Marconi shareholders' worst fears confirmed
By Ben Hunt, IT Correspondent
Published: August 28 2002 7:36 | Last Updated: August 28 2002 7:36
Marconi on Wednesday confirmed the worst fears of its long-suffering shareholders when it said the restructuring plan, still being negotiated with creditors owed £4bn ($6.13bn), was likely to leave them with just a 0.5 per cent stake in the group.
As part of the massive debt-for-equity swap that will be the centrepiece of the refinancing and which will leave Marconi owned by its banks and bondholders, shareholders will also be offered "warrants allowing the purchase of 5 per cent of the issued share capital, subject to certain criteria".
The telecommunications equipment group quashed hopes of an immediate end to months of painstaking negotiations with creditors, however, as said "talks with creditors ... are continuing".
Marconi has been in negotiations with banks owed £2.3bn and bondholders owed £1.7bn, since the middle of May, and while all substantive issues are understood to have been resolved, the group has been prevented from announcing an agreement in principle by a string of last minute problems.
The group also revealed that it was likely to carry net debt of about £300m following the restructuring.
It added: "The prospective capital structure being discussed has been designed to provide flexibility for Marconi Group's ongoing success, maximise cash and overall recovery for creditors and allow existing Marconi shareholders to maintain an ongoing economic interest in the Group."
It is understood that the group has between £500m and £600m in cash, at least half of which will be used to fund working capital requirements while the remainder is set aside for security against certain continuing liabilities.
Marconi’s shareholders have already suffered a virtual wipeout in the value of their equity which has fallen from a high of more than £12 at the height of the telecoms boom to lows of just 1.5p.
On Wednesday morning they edged up about 0.04p to 1.75p despite the bad news. Marconi forewarned shareholders of a “very substantial dilution” in equity value last month, which sparked a rush among investors to dump the stock, driving the price down to its current levels.
The award of even 0.5 per cent of equity to shareholders is a small victory for Marconi, which had argued strongly throughout the process that in the interests of continuity and liquidity shareholders should be given a symbolic stake in the group.
Creditors, who are collectively likely to have to write off billions of pounds in debt, wanted to leave shareholders empty-handed. |
