Moody's may up Nortel ratings

Moody's Investors Service said it placed all ratings (other than commercial paper) of Nortel Networks Corp. under review for possible upgrade.

The review is prompted by a stabilization in Nortel's revenue, coupled with a strong improvement in operating margins and free cash flow in 2003.

Moody's said the review will consider the outlook for industry demand in 2004 and 2005, Nortel's competitive position in its chosen market sectors, the likely restructuring and margin impacts of a possible outsourcing of its remaining manufacturing operations, prospects for Nortel to produce positive free cash flow on a sustainable basis in the future, and its ability and willingness to reduce its US$9.2 billion of gross adjusted debt.

The ratings and debt affected by this action are: Nortel Networks Corp.'s senior secured B3 (guaranteed by Nortel Networks Ltd.) US$1.8 billion 4.25% convertible notes due September 2008, Nortel Networks Ltd.'s senior implied rating of B3, issuer rating of Caa1, B3 rated senior secured US$1.275 billion 6.125% notes due February 2006 and US$200 million 6.875% notes due September 2023. Also affected are Nortel Networks Capital Corp.'s B3 rated senior secured (guaranteed by Nortel Networks Ltd.) US$150 million 7.4% notes due September 2006 and US$150 million 7.875% notes due June 2026.

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