Another WorldCom?
By Ottawa Business Journal Staff
Thu, Mar 11, 2004 9:00 AM EST
Nortel Networks Corp. set itself up for a bumpy trading session Thursday by announcing overnight it will have to delay regulatory filings and make additional restatements of its financial results for the past three years.
Just the word "restatement" is enough to send shivers of fear through the markets, a fact borne out last fall when Nortel first announced a massive review of its results for the previous three years. However, the end result of that process was in Nortel's favour, with about US$505 million added to net earnings.
The company attributed the restatements to its extensive restructuring of the past three years that saw it cut almost two-thirds if its staff and close down about 450 of 700 facilities worldwide. In November Nortel said the cost of that downsizing was overestimated by about US$952 million.
Late Wednesday evening the company acknowledged that process continues to shake itself out, forcing a delay in filing its 2003 annual report with the U.S. Securities and Exchange Commission. Nortel said the accounting review that led to the first round of restatements for some or all of 2000, 2001 and 2002 could now require additional restatements of its 2003 results.
In a statement, Nortel said it is now "re-examining the establishment, timing of, support for and release to income of certain accruals and provisions in prior periods."
Nortel could not specify when it expects to complete the review.
Nortel already filed restatements for fiscal 2002 and the first half of 2003 in December. It also filed restatements in November going back to 2000.
It now expects to have to file further restatements for some quarters of 2003 and for one or more earlier periods.
The delay in filing its yearend report with the SEC could put Nortel in default of certain debt agreements if the delay extends beyond the end of March.
Nortel said the delay should not cause an automatic default or acceleration in repayments of long-term debt.
However, if repayment of the company's debt securities were accelerated by creditors, Nortel said operating subsidiary Nortel Networks Ltd. might be left on the hook and forced to seek alternative financing sources.
Nortel Networks Ltd. has about $1.8 billion of notes outstanding, and the parent company has about $1.8 billion of convertible debt securities outstanding under the indentures, the company said.
Nortel added that Export Development Canada would also have the right to withdraw credit facilities of $750 million.
By Ottawa Business Journal Staff
Thu, Mar 11, 2004 9:00 AM EST
Nortel Networks Corp. set itself up for a bumpy trading session Thursday by announcing overnight it will have to delay regulatory filings and make additional restatements of its financial results for the past three years.
Just the word "restatement" is enough to send shivers of fear through the markets, a fact borne out last fall when Nortel first announced a massive review of its results for the previous three years. However, the end result of that process was in Nortel's favour, with about US$505 million added to net earnings.
The company attributed the restatements to its extensive restructuring of the past three years that saw it cut almost two-thirds if its staff and close down about 450 of 700 facilities worldwide. In November Nortel said the cost of that downsizing was overestimated by about US$952 million.
Late Wednesday evening the company acknowledged that process continues to shake itself out, forcing a delay in filing its 2003 annual report with the U.S. Securities and Exchange Commission. Nortel said the accounting review that led to the first round of restatements for some or all of 2000, 2001 and 2002 could now require additional restatements of its 2003 results.
In a statement, Nortel said it is now "re-examining the establishment, timing of, support for and release to income of certain accruals and provisions in prior periods."
Nortel could not specify when it expects to complete the review.
Nortel already filed restatements for fiscal 2002 and the first half of 2003 in December. It also filed restatements in November going back to 2000.
It now expects to have to file further restatements for some quarters of 2003 and for one or more earlier periods.
The delay in filing its yearend report with the SEC could put Nortel in default of certain debt agreements if the delay extends beyond the end of March.
Nortel said the delay should not cause an automatic default or acceleration in repayments of long-term debt.
However, if repayment of the company's debt securities were accelerated by creditors, Nortel said operating subsidiary Nortel Networks Ltd. might be left on the hook and forced to seek alternative financing sources.
Nortel Networks Ltd. has about $1.8 billion of notes outstanding, and the parent company has about $1.8 billion of convertible debt securities outstanding under the indentures, the company said.
Nortel added that Export Development Canada would also have the right to withdraw credit facilities of $750 million.
