Nortel Gets 30 Day Loan Waiver, Despite Moody's Downgrade

Moody’s Investor Services downgraded Nortel (NT) 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 share fell seven cents to 33 cents, giving the company a market capitalization of $164.1-million.

EDC Waiver

If Nortel has enjoyed a constant supporter over the years, it’s been Export Development Canada, which provides loans to Canadian companies so they can finance international sales.

Today, EDC provided Nortel with a 30-day waiver that will continue to give it access to $750-million of financial support even though Moody’s downgraded Nortel’s debt.

The EDC support consists of US$300 million of committed support and $450 million of uncommitted support. As of Sept. 30, there was $190 million of outstanding support under the facility.

EDC is a Crown corporation with a mandate to provide trade finance and risk management services to Canadian companies doing business internationally. EDC’s financial support has played a key role in helping Canadian companies such as Nortel and Bombardier attract international deals because they are able to offer credit to purchasers.