Europe News

Lenders Show Faith in Nokia Siemens

Daniel Thomas, Telecoms Correspondent, Financial Times

Nokia Siemens Networks has raised more than 1.2 billion euros ($1.54 billion) of finance from a consortium of 14 European and US banks in a vote of confidence from the lending market in the troubled telecoms equipment maker’s strategic overhaul.

NSN, which is jointly owned by Nokia and Siemens , needed to replace a 2 billion euros ($2.6 billion) debt facility set to expire this summer that was used to support corporate activities. There were fears in the banking community the company would struggle to find sufficient finance given difficult trading conditions, which forced it to announce 17,000 job losses in November against a backdrop of poor corporate lending. Nokia and Siemens had to bail out NSN with an additional 1 billion euros ($1.29 billion) of equity last year after attempts to sell the business failed.

NSN has agreed a forward starting facility with 14 banks that will provide almost 1.3 billion euros ($1.67 billion) of finance. It has kept the option of adding more banks to the group in the first quarter to provide additional money given delays caused by the uncertain economic climate at the end of last year.

The number of the banks involved, which include JPMorgan, Citi , Bank of America, Royal Bank of Scotland and Standard Chartered , reflects the difficulty in raising debt in 2011.

One source close to the negotiations said fundraising conditions had worsened as fears over a collapse of the euro grew, which he said had made the process harder.

The terms of the debt have been made more onerous than the existing facility, which was agreed in 2009, and there will be continued concern given the short-term nature of half of the agreed debt.

About 600 million euros will be provided as a one-year term loan – in effect a short-term corporate bridging loan – that will need to replaced when it expires in the summer of 2013. The remainder is on a three-year term.

NSN will look at raising money in the capital market through bond issuance, according to one source, which it is hoped will be available before the expiry of the one-year debt. NSN declined to comment.

In November, NSN revealed plans to reposition the business in a network equipment market hard-pressed by cheaper entrants from Asia such as Huawei and a drop in infrastructure investment by the main European network operator clients.

As a result, NSN will focus on more profitable mobile broadband operations and improve profitability by reducing operating expenses and overheads by 1 billion euros ($1.29 billion) by the end of 2013.

This will result in the loss of almost a quarter of its 74,000 jobs worldwide and the sale of divisions overseeing carrier Ethernet, business support services, communication and entertainment solutions, broadband access and narrowband. More details of where the job losses will occur are expected in the next few weeks as the company talks to regional labor unions.