Alcatel-Lucent to use €1.6 billion in new financing to fund restructuring program

Additional €1 billion to €1.5 billion worth of assets being sold, says Wall Street Journal

Alcatel-Lucent (NYSE: ALU) plans to use the €1.6 billion ($2.1 billion) in bank financing it secured last week to fund its €1.25 billion ($1.6 billion) restructuring program as well as the restructuring of unprofitable managed services contracts and exiting of geographic markets.

In announcing the financing, Ben Verwaayen, chief executive officer of Alcatel-Lucent, commented: "We will take advantage of the flexibility provided by this new financing in order to aggressively look at all options to drive long-term sustainable profitability, enhance our strategic positioning and improve our balance sheet."

The telecom equipment maker pledged its intellectual property as collateral to secure the financing from Goldman Sachs and Credit Suisse Group. The loans have maturities of three-and-a-half to six years from now.

Some of that intellectual property might not be as valuable as Alcatel-Lucent thinks it is. A federal court recently ruled that Apple and LG Electronics did not infringe on Alcatel-Lucent's patents for video compression technology used to send data more efficiently over electronic devices. Alcatel-Lucent had been seeking $172.3 million from Apple and $9.1 million from LG, according to a Bloomberg report.

Alcatel-Lucent has been struggling financially, having posted a net loss of €146 million ($186 million) for the quarter.

The company's restructuring program includes asset sales and 5,500 job cuts. According to the Wall Street Journal, those asset sales could generate another €1 billion to €1.5 billion. The company has also been considering selling its submarine cable business and its business telecom equipment unit, the newspaper said, citing a person with "direction knowledge of the matter."

Alcatel-Lucent has seen its stock value drop close to 65 percent over the past year, but the financing announcement bumped its stock up 13 percent in Friday trading on the New York Stock Exchange.

Alcatel-Lucent is playing in a market that has seen steady growth. Competitors Cisco (Nasdaq: CSCO) and Juniper Networks (NYSE: JNPR) are posting positive financial results, so if the telecom gear giant can get its financial house in order with the help of the latest funding, it should be able to return to profitability in the near future.

For more:
- see Alcatel-Lucent's release
- read the Wall Street Journal article (sub. req.)

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