Alcatel Gets its Debt Rating Upgraded

The debt ratings agency, Standard & Poor's says that it has revised its outlook on Alcatel from negative to stable, following publication by the company of its second-quarter results. At the same time, Standard & Poor's affirmed its 'B+/B' corporate credit ratings and its 'B+' senior unsecured debt ratings on Alcatel. "Alcatel's ongoing restructuring program is mitigating the severe market contraction affecting the global telecoms equipment industry and offsets any short-term liquidity risk," said Standard & Poor's credit analyst Leandro de Torres Zabala.

At June 30, 2003, Alcatel had gross debt of US$7.4 billion.

In the face of continuing challenging market conditions, Alcatel has managed to reduce materially its cost base. This has resulted in positive operating income before restructuring expenses in the second quarter of 2003. With slower rates of sales decline expected in the second half of 2003 and continuation of its rigorous cost-cutting program, Alcatel should be in a position to become profitable for the full year 2003, before restructuring costs, and to continue reducing negative free operating cash flow. The latter, coupled with Alcatel's adequate liquidity profile, should help the company to sustain its business and technological positions and offsets any short-term liquidity risks.

The ratings on Alcatel are also supported by its position as one of the leading global manufacturers of telecoms equipment, its established relationship with major telephone operators, and substantial exposure to nontelecoms operations.

"It is critical that Alcatel continues implementing its restructuring program in order to restore sustained positive operating profitability and free operating cash flow generation, while preserving an adequate liquidity position at all times," said Mr. de Torres Zabala."

Posted to the site on 13th August 2003