£22bn debts force Vivendi sales

VIVENDI Universal, the struggling French media and entertainment giant, today warned of liquidity problems caused by the vast levels of debt built up during an over-ambitious acquisitions bonanza.

The Paris group said it was shouldering e35bn (£22bn) of borrowings, which has forced it into a vast fire sale of assets in a bid to regain control of its balance sheet. At least e10bn needs to be raised from the disposals programme over the next two years, of which the company aims to achieve half over the next nine months.

The group, which last month ousted former chief executive Jean-Marie Messier, also announced a record loss for a French company. It fell e12.3bn into the red in the first half following a wide-ranging asset write-down.

Vivendi shares were initially suspended but fell sharply after they resumed trading to e13.19, down e2.76. They peaked at e139.06 in October 2000.

New chairman and chief executive Jean-Rene Fourtou said: 'In the short term, due to the structure of our debt, Vivendi Universal is facing a liquidity problem despite the value of our assets.' He said that debt was about e10bn too high to regain its investment grade BBB rating. Today, Standard & Poor's downgraded Vivendi debt to a junk rating of BB. Fourtou added that the company had cash and unused credit facilities of e1.6bn and was talking to its banks about new long-term funding.

As well as the disposals, debt would be reduced through cutting back on the international activities of TV station Canal Plus, its internet operations and 'the huge level of corporate overhead'. Vivendi also announced the appointment of Jean Bernard Levy as chief operating officer.

The first-half loss was struck after an e11bn goodwill write-off. The net loss before goodwill and other write-offs was e66m. Group revenues rose 8% to e30.6bn. The biggest operating lossmakers were the internet businesses (e103m) and Canal Plus (e68m). The company is abandoning reporting 'misleading' ebitda figures.

Canal Plus is being written down by e3.8bn, the music division by e3.5bn, the films and entertainment division by e2.6bn and telecoms and internet by e1.1bn.