CITY ROUND-UP

Published on Tuesday 7 May 2002 01:00

Speculation rife over Marconi fate

THE market is rife with speculation today about the future of Marconi as talks continue with banks and bondholders and what value will be left when the two sides emerge.

Some analysts believe an announcement on its future financing will be imminent, others think it months away.

Experts are now worried that the strongest outcome is likely to be a debt-for-equity swap, which could leave shareholders with virtually nothing in terms of value.

Bear Stearns analyst Louis Landeman said: "I would be surprised if they announce something now, I think we will probably hear something in the next one to three months."

The bondholders came late to the talks and could, some analysts believe, need a little more time to evaluate Marconi’s position.

They also reckon that as the talks involve three parties with very different aims - the banks, the bondholders and Marconi itself - they could drag on.

But another analyst said: "My bet will be that the company comes out of the talks with an announcement any time now. Although in theory they have months to find a solution, it is difficult to see why they should prolong the agony."

He said that when Marconi does emerge from its talks, some investors might have a rude awakening as a debt-for-equity swap could leave them very little value.

"I am amazed the shares are trading at 10p," he said. "In the circumstances they should be trading at 1p as the banks are not going to clear billions of debt just to give that value back to the shareholders."

The banks have taken a firm hand with Marconi, freezing 850 million of its cash balance. Marconi reduced its debt from 3.5 billion at December 31, 2001, to 2.9bn at March 31, 2002, but also reported losses of over 100m a quarter.

Marconi’s share price of around 10p leave the firm valued at around 296m.

Railtrack shares sale probe

CITIGROUP, whose Schroder Salomon Smith Barney unit advises the Government on Railtrack, will investigate a subsidiary over shares traded in the insolvent rail operator, it has been reported.

Reports today said the investment bank was examining the purchase of 500,000 Railtrack shares by subsidiary Vidacos in the run-up to a crucial government decision on shareholder compensation. Citigroup was not immediately available for comment.

In March, government-backed vehicle Network Rail agreed to give 500 million in compensation to shareholders, despite insistence by Transport Secretary Stephen Byers that they would get no more taxpayer money. An FSA spokesman said trading in the grey market for Railtrack shares ahead of the announcement also prompted an investigation.

Wall Street stock gloom

WALL Street’s main stock indexes have dropped heavily as investors reacted to the news late last week that US unemployment hit an eight-year high of six per cent in April.

Investors’ confidence in government and central bank predictions that an economic recovery is under way is waning, according to analysts.

The Nasdaq closed down 2.1 per cent at 1578.48 while the Dow Jones industrial average fell 1.98 per cent at 9808.04, its lowest close since February 19.

Peregrine hit by 60% plunge

CALIFORNIA-based software firm Peregrine Systems has said it has unearthed potential accounting irregularities worth up to 68 million, sending its shares plunging more than 60 per cent.

The news came on the day that criminal proceedings opened against Peregrine’s ex-auditor, Arthur Andersen, for its role in the Enron affair. The firm also said two executives had resigned - chief executive Steve Gardner and chief financial officer Matt Gless.

Cash lifeline for air traffic

AIRPORTS operator BAA is to offer the country’s cash-strapped air traffic controller service 50 million in funding later this month, according to reports today.

The Government would also match BAA’s contribution .

Last Wednesday, the Civil Aviation Authority said the partly-privatised National Air Traffic Services had an inadequate financial structure for the long term, particularly to withstand another major external shock on its revenues.

Revenue up for Incepta

INCEPTA, the international marketing and communications group that owns public relations firm Citigate Dewe Rogerson, today announced an 11 per cent growth in revenues to 170.8 million for the year.

The firm, which cut eight per cent of its workforce - 160 staff - in October, said profit before tax fell to 26m from 27.2m, as the company registered exceptional charges of 8.5m.

David Wright, the executive chairman, said the cuts resulted in annualised savings of 7m.