Alcatel-Lucent Said to Increase Loan Financing to $2.65 Billion

Alcatel-Lucent SA increased loans its seeking to refinance debt to $2.65 billion and removed financial covenants from the deal, according to a person with knowledge of the transaction.

A six-year term portion was increased to $1.75 billion from $1.275 billion and will will pay interest at 6.25 percentage points more than the London interbank offered rate, down from 700 percentage points originall proposed, said the person, who asked not to be identified because the information is private. A floor on Libor, a lending benchmark, remains at 1.25 percent.

The company increased a six-year euro-denominated term loan by 50 million to 300 million ($400 million), said the person. That piece will pay interest at 6.5 percentage points more than the Euro interbank offered rate, compared with 7 percentage points initially offered.

Alcatel-Lucent is proposing to sell both portions at 99 cents on dollar, compared with a previous offer of 98 cents, the person said, increasing proceeds for the company and reducing the yield to investors.

The company will not be able to refinance the debt during the first year, then can do so at 102 cents in the second year and 101 cents in the third year, said the person.

The $500 million 3 ½-year term piece will now pay interest

5.25 percentage points more than Libor, down from 6 percentage points, with a 1.25 percent floor, the person said. The debt will be sold at 99 cents compared with 98 cents previously proposed.

Lenders are being offered one-year soft-call protection of 101 cents, meaning the company would have to pay 1 cent more than face value to refinance the debt during the first year, according to a person.

Credit Suisse Group AG is arranging the financing and investors have until tomorrow at 5 p.m. in New York to let the bank know if they will participate in the deal, the person said.

Before it's here, it's on the Bloomberg Terminal.