S&P Affirms Nortel, Stocks Hit 42 Cents

Standard & Poor's Ratings Services on Friday affirmed the ratings, including the 'B-' long-term corporate credit mark, on Nortel Networks Ltd. (NT).

The news came on the day Nortel’s stocks closed at their lowest price — 42 cents — in 52 weeks.

“Nortel should be able to sustain adequate levels of liquidity in the next 12-18 months to support its high fixed charges and turnaround efforts despite difficult market conditions and company-specific challenges," said Standard & Poor's credit analyst Madhav Hari.

At the same time, S&P removed Nortel’s ratings from CreditWatch with negative implications, where they were placed Nov. 10, following Nortel’s weakened operating outlook for 2008, higher-than-expected cash burn and a change in strategy. The outlook is negative, S&P said.

"The negative outlook reflects our concerns about the company's ability to contain revenue erosion given difficult market conditions, high cash burn and execution risk as it relates to its revised strategy," Hari added.

S&P said if Nortel's prospective cash balances fall to about $1.5 billion, or if the pace of cash burn proves higher than expectations, it likely will lower the ratings.

As of Sept. 30, Nortel had about $4.5 billion in outstanding debt.

This marks the third time in a week S&P has issued statements on key telecom companies.

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