US/French equipment vendor Alcatel-Lucent is planning to raise up to EUR1 billion by issuing convertible bonds to help refinance its debt, reports the Financial Times (FT), citing a Reuters article. According to official company statements, the firm initially said it would launch a EUR750 million bond, but raised the amount to EUR870 million due to better-than-expected demand. The firm subsequently said the offering could be increased to a maximum of EUR1 billion if the over-allotment option granted to the joint lead-managers and joint bookrunners is exercised in full by 8 September 2009. “The principal purpose of the offering is to contribute to the refinancing of the group’s debt and the extension of its maturity, and, secondarily, to further enhance the group’s financial position,” the vendor said in the statement. 

According to the FT, shares in Alcatel-Lucent were down 8.5 percent to EUR2.334 in morning trading in Paris yesterday, underperforming the wider market. Traders attributed the drop to some investors selling the shares to acquire the bond. “This will alleviate investor worries about the balance sheet,” said one London-based analyst. The report added that Alcatel-Lucent carries about EUR4 billion in long-term debt and also has large pension obligations from the former Lucent, which it funds in accordance with US pension laws. The new bonds will bear interest at a rate of between 5 percent and 5.5 percent per year payable semi-annually in arrears on 1 January and 1 July of each year, starting 1 January 2010.