Alcatel-Lucent recently put up its patent portfolio as collateral for a credit line from Goldman-Sachs and Credit Suisse, and this arrangement has the French government nervous. The government may urge the company to sell off business units instead, including its enterprise division.
According to a report in the French business publication Les Echos, the government is discouraging Alcatel-Lucent (ALU) from using the 1.6 billion euro credit line. The government fears that ALU could default on its loans and let its patents fall into the hands of foreign banks. The credit line would stabilize ALU while it tries to reduce costs following consecutive quarters of heavy losses. The French government prefers that ALU find alternatives to putting its patents up as collateral. My French is rusty, but my reading of Les Echos reveals that the government is pushing ALU to sell off a valuable business unit to raise cash, including the enterprise business or its submarine communications business. The government is also exploring a patent consortium, which would allow ALU to share its patent portfolio with other companies and derive revenue from them.
ALU has put its enterprise business up for sale a couple times in recent years, so this news is not great shock. But some customers must be frustrated by the continued instability of the company. ALU has a lot of debt, negative cash flow and dwindling cash reserves. Seeking Alpha says the credit line is unlikely to turn around the company’s fortunes.