Alcatel-Lucent secures €1.6bn in loans Alcatel-Lucent, the ailing telecoms equipment maker, has secured €1.6bn in loan financing that it hopes will give it enough time to secure its future by cutting costs and getting cash burn under control. The company, which has struggled since its 2006 creation from the merger of France's Alcatel and Lucent of the US, has large cash reserves but its heavy working capital requirements have raised questions about its financial solidity. It alarmed investors in November when it said negative free cash flow was €1bn in the first nine months of the year, worse than expected by analysts. Before the €1.6bn financing deal announced on Friday, underwritten by Credit Suisse and Goldman Sachs, Alcatel was facing about €2.2bn of debt repayments by the end of 2015. Shares in Alcatel rose 10 per cent in Paris on Friday as some investors welcomed the extra breathing space, but they have fallen by 83 per cent over five years. Ben Verwaayen, chief executive, said the financing would let the company pursue a €1.25bn cost-cutting programme, which involves 5,500 redundancies, and the potential sale of assets such as its submarine cable division and parts of its large portfolio of patents. Some industry executives predict it will have to make deeper cuts to jobs. Mr Verwaayen said: "We will take advantage of the flexibility provided by this new financing in order to aggressively look at all options to drive long-term sustainable profitability." However, analysts were sceptical about the company's ability to improve profits and hit a 2015 target for a gross margin in the range of 35 per cent to 37 per cent and an adjusted operating margin of 6 per cent to 9 per cent, which was used to secure the financing from the banks. Pierre Ferragu at Bernstein said: "We don't believe the 2015 target presented by management is credible. It implies a significant recovery in gross margins in optics and a stabilisation of negative trends at most other business units. Mr Ferragu added that the financing deal would reduce the "liquidation value" of Alcatel. "Given the operational challenges of the company, we consider this the main valuation driver for the stock," he said. Analysts at JPMorgan said: "These new credit facilities improve liquidity but do not solve the underlying problems of weak profitability, poor underlying free cash flow and a debt level that looks too high for a cyclical technology company." Mr Verwaayen, a former BT chief executive, has had to answer questions over his own future in recent months. When he took the job in 2008 he promised to make Alcatel a "normal company" with predictable profits and cash flow.