Ian, Fitch lowers to BBB- from A [no link]
(Press release provided by Fitch)
NEW YORK, Feb 20 - Fitch has lowered the rating on Lucent
Technologies Inc.’s (Lucent) senior unsecured debt to ’BBB-’
from ’A’.
The commercial paper rating was lowered to ’F3’ from ’F1’.
The company has been removed from Rating Watch Negative and
placed on Rating Outlook Negative.
This rating action reflects the eroding credit protection
measures and several material concerns regarding this credit.
Lucent’s focus on revenue growth created underlying problems in
its business due to the questionable economic decisions made to
meet revenue targets.
The accelerated growth revealed weaknesses in executing a
unified business strategy and highlighted lagging processes and
systems.
Additional issues, such as, unsustainable expense
structure, lack of cash flow orientation, missed product
introductions, and successive quarterly revisions caused
Lucent’s credit measures to decline even further.
The depth and breadth of the restructuring announcement in
Lucent’s seven-point plan emphasizes the severity of the
situation.
In regards to the restructuring plan, Lucent must execute
on the reductions in workforce, rationalization of various
product lines, consolidation of corporate functions, and the
elimination of duplicate sales and marketing efforts to avoid
placing additional pressure on its credit rating.
Lucent’s most pressing requirement is to finalize
negotiations on a new $4.5 billion credit facility required for
liquidity in 2001. The credit facility, which will be secured
with Lucent and Agere assets, will give Lucent sufficient room
to execute future strategic initiatives.
The unsecured debt will be subordinate to this facility.
Additional concerns surround the ability for Lucent to execute
the IPO of Agere due to general market conditions. Upon
completion of the IPO, Lucent will be able to assign $2.5
billion of its credit facility to Agere.
This credit facility will be unsecured if Agere has a ’2’
short-term debt rating and ’BBB’ long-term debt rating. The IPO
is also expected to provide Lucent with significant additional
liquidity.
Resolution of the Rating Outlook is dependent on Lucent
executing the above concerns. The successful placement of the
credit facility along with the Agere IPO will remove the
near-term pressures for this credit.
Longer term, the risk then moves to the execution of its
restructuring plans along with plans along with meeting its
aggressive revenue and cost control efforts.< |
