Alcatel-Lucent, the troubled Franco-U.S. telecom-equipment maker, has mandated Credit Suisse and Goldman Sachs to arrange a €1.615 billion senior secured loan designed to extend the firm’s maturity profile and provide flexibility as it works to cut costs through a restructuring programme.
The financing is split between a $500 million, 3.5-year asset sale facility and $1.275 billion and €250 million six-year senior secured term loans. Pricing sees indicative margins of L+600 and E/L+700 on the asset sale and term loans, respectively, at an indicative issue price of 98. A 1.25% LIBOR floor supports pricing on the asset sale facility, which also has 101 call protection in the first year. The term loans, meanwhile, are non-call one, 102 in year two, and 101 in year three.
Proceeds will, through a tender, refinance various bond issues with call dates and maturities from June 2013 to April 2016 with a face value of more than €2.6 billion. The company’s revolver – first signed in April 2007 and due to expire in April next year – will be terminated as part of the new financing. Total secured leveraged for the new facility will be 2.4x based on LTM September 2012 adjusted EBITDA of €689 million, and the new debt is secured by assets including its intellectual property portfolio.
Alcatel said it will hold an investor meeting today in London with New York meetings to follow next week. It has also set bank meetings for Jan. 8 and Jan. 9 in London and New York, respectively.
The deal comes in the midst of a €1.25 billion cost-cutting programme by the company that includes 5,500 redundancies and is due for completion by the end of 2013. In its third-quarter results the firm reported negative free cash flow of €360 million, while adjusted EBITDA to LTM Q3 2012 was €689 million, down from €1.257 billion in 2011.
In today’s announcement, Alcatel said it was on track to realise €500 million of cost savings this year, adding that it has identified divestitures valued at €1-1.5 billion.
In response to the news investors had marked the shares up roughly 10% by lunchtime, at about 95c.
Alcatel-Lucent is a French developer and manufacturer of telecom equipment, providing products, solutions, and transformation services. Its clients include service providers, enterprises, governments, and strategic industries (such as transportation or energy) which deliver voice, data, and video communication services to end users. It is rated B/B3. – David Cox