Nortel Networks Corporation announced the pricing of the previously announced offering of
US$2billion 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. The placement
of the Notes is subject to customary closing conditions and is expected to
close on July 5, 2006.
The Notes to be issued by NNL will 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$1,000 million of Floating Rate
Senior Notes due 2011 (the “Floating Rate Notes”) and will be 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 $1,956 million, after deducting discounts and other offering
expenses. NNL plans to use US$1.3 billion of these net proceeds to repay the
US$1.3 billion one-year credit facility that NNI entered into in February
2006, and 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$575million (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.
