Alcatel Offers $1.4 Billion Convertible Bonds to Repay Debt

Alcatel-Lucent SA is offering about 1 billion euros ($1.4 billion) in bonds that can be exchanged for its stock, to repay debt taken on last year when the network-equipment vendor struggled to survive.

The securities are offered in a 600 million-euro tranche due January 2019 and a 400 million-euro portion maturing in January 2020, Paris-based Alcatel-Lucent said in a statement today. Each tranche could be increased by 10 percent if demand outstrips supply, with terms of the sale to be decided later today, the company said.

The proceeds will reimburse some or all of a senior secured credit facility of $1.75 billion -- part of financing granted in January 2013 for which the company pledged patents and other assets. In case of insufficient proceeds, the company said it may raise more financing in capital markets.

Since becoming CEO last year, Michel Combes has raised capital to pay down debt and renegotiated terms of some loans that his predecessor, Ben Verwaayen, took out to win time while restructuring the company. In January 2013, Verwaayen obtained a 2 billion-euro credit facility, pledging the company’s patents as collateral.

Alcatel-Lucent shares fell as much as 3.1 percent to 2.90 euros in Paris. The stock was down 1.6 percent at 2.94 euros as of 12:02 p.m., taking the decline to 10 percent this year.

Combes is seeking to turn around Alcatel-Lucent after years of losses following the 2006 merger of Alcatel SA and Lucent Technologies Inc. In February, the company reported its first quarterly profit in two years. It had a loss of 73 million euros for the most recent quarter.

Junk Rating

Alcatel-Lucent’s debt is rated B3, six steps into junk, by Moody’s Investors Service and an equivalent B- by Standard & Poor’s. S&P said in a release today that it assigned the same rating to the proposed Alcatel issue.

Alcatel last sold convertible bonds on June 26, issuing

628.9 million euros of five-year notes rated Caa1 by Moody’s.

The company’s latest issue is the largest sale of convertible bonds since Telecom Italia SpA sold 1.3 billion euros of 6.125 percent notes on November 7, according to data compiled by Bloomberg.

Non-financial companies issued 3.6 billion euros of convertible bonds so far this year compared with 4.7 billion euros a year earlier and 1.5 billion euros in same period of


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