LU and NT shareholders' future => Marconi shareholders may be left with 1%
By Ben Hunt, IT Correspondent
Published: August 15 2002 19:49 | Last Updated: August 15 2002 19:49
Shareholders at Marconi may be left with less than 1 per cent of the troubled telecommunications group in its long-awaited financial restructuring.
Company executives and creditors owed £4bn were last night negotiating final terms of the overhaul, forced on the company by its disastrous acquisition spree and collapsing sales of t elecommunications equipment.
Officials have warned that investors in the company, born out of GEC, would experience a "very substantial dilution" of equity value. Shareholders could receive a stake of almost 1 pe r cent in the company, according to people familiar with this week's talks.
It is understood that existing shareholders will not be able to vote on the package.
At the height of the telecoms boom in 2000, Marconi boasted a market capitalisation of £34.5bn. Yesterday it was valued at £100.5m.
Under the refinancing, a syndicate of 31 banks owed £2.3bn by Marconi are expected to write off about £1bn of those loans, while bondholders owed £1.7bn are also expected to sustain h eavy losses.
Nevertheless, Marconi's management - led by Mike Parton, chief executive - this week secured crucial support from lenders after assuring them that the company had a sustainable future following a big restructuring.
Mr Parton is expected to maintain his role in the new Marconi group following the restructuring.
Once the deal is completed, the future contract terms and remuneration of Marconi directors will be discussed by the creditors and the board. Any move to change existing one-year cont racts or introduce bonus schemes could prove controversial, and would dismay former shareholders.
Any stake offered to existing shareholders could be supplemented by warrants, exercisable if Marconi's future market value rebounded to a level that allows creditors to recoup their l osses.
Marconi will keep about £500m of an estimated cash pile of £1.4bn for working capital requirements.
Some of the cash will be returned to creditors but some will be kept by the group for use as security against operational contracts.
The ongoing company is expected to carry net debt of between £350m and £400m on its balance sheet.
Although a heads-of-term agreement could be announced today, last-minute haggling could delay a deal until next week.
Marconi has been locked in tripartite negotiations with a leading group of banks, including JP Morgan and HSBC, and representatives of bondholders since mid-May.
Although most parties were optimistic throughout that an agreement could be reached, a minority of the lending banks are understood to have believed that their interests were best se rved by allowing the group to slide into administration, allowing them to collect credit default insurance.
Analysts have warned, however, that a resolution to Marconi's debt situation will not be the end of the group's difficulties.
Ben Cohen of UBS Warburg said: "Pricing power and revenue growth will still be difficult to attain unless capacity in the sector comes down or demand returns. Both seem fairly distant ." |
