Return to Sender, an even better shorting opportunity may be Vivendi. It has it all. Huge debt, overstated book value due to acquisitions and top it off $17 billion in off-balance sheet liabilities (shades of Enron)
forbes.com
Veiled risks at Vivendi - Elizabeth MacDonald, 07.22.02
Oil and water don't mix. Nor do huge debt, jazzy media properties and a plodding provider of water, as Jean-Marie Messier found out. Under pressure from the board, he stepped aside as CEO of Vivendi Universal--a French water company whose debt-fueled acquisition of entertainment assets is under assault. Vivendi's (nyse: V - news - people ) stock had fallen by two thirds since January, to $21 a share; the day Messier's departure hit the news, it went up $1.
But celebrating is premature. Vivendi after Messier is a bigger mess than most realize. Aside from the $20 billion in debt everyone worries about, it carries another $17 billion in off-balance-sheet liabilities.
Vivendi gets an earnings boost from this murky dealmaking, says the Center for Financial Research & Analysis, an accounting watchdog group. Until August 2000, Vivendi included in its results a pro-rated, 24.5% share of losses at the satellite and cable company British Sky Broadcasting. In September 2000, Vivendi stopped doing so, saying that European antitrust regulators had forced it to sell its stake. It thus avoided an estimated $215 million of BSkyB's losses, the center says, but waited more than a year to unload BSkyB. Vivendi had no immediate comment.
Vivendi got an estimated $400 million boost to its results for 2001 when it sold its stake in AOL Europe. But as part of the deal, Vivendi agreed that until March 2003 it would make up any shortfall if the unit's valuation fell below $812 million. That's likely to happen. Analysts see $300 million in losses this year. |
