Nortel Networks

Nortel Completes US$2 Billion Senior Notes Offering, Refinances Short-Term Debt

    Toronto, Canada (ots/PRNewswire) - Nortel(x) Networks Corporation (NYSE/TSX: NT) today announced the  closing of the previously announced offering of US$2 billion aggregate  principal amount of senior notes (the "Notes") by its principal direct  operating subsidiary, Nortel Networks Limited ("NNL"), to qualified institutional buyers pursuant to Rule 144A under the U.S. Securities Act of  1933, as amended (the "Securities Act"), and to persons outside of the  United States pursuant to Regulation S under the Securities Act.

    As previously announced, the Notes issued by NNL consist of US$450  million of Senior Notes due 2016 (the "2016 Fixed Rate Notes"), US$550  million of Senior Notes due 2013 (the "2013 Fixed Rate Notes") and US$1  billion of Floating Rate Senior Notes due 2011 (the "Floating Rate Notes")  and are fully and unconditionally guaranteed by the Company and initially  guaranteed by the Company's indirect subsidiary, Nortel Networks Inc. ("NNI").

    The 2016 Fixed Rate Notes will pay interest semi-annually at a rate  per annum of 10.75%, the 2013 Fixed Rate Notes will pay interest semi- annually at a rate per annum of 10.125%, and the Floating Rate Notes will  pay interest quarterly at a rate per annum, reset quarterly, equal to three-month LIBOR plus 4.25%.

    NNL expects that the net proceeds from the sale of the Notes will be  approximately US$1,956 million, after deducting commissions payable to the  initial purchasers and other offering expenses. NNL has used US$1.3 billion  of these net proceeds to prepay the US$1.3 billion one-year credit facility  that NNI entered into in February 2006, and expects to use the remainder  for general corporate purposes, including to replenish recent cash outflows  of US $150 million for the repayment at maturity of the outstanding  aggregate principal amount of the 7.40% Notes due June 15, 2006 issued by  the Company's indirect finance subsidiary, Nortel Networks Capital Corporation, and fully and unconditionally guaranteed by NNL, and US$575  million (plus accrued interest of US$5 million) deposited into escrow on  June 1, 2006 pursuant to the proposed class action settlement first announced on February 8, 2006.

    The Notes and the related guarantees have not been registered under  the Securities Act or the securities laws of any other jurisdiction and may  not be offered or sold in the United States or to or for the benefit of U.S . persons unless so registered except pursuant to an exemption from, or in  a transaction not subject to, the registration requirements of the  Securities Act and applicable securities laws in other jurisdictions. This  press release shall not constitute an offer to sell or the solicitation of  an offer to buy the Notes and the related guarantees, nor shall there be  any sale of the Notes and the related guarantees in any jurisdiction in  which such offer, solicitation or sale is unlawful. This press release is being issued pursuant to and in accordance with Rule 135c under the Securities Act.

    (x) Nortel, the Nortel logo and the Globemark are trademarks of Nortel Networks.

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