Alcatel to launch exchange offer for 7% notes

New York, March 11 - Alcatel (B1/B+) announced Thursday that it plans to launch an offer to exchange new, longer-dated debt for its €995 million of 7% notes due 2006 currently outstanding (out of the €1.2 billion originally issued.)

The Paris-based provider of telecommunications and broadband services said that the operation will be launched, subject to market conditions, on or about March 17, when a notice officially announcing the beginning of the exchange offer will be published and the maturity of the new notes will be announced.

Alcatel said that it is considering inviting all holders of its existing outstanding 7% notes to exchange them for the new, longer-term notes, subject to selling restrictions. It plans to make an application to have the new notes listed on the Luxembourg Stock Exchange.

Alcatel said that it does not intend to limit the maximum amount of the existing notes to be submitted to the exchange offer, and said that it may issue up to €100 million of additional new notes, depending on the results of the exchange offer and subject to market conditions. They will be fungible with the new notes being issued in exchange for the existing notes, and will also be listed on the Luxembourg Stock Exchange.

Alcatel said that the exchange offer will be conditional on valid acceptances being received from holders of at least €300 million principal amount of the existing notes, although it reserves the right to waive this condition, provided the total principal amount of the new notes and the additional new notes is a minimum of €300 million.

The company said that the existing notes will be exchanged for the new debt based upon an exchange ratio which will be equal to the exchange price at which the existing notes are tendered, divided by the new notes' issue price. The exchange price for the existing notes will be determined on or around March 30, using a formula based on a fixed exchange spread over the yield on the French government OBL 4½% notes due Aug. 18, 2006. The issue price for the new notes will be determined on or about March 30, 2004 using a fixed spread over the yield of a benchmark security.

Alcatel said the settlement date for its offer will be on or around April 7; at that time, the company will pay all holders who have validly accepted the exchange offer an amount of cash equal to accrued and unpaid interest on the existing notes from the previous interest payment date, up to but not including the settlement dates, will deliver all applicable new notes, and will pay in cash any fractional portion of new notes resulting from the exchange ratio.

The lead dealer managers and structuring agents for the exchange offer will be 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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