Marconi slammed by analysts
Stock downgraded after trading statement disappoints By Friedel Rother FT Investor, Peter Bale FT Investor, 17:13 GMT Mar 25, 2002
LONDON (FT Investor) - In what had all the elements of shooting fish in a barrel, stock and debt analysts took aim at struggling Marconi on Monday.
Marconi sank to copper coin level, closing down 34 per cent at 6p, after a welter of analyst reports added emphasise to the belief the company is virtually worthless to shareholders. Its future now appears to lie in the hands of bondholders and banks.
More than 310m shares changed hands down from the spectacular 735m of Friday but still gigantic volume.
Morgan Stanley downgraded Marconi [MONI, News, Chart, Research] [MONI, News, Chart, Research] to "underweight" from "equal weight" and said options for the telecoms equipment supplier were more limited, now that it had placed its loan facility on demand and acknowledged that trading would not pick up until early 2003. See Friday's story on the crisis at Marconi
It also said that any future balance sheet restructuring could have a "significantly dilutive" effect on equity, referring to a widely expected debt for equity swap expected as part of any rebuilding of the company's £3.1bn in bank lending and bonds.
Merrill Lynch, repeated that sentiment in a research note. "While a debt restructuring should help the future viability of the company, we believe that the likely heavy equity dilution impact - depending on deal terms - would not improve our view regarding the position of equity shareholders."
Target slashed
UBS Warburg went slightly further, actually cutting Marconi's price target to 5p from 30p and telling investors that the shares were close to worthless. "We see the value of the equity as negligible," wrote analysts Ben Cohen and Benny Hallam.
They added that it was "difficult to construct a scenario in which the equity has any residual value" following the recent decision by Marconi [MONI, News, Chart, Research] and its banks to cancel the company's undrawn facilities and place the £2.2bn drawn portion of its loans on demand. See more on this story
Marconi shareholders have already seen the value of their investment fall heavily.
The shares lost 50 per cent on Friday, following the trading statement.
Its current trading price represents a fraction of what the shares were worth less than two years ago, during the technology boom, when they reached highs of as much £12.75.
Debt rating agency Standard & Poor's added to the pain with a cut, late on Friday, in the Marconi debt rating, and offered little joy to shareholders who have been buying the stock all the way down or to those who hold around £1.8bn in Marconi bonds.
"There is a high probability that the group's balance sheet will be restructured on terms that are detrimental to bondholders," S&P said, cutting the rating to single-B-minus from single-B-plus.
Marconi was forced to deny over the weekend reports that it would deliberately default on interest payments on bonds in order to conserve cash as it worked through talks with bank and bondholders. See more on Marconi denial. |
