Paris-based equipment supplier Alcatel-Lucent is reportedly close to securing at least €1bn (US$1.3bn) in financing from a syndicate of banks to refinance existing debt and fund turnaround plans.
Goldman Sachs and Credit Suisse are expected to lead…
Paris-based equipment supplier Alcatel-Lucent is reportedly close to securing at least €1bn (US$1.3bn) in financing from a syndicate of banks to refinance existing debt and fund turnaround plans.
Goldman Sachs and Credit Suisse are expected to lead the financing, while other banks, including JP Morgan and Citi, are also anticipated to be involved, news agencies reported, citing sources familiar with the deal. The financing will be comprised of US-syndicated loans, according to a Reuters report, citing banking sources.
Alcatel-Lucent declined to comment.
Rumours that Alcatel-Lucent is negotiating a loan to help strengthen its balance sheet began circulation last months. It was suggested that the company would offer assets as collateral.
Moody’s downgrade
This morning, Moody’s announced it has downgraded Alcatel-Lucent’s corporate family and probability of default ratings from B2 to B3. The ratings agency has also cut its ratings on senior debt, specifically two convertible bonds, from Caa1 to Caa2. Moody’s outlook on all ratings remains negative.
“Today’s one-notch downgrade of Alcatel-Lucent’s CFR was driven by our expectation that, in 2012, the company will not be able to cut its cash burn materially below the 2011 level of approximately €620m as adjusted by Moody’s,” agency vice president and senior analyst Roberto Pozzi said.
He added that the inability to reduce cash burn reflects the company’s 7% year-on-year revenue decline for the first nine month of the year and continued weakness in its profit margins. In Pozzi’s view, it is crucial that the company renews restructuring efforts.
The agency was more positive about Alcatel-Lucent’s liquidity, based upon the availability of about €4.7bn in cash, describing it as “substantial but finite”.
“With an outlook for declining sales in 2012, Moody’s considers that Alcatel-Lucent’s management will be challenged to cut costs fast enough to curb cash consumption and to realise opportunities for asset monetisation,” the agency said.
Alcatel-Lucent reported revenues of €3.56m for Q3, down 2.8% year-on-year. The company is currently executing a €1.25bn restructuring programme which it claimed had saved €450m by the end of Q3.
Commenting on the Q3 results, CEO Ben Verwaayen said recently the company is aiming for a positive net cash situation at year-end.
“We are taking action to strengthen our balance sheet and we are reviewing a variety of options, which we will communicate when appropriate,” he said.
Verwaayen said the company is considering disposals to cut debt and, while he did not specify which assets may be sold, he noted that it has “a broad spectrum” of non-core assets. In a Q3 conference call with analysts, he declined to comment on suggestions that the submarine cable business is among disposal possibilities. However, CFO Paul Tufano noted that it is an “extremely attractive business” with excellent growth potential.
