Marconi heartened by £595m return to stock market

Marconi made a strong trading debut on the London Stock Exchange in its restructured form yesterday, lifting hopes that the telecoms equipment maker may yet make a recovery from its near collapse.

Shares in the new Marconi Corporation climbed as high as 61.5p in early trade before closing at 59.5p. This gives it a market capitalisation of £595m. The old Marconi was worth £35bn at the height of the telecom boom.

Marconi Corporation was created after creditors agreed to swap £4bn of debt in the old Marconi for cash, loans and shares in the new company. The company had been valued at between £400m and £600m in "grey market" trading ahead of yesterday's listing, with analyst forecasts for the opening price ranging from 40p to 80p.

Mike Parton, the company's chief executive, was able to use the words 'confidence' and 'optimism' in connection with Marconi's future, after a year-long overhaul that handed control of the company to banks and bondholders. He described yesterday as a very 'significant day'.

"The company is very pleased to have completed the restructuring process," a spokesman for the company said yesterday. "It gives confidence to our employees, our customers and our suppliers, who have all been waiting a long time for this to happen. We are working very hard to rebuild the business."

The former British industrial giant's decline began with a profits warning in July 2001, after series of expensive acquisitions designed to turn the company into a 'new economy' telecom stock backfired. As part of the debt-for-equity swap, shareholders have borne the brunt of the company's losses and received just 0.5 per cent of the new equity.

Marconi shares were subject to heavy trading yesterday, as banks and bondholders sought to offload their equity holdings.

"The new Marconi emerges from its restructuring with a relatively low level of balance sheet risk, the opportunity to increase revenues from a retrenched base, and scope to increase margins," analysts at Deutsche Bank said.

Per Lindberg, an analyst at Dresdner Kleinwort Wasserstein and a former bear of the group's old shares, said Marconi was no longer in freefall, and was virtually free of net debt, but still had problems to overcome. He said: "Prior to this restructuring, Marconi had debts that exceeded its assets of £3bn. The company is now more stable, but it still has to instil confidence with its customers. Everything hinges on its ability to produce earnings and cashflow."