RLPC-Alcatel raises debt issue amid strong demand-bankers

LONDON/NEW YORK Wed Jan 23, 2013 7:08am EST

LONDON/NEW YORK Jan 23 (Reuters) - Growing investor demand for riskier assets has allowed French telecoms equipment maker Alcatel-Lucent to increase the debt it plans to raise in a refinancing to $2.65 billion, bankers said, giving a boost to its turnaround efforts.

Investors are pouring money into higher-yielding leveraged loans amid a return to stability in financial markets as well as a lack of investment opportunities in many other asset classes due to a sluggish economic outlook.

Alcatel-Lucent had been looking to raise about $2.1 billion.

Like competitors Ericsson and Nokia Siemens Networks, Alcatel-Lucent has been struggling as big telecom carriers cut 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.

The refinancing has received strong demand from investors due to the high yield the deal offers compared with other deals in the market, bankers said.

As a result, the financial terms of the loans, known as covenants, were relaxed, offering lenders little protection. Pricing was also cut which will offer lenders less interest margin, Thomson Reuters LPC reported on Tuesday

Alcatel-Lucent is in a struggling sector, but parts of the firm are valuable and doing well so investors are confident that they can achieve their objectives, bankers said.

"We had very strong momentum so we increased the dollar and euro tranches," one of the bankers said.

The credit is now split between a $500 million, 3.5-year, first-lien term loan, a $1.75 billion, six-year, first-lien term loan, and a 300 million euro ($399 million), six-year, first-lien term loan.

Previously, the six-year, first-lien term loan was split between a $1.275 billion loan and a 250 million euro loan.

The price on the 3.5 year term loan is now expected to be around 525 basis points over Libor, down from 600 bps.

Meanwhile the price on the six-year U.S. dollar tranche has been reduced to 625 bps over Libor and the euro tranche is offered at 650 bps, both cut from 700 bps, bankers said.

"We are making good progress with our financing arrangements and are very pleased with it. We expect to have it all concluded before the end of the month," a spokesman for Alcatel-Lucent said.

Credit Suisse is leading the refinancing along with Goldman Sachs, Citigroup and Deutsche Bank . The banks declined to comment.

The financing would help address Alcatel-Lucent's upcoming debt maturities, with the largest due in January 2015. The group 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.

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