Big banks have thrown Lucent Technologies a financial lifeline, extending $US6.5 billion in credit to the struggling networking company, but they expect a quick turnaround in return for the loan.
Lucent received $4.5 billion of new 364-day credit facilities arranged by JP Morgan and Co and Salomon Smith Barney. Part of these new credit facilities replace a $2 billion credit facility that expired on February 22. Lucent also amended an existing $2 billion credit facility due in 2003.
Lucent will shift $2.5 billion of this debt to its Agere Systems spin-off at its initial public offering.
The lenders tied financial performance to the loans. In Lucent's filings with the US Securities and Exchange Commission (SEC), the company said it must post losses before interest, taxes, depreciation and amortisation of no more than $2.35 billion in the first six months of the year to remain in good standing with its lenders. In the 12 months following that, Lucent must post profits of at least $1.4 billion.
"We feel the banks have given us achievable performance targets," said Michelle Davidson, a Lucent spokeswoman. "The important thing is that we have room to turn the company around."
Lucent has faced hard times of late. The SEC is investigating its accounting practices after a "revenue recognition" issue trimmed Lucent's revenue for the fourth quarter of 2000 by $125 million. In December, Lucent announced the revenue reduction was actually $679 million.
Lucent also ousted Rich McGinn as chairman and chief executive officer in October after five quarters of not meeting its earnings forecasts.