Lucent Debt Syndication a Tough Sell

Dow Jones

NEW YORK — Bankers marketing a huge syndicated loan package last week for Lucent Technologies Inc. had anything but an easy time attracting buyers.

The deadline was Friday for banks to commit themselves to $4.5 billion, 364-day credit facilities for the Murray Hill, N.J., telecommunications equipment maker. J.P. Morgan Chase & Co. and Citigroup Inc.’s Salomon Smith Barney unit, the syndicate’s lead agents, encountered resistance to placing chunks of the loans with other banking companies.

And sources said affiliates of J.P. Morgan Chase and Citicorp North America Inc. could be stuck holding larger than desired portions of the financing on their books. Each committed itself to lending $1.25 billion, for a total of $2.5 billion of the facilities, Lucent said Jan. 24 when it announced a seven-point restructuring.

A J.P. Morgan Chase spokeswoman referred calls to Lucent. A Salomon Smith Barney spokeswoman wasn’t immediately available. Michelle Davidson, a Lucent spokeswoman, said the company expected to complete the negotiations for the credit lines.

As Lucent announced its restructuring, it said the J.P. Morgan Chase and Citicorp North America affiliates were “highly confident that the facilities can be successfully syndicated in the bank market.”

But since then, Lucent’s credit ratings have deteriorated, and investors have begun to shun its debt.

Lucent’s debt ratings were cut to one notch above junk status Feb. 12 by Moody’s Investors Service and Standard & Poor’s. Its P-3 short-term rating from Moody’s and A-3 rating from S&P have essentially shut Lucent out of the commercial paper market.

Lucent also must refinance existing debt. A $2 billion credit facility comes due Thursday. Of the $4.5 billion of new facilities that Lucent was negotiating, $2 billion would go to replace that maturing 364-day facility. The other $2.5 billion facility would be assigned to Agere Systems Inc. as part of Lucent’s spinoff of its microelectronics group.

Both rating agencies said they would reassess Lucent’s debt ratings if the credit facilities weren’t completed. The company would fall to junk status with any new downgrading.

“If they don’t have the bank lines, there are serious issues at hand because they are having to find a way to pay $3 billion” of commercial paper “that’s maturing in the short term,” said Bruce Hyman, a director at Standard & Poor’s.

Robert Ray, a senior vice president at Moody’s, said the agency expects that Lucent will be able to “close the deal.”

“If they don’t, obviously we’ll have to look again at the situation,” he said.