Can Market Support $1B Lucent Loan?

Lucent Technologies Inc. is facing an uphill battle in its attempt to line up close to $1 billion in financing to provide hardware for a highly touted telecommunications joint venture, according to bankers.

These bankers wondered aloud whether the Murray Hill, N.J.-based AT&T spinoff can raise that kind of capital necessary to provide switches and other wireless equipment to Sprint Spectrum, a wireless communications joint venture of Sprint Corp., Cox Communications, Comcast Cable, and Telecommunications Inc.

"The lead banks are really scratching their heads, wondering how much capacity the market has," said a telecommunications banker at a large foreign bank. "I've received calls to try and sound us out about what we'd be willing to do."

A number of financial institutions, including Chase Manhattan Corp. and Goldman, Sachs & Co., are working behind the scenes to determine the market capacity for a bank facility.

Northern Telecom already may have satisfied the appetite for telecommunications debt when it arranged $600 million in vendor financing for the build-out of Sprint's wireless communications network. BankAmerica Corp., Bank of Nova Scotia, Barclays de Zoete Wedd, J.P. Morgan & Co., and Royal Bank of Canada recently landed over $300 million in commitments from a combination of banks and institutional investors for Northern Telecom.

"There is some concern about portfolio management," said Michael Weaver, a vice president at Duff & Phelps Credit Rating Co. "If you're an owner of Nortel paper for Sprint PCS, there is some question about whether you want the Lucent paper, too?"

Indeed, experts said that during the syndication of the Northern Telecom loan, some bankers waited until the last minute to make their commitments to compare the deal to a Lucent facility.

Now, the pressure would appear to be on Lucent, which makes phone company networking systems, office phone systems, and telecommunications- related computer chips and software.

"It may be that in the race to get banks involved, Nortel was just more efficient," said Charles A. DiSanza, a telecommunications industry analyst at Gerard Klauer Mattison & Co.

Lucent has $3 billion of cash on its balance sheet from its initial public offering, so executives may not feel pressured to reduce their exposure to Sprint Spectrum immediately.

"Liquidity is not a major concern," said Mr. Weaver.

Mr. DiSanza said Lucent was also considering a large bond issue, which would reduce the need for a huge bank credit.

Lucent soon may want to reduce its own exposure to the joint venture, to arrange vendor financing packages with other wireless companies.

"Lucent has internal limits on how much personal communication services they can offer, and Sprint eats up quite a bit of that," said Mr. Weaver. "They may need to unload some of this to pursue other attractive opportunities."

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