Moody’s Investors Services downgraded Nortel based on expectations that “adverse business conditions may persist at the telecom company”
Moody’s reduced Nortel’s probability of default rating to Caa3 from B2, while downgrading Nortel’s debt rating to Caa2 from B3. The outlook remains negative.
“It appears to be more likely that the existing cash pool will be slowly depleted,” Moody’s said.
Nortel shares (NT/NYSE) fell seven cents to 33 cents, giving the company a market capitalization of $164.1-million.
anyone knows what are the negative effects of this downgrade??
Here I found one
TORONTO, ONTARIO–(MARKET WIRE)–Dec 15, 2008 — Nortel(1) Networks Corporation (“Nortel”) (Toronto:NT.TO – News)(NYSE:NT – News) today announced that its principal operating subsidiary Nortel Networks Limited (“NNL”) has obtained a 30 day waiver from Export Development Canada (“EDC”) to permit continued access by NNL to its EDC performance-related support facility (“EDC Support Facility”). The waiver applies to EDC's right under the facility to suspend or terminate support resulting from today's downgrade by Moody's of Nortel's corporate family rating to Caa2. EDC and Nortel intend to work together over the next 30 days to potentially put in place a permanent waiver.
As disclosed in our third quarter report on Form 10-Q the EDC Support Facility provides for up to US$300 million of committed support and US$450 million of uncommitted support and as of September 30 2008 there was approximately US$190 million of outstanding support under this facility
protosphere
The EDC spends taxpayers dollars to export jobs more than product it seems to me. Like the OSC, for all the good it will do them now trouble to continue selling assets to pay for layoffs, researching bankruptcy, and delisting notices, etc…
There is no good news. This is what Moody's ratings mean:
Rating “Aa” Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities.
Rating “A” Bonds which are rated A possess many favorable investment attributes and are considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future.
Rating “Baa” Bonds which are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected not poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
Rating “Ba” Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
Rating “B” Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments of of maintenance of other terms of the contract over any long period of time may be small.
Rating “Caa” Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Rating “Ca” Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
Rating “C” Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
joremero
anyone knows what are the negative effects of this downgrade??
Here I found one
TORONTO, ONTARIO–(MARKET WIRE)–Dec 15, 2008 — Nortel(1) Networks Corporation (“Nortel”) (Toronto:NT.TO – News)(NYSE:NT – News) today announced that its principal operating subsidiary Nortel Networks Limited (“NNL”) has obtained a 30 day waiver from Export Development Canada (“EDC”) to permit continued access by NNL to its EDC performance-related support facility (“EDC Support Facility”). The waiver applies to EDC's right under the facility to suspend or terminate support resulting from today's downgrade by Moody's of Nortel's corporate family rating to Caa2. EDC and Nortel intend to work together over the next 30 days to potentially put in place a permanent waiver.
As disclosed in our third quarter report on Form 10-Q the EDC Support Facility provides for up to US$300 million of committed support and US$450 million of uncommitted support and as of September 30 2008 there was approximately US$190 million of outstanding support under this facility
protosphere
The EDC spends taxpayers dollars to export jobs more than product it seems to me. Like the OSC, for all the good it will do them now trouble to continue selling assets to pay for layoffs, researching bankruptcy, and delisting notices, etc…
There is no good news. This is what Moody's ratings mean:
Rating “Aa” Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities.
Rating “A” Bonds which are rated A possess many favorable investment attributes and are considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future.
Rating “Baa” Bonds which are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected not poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
Rating “Ba” Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
Rating “B” Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments of of maintenance of other terms of the contract over any long period of time may be small.
Rating “Caa” Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Rating “Ca” Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
Rating “C” Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Moody’s Downgrades NT
Moody’s Investors Services downgraded Nortel based on expectations that “adverse business conditions may persist at the telecom company”
Moody’s reduced Nortel’s probability of default rating to Caa3 from B2, while downgrading Nortel’s debt rating to Caa2 from B3. The outlook remains negative.
“It appears to be more likely that the existing cash pool will be slowly depleted,” Moody’s said.
Nortel shares (NT/NYSE) fell seven cents to 33 cents, giving the company a market capitalization of $164.1-million.
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