debt to junk status Thursday. The company said it was proceeding with "business as usual" even as the downgrade activated liens, pledges and guarantees to creditors.
Moody's cut the Toronto telco gear maker's senior unsecured debt three notches to Ba3, its third-highest junk grade, from Baa3, on account of a "deeper and more protracted than previously anticipated" demand shortfall. Its ratings outlook is negative. Moody's said its action affects about $5 billion in debt.
Nortel shares slipped a dime to $4.25.
"We see the downgrade as being primarily driven by industry conditions affecting the telecom sector following the events of 2001," Nortel said in a press release. "In arranging our credit facilities, we took the possibility of downgrades into account."
Nortel said that as a result of the arrangement with creditors, "credit agreements and outstanding public debt securities are now secured by liens over substantially all of the assets of
Nortel Networks Ltd. and most of its United States and Canadian subsidiaries, and by a pledge of shares in certain of NNL's other subsidiaries."
Nortel and rivals such as
were investor favorites during the Internet building boom of the late 1990s, but as upstart telcos and established carries ran short on funds, the companies saw their orders plunge, setting off a brutal wave of financial shortfalls and job cuts.