Filter
Top Products
F-84
On October 26, 2004, Nortel Networks entered into an agreement with Foundry Networks, Inc. (“Foundry”) to settle outstanding patent
infringement claims and counterclaims by the parties. As part of the settlement, Nortel Networks granted Foundry a four year license
under certain patents, and Foundry paid $35 to Nortel Networks.
On December 15 and 16, 2004, Nortel Networks sold certain notes receivable and convertible notes receivable that had been received as
a result of the restructuring of a customer financing arrangement for cash proceeds of $116. The net carrying amount of the notes
receivable and convertible notes receivable was $56.
On December 23, 2004, a customer financing arrangement was restructured. The notes receivable that were restructured had a net
carrying amount as of December 31, 2003 of $13, net of provisions for doubtful accounts of $147 ($55 of the provision is included in
discontinued operations). Nortel Networks is currently assessing the value of the restructured notes receivable and expects that an
increase in value from the net carrying amount has occurred.
2
4. Su
pp
lemental consolidatin
gf
inancial in
f
ormation
As of December 31, 2003, and as a result of NNL’s credit ratings, various liens, pledges and guarantees were effective under security
agreements entered into by NNL and various of its subsidiaries that pledged substantially all of the assets of NNL in favor of the banks
under the Five Year Facilities, EDC and the holders of Nortel Networks and NNL’s outstanding public debt securities, which debt
securities represent substantially all of Nortel Networks consolidated long-term debt (see notes 11 and 23).
The security agreements were originally entered into in connection with the $1,510 December 2001 364-day credit facilities (which
expired on December 13, 2002). The security became effective April 4, 2002, following Moody’s Investors Service, Inc. (“Moody’s”)
downgrade of NNL’s senior long-term debt rating to below investment grade, in respect of the then existing credit facilities including the
Five Year Facilities. Consequently, on April 4, 2002 and in accordance with the negative pledge covenants in the indentures for all Nortel
Networks outstanding public debt securities, all such public debt securities became, under the terms of the security agreements, secured
equally and ratably with the obligations under NNL’s and NNI’s then existing credit facilities.
As of December 31, 2003, the security provided under the security agreements was comprised of pledges of substantially all of the assets
of NNL and those of most of its U.S. and Canadian subsidiaries and pledges of shares in certain of NNL’s other subsidiaries. In addition,
certain of NNL’s wholly owned subsidiaries guaranteed NNL’s obligations under the credit and support facilities and outstanding public
debt securities (the “Guarantor Subsidiaries”). Non-guarantor subsidiaries (the “Non-Guarantor Subsidiaries”) represented either wholly
owned subsidiaries of NNL whose shares were pledged, or were the remaining subsidiaries of NNL which did not provide liens, pledges
or guarantees (see note 23).
If NNL’s senior long-term debt rating by Moody’s returns to Baa2 (with a stable outlook) and its rating by Standard & Poor’s returns to
BBB (with a stable outlook), the security and guarantees will be released in full. If both the Five Year Facilities and the EDC Support
Facility are terminated, or expire, the security and guarantees will also be released in full. NNL may provide EDC with cash collateral in
an amount equal to the total amount of its outstanding obligations and undrawn commitments and expenses under the EDC Support
Facility (or any other alternative collateral or arrangements acceptable to EDC) in lieu of the security provided under the security
agreements (see note 11). Accordingly, if the EDC Support Facility is secured by cash or other alternate collateral or arrangements
acceptable to EDC and if the Five Year Facilities are terminated or expire, the security and guarantees will also be released in full (see
note 23 for additional related information including the termination of the Five Year Facilities).
The following supplemental consolidating financial data illustrates, in separate columns, the composition of Nortel Networks
Corporation, NNL, the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries, eliminations and the consolidated total as of
December 31, 2003 and 2002 and for the years ended December 31, 2003, 2002 and 2001 (see note 23).
Investments in subsidiaries are accounted for using the equity method for purposes of the supplemental consolidating financial data. Net
earnings (loss) of subsidiaries are therefore reflected in the investment account and net earnings (loss). The principal elimination entries
eliminate investments in subsidiaries and intercompany balances and transactions. The financial data may not necessarily be indicative of
the results of operations or financial position had the subsidiaries been operating as independent entities.