In less than a month, Nortel has $1.275-billion of debt coming due. The question being asked by analysts is how the company is going to deal with it. Nortel could issue equity but that would be extremely dilutive – 350 million shares – so that’s probably out. It could use some of its $3-billion of cash but you would think a telecom equipment maker would want to hold onto its cash given the industry’s volatility. Nortel could issue convertible bonds but that would involve equity as well at some point. So, that leaves new debt, which one analyst told Reuters would come with 9% rate over five years. Sanford Bernstein Paul Sagawa also believes Nortel will have to pay $1-billion to $2-billion to settle class-action lawsuits.
Nortel’s Bond Issues