Nortel Preps for Financial Update

Tomorrow morning, Nortel Networks Ltd. (NYSE/Toronto: NT) will provide the first of a series of biweekly business updates demanded by the Ontario Securities Commission.

Nortel said last month it would provide updates on "the affairs of the company" every two weeks to satisfy the requirements of the Canadian regulator. The OSC demanded the regular updates when it prohibited trading in Nortel stock by more than 160 senior staff and other current and former employees, including new board director John Manley. That order followed the OSC's announcement of a probe into Nortel's financial reporting (see Nortel Insider Trading Halted, Nortel Hires a Statesman, and Canadian Regulator Probes Nortel).

It's not clear exactly what the report will cover or whether any update concerning Nortel's anticipated financial restatements will be included. A Nortel spokesman said he "couldn't speculate" about the report's contents (see SEC Pops In on Nortel and Nortel Gets Federal Subpoena).

Things could be worse for Nortel, though. The Canadian government agency Export Development Canada has allowed it access to the $750 million credit facility used to help secure deals with customers outside Canada. The availability of the funds had been in doubt since Nortel announced it was under investigation by the U.S. Securities and Exchange Commission (SEC) (see Nortel Gets EDC Waiver). But it's not just business as usual: The conditions surrounding the financial facility have been tightened, and the EDC will now review Nortel's use of the fund on a case-by-case basis. Nortel says there's no guarantee it will receive any further EDC funds.

The EDC will review the situation again either on July 30 or August 30, or even earlier if Nortel files its restated accounts for 2003 and the first quarter of 2004 before those dates. Nortel's share price was down by two cents at $3.81 in pre-market trading today, following the holiday weekend break.

— Ray Le Maistre, International Editor, Boardwatch