NTL.PR.F & NTL.PR.G : DBRS Downgrades to "D"

DBRS has announced that it:

has today downgraded its preferred share ratings of Nortel Network Limited to D from Pfd-5 (low). Nortel Networks Limited is a wholly owned subsidiary of Nortel Networks Corporation (collectively, Nortel or the Company). This rating action follows the Under Review with Negative Implications status, where the ratings were placed November 10, 2008 (see press release dated November 10, 2008). Nortel’s long-term debt remains Under Review with Negative Implications.

This rating action results from Nortel suspending its dividend payments on its preferred shares. This suspension begins with its November 2008 dividends, which will not be paid on December 12, 2008. The last dividend the Company paid was on November 12, 2008, on its Series 5 preferred shares (cumulative) and its Series 7 preferred shares (non-cumulative) as originally declared on July 31, 2008.

DBRS notes that on November 10, 2008 Nortel released its Q3 2008 results, which were below DBRS’s expectations, and lowered its outlook for the year. Additionally, Nortel announced the suspension of its preferred share dividends in an effort to preserve its liquidity. Shortly after this announcement, DBRS placed all of Nortel’s ratings Under Review with Negative Implications.

DBRS’s ratings on technology companies are primarily based on factors such as the product suite, the base of customers, the competitive landscape, research and development initiatives, gross operating margins and the financial profile.

These issues were last discussed on PrefBlog when Nortel announced its intention to default.

NTL.PR.F & NTL.PR.G are tracked by HIMIPref™. They would be included in the “Ratchet” index, but have been relegated to “Scraps” on credit concerns.

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