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Agere repays $1 bln bank debt, extends maturity, pays higher rate
By Peter Heap
New York, Oct. 5 - Agere Systems said it repaid $1 billion of the $2.5 billion of bank debt it assumed from Lucent Technologies at the time of its initial public offering and extended the maturity of the credit facility. The amendment also changes some of the covenants and requires Agere to pay a higher interest rate.
Allentown, Pa.-based Agere said the changes, effective Oct. 4, give it "further flexibility to manage the business through the current market conditions." Lead arrangers for the facility are J.P. Morgan Securities Inc. and Salomon Smith Barney Inc.
The amendments cut the credit facility to $1.5 billion and extend the maturity date to Sept. 30, 2002 from Feb. 21, 2002, Agere said. If the optical communications components company raises at least $500 million in public or private debt or equity transactions before Sept. 30, 2002, part of the facility will be extended further, giving it $750 million of availability until Sept. 30, 2003 and $500 million from then until Sept. 30, 2004.
Agere will also pay a higher interest rate following the amendments. Based on its current ratings of Ba3 from Moody's Investors Service and BB- from Standard & Poor's, Agere will pay Libor plus 450 basis points. In addition, until $500 million of the loans is permanently repaid, the interest rate will step up 25 basis points every 90 days, with the first increment on Nov. 19, 2001. Once the $500 million is repaid the borrowing cost will decline to Libor plus 400 basis points at the current ratings. Previously, Agere paid Libor plus 350 basis points for term loans at its current credit ratings.
Among the changes to the covenant are new minimum values for liquidity, consolidated EBITDA (earnings before interest, taxation, depreciation and amortization) and consolidated net worth and limit capital expenditures. Levels are as follows (in millions of dollars):
Quarter Ending Liquidity EBITDA Net worth
-------------- --------- ------ ---------
Sept. 30, 2001 $1,800 $(275) $4,900
Dec. 31, 2001 $1,175 $(275) $4,300
March 31, 2002 $850 $(200) $3,800
June 30, 2002 $625 $(100) $3,400
Sept. 30, 2002 $500 $5 $3,175
Dec. 31, 2002 $600 $65 $3,100
March 31, 2003 $650 $100 $3,000
June 30, 2003 $700 $150 $3,000
Sept. 30, 2003 $750 $175 $3,100
Dec. 31, 2003 $750 $175 $3,200
March 31, 2004 $750 $200 $3,300
June 30, 2004 $750 $200 $3,500
Sept. 30, 2004 $750 $200 $3,700
Year Ended Capital Spending
---------- ----------------
Sept. 30, 2002 $330
Sept. 30, 2003 $475
Sept. 30, 2004 $500
End
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