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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.
About Nortel
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.

Contact:

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

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