* Studying options to strengthen balance sheet
* Asset sales, debt restructuring possible
* Submarine, enterprise units under management of CFO
* Alcatel exploring pledging of assets to raise debt-source
By Leila Abboud and Gwénaëlle Barzic
PARIS, Nov 2 Alcatel-Lucent is
considering selling its submarine cable business and a unit that
supplies telephone systems to big companies as part of its
effort to shore up its balance sheet, according to sources
familiar with the matter.
The company has yet to hire banks to work on the deals, but
a previously announced mid-September move to put the two
businesses directly under Chief Financial Executive Paul Tufano
is a sign they are candidates for sale, the sources said.
Alcatel-Lucent said on Friday it was studying options,
including asset sales and a restructuring of its debt, to
strengthen its balance sheet after posting a third-quarter loss.
"There are number of opportunities we are actively exploring
to address our debt profile," Tufano said on a call with
analysts. "As we do that, it could have a material impact on how
people view our liquidity."
Goldman Sachs analysts estimated that sales of the submarine
optic and the corporate telephony units could raise up to 400
million euros. One of the sources said the valuation would be
"much higher" without giving details.
The submarine optics business, which employs 700-800
employees in France, manufactures, installs and maintains the
undersea cables that link continents to transfer phone and
Internet traffic. Potential buyers could include Nexans
, which makes undersea cables for the electricity
sector, or Italian cable maker Prysmian, the sources
The corporate telephony business is what was left of
Alcatel's enterprise business, after selling call centre unit
Genesys to private equity fund Permira last year for $1.5
billion. It had tried to sell the business with Genesys last
year, but found no takers for it.
Possible bidders include Canada's Mitel and Siemens
Enterprise Communications, which took part in the bidding for
the business last year, the sources said.
A smaller business known as radio frequency systems, which
sells cable and antenna equipment that goes on mobile antennas,
is also being considered for sale, two of the sources said.
DEBT MATURITIES AHEAD
The company faces about 2.2 billion euros in debt repayments
through to the end of 2015, with a major deadline on January 1,
2015, according to analysts. It has 2.96 billion euros on its
balance sheet as of September 30, and nearly 4.63 billion euros
of debt outstanding.
In parallel to studying asset sales, the group continues to
work on ways to monetise its portfolio of 29,000 patents to
boost liquidity. It signed a licensing deal with RPX Corp.
in February on its patents.
One of the sources familiar with the matter said
Alcatel-Lucent is also studying whether it could pledge some of
its assets to raise debt.
"It would be like an asset-backed security," the source
said. "The asset sales altogether are too small to solve their
financing issues, so they are looking at other ways to improve
their credit profile."
Alcatel-Lucent said in July that it was in negotiations with
its banks on renewing a revolving credit facility. In April,
part of the company's 1.4 billion euros five-year revolving bank
credit facility expired leaving it with 837 million euros
available that expires in April 2013.
Sources told Reuters in September that a number of banks
have been reluctant to lend due to the uncertainty around the
According to the source, doing a type of asset-backed
security where Alcatel-Lucent pledges assets or its patents to
raise debt could unblock the stalemate with banks over the
Tufano hinted that the moves being explored on the debt
profile could be linked to the credit facility issue: "It could
also be done in concert with the RCF (revolving credit
facility)," he said.
A spokeswoman for the company declined to comment on
specific asset sales or debt options. "We are reviewing all our
options and will communicate when appropriate," she said.