Lucent Technologies raised US$1.75 billion in a securities offering Wednesday, providing it with a sizable injection of cash after months of seeking to dispel concerns about its liquidity.
The convertible preferred stock, which was acquired by a mix of investors from large hedge funds to institutions, will pay an annual coupon of 8 percent. The securities also allow their holders to buy Lucent's common stock at about US$7.48 a share, a 22 percent premium to Wednesday's closing price of US$6.13.
Lucent sold about US$750 million more of the securities than it had anticipated. "This is a major vote of confidence in our restructuring efforts," said Kathleen Fitzgerald, a Lucent spokeswoman.
Show of support
The sale shows how hard it is for many communications companies to raise cash in conventional equity and debt markets. But the transaction is also an important show of support in Lucent from investors who are betting its financial performance will improve.
At a meeting at Lucent's headquarters in Murray Hill, New Jersey, on Wednesday, nearly 200 representatives from the group of 20 or so banks that are Lucent's principal creditors applauded news of the deal when it was provided by Henry B. Schacht, Lucent's chief executive.
Lucent is negotiating with the banks so it can take a large revamping charge this quarter without violating the covenants of a US$4 billion financing agreement reached earlier this year. The company's success with the securities deal should help it in talks with the banks and with its overall turnaround efforts, investors said.
"This is a home run," said Sandra Durn, manager of the Pimco Convertible Bond Fund. "It's expensive, but probably not that much more than a high-yield deal, and it plays into the view that management is doing the right things."
Hit by a steep decline in the market for communications equipment, Lucent has cut jobs, spun off divisions and is seeking to reduce costs.
Last week, the company reported a loss of US$3.25 billion for the most recent quarter and, despite the transaction on Wednesday, concern over Lucent's financial situation persists.
Moody's Investors Service followed the example of Standard & Poor's on Wednesday and lowered its ratings on Lucent's long-term debt, to Ba3 from Ba1, and said its ratings outlook for the company remained negative. Moody's cited uncertainties in markets for Lucent's products as a main cause for concern.
Lucent, which is redirecting its energies to focus on established wireless and fixed-line customers, expects to return to profitability by the end of next year, but even with cash from the securities sale and from the sale of factories and other parts of the company, Moody's said these efforts "do not address the company's excessive cost structure or its product-offering situation."
Concern shrugged off
Investors appeared to shrug off these concerns Wednesday, however. Shares in Lucent declined US$0.57, or 8.5 percent, to US$6.13, but much of the selling was said to come from hedge funds that were selling Lucent's common stock short as they sought to acquire the convertible preferred stock.
Lucent may sell an additional US$250 million of the securities, increasing the size of the deal to US$2 billion, people close to the transaction said.
The security has a five-year no-call provision, which means Lucent cannot force the conversion of the security into common stock during that time. It may be converted to cash after three, six, nine or 15 years. In addition, Lucent may use common stock instead of cash to pay the 8 percent coupon.
Based on Lucent's market value of about US$21 billion, the convertible preferred stock offering may dilute common shareholders' stake in the company about 8 percent.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique