Marconi warns debt-equity swap will dilute shareholdings

After postponing a restructuring in May, Marconi hoped to agree a recapitalisation with its banks and bondholders in early July.

To cut interest payments and support its credit rating, this will involve a debt-for-equity swap for a significant proportion of its £4.3bn gross indebtedness (£2.2bn in syndicated loans and £1.8bn in bonds). The banks are being asked to accept that they will not get all of their £2.2bn back as new shares.

But lenders would still become majority owners, so the board expects the issue of new shares to lead to a "very substantial dilution in value for existing equity holders". Marconi's market value has already fallen by over 99% from £35bn in 1999 to about £140m.

  • In the year to end-March Marconi reported a 34% drop in sales and a pre-tax loss of £5.7bn, forcing it to cut a quarter of its staff. Core business order backlog was down 19% on a year ago. It expects no pick-up in the year to March 2003.

In the last six months Marconi raised £1.5bn by selling non-core assets. It hopes to raise £300m by October in an IPO of Marconi Mobile's Strategic Communications unit.

  • After falling below USD1, Marconi's American Depositary Receipts have been delisted from Nasdaq and will trade on the OTC Bulletin Board.

Marconi will continue to trade on the London Stock Exchange.

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