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Nortel Networks

Nortel Announces US$1.3 Billion Financing Commitment

Toronto, Canada (ots/PRNewswire)

  • US$1.3 Billion Credit Facility to Refinance Bond Maturity
  • Cash Balance of US$3.0 Billion as at December 31, 2005
  • Timing of Fourth Quarter & Full Year 2005 Financial Reporting
Nortel(1) Networks Corporation (NYSE: NT ; TSX: NT) today
announced that  it and the Company's indirect subsidiary, Nortel
Networks Inc. ("NNI"), have  entered into binding commitments for a
new one year credit facility in the  aggregate principal amount of
US$1.3 billion arranged by J.P. Morgan  Securities Inc. and Citigroup
Corporate and Investment Banking, or their  affiliates.
Subject to the terms and conditions of the commitments, JPMorgan
Chase Bank, N.A., Citigroup Corporate and Investment Banking, Royal
Bank of Canada and Export Development Canada have agreed to provide
NNI with a credit facility in the aggregate amount of US$1.3 billion,
consisting 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.
This new facility, which would mature in February 2007, will 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").
The Company has elected to proceed with this financing while it
continues to pursue important objectives, including the ongoing
mediation efforts relating to two of its significant pending class
action lawsuits in the United States. As the Company has previously
disclosed, it cannot predict whether such mediation efforts will
result in achieving a global settlement encompassing these two
actions. For additional information about these actions, see the
Company's periodic and current reports filed with the United States
Securities and Exchange Commission. The Company continues to evaluate
its long term financing alternatives and expects to access the
capital markets at the appropriate time.
The secured loan would be secured by a first priority lien on
substantially all of the U.S. and Canadian assets of the Company, NNL
and NNI. NNL's US$200 million 6.875% Notes due June 15, 2023 and
amounts outstanding under NNL's US$750 million EDC
performance-related support facility would be equally and ratably
secured with the secured loan. NNI's obligations under the secured
loan would be guaranteed by the Company and NNL, and amounts
outstanding under NNL's US$750 million EDC performance-related
support facility would be guaranteed by the Company and NNI during
the term of the secured loan. As of January 30, 2006, there was
approximately US$156 million of outstanding support utilized under
the EDC Support Facility.
The loans under the facility would bear interest equal to LIBOR
(or in certain cases a defined base rate) plus an applicable margin
as set forth in the commitment letter. The loan documentation would
contain 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 would be 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 financing commitments permit the lenders, in consultation
with the Company, to further syndicate the facility and are subject
to the completion of definitive documentation for the facility and
other customary conditions. 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.
Cash
The Company's consolidated cash balance at the end of 2005 was
approximately US$3.0 billion.
Financial Reporting
The Company expects that the announcement and conference call
related to its fourth quarter and full year 2005 results will
coincide with the filing of the Company's and NNL's 2005 Annual
Reports on Form 10-K with the requisite regulatory authorities.
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. Serving both service provider and enterprise customers,
Nortel delivers innovative technology solutions encompassing
end-to-end broadband, Voice over IP, multimedia services and
applications, and wireless broadband designed to help people solve
the world's greatest challenges. 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
rationalization 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.
(1) Nortel, the Nortel logo and the Globemark are trademarks of
Nortel.
www.nortel.com

Contact:

Media, Patricia Vernon, Tel: +1-(905)-863-1035, patricve@nortel.com;
Investors, Tel: +1-(888)-901-7286, +1-(905)-863-6049,
investor@nortel.com

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