicity; the existence of material weaknesses in Nortel's internal control over financial reporting and the conclusion of Nortel's management and independent auditor that Nortel's internal control over financial reporting is ineffective, which could continue to impact Nortel's ability to report its results of operations and financial condition accurately and in a timely manner; the impact of Nortel's and NNL's failure to timely file their financial statements and related periodic reports, including Nortel's inability to access its shelf registration statement filed with the United States Securities and Exchange Commission (SEC); the impact of management changes, including the termination for cause of Nortel's former CEO, CFO and Controller in April 2004; the sufficiency of Nortel's restructuring activities, including the work plan announced on August 19, 2004 as updated on September 30, 2004 and December 14, 2004, including the potential for higher actual costs to be incurred in connection with restructuring actions compared to the estimated costs of such actions; cautious or reduced spending by Nortel's customers; increased consolidation among Nortel's customers and the loss of customers in certain markets; fluctuations in Nortel's operating results and general industry, economic and market conditions and growth rates; fluctuations in Nortel's cash flow, level of outstanding debt and current debt ratings; Nortel's monitoring of the capital markets for opportunities to improve its capital structure and financial flexibility; Nortel's ability to recruit and retain qualified employees; the use of cash collateral to support Nortel's normal course business activities; the dependence on Nortel's subsidiaries for funding; the impact of Nortel's defined benefit plans and deferred tax assets on results of operations and Nortel's cash flow; the adverse resolution of class actions, litigation in the ordinary course of business, intellectual property disputes and similar matters; Nortel's dependence on new product development and its ability to predict market demand for particular products; Nortel's ability to integrate the operations and technologies of acquired businesses in an effective manner; the impact of rapid technological and market change; the impact of price and product competition; barriers to international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; the impact of rationalisation and consolidation in the telecommunications industry; changes in regulation of the Internet; the impact of the credit risks of Nortel's customers and the impact of customer financing and commitments; general stock market volatility; negative developments associated with Nortel's supply contracts and contract manufacturing agreements, including as a result of using a sole supplier for a key component of certain optical networks solutions; the impact of Nortel's supply and outsourcing contracts that contain delivery and installation provisions, which, if not met, could result in the payment of substantial penalties or liquidated damages; any undetected product defects, errors or failures; the future success of Nortel's strategic alliances; and certain restrictions on how Nortel and its president and chief executive officer conduct business. For additional information with respect to certain of these and other factors, see the most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed by Nortel with the SEC. Unless otherwise required by applicable securities laws, Nortel disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
(x) Nortel, the Nortel logo and the Globemark are trademarks of Nortel.
ots Originaltext: Nortel Networks
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