Alcatel sets spreads on exchange offer for 7% notes

New York, March 24 - Alcatel (B1/BB-) said it has set the spreads on its previously announced offer to exchange new debt for its outstanding 7% notes due 2006.

The company said that It said the exchange spread on the existing notes was set at 150 basis points over the 4½% OBL due Aug. 18, 2006. The new-issue spread was set at 255 basis points over the 4¼% Bund due Jan. 4, 2014.

As previously announced, Alcatel, a Paris-based telecommunications equipment company, said on March 17 that it had begun its offer to exchange new fixed-rate notes due 2014 for its €995 million of outstanding 7% notes.

The exchange will expire at 9 a.m. ET on March 29, subject to possible extension, with the exchange price for the existing notes and the issue price and coupon of the new bonds to be set at 7 a.m. ET on March 24, subject to possible extension.

The company said the exchange price for the existing notes would be fixed at a margin over the mid-market quote on the 4½% OBL bond due Aug. 18, 2006. The margin would be between 145 and 155 basis points, with the precise level to be fixed at the pricing deadline.

Alcatel said the issue price and coupon of the new bonds would be based on a spread over the 4¼% Bund due Jan. 4, 2014. It said the spread would be between 225 and 265 basis points, with the precise level to be fixed at the pricing deadline.

Alcatel said the price for the new bonds would be set as close to par as is possible to achieve a coupon that is a multiple of 1/8%.

The exchange ratio will be set as the ratio of the exchange price and the issue price of the new bonds. It will be fixed on March 30.

Holders will also receive accrued interest.

Alcatel said it may also issue up to an additional €100 million of the new notes, and that any decision to do so would be announced at the pricing deadline.

Alcatel said it reserves the right to terminate the exchange offer if less than €300 million of the existing notes are tendered, although it may waive this condition provided the total principal amount of the new notes and the additional new notes is a minimum of €300 million.

Alcatel said it is carrying out the exchange to extend the maturity of its debt.

The lead dealer managers and structuring agents for the exchange offer are the London offices of BNP Paribas (contact Frédéric Zorzi or Stéphanie Sfakianos at +44 20 7595 8222) and Merrill Lynch International (contact Jeff Tannenbaum or Asar Mashkoor at + 44 20 7995 3966).

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