Moody's downgrades Nortel debt Rating agency worries about 'more severe' industry weakness

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NEW YORK (CP) - Moody's Investors Service lowered its rating on Nortel Networks debt and preferred shares Tuesday, saying it will also review Nortel's ability to cope with a severe downturn affecting the telecom industry.
The Wall Street bond rating agency said Tuesday it had lowered its rating on Nortel's long-term unsecured debt to A3 from A2.
That's still considered investment quality, according to the Moody's rating system, which assigns B ratings to medium-quality debt and C ratings to poor-quality debt.
It also reduced its rating on Nortel preferred stock to the medium-grade baa1, down from a3.
''The continuing review will focus on the ability of Nortel to address end markets that will be experiencing a more severe and protracted period of industry adjustment than had been recently envisioned,'' Moody's stated.
Nortel announced last month that it expects to report a net loss of $19.2 billion (U.S.) for the quarter ended June 30, which would be the biggest quarterly loss ever by a Canadian company.
The company also said June 15 that it would cut 10,000 additional jobs by the end of September, bringing the total this year to 30,000.
Nortel also said at the time it had arranged to borrow $2 billion from U.S. investment banks and would suspend dividend payments on its common shares to conserve cash.
Nortel spokesperson Tina Warren said the downgrade ''was not unexpected,'' adding that ''this action will not have a significant impact on our business.
''We are making continuing progress with our alignment plan,'' Warren said. ''And we are confident our ratings will remain solidly within investment grade.''
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2001-7-4 -04:00
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