What a BS, challenging Position because of $765m debt in mid 2013? ALU has over $6B in Cash!
The latter interpretation implies potentially disastrous developments for the company. Our analysis suggests that if gross margins stay at 1Q12 levels, the company could be in a very challenging position when its $765m convertible debenture is due for refinancing in mid-2013. We estimate the company could be left with ~€2bn of cash by then, making this refinancing difficult (remember Nortel filed for bankruptcy with $2.4bn in cash) and the subsequent refinancing probably impossible.
Look what Moodys said 4 Weeks ago:
Alcatel-Lucent's rating is underpinned by its solid liquid balances. After consuming almost EUR4.0 billion cash in the five years since the merger, the company's reported cash and marketable securities remained substantial at EUR5.2 billion at the end of March 2012. However, Alcatel-Lucent's liquid resources are constrained by (i) cash needs for operations (estimated by Moody's to amount to 3% of sales, or around EUR500 million); (ii) around EUR1.1 billion cash held in countries in which it is subject to exchange controls; and (ii) upcoming debt maturities of around EUR930 million in the next 15 months including the US$765 million (EUR599 million) 2.875% Series B convertible bonds due in 2025, with a 15 June 2013 put option. The net balances still leave almost EUR2.7 billion headroom for cash burn, but the cushion is shrinking.