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Technology Stocks : Lucent Technologies (LU) -- Ignore unavailable to you. Want to Upgrade?

To: GVTucker who wrote (21019)	10/22/2002 4:01:29 PM
From: John Soileau	Respond to of 21876

<<They had to cancel their bank line of credit not too long ago solely because if they didn't, they would have been in default.>> Yeah but it was not drawn--it was not a payment obligation at all! Just an unused rainy day line of credit. They were not in default of any payment obligation, and are not now. They apparently just wanted to avoid the bad press of having the line cancelled by the lenders, so they cancelled it themselves. LU's pension liability is another negative in the picture. That's true all over the place these days. If you want to see a REAL SCARY unfunded pension liability, check out GM. That one belongs at Halloween Horror Night! John

To: GVTucker who wrote (21019)	10/22/2002 5:56:45 PM
From: bofp	Read Replies (2) \| Respond to of 21876

GV, Your message is not as well considered as your usual contribution. Lucent's pension was 17% or $5.2B OVERFUNDED at the end of FY01. While performance over the last 12 months was likely in the range of -20% or so, LU's expected obligation likely also declined with the divestments and force reductions over the same timeframe. Indeed, leaving the 9% return assumption aside for the moment, LU's pension fund obligation may not be underfunded AT ALL, much less severely underfunded in billions of $$ as you have unequivocably stated. A shift in the return assumption will likely be necessary and will probably push LU into an underfunded position, but it is not likely to result in a $billion payment obligation. Moreover, companies are not expected to make good on their pension obligations immediately. Usually payments are amortized over several years, making it extremely unlikely that LU's pension position would ever throw it into bankruptcy. As to the undrawn bank line of credit - while LU would have been in default of EBITDA covenants in 3Q, it is not clear why LU did not negotiate new terms. Many speculate that LU wishes to have the flexibility to buy in shares of their put-able convertible preferred issue - currently trading at less than 30 cents on the dollar - and didn't believe that it needed that particular tranche of bank credit. IMHO The biggest threat to existing shareholders is the dilution of the convertible NOT involuntary bankruptcy.