RLPC-Alcatel-Lucent nears 1.4 bln euro refinancing-sources

LONDON/PARIS Wed Dec 5, 2012 9:11am EST

LONDON/PARIS Dec 5 (Reuters) - Telecom equipment maker Alcatel-Lucent <ALUA.PA > is close to hiring banks to back an up to 1.4 billion euro ($1.8 billion) loan refinancing that will provide more cash for looming debt repayments.

Goldman Sachs and Credit Suisse are among banks expected to lead the refinancing, along with Citi and JP Morgan as well as French banks, the sources said.

New loans backing the refinancing are expected to be raised in the U.S. dollar market from institutional investors which have greater appetite and liquidity to invest in loans for lower-rated borrowers, the bankers added.

Alcatel-Lucent's strong presence in North America, where it generates nearly one-third of sales through contracts with AT&T and Verizon, will also offer support to raise dollar financing.

Alcatel-Lucent, like competitors Ericsson and Nokia Siemens Networks, has been struggling this year as big telecom carriers lower spending on network equipment and price competition with Chinese players continues. It has launched a programme of 5,000 job cuts in a bid to slow the rate at which it burns cash through its business operations.

With its share price near historic lows, Moody's downgraded Alcatel-Lucent's credit rating on Wednesday to B3 because the credit rating agency does not expect the company to be able to cut its cash burn materially below the 2011 level.

Alcatel-Lucent's shares are down 27 percent this year, taking its market capitalisation to roughly 2 billion euros, down from roughly 30 billion euros when it was formed in a merger in 2006

"We are working with them to look to raise financing to manage their capital structure and there will be significant finance, but the numbers and structure have been moving around a bit," one banker close to the transaction said, adding that the financing could include a high-yield bond element.

Alcatel-Lucent was not immediately available to comment.

Another banker added that the financing could include an asset-backed loan.

Alcatel-Lucent's Chief Financial Officer Paul Tufano told Reuters in November that it was looking at options including asset-backed financing to strengthen its balance sheet. Sources had earlier told Reuters that the asset-backed financing could put up the group's submarine cable business or its patent portfolio to secure the loan.

The financing would help address upcoming debt maturities, with the largest due in January 2015. Alcatel-Lucent has 837 million euros of loans under its 1.4 billion euro revolving credit facility that mature on April 5, 2013, according to its annual report.

Alcatel-Lucent's next large debt maturities are its 6.375 percent coupon bonds due in April 2014, with 462 million euros outstanding and 1 billion euros under the company's convertible bond due in January 2015, according to Moody's.