The McDuffy Report: Nortel Networks (NT)
January 1, 2009
Heading Into 2009
Export Development Canada, which, as of December 15, 2008, had granted company a 30 day waiver through January 15, 2009 to permit continued access to its EDC performance-related support facility, has been apparently working with company to potentially grant a permanent waiver by then. EDC has the right to terminate facility based upon a recent Moody's downgrade.
An interest payment of $100-120 million is due by January 15, 2009.
Company has reportedly sought legal counsel recently in regard to exploring possible bankruptcy protection if its current restructuring objectives are not realized vis-a-vis its creditors. However, a company spokesman said that no bankruptcy filing is imminent. Investor alert: any claims made or opinions stated to date by analysts, bloggers or posters that company may file for bankruptcy prior to January 15, 2009, or in the near-term, are pure conjecture.
Company has reportedly had several $1 billion bids for its Metro Ethernet Networks division, including a $2 billion (USD) bid from China’s Huawei Technologies Co. Huawei, interested in entering the North American market in a big way, has also reportedly offered to buy the company outright. However, in March 2008, the Committee on Foreign Investment in the United States (CFIUS) had already nixed Huawei's desire to buy a 16.5% stake in Massachusetts-based, 3Com Corp. (COMS) citing national security concerns. Nortel is reportedly lobbying both US and Canadian governments to allow Huawei bid, although seems unlikely to be approved given prior 3Com rejection. Investor-alert: through the close of 2008, any claims made/published by certain bloggers in regard to MEN purchase, as to likely-hood or ballpark price range are pure speculation.
Company is apparently interested in using its accumulated research and development (R&D) tax credits as collateral to borrow money from the Canadian Department Of Finance- tax credits which company cannot claim unless it is profitable. The Canadian government would, therefore, have to amend related provisions in order to allow this to occur.
Company, which, on December 11, 2008 had received a deficiency notice from NYSE as a result of the company's common shares having an average closing price of less than $1.00 per share during the consecutive 30 trading days ending December 9, 2008, has until June 9, 2009 to cure said deficiency. Under NYSE policy, in order to cure the deficiency for this continued listing standard, the company's common stock share price and the average share price over a consecutive 30-trading-day period both must exceed $1.00 within six months following receipt of the non-compliance notice (the NYSE also may notify the company that the NYSE has the right to re-evaluate continued listing determinations with respect to qualitative listing standards, including an abnormally low selling price at sustained levels).
A reverse-split is one method normally used to cure the $1/share closing price deficiency. Nortel would have to receive shareholder approval for any reverse-split. Company has an upcoming spring 2009 annual shareholders meeting (2008's shareholders meeting was in May). Companies normally do not reverse-split until 180 day cure period has expired (or is about to). Investor alert: any claims made by bloggers or posters that company will reverse-split prior to the aforementioned spring-2009 shareholder meeting, or without shareholder approval, are false and misleading.
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