Marconi shares slump 50 per cent after failure of bank loans deal

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The Independent Online

Struggling telecoms firm Marconi saw another 50 per cent wiped from its share price today after failing to secure a crucial bank loans deal.



Struggling telecoms firm Marconi saw another 50 per cent wiped from its share price today after failing to secure a crucial bank loans deal.

The former stock market star, which has axed thousands of jobs and seen its share price collapse over the last year, said market conditions had continued to deteriorate.

It added the uncertain conditions were likely to persist beyond the financial year to March 2003 – longer than previously expected and that in the light of the extended downturn it was unable to enter into its proposed new banking facility.

Shares slumped 50 per cent following the announcement to 8.9p, valuing the firm at just £248 million.

Yesterday it was worth more than £500 million. At its peak, in 2000, the group was valued at around £35 billion.

The group had been in talks with its banks for months over terms of a new deal and analysts had expected a statement around this time.

Marconi said it would develop a revised business plan in the next few weeks, while continuing talks with banks and assessing further refinancing options.

One analyst said: "They have basically failed to secure a banking deal and have got to go back to the drawing board."

The news will cause further concerns for staff at the group. Marconi has slashed thousands of jobs after a spate of profit warnings and in January it said it would cut 4,000 more jobs, taking the total to 13,000.

A spokesman said today: "We have no plans for additional job losses but clearly we cannot rule this out depending on what happens in the marketplace."

Analysts said the firm must act fast to secure its future.

Chavan Bhogaita, of Bear Stearns, said: "The failure to secure the (bank) facility at this stage has made the situation more urgent and the company must do something very, very soon to prevent a complete collapse in its share price."

The group has two existing bank facilities, one for 4.5bn euros (£2.8bn) which expires in March 2003 and one for 3bn euros (£1.9bn) which expires in May 2003. It has not accessed the 3bn euros facility.

However it has large debts built up by overpaying for companies at the height of the tech boom.

It has been reducing its debt mountain by selling off businesses, and debts are expected to have been cut from more than £4bn originally to between £2.7bn to £3.2bn by the end of this month.

Marconi's slump echoes rival Energis's fall from grace. The former Footsie firm has also seen a dramatic collapse in its share price, after a shock profits warning earlier this year. Shares in Energis also slumped today, falling 13 per cent.

Roger Lyons, general secretary of Amicus union, said: "We have grave concerns for the future of the company. We are mutually seeking ways to pull the company out of this crisis. We have urgent talks early next week.

"We will be seeking a meeting with the DTI in order to formulate a rescue package should it be required in order to avoid the collapse of the company."



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