Nortel Networks

Nortel Provides Status Update

    Toronto, Canada (ots/PRNewswire) - Nortel Networks(x) Corporation (NYSE: NT, TSX: NT) and its principal  operating subsidiary, Nortel Networks Limited ("NNL"), today provided a  status update pursuant to the alternate information guidelines of the  Ontario Securities Commission ("OSC"). These guidelines contemplate that  the Company and NNL will normally provide bi-weekly updates on their  affairs until such time as they are current with their filing obligations under Canadian securities laws. All dollar amounts given below are in U.S.  dollars.



    As previously announced on April 6, 2006, further revenue adjustments  to those initially identified in the March 10, 2006 press release were  anticipated primarily as a result of an accounting policy change with  respect to revenue for contracts with provisions for multiple deliverables  that was historically accounted for under the percentage-of-completion  methodology. While expected restatement impacts are approximate and subject  to change, the Company currently expects an increase in aggregate revenue restatement adjustments of approximately US$350 million over the US$866  million previously announced. The current estimated impacts to 2005, 2004  and 2003 revenues would increase the revenue adjustments by approximately  US$120 million, US$220 million and US$100 million, respectively, from those  previously announced. The current estimated impact to periods prior to 2003  would decrease the revenue adjustments by approximately US$90 million from  those previously announced. These revenue adjustments result in the deferral to later periods of revenue that was previously recognized in  prior periods.

    The expected restatement impacts set forth in this release are preliminary and unaudited and reflect known restatement adjustments. These  impacts are subject to change as a result of any adjustments arising from  the completion of the restatement process, subsequent events and the  completion of the audit of the financial statements by Nortel's independent  auditors.

    Timing of Filing of Financial Statements

    Nortel has determined, after consultation with the Staff of the United  States Securities and Exchange Commission (the "SEC"), to include  additional 2005 and comparative 2004 restated quarterly information in its  and NNL's 2005 Annual Reports on Form 10-K (the "2005 Form 10-Ks"). The  additional quarterly information is more extensive than originally  contemplated for inclusion in the 2005 Form 10-Ks when Nortel first  announced the intention to restate on March 10, 2006, and necessitates  additional work for preparation of the 2005 Form 10-Ks.

    The Company continues to expect to file the 2005 Form 10-Ks and
the  corresponding filings under Canadian securities laws by April
30, 2006. But  as a result of the incremental work to include the
additional restated  quarterly information in the 2005 Form 10-Ks,
and the continuing work to  finalize the restatement, the Company has
concluded that it and NNL will  need to delay the filing with the SEC
of their Quarterly Reports on Form 10  -Q for the quarter ended March
31, 2006 (the "First Quarter 2006 Form  10-Qs ") and their
corresponding Canadian filings under Canadian securities  laws. The
Company and NNL now expect to file the First Quarter 2006 Form  10-Qs
and corresponding Canadian filings no later than the week of  June 5,
2006.         The Company and NNL will therefore file with the SEC a
Form 12b-25  Notification of Late Filing relating to this delay and
indicating that the  filings will not be made within the 5-day
extension period permitted by the  Form. The Company has notified the
New York Stock Exchange and the Toronto  Stock Exchange of the delay
in filing the First Quarter 2006 Form 10-Qs.  The Company and NNL
will continue to provide bi-weekly updates on their  affairs in
accordance with the alternate information guidelines of the OSC
until they are current with their filing obligations under Canadian
securities laws.

    Credit Facility; EDC Support Facility; Debt Securities

    As previously announced, an event of default has occurred and is continuing under Nortel's US$1.3 billion one-year credit facility (the " 2006 Credit Facility") as a result of the Company's delay in filing its  2005 Form 10-K and certain other related breaches. Since the Company will  not be able to file its First Quarter 2006 Form 10-Q by May 15, 2006,  absent a waiver, an additional event of default will occur under the 2006  Credit Facility. As a result of these Events of Default, lenders holding  greater than 50% of each tranche under the 2006 Credit Facility have the  right to accelerate such tranche, and lenders holding greater than 50% of  all of the secured loans under the 2006 Credit Facility have the right to exercise rights against certain collateral. The entire US$1.3 billion under  the 2006 Credit Facility is currently outstanding.

    As previously announced, an event of default has occurred and is continuing under NNL's US$750 million support facility (the "EDC Support  Facility") with Export Development Canada ("EDC") as a result of the  Company's and NNL's delay in filing their 2005 Form 10-Ks and certain other  related breaches. An additional Event of Default will arise, absent a  waiver, as the Company and NNL will not be able to file their First Quarter  2006 Form 10-Qs by May 15, 2006. As a result of these Events of Default,  EDC has the right to refuse to issue additional support and may terminate  its commitments under the EDC Support Facility or require that NNL cash  collateralize all existing support. As at March 8, 2006, there was  approximately US$161 million of outstanding support under this facility.

    Nortel and NNL are currently in discussions with these lenders and EDC  to negotiate waivers while Nortel completes its filing obligations.  Although the Company expects that it will reach agreement with the lenders  and EDC with respect to terms of an acceptable waiver, there can be no  assurance that Nortel will receive such waivers.

    As previously announced, the Company and NNL are not in compliance with  their obligations to deliver their SEC filings to the trustees under their  public debt indentures as a result of the Company's and NNL's delay in  filing its 2005 Form 10-K. An additional Event of Default will arise as the  Company and NNL will not be able to file their First Quarter 2006 Form 10-  Qs by May 25, 2006. These filing delays will not result in an automatic  default and acceleration of such long-term debt. Neither the trustee under  any such public debt indenture nor the holders of at least 25% of the  outstanding principal amount of any series of debt securities issued under  the indentures will have the right to accelerate the maturity of such debt  securities unless the Company or NNL, as the case may be, fails to file and  deliver its 2005 Form 10- K or First Quarter 2006 Form 10-Q within 90 days  after the above mentioned holders have given notice of such default to the  Company or NNL. In addition, any acceleration of the loans under the 2006  Credit Facility would result in a cross-default under the public debt  indentures that would give the trustee under any such public debt indenture  or the holders of at least 25% of the outstanding principal amount of any series of debt securities issued under the indentures the right to accelerate such series of debt securities. US$500 million of debt securities of NNL (or its subsidiaries) and US$1.8 billion of convertible  debt securities of the Company (guaranteed by NNL) are currently  outstanding under the indentures.

    If an acceleration of the Company's and NNL's obligations were to occur, the Company and NNL may be unable to meet their respective payment  obligations with respect to the related indebtedness.

    OSC Management Cease Trade Order


    On April 10, 2006, the OSC, in accordance with its guidelines, issued a  final order prohibiting certain directors, officers and current and former  employees of the Company and NNL from trading in securities of the Company  and NNL, which finalized the temporary order issued on March 27, 2006. This  final order will remain in effect until two business days following the  receipt by the OSC of all filings required to be made by the Company and  NNL pursuant to Ontario securities laws.

    The Company and NNL reported that there have been no material developments in the matters reported in the March 10, 2006 press release  and their status updates of March 23, 2006 and April 6, 2006, other than  the matters described above.

    The Company's and NNL's next bi-weekly status update is expected to  be released during the week of May 1, 2006.

    About Nortel

    Nortel is a recognized 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  For the latest Nortel news, visit

    Certain statements in this press release may contain words such as "could", "expects", "may", "anticipates", "believes", "intends", "estimates",  "plans", "envisions", "seeks" and other similar language and are  considered forward-looking statements or information under applicable  securities legislation. These statements are based on Nortel's current  expectations, estimates, forecasts and projections about the operating  environment, economies and markets in which Nortel operates. These  statements are subject to important assumptions, risks and uncertainties,  which are difficult to predict and the actual outcome may be materially different. Although Nortel believes expectations reflected in such forward- looking statements are reasonable based upon the assumptions in this press  release, they may prove to be inaccurate and consequently Nortel's actual  results could differ materially from its expectations set out in this press  release. Further, actual results or events could differ materially from  those contemplated in forward-looking statements as a result of the  following (i) risks and uncertainties relating to Nortel's restatements and  related matters including: Nortel's recently announced restatement and two previous restatements of its financial statements and related events and  that the previously filed financial statements of Nortel and NNL and  related audit reports should not be relied upon; the negative impact on  Nortel and NNL of their announced restatement and delay in filing their  financial statements and related periodic reports causing them to breach  their public debt indentures and obligations under their credit facilities  with the possibility that the holders of their public debt or NNL's lenders  would seek to accelerate the maturity of that debt; and causing a breach of  NNL's support facility with EDC with the possibility that EDC would refuse  to issue additional support under the facility, terminate its commitments  under the facility or require NNL to cash collateralize all existing  support; legal judgments, fines, penalties or settlements, or any  substantial regulatory fines or other penalties or sanctions, related to  the ongoing regulatory and criminal investigations of Nortel in the U.S.  and Canada; any significant pending civil litigation actions not  encompassed by Nortel's proposed class action settlement; any substantial  cash payment and/or significant dilution of Nortel's existing equity  positions resulting from the finalization and approval of its proposed  class action settlement, or if such proposed class action settlement is not finalized, any larger settlements or awards of damages in respect of such  class actions; any unsuccessful remediation of Nortel's material weaknesses  in internal control over financial reporting resulting in an inability to  report Nortel's results of operations and financial condition accurately  and in a timely manner; the time required to implement Nortel's remedial  measures; Nortel's inability to access, in its current form, its shelf  registration filed with the United States Securities and Exchange  Commission (SEC), and Nortel's below investment grade credit rating and any  further adverse effect on its credit rating due to Nortel's restatement of its financial statements; any adverse effect on Nortel's business and market price of its publicly traded securities arising from continuing  negative publicity related to Nortel's restatements; Nortel's potential  inability to attract or retain the personnel necessary to achieve its  business objectives; any breach by Nortel of the continued listing  requirements of the NYSE or TSX causing the NYSE and/or the TSX to commence  suspension or delisting procedures; any default in Nortel's filing  obligations extending beyond May 9, 2006 for the 2005 Form 10-Ks, and July  15, 2006 for the First Quarter 2006 Form 10-Qs, causing any Canadian  securities regulatory authority to impose an order to cease all trading in  Nortel's securities within the applicable jurisdiction or to impose such an order sooner if Nortel fails to comply with the alternate information guidelines of such regulatory authorities; (ii) risks and uncertainties  relating to Nortel's business including: yearly and quarterly fluctuations  of Nortel's operating results; reduced demand and pricing pressures for its  products due to global economic conditions, significant competition,  competitive pricing practice, cautious capital spending by customers,  increased industry consolidation, rapidly changing technologies, evolving  industry standards, frequent new product introductions and short product  life cycles, and other trends and industry characteristics affecting the telecommunications industry; any material and adverse effects on Nortel's  performance if its expectations regarding market demand for particular  products prove to be wrong or because of certain barriers in its efforts to  expand internationally; any reduction in Nortel's operating results and any  related volatility in its market price of its publicly traded securities  arising from any decline in its gross margin, or fluctuations in foreign  currency exchange rates; any negative developments associated with Nortel's  supply contract and contract manufacturing agreements including as a result  of using a sole supplier for key optical networking solutions components,  and any defects or errors in Nortel's current or planned products; any negative impact to Nortel of its failure to achieve its business transformation objectives; restrictions on how Nortel and its president and  chief executive officer conduct its business arising from a settlement with  Motorola Inc.; additional valuation allowances for all or a portion of its  deferred tax assets; Nortel's failure to protect its intellectual property  rights, or any adverse judgments or settlements arising out of disputes  regarding intellectual property; changes in regulation of the Internet  and/or other aspects of the industry; Nortel's failure to successfully operate or integrate its strategic acquisitions, or failure to consummate or  succeed with its strategic alliances; any negative effect of Nortel's  failure to evolve adequately its financial and managerial control and  reporting systems and processes, manage and grow its business, or create an  effective risk management strategy; and (iii) risks and uncertainties  relating to Nortel's liquidity, financing arrangements and capital  including: the impact of Nortel's recently announced restatement and two  previous restatements of its financial statements; any acceleration under  their public debt indentures and credit facilities, which may result in  Nortel and NNL being unable to meet their respective payment obligations;  any inability of Nortel to manage cash flow fluctuations to fund working capital requirements or achieve its business objectives in a timely manner  or obtain additional sources of funding; high levels of debt, limitations  on Nortel capitalizing on business opportunities because of credit facility  covenants, or on obtaining additional secured debt pursuant to the  provisions of indentures governing certain of Nortel's public debt issues  and the provisions of its credit facilities; any increase of restricted  cash requirements for Nortel if it is unable to secure alternative support  for obligations arising from certain normal course business activities, or  any inability of Nortel's subsidiaries to provide it with sufficient funding; any negative effect to Nortel of the need to make larger defined  benefit plans contributions in the future or exposure to customer credit  risks or inability of customers to fulfill payment obligations under  customer financing arrangements; any negative impact on Nortel's ability to  make future acquisitions, raise capital, issue debt and retain employees  arising from stock price volatility and further declines in Nortel's market  price of its publicly traded securities, or any future share consolidation resulting in a lower total market capitalization or adverse effect on the  liquidity of Nortel's common shares. For additional information with  respect to certain of these and other factors, see Nortel's securities  filings with the SEC, which have not been updated to reflect each of these  risks and uncertainties and which include financial information that Nortel  announced on March 10, 2006 cannot be relied upon. 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 Networks.

ots Originaltext: Nortel Networks
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