Alcatel-Lucent SA (ALU) reached a 1.6 billion-euro ($2.1 billion) financing deal, gaining time to overhaul the French phone-equipment maker and try to sell as much as 1.5 billion euros of assets.
The senior secured credit facilities underwritten by Credit Suisse Group AG (CSGN) and Goldman Sachs Group Inc. (GS) will be denominated in U.S. dollars and euros, with maturities of 3 1/2 to six years, the Paris-based company said today. The stock gained 7 percent and the company’s 8.5 percent bonds jumped to the highest in almost eight months.
The funding will allow Alcatel to “aggressively” consider all options to boost profitability, improve its strategy and shore up the company’s finances, Chief Executive Officer Ben Verwaayen said in a statement.
The CEO has so far sold smaller assets, cut jobs and costs and signed a patent-licensing agreement. Those measures have failed to reduce an average annual cash consumption of 700 million euros since the 2006 merger of Alcatel SA and Lucent Technologies.
Alcatel-Lucent shares closed at 91 cents in Paris, after rising as much as 15 percent. They surged 16 percent on Nov. 22 after Bloomberg News reported the company was in talks with Goldman Sachs about obtaining funding in exchange for assets offered as collateral. Still, the stock has fallen 24 percent this year.
Alcatel’s 8.5 percent bonds due 2016 jumped 4.5 percent to 102.8 cents on the euro, the day’s biggest gain in Bank of America Merrill Lynch’s Euro High-Yield Index. The notes’ yield, which moves inversely to the price, fell 1.7 percentage points to 7.6 percent.
The senior-senior secured facility includes 3 1/2 year and six year portions, according to a presentation on the company’s website. The shorter-dated loan is for $500 million and has an indicative interest margin of 600 basis points more than the London interbank offered rate, and the longer-dated piece is split into $1.275 billion and 250 million-euro loans that pay interest of 700 basis points more than benchmark rates.
The loans will be sold to investors at 98 cents on the dollar or euro and include protection against early repayment, according to the presentation. Investor group meetings will be held in London today and in New York on Dec. 17 and 18, with pre-marketing commitments due by Dec. 21. Banks meetings will be held in both cities in January next year.
The company, faced with the task of stemming a streak of mounting losses, is weighing the sale of more assets to fetch 1 billion euros to 1.5 billion euros, according to a document published today on its website.
The unit that produces undersea fiber-optic cables and the division that provides equipment to businesses are among those considered for sale, people familiar with the matter said last month. Talks on both assets, which may fetch less than 1 billion euros, are at an early stage, the people said then.
The financing will be secured by assets including Alcatel- Lucent’s intellectual property portfolio, in part inherited from the research of Bell Labs and valued at 5 billion euros, the company said on its website. Stock of Alcatel-Lucent USA and other tangible and intangible assets were also used as collateral, said Simon Poulter, a spokesman for the equipment vendor.
Hurt by declining demand for networking gear and Asian competition, Alcatel isn’t alone in its struggle. Nokia Siemens Networks is cutting 17,000 jobs and the Finnish-German joint venture has sold assets including its optical networks business to restore profitability.
Alcatel is eliminating about 5,500 jobs in sales, marketing and administration to reduce expenses. Despite those cuts, announced this year, the company is still lagging behind Nokia Siemens Networks and Ericsson AB based on efficiency figures, data compiled by Bloomberg show.
Alcatel-Lucent may face hurdles to scale back its workforce, especially at home, where President Francois Hollande’s Socialist government has adopted a tough stance against firings at companies such as ArcelorMittal. (MT)
Alcatel executives are scheduled to speak before the French National Assembly’s economic commission on Dec. 19.
To contact the reporter on this story: Marie Mawad in Paris at email@example.com