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Strategies & Market Trends : Trader J's Inner Circle -- Ignore unavailable to you. Want to Upgrade?

To: Trader J who wrote (43724)	5/31/2001 1:31:04 PM
From: Nicole Bourgault	Respond to of 56537

Nortel Networks Ltd. downgraded to A by DBRS Nortel Networks Corp NT Shares issued 3,099,655,476 May 30 close $20.65 Thu 31 May 2001 Mr. Paul Holman of Dominion Bond Rating Service reports Rating: A Trend: Stable Rating action: Downgraded Debt rated: Notes and other long- term senior debt Rating: Pfd-2 Trend: Stable Rating action: Downgraded Debt rated: Class A, redeemable preferred shares Rating: Pfd-2 n Trend: Stable Rating action: Downgraded Debt rated: Class A, non-cumulative redeemable preferred shares The long-term debt, cumulative preferred shares and non-cumulative preferred shares ratings of Nortel Networks Ltd. (Nortel or the company) have been downgraded to A, Pfd-2 and Pfd-2 n, all with stable trends. Nortel is a wholly owned subsidiary of Nortel Networks Corp. The rating downgrade reflects a dramatic downturn in several of the company's core markets that has caused a sharp reduction in DBRS's outlook for Nortel's sales growth and margins for 2001 and 2002. Nortel's customers include large carriers building intercity fibre networks, which started to reduce capital spending late in 2000 due to (a) a growing oversupply of fibre networks, (b) falling prices, (c) reduced access to capital markets, (d) increasing leverage and (e) a slowing U.S. economy. Nortel's recovery in this area will await the coming shakeout in the global carrier industry and the growth in network utilization. Even as demand strengthens, Nortel will continue to face intense competition from other major suppliers. Nortel expects to quickly restructure to focus on selected businesses and reduce operating costs. With its relatively high fixed and semi-fixed cost base, including SG&A and R&D expenses, Nortel's profitability fell sharply in Q1 2001 with the downturn, and cash flow is under pressure. The need to provide vendor financing exacerbates this concern. While Nortel has good access to the capital markets to finance its negative free cash flow, it must make the necessary changes to turn free cash flow positive, in line with the more modest outlook for its core sectors. Even with the forgoing, Nortel has transformed itself to become one of the world's largest and most pre-eminent suppliers of network solutions and faces significant opportunities over the next few years. Specifically, Nortel's core IP network, optical Internet and wireless Internet solutions employ leading technologies and continue to show good growth. Accordingly, the company has good prospects for recovery over the longer term. (c) Copyright 2001 Canjex Publishing Ltd. stockwatch.com