Marconi staff to gain share options as debts cut

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The Independent Online

About 300 staff at Marconi will be granted share options over the coming weeks when the company's management team officially hit the first of five key targets under its incentive scheme.

The scheme, put in place at the time of its rescue restructuring to incentivise management to restore the company's financial health, centres on debt reduction and market capitalisation targets.

News yesterday that Marconi had raised £56.7m - which must all go toward cutting debt - by placing its remaining 40 per cent stake in the internet company Easynet, put it on course to hit the first target.

That first target - repaying 30 per cent of the company's £300m of junior notes - is expected to be officially reached once Marconi receives the cash from the share placing.

The move will see Mike Parton, the company's chief executive and the biggest beneficiary of the scheme, awarded options over 3.5 million shares. None of the options can be exercised until next May but they will be awarded free to the managers concerned.

Marconi, which ended up with a 72 per cent stake in Easynet after it folded one of its divisions into the broadband business, cut its stake to about 40 per cent in July and placed its remaining 44.7 million shares with institutions yesterday. The placing, which raised the company nearly £57m before accounting for expenses at a price of 127 pence a share, was said to have been two to three times oversubscribed.

All the cash has gone on reducing debt. Under the terms of its recent refinancing deal, Marconi was only allowed to keep the first £82m of money that it got from selling off businesses and assets - a goal it had already exceeded before yesterday's share placing.

Nine per cent of Marconi's equity was set aside for the incentive scheme which will benefit 60 executives, including the chairman, John Devaney, chief executive, Mr Parton, and chief operating officer, Mike Donovan. A further 3 per cent of the equity has been set aside for a separate option scheme for a further 250 staff.

The first of the three targets relating to the scheme cover the reduction of debt while the last two are contingent on Marconi's market capitalisation hitting £1bn and then £1.5bn after the debt has been paid off.

Separately, Easynet reiterated previous guidance that it expects to make an underlying, or Ebitda, profit by the end of the year. "We expect to turn cash flow positive during 2005 with a cash cushion of at least £40m based on our current investment plans," it said.

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