GEO Defaults; Industry Stability Lifts Lucent

GEO Specialty Chemicals has defaulted on its bank debt after failing to make the Feb. 2 interest payment on its 101/8%, $120 million subordinated bonds within a 30-day grace period. As a result, Standard & Poor's has lowered its senior secured bank debt rating on the company to D from CC. William Eckman, cfo of GEO, did not return calls.

The chemicals manufacturer and marketer has been in discussion with its senior bank lenders and its equity sponsor Charter Oak Partners about a financial restructuring. Deutsche Bank, US Bank and Citigroup lead GEO's existing $125 million credit, which includes a $105 million loan. The facility was amended last year to limit further acquisitions, reduce the amount of cash GEO can retain and increase the spread paid to lenders (LMW, 2/6). GEO has approximately $227 million of total debt outstanding.

* Lucent Technologies' corporate credit rating was raised to B from B- by S&P. The rating agency believes that industry revenues have stabilized after declining steeply from 1999 levels. At the same time, Lucent's cost reduction actions have enabled a return to moderate profitability.

"We believe service providers still face a number of challenges in 2004, primarily continuing to reduce the cost of their operations, while simultaneously expanding service offerings to increase revenues," said a Lucent spokesman. "Our customers need to accomplish this while maintaining and improving the security and reliability of their networks. This set of circumstances creates opportunities for Lucent in growth areas like VoIP, mobile high-speed data and metro optical solutions," he added. According to S&P, the company's ratings still reflect its high leverage, a dramatically smaller and more aggressive industry due to changes in service providers buying patterns, and ongoing changes in the technology industry.