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[02 OCT 01] MARCONI NEWS
Marconi On The Brink

Marconi moved even closer to stock market annihilation on Monday as its shares plummeted another 25% to a low of 13.5p.

The filing of a statutory report, a Form 20-F, to the Securities and Exchange Commission in the USA, sent the share price into tailspin as the market absorbed the doom-laden content of the report.

The report grimly warns that the terrorist attacks in the USA have made the company's bad financial situation even worse:

"After our September 4 trading update was published, events arising from the tragic terrorist destruction of the WTC and the Pentagon on September 11 have increased the general uncertainty in our markets and there can be no assurance that the action we announced on September 4 will be sufficient to offset the decline in group sales or that we will be able to achieve our forecasts for the six months ended September 30, 2001.

"If our trading position continues to decline, our financial condition and results of operations would be detrimentally affected."

There are now few signs of hope for the former GEC conglomerate.

The company was dropped last week from the FTSE 100 list of the top 100 UK companies valued by market capitalisation. The current share price now values the company at under 370 million - at its peak last year it was worth 30 billion.

Marconi has also recently had to suffer the financial indignity of having its credit rating lowered by S & P and Moody's. This latest company filing to the SEC warns that the credit rating may be reduced even further. This will make attracting any further financing for the firm much more difficult and more expensive.

As at 31 August 2001 Marconi had debts of 4.4 billion. At the end of May the company entered into a 3 billion Euro revolving credit facility with a syndicate of banks.

There is no indication yet that the banks are getting nervous about the borrowing. However this credit agreement, and another 4.5 billion Euro facility from 1998, both have clauses that state that:

"it is an event of default if there has been a material adverse change in the financial condition of the Group taken as a whole since the date of the latest annual accounts delivered to the agent of the such facility which has had or will have a material adverse effect on the ability of Marconi plc to comply with its payment obligations under the facility."

Should there be cause for the banks to invoke this clause they could demand rapid, or even immediate, repayment of loans under these facilities.

This would likely have dire consequences. The report to the SEC warns:

"Our liquidity and financial stability could be detrimentally affected if we were unable to access our syndicated credit facilities."

Marconi is also facing an inquiry by the UK Listing Authority into events leading up to the suspension of trading in Marconi plc's shares on the London Stock Exchange on 4 July 2001 and Marconi plc's trading updates of 4 July and 4 September 2001. If the UKLA determines that Marconi has breached the rules it may issue a public censure.

Confidence in Marconi was further dented last week when leading city analysts Dresdner Kleinwort Wasserstein issued a research note that suggested that Marconi's shares are now in effect worthless, with a value of zero to 10p.

It now looks as if the beleagured company's shares are rapidly heading in that downway direction.

The city broker concluded in its research note that:

"Marconi is unlikely to survive unless a rescue package is provided by a strategic backer or a hostile buyer in the imminent future."

Earlier in the year it was rumoured that Cisco were poised to takeover Marconi.

Marconi's much heralded 200m development at Ansty, just to the north of Coventry, now seems a very dim prospect.

Indeed the future prospects for the 2,000 employees of Marconi Communications in Coventry do not look good.

All eyes will be on a trading update due on Monday 15 October.

The next couple of weeks for the company may be decisive.

SEE ALSO : [04 SEP 01] MORE DOOM FOR MARCONI
SEE ALSO : [03 JUN 01] CISCO POISED FOR MARCONI TAKEOVER
SEE ALSO :
[10 APR 01] MARCONI JOB CUTS HIT COVENTRY

  

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CWN / Business / A-Z / Marconi / 2 Oct 01
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