British Energy Gets $639 Million Loan Guarantee From U.K. Government
Monday September 9
LONDON -- The United Kingdom's government threw a lifeline to British Energy PLC Monday, extending the ailing nuclear power supplier supplier a 410 million British pounds ($639.1 million) loan guarantee through the end of the month.
The agreement, which expires Sept. 27, is designed to give British Energy enough working capital to fend off insolvency as it starts to put together a longer-term restructuring plan, a process that is likely to be painful to the company's shareholders.
Investors view of British Energy's prospects was made abundantly clear when its stock resumed trade after its suspension Thursday. In morning trading Monday, the company's shares had collapsed, down 84%, or 67.25 pence ($1.05), to 13 pence a share.
"It is expected that discussions regarding longer-term restructuring will commence shortly," British Energy said in a statement.
"The board has reasonable grounds for believing that these discussions will be successful but there can be no certainty that this will preserve value for investors," it added.
British Energy has drawn fire for reassuring analysts in a conference call in mid-August that it had its financial situation under control.
The Financial Services Authority, the U.K. market watchdog, is looking into the chain of events leading to the suspension of the company's shares last week, but an FSA spokesman said there are no plans yet to launch a formal investigation.
The government's loan guarantee will provide British Energy with collateral to continue trading with counterparties, as well as working capital to fund operations, the company said.
The company has had trouble finding counterparties to trade with since the scale of its financial problems became apparent last week, according to industry sources.
A person familiar with the matter said longer-term restructuring talks could take up to six months to conclude, and that the government "wouldn't be offering a blank check to British Energy."
"The government has now prevented the whole thing collapsing in the short term," said one analyst. "They now go away (to) see if they can solve the whole thing (using) their own resources."
Observers said much will depend on the company's ability to attract the longer-term financing necessary for a full restructuring.
British Energy warned Monday that if its discussions over the next month are unsuccessful, "the company may be unable to meet its financial obligations as they fall due and therefore the company may have to take appropriate insolvency proceedings."
Company Web site: britishenergy.co.uk |
