Lucent buys back $275 mln of preferred shares
biz.yahoo.com
Wednesday October 23, 12:08 pm ET
By Jonathan Stempel
NEW YORK, Oct 23 (Reuters) - Lucent Technologies Inc. (NYSE:LU - News) said on Wednesday it bought back $275 million of its convertible preferred stock at far below face value, a move that might make it easier for the money-losing telecommunications equipment provider to manage its debt load.
With its cash level shrinking, Lucent in the quarter ending Sept. 30 issued 58 million shares of new common stock in exchange for $175 million of its 8 percent convertible preferred stock maturing in 2031, Chief Financial Officer Frank d'Amelio said. He said Lucent later exchanged 38 million more common shares for an additional $100 million of preferred stock.
"The current trading levels of these securities presented an opportunity to redeem them at well below their face value," he said on a conference call. "This is a prudent risk mitigation strategy. Considering the difficult market environment, we did not use any cash for these redemptions."
D'Amelio said $1.6 billion of the preferred stock remains outstanding but declined to say if Lucent planned more buybacks.
With customers spending less on its products, Lucent on Wednesday posted a $2.88 billion net loss in the latest quarter, its 10th straight quarterly loss.
The company said it ended the quarter with $4.4 billion of cash, and expects to have more than $2 billion by next Sept. 30. It said it had about $6.8 billion of long- and short-term debt and convertible securities outstanding as of Sept. 30.
Lucent may have to buy back the rest of the 8 percent preferred stock in August 2004 at face value for cash or common stock. Traders on Wednesday quoted the preferred stock at below 24 cents on the dollar.
"The company needs to keep its debt position down," said Jeff Seidel, global head of convertible research at Credit Suisse First Boston. "If they chip away at the ultimate redemption amount and do negotiated buybacks at prices below where they might be redeemed, that's intelligent. Buying back preferred stock is probably the right thing to do." |
