Lucent debt declared ‘junk’

Lucent Technologies got knocked down another notch by two credit-rating agencies while published reports indicated the vendor may cut more employees.

Lucent has already announced 10,000 layoffs and extended an early retirement package it hopes will reduce headcount by an additional 10,000. But unconfirmed media reports suggest the company may have to lay off several thousand additional people to reduce costs.

According to a Lucent spokesman, the company is on track with its previously announced job reductions and, once those are complete, will reassess where it stands.

“At this point, we have nothing to announce,” he said.

Workers have until July 10 to decide whether to accept the buyout offer. The number of employees who take early retirement could affect the number of additional layoffs.

Meanwhile, Lucent also had its credit rating lowered to “junk” status by Moody’s Investors Service and Fitch, following a downgrade to junk two weeks ago by Standard & Poor’s.

Moody’s downgraded Lucent’s senior long-term debt to “Ba1,” its highest junk grade, from “Baa3” and lowered the vendor’s rating on commercial paper to “Not Prime” from “Prime-3.” The downgrade affects about $3.8 billion of Lucent’s debt securities, and Moody’s placed the long term ratings on review for possible further downgrade.

According to Moody’s, the rating action reflects “a more protracted downturn in the company’s end markets and the resultant challenges to the company’s financing plans, as well as increasing concern about the timing, scope, and ability to deliver critical liquidity events such as the sale of the fiber unit.” The fact that Lucent’s secured bank facility likely will be a “more permanent element” of the company’s capital structure also played a role, the Moody’s rating action note said.

Moody’s said its continuing review of Lucent would focus on the company’s ability to maintain access to liquidity, reduce its cost levels and reach cash-neutral operating results.

Lucent is in talks to sell its fiber-optic cable unit and two manufacturing plants to help raise the additional $2 billion required to complete the spin off of Agere Systems, its microelectronics unit.