Nortel Networks is back out to banks seeking a waiver on its $1.3 billion credit after failing to file its 10-K with the Securities and Exchange Commission by March 16. For the third time since 2003, the company is restating its financial results because of prematurely booked sales. Calls to Peter Currie, cfo, were not returned. A company spokesman said he could not provide any details on the waiver or a timetable for Nortel's discussions with its lenders. He noted, however, that the company hopes to have the SEC filing complete by the end of April. The credit is led by JPMorgan, Citigroup and The Royal Bank of Scotland. Officials at those banks declined to comment.
Yet to be seen, is how lenders will react to the waiver request. "When you look at it realistically, they probably shouldn't be granted this waiver," said one investor, who does not own the paper. "If it was the first time, okay, maybe even the second time; mistakes happen. But this is the third time that they have had essentially the same problem." He said that there is likely to be a sense of inevitability among lenders. "You have to figure that sooner or later, [it will] happen again," he explained.
The company had previously recorded payment for sales received on specific dates, when in fact, it did not receive payment until a later date. The most recent errors are expected to cost the company $2.4 billion in sales for 2005. "It really is unbelievable that they could let something like this happen again," another investor said.
Nortel will be restating its financial terms for all of 2003 and 2004, and up to the end of September 2005. Standard & Poor's said it may lower the company's long-term debt rating of B- in light of the default situation and has placed Nortel on CreditWatch negative. A spokesman at Moody's Investors Service said the agency has not taken any rating actions and does not discuss potential future rating actions.