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F-56
On August 15, 2001, Nortel Networks completed an offering of $1,800 of 4.25% convertible Senior Notes (the “Senior Notes”), due on
September 1, 2008. The Senior Notes pay interest on a semi-annual basis on March 1 and September 1, which began March 1, 2002. The
Senior Notes are convertible, at any time by holders into common shares of Nortel Networks Corporation, at an initial conversion price of
$10 per common share, subject to adjustment upon the occurrence of certain events. Nortel Networks may redeem some or all of the
Senior Notes in cash at any time on or after September 7, 2004 at a redemption price of between 100% and 102.125% of the principal
amount of the Senior Notes, depending on the redemption date, plus accrued and unpaid interest and additional interest, if any, to the date
of the redemption. In addition, Nortel Networks may be required to redeem the Senior Notes in cash and/or common shares of Nortel
Networks Corporation under certain circumstances such as a change in control, or Nortel Networks may redeem the Senior Notes at its
option under certain circumstances such as a change in the applicable Canadian withholding tax legislation. NNL is the full and
unconditional guarantor of the Senior Notes in the event Nortel Networks does not make payments for the principal, interest, premium, if
any, or other amounts, if any, as they are due. The guarantee is a direct, unconditional and unsubordinated obligation of NNL.
On February 8, 2001, NNL completed an offering of $1,500 of 6.125% Notes due on February 15, 2006 (the “6.125% Notes”). The
6.125% Notes pay interest on a semi-annual basis on February 15 and August 15, which began on August 15, 2001. The 6.125% Notes
are redeemable, at any time at NNL’s option, at a redemption price equal to the principal amount thereof plus accrued and unpaid interest
and a make-whole premium.
During the year ended December 31, 2003, Nortel Networks purchased a portion of its 6.125% Notes with a face value of $39. The
transaction resulted in a gain of $4 which was included in the consolidated statement of operations within other income (expense) — net
for the year ended December 31, 2003.
During the year ended December 31, 2002, Nortel Networks paid $162 to purchase a portion of its 6.00% Notes due on September 1,
2003 and its 6.125% Notes with carrying values of $36 and $186, respectively. The early extinguishment of debt resulted in a gain of $60
which was included in the consolidated statement of operations within other income (expense) — net for the year ended December 31,
2002.
During the year ended December 31, 2002, Nortel Networks sold an office building for $24 and concurrent with the sale Nortel Networks
leased the property back for a period of fifteen years at an average annual rental of $3. The lease is renewable at Nortel Networks option
for four additional five year terms. The lease requires that a letter of credit for $1 be provided while Nortel Networks bonds are rated
below investment grade. As a result of the letter of credit structure, the transaction has been recorded as a financing transaction rather
than a sale, and the building and related accounts will continue to be recognized in the consolidated financial statements.
During the year ended December 31, 2001, Nortel Networks sold an office building for $9 and, concurrent with the sale, Nortel Networks
leased the property back for a period of fifteen years at an average annual rental of $1. The lease is renewable at Nortel Networks option
for three additional five year terms. The lease requires that Nortel Networks indemnify the landlord against environmental contamination
caused by unrelated third parties during the lease term. As a result of the indemnification, the transaction has been recorded as a financing
transaction rather than a sale, and the building and related accounts will continue to be recognized in the consolidated financial
statements.
During the year ended December 31, 2001, Nortel Networks sold an office building for $137 and, concurrent with the sale, Nortel
Networks leased the property back for a period of fifteen years at an average annual rental of $18. The lease is renewable at Nortel
Networks option for four additional five year terms. The lease is classified as a capital lease. As such, the transaction has been recorded
as a financing transaction rather than a sale, and the building and related accounts will continue to be recognized in the consolidated
financial statements.
See note 23 for additional information related to Nortel Networks and NNL’s debt securities.
Credit facilities
As of December 31, 2003 and 2002, Nortel Networks had total unused committed credit facilities of $750 under the NNL and Nortel
Networks Inc. (“NNI”) $750 April 2000 five year credit facilities (the “Five Year Facilities”). See note 23 for additional information.