Investor wipe-out fear at Marconi

BELEAGUERED telecoms equipment maker Marconi today warned its shareholders that ongoing restructuring talks could wipe out the value of their holdings. The warning came as the group unveiled one of the largest annual losses in British corporate history, with the pre-tax loss in the year to 31 March spiralling to £5.66bn.

The admission is the first by the company that its shareholders face a massive dilution from a possible agreement between the company, its banks and bondholders to restructure its finances with a a massive debt-for-equity swap. 'Debt restructuring discussions ongoing with syndicate banks and certain bondholder representatives could lead to a dilution of value for existing shareholders,' it warned.

Marconi had been expected to produce a new business plan and comment on the progress of talks to restructure its £2.2bn in syndicated loans and £1.8bn in bonds. However, on Wednesday the group said it would not update the market on progress because the talks had entered a new phase. Shares in the group, which was worth about £35bn at the peak of the technology boom, led the FTSE 250 fallers, shedding 16%, or 1.45p, to only 7.65p.

The full-year losses included a £3.8bn write-down against goodwill from its illfated expansion in America, a £150m provision against doubtful debts and £672m against obsolete or slowmoving stock.

Core operating losses of £463m were slightly better than forecast because of savings from a cost-cutting programme which has so far cost tens of thousands of British jobs.

Marconi chief executive Mike Parton said there was little sign of an improvement in demand, after sales slid by about a third to £4.6bn. Sales in its core division were £ 3.1bn, with turnover in Europe falling 34% and by 37% in America.

As well as the restructuring talks, the group's plans to address its debt mountain now include a plan to float its strategic communications business, part of its mobile business, on the Milan bourse. The defence communications unit was one of the brighter performers in the Marconi portfolio, with sales rising 17% to about £300m last year. No timing or price of the float were given.