Marconi rescue may cost shareholders dear

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The Independent Online

The troubled telecoms equipment maker Marconi warned yesterday that shareholders could see the value of their holdings wiped out as part of its rescue refinancing plans, sending its shares down 18 per cent.

Separately, it also announced plans to float its Strategic Communications business, which makes communications systems for the defence sector, on the Milan stock exchange by the end of September.

Mike Parton, Marconi's chief executive, confirmed for the first time that a debt-for-equity swap, which would see banks and bondholders seize control of the firm, was under consideration. Shares in Marconi fell 1.6p to 7.5p.

"We're saying that [a debt -for-equity swap] is clearly one of the options," he said, "Everyone is round the table. The talks are very constructive."

The company, which warned earlier this week that it would not update investors on the progress of those refinancing talks yesterday, as originally scheduled, is hoping to get a deal signed off over the course of the coming month.

Marconi, which issued a fourth quarter trading update last month, reported a pre-tax loss of £5.7bn for the year to 31 March. Sales were £4.6bn, down from £6.9bn, after the company's telecoms customers, including BT, cut back on spending in the face of tougher economic conditions.

The company also reiterated that its core markets were likely to remain tough over the coming year but refused to make predictions beyond that. "The guidance we gave at the end of April still stands. We're not looking at any upside this financial year," Mr Parton said.

Analysts at Altium Capital said: "With its funding position, which is crucial to the company's ability to continue as a going concern, still unclear, we advise investors to steer clear of the shares."

Marconi, which has been slashing costs and shedding staff, ended the year with debt of £2.9bn, down from £4.3bn at the end of September.