GimmeCredit Down on NT Bonds

GimmeCredit is far from excited about Nortel's long bonds even though they're yielding 8.3%. "Nortel has bonds maturing this month and although we think the company can repay or refinance these bonds as well as bank debt coming due in 2007, business growth that would dramatically improve credit quality is unlikely this year." GimmeCredit is also concerned about Nortel's declining cash balances, while net leverage has climbed to more than 3X. "Given interest expense, capital spending and pension funding which collectively exceed $900 million this year, we estimate Nortel will generate negative cash flow," Gimme Credit said.


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