| LONDON/NEW YORK
LONDON/NEW YORK Jan 23 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
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.