/raid1/www/Hosts/bankrupt/TCREUR_Public/000526.mbx       T R O U B L E D   C O M P A N Y   R E P O R T E R     

                       E U R O P E

         Friday, May 26, 2000, Vol. 1, No. 15

                       Headlines

G E R M A N Y

PRODACTA:  Heavy Losses Burden Software Integrator Firm


I T A L Y

TECNOST SPA: Lessons from the Sorry Saga of Tech Giant


S L O V A K   R E P U B L I C

VSZ: US Company to Takeover Lossmaking Steel Maker
ZTS TEES: Workforce Feels the Effect of Credit Squeeze


S W I T Z E R L A N D

BANQUE CANTONALE: Swiss Bank Rescued Plan Agreed


U N I T E D   K I N G D O M

ALCHYMIE LTD: Notice of Creditors Meeting
BILLAM: Receivership to Transform into Venture Capital Firm
BRIT INSURANCE: Hit by Second Worst Catastrophe
DW KERSEY: Notice of Creditors Meeting
ELECTRA INVESTMENT: Planned 5 Yr. Self-Liquidation Programme

GREENWICH MEAN TIME: Notice of Creditors Meeting
MILLENIUM DOME: Closure Could Cost up to o200 Million
PJ AMBLER: Notice of Creditors Meeting
REDSTONE TELECOM:  Sharp Increase on Losses
SALIDA EXHIBITION: Notice of Creditors Meeting

SEGAR ELECTRICS: Notice of Creditors Meeting
SOMERFIELD: Woes Worsen, Sales Fell to o5.47 Billion


=============
G E R M A N Y
=============

PRODACTA:  Heavy Losses Burden Software Integrator Firm
-------------------------------------------
Handelsblatt   May 25, 2000

Poor sales and earnings figures sent Prodacta's share price into
a tailspin Wednesday. By the end of the day's trading, it stood
at 6.35 euros, down 21.6% from Tuesday and just shy of its day's
(and lifetime) low of 6.30 euros. The Neuer Markt-listed firm, a
software integrator, reported a loss before write-downs of
DM5.7m. The loss in the previous quarter was only DM1.3m. Sales
were also disappointing, growing only 5% from DM7.4m to DM7.8m.
Prodacta said the weak results were due to low license and
product sales.


=========
I T A L Y
=========

TECNOST SPA: Lessons from the Sorry Saga of Tech Giant
------------------------------------------------------
This is London   May 24, 2000

Credit markets have endured a roller-coaster ride so far this
year, and none more so than the biggest credit company of them
all, Italian technology giant Tecnost.

Confirmation last week of plans to simplify the extraordinarily
convoluted structure of Telecom Italia by merging Olivetti and
its Tecnost subsidiary immediately triggered threats of rating
downgrades from the agencies and sent Tecnost bonds reeling.

In the past three weeks alone, the spread over German government
bonds of Tecnost's 10-year paper has ballooned by about 150 basis
points. Its five-year bond has fared little better.

To put the sell-off into context, that compares with an average
spread widening of 10-15 basis points in the European telecoms
sector as a whole over the same period. Although the bonds are
technically still investment grade, they are now trading at junk-
bond levels.

The bonds have taken a beating because a merger would burden
existing bondholders with an additional e2.5 billion (o1.5
billion) worth of debt from Olivetti. The merged company would
have total debts of about e17.5 billion.

Adding to the woe has been a sharp drop in the share price of
Seat Pagine Gialle, publisher of Italy's Yellow Pages, which is
being targeted by Telecom Italia.

If the shares slide below the tender offer price specified by
Telecom Italia, which looks likely following referral of the
merger plans to the Italian anti-trust commission, it could be
forced to part with e16 billion in share purchases to force the
deal through. Understandably, Tecnost bondholders have been
spooked by the implications for debt servicing.

The whole sorry affair highlights several broader issues for
corporate bond markets. It demonstrates that even holders of the
biggest bond in the world are vulnerable to unforeseen event risk
which can demolish credit quality in one fell swoop.

With an ever-increasing focus on shareholder value, it is not a
risk that is going to go away and shows the value of covenants to
give investors protection. It also shows the dangers of investing
in the paper of a company tangled in the web of a complex group
structure.

There is also the risk that the deterioration in Tecnost's paper
could have severe repercussions for the European telecoms sector.

Being the giant confers it with a certain benchmark status.
Already fragile because of the forthcoming auctions of third-
generation mobile phone licences on the Continent, the concern
must be that Tecnost's plight could tip the sector over the edge.

Bondholders should also pay heed to an issuer's past treatment of
its shareholders. Just a year ago, investors in Telecom Italia
were up in arms about attempts to merge Italia with Tecnost,
fearing that a highly-geared company would have less ability to
pay dividends. As one credit analyst put it: 'A company that
tries to stuff its shareholders is not going to look after its
bondholders very well.'


=============================
S L O V A K   R E P U B L I C
=============================

VSZ: US Company to Takeover Lossmaking Steel Maker
--------------------------------------------------
The Financial Times      May 25, 2000

Shareholders of VSZ, the Slovak steel company, are likely to
approve today a takeover by US Steel.

The expected approval follows efforts by the Slovak government to
buy up enough shares to secure a majority in the face of
criticism from institutional investors and former managers, who
remain significant shareholders.

One investment fund, Templeton Emerging Markets, has accused the
government of an "incestuous" relationship with US Steel. It is
pushing for other offers to be considered, amid reports that
Ispat, the Indian-owned steel group, is still interested.  

Voting at today's shareholders' meeting had been expected to be
close, but state-owned companies have recently bought up the
lossmaking steelworks' shares at above market prices.

Gabriel Eichler, VSZ chief executive, has recommended the deal to
shareholders in a letter, arguing: "Rejection . . . could mean
uncertainty, threat to the stable operations of the company and
the commencement of counter measures on the part of the
creditors." Although the shareholding structure is still unclear,
foreign investors now concede that the deal will get a
preliminary go-ahead. "A lot of people have staked their
political careers on this deal going through," one investor said.
"So they're not going to let it go down."

An outline agreement was reached in March between US Steel, VSZ,
and the government, which then controlled around 30 per cent of
the shares.

Under its terms, which were recently publicised, US Steel - which
already has a joint venture with VSZ - will take over the rest of
the steelmaking assets for Dollars 60m and will pay the company
another Dollars 25m-Dollars 75m before the end of July 2003
depending upon earnings.

It will also assume Dollars 325m in bank debt from the company -
which has been in default since November 1998 - and Dollars 15m
in tax obligations, and will invest Dollars 700m over the next 10
years in what is already the highest quality steel producer in
central Europe.

VSZ shareholders will keep the non-core assets and will have to
pay off the remaining Dollars 100m in bank debt out of the US
Steel payments and further sell offs.  


ZTS TEES: Workforce Feels the Effect of Credit Squeeze
-------------------------------------------
The Financial Times     May 25, 2000

ZTS was once the biggest industrial group in Czechoslovakia,
employing 85,000 workers, a quarter of them involved in defence,
at a time when the country was one of the world's top arms
producers.

In Martin, an historic town of 60,000 surrounded by mountains
deep in central Slovakia, the communists built ZTS TEES, the
biggest tank producer in the Warsaw Pact, which employed 16,000
in 1989.

After the break-up of the Warsaw Pact, and then of
Czechoslovakia, a shadow of the once proud ZTS TEES still
survives. It now employs only 2,300 and operates mainly under the
name of its chief subsidiary, Martinske Strojarne, after the
state-owned mother company declared itself bankrupt in 1998 with
debts of Sk7bn.  

Martinske Strojarne operates at 10 per cent capacity, and the few
remaining workers take their time as they turn out outdated but
sturdy diesel engines and tractors for former Soviet Union
countries in the huge production halls.

The company limps on: last year, it registered a loss of Sk500m
on revenues of Sk1.3bn. Jaroslav Balogh, managing director,
admits it is nearing the end of the road unless it secures a
partner who can provide working capital and invest in new
production lines.

"We have invested almost nothing for two years," says Mr Balogh.

The fate of ZTS TEES is an extreme example of the problems Slovak
industry has experienced since 1989. The country was left the
most difficult legacy in former communist central Europe, with
huge heavy industrial companies, often situated in illogical
places, producing low value-added products for markets which no
longer existed.

The restructuring of ZTS TEES has been delayed by state ownership
but privatised enterprises have fared little better because of
the former government's policy of selling them cheaply to
favoured domestic entrepreneurs.

Even if they were well managed, these companies struggled with
lack of capital and became reliant on expensive bank credits. But
often they were "tunnelled" as the owners stripped assets,
leaving the state-owned banks to pick up the bill.

These problems came to a head when the current government took
office. The devaluation in October 1998 hiked unhedged foreign
borrowing costs, causing liquidity crises at big indebted
companies such as VSZ, the steel group, and Slovnaft, the oil
refiner.

All companies were hit by the economic slowdown and a credit
squeeze as the new managers of the state banks halted the flow of
easy credits.

The result has been a surge in unemployment - currently 18.8 per
cent - as companies released surplus workers, and a growing
mountain of bad debts to banks, the state and other companies.

The OECD calls this interlocking debt the "gordian knot" of the
economy and Brigita Schmognerova, finance minister, says the
government faces a "massive restructuring project" to try to
resolve it. "The question of financial restructuring of companies
is very much connected with the question of the restructuring of
the banks' loan portfolios," she adds.

The government's strategy is first to make the banks solvent
enough to deal with their bad debts by transferring them to
special state vehicles, and then - through a bankruptcy law
taking effect this July - to improve creditor rights and speed up
the legal process of claiming the debts.

This should gradually improve the banks' health, end the credit
squeeze and remove some of the dying dinosaurs that weigh down
the economy. But to revive the viable companies, and give work to
the unemployed, the government is counting on foreign investors.

To attract them, parliament passed an incentive package last
year, which the government has recently agreed to improve and a
wider package of reforms is planned to meet investor complaints
about bureaucracy and the business environment.

But even more significant are signs that Slovak entrepreneurs are
realising that they have neither the capital nor the expertise to
develop their companies and that they need foreign partners.

Slovnaft, which had become heavily indebted after upgrading its
refinery, agreed last month to be taken over by MOL, the
Hungarian oil and gas company.

The Dollars 262m deal is not just Slovakia's biggest foreign
investment but also the largest cross-border merger in central
Europe.

VSZ - under new management imposed by creditors - agreed in March
to be taken over by US Steel, pending approval by a shareholders'
meeting today.

The big US steel company wants to turn VSZ, which is back up to
full capacity after its debt default in November 1998, into its
European launchpad through a Dollars 700m investment programme.
Other companies such as SCP, the paper company, and Matador, the
tyre manufacturer, are also looking for investors.

The government has removed one obstacle it created by calling a
halt to the renationalisation of some of the previous
government's dubious sell-offs, but the untransparency of many
companies remains a deterrent for foreign investors.

"It is difficult to discuss financing with a company that does
not want to disclose who the shareholders are," says one foreign
banker.

Yet, even ZTS TEES now dreams of privatisation and hopes to agree
soon to a joint venture with Lombardini, the Italian company
whose engines it produces under licence.

"We need to find strategic partners," says Mr Balogh. "Unless we
join the globalisation process, this production is over."


=====================
S W I T Z E R L A N D
=====================

BANQUE CANTONALE: Swiss Bank Rescued Plan Agreed
------------------------------------------------
The Financial Times     May 25, 2000

Shareholders in Geneva's cantonal bank this week approved a
rescue package by the cantonal government, which will
recapitalise the bank and transfer to a state-guaranteed
foundation some SFr5bn (Pounds 1.9bn) in troubled property-backed
loans.

The Banque Cantonale de Geneve, in which the canton and city of
Geneva have a majority stake, made a loss of SFr427m last year
after writing down bad debt and revealed further unsecured
problem loans of SFr1.4bn. These loans will be covered by
provisions and kept on the bank's books but most of the bank's
property portfolio will be handed over to the foundation for
gradual liquidation. Frances Williams, Geneva


===========================
U N I T E D   K I N G D O M
===========================

ALCHYMIE LTD:  Notice of Creditors Meeting
-------------------------------------------
Insolvency UK


Company Name :   Alchymie Ltd
IA 1986 Section :   98  Creditors
Meeting Time :   11.30 am
Meeting date :   31/05/00
Meeting address :   Clareville House  26-27 Oxendon Street
Meeting City Code :   London   SW1Y 4EP
Authorised by :   G Egan   Director  
Last day for proxy:   30/05/00
Proxy address :   Clareville House  26-27 Oxendon Street  
London  SW1Y 4EP
Liquidators       : Rothman Pantall
Address  : Clareville House  26-27 Oxendon Street
                    London  SW1Y 4EP


BILLAM: Receivership to Transform into Venture Capital Firm
-----------------------------------------------------------
The Financial Times       May 25, 2000

Billam, the Sheffield engineering company that went into
administrative receivership last year, looks set to transform
itself into a venture capital backer for high technology
businesses and keep its Aim listing. Since the shares were
suspended at 37p in October, administrative receivers from PwC
have realised the majority of assets of the group and distributed
the proceeds, but there is still some freehold property.  The
company will announce today plans to build a pan-European venture
capital company looking at start-up and early stage businesses in
IT and other technology. A creditors' voluntary arrangement and
an extraordinary meeting to approve the plan will be held on
Tuesday. Angus Forrest, a venture capitalist, and Juliet Hoskins,
managing editor of Eurowind, the IT magazine, will be proposed as
directors. The company, advised by Peel Hunt, is expected to
issue new shares to raise more than Pounds 1m. The shares will be
relisted on June 1. Existing shareholders are expected to be
diluted.


BRIT INSURANCE: Hit by Second Worst Catastrophe
-----------------------------------------------
Citywire   May 24, 2000

BRIT Insurance Holdings announced losses at almost treble last
year's levels, as it was hit by `the second worst catastrophe
year in history'.

Pre-tax losses for the nine months to 31 December were o27.4
million, compared with only o9.48 million for the full year ended
31 March. However, the inequality of the two time periods makes
comparisons less meaningful. The final dividend will be 2p.

After emerging from the soft part of the insurance cycle,
chairman Jo Welman is `increasingly confident that the insurance
cycle has turned'. He blamed a `disastrous year' on a cyclical
downturn in insurance rates and an increased frequency and
severity of insurance claims.


DW KERSEY: Notice of Creditors Meeting
--------------------------------------
Insolvency UK

Company Name : D W Kersey Ltd
IA 1986 Section : 98 Creditors
Meeting Time : 12.00 pm
Meeting date : 31/05/00
Meeting address : 47 London Street
Meeting City Code : Reading RG1 4PS
Authorised by : D Kersey Director 05/05/00
Last day for proxy: 30/05/00
Proxy address : 47 London Street Reading RG1 4PS
Liquidators  : Bridgers
Address  : 47 London Street Reading RG1 4PS


ELECTRA INVESTMENT: Planned 5 Yr. Self-Liquidation Programme
------------------------------------------------------------
The Times   May 25, 2000

ELECTRA Investment Trust, the venture capital fund, is to hold
its second big share buyback next month. It will spend up to o250
million in this latest phase of its planned five-year self-
liquidation programme.

But Brian Williamson, the chairman, left the door open yesterday
to the possibility that Electra might stop short of complete
closure. He said he was aware that some shareholders wanted to
see a rollover fund created so they could stay invested in
Electra-managed private equity assets in the long term.

But Mr Williamson also emphasised that the board's efforts
remained focused on maximising the value in its investment
portfolio and returning that value to shareholders.

The o250 million buyback is taking the form of a tender offer in
which investors are invited to apply to have their shares bought
back. Terms will be finalised next month but if market conditions
remain unchanged investors will have an automatic right to cash
in about 23 per cent of their holdings. If some investors choose
not to tender, those that do will be able to liquidate larger
amounts.

Electra said that if the details had been set this week the
tender off price would have been o10.57. The first buyback, held
in April 1999, was at o7.86. At the start of 1999, before Electra
found itself on the receiving end of a hostile but ultimately
unsuccessful takeover bid from 3i, the shares sat at 547®p. It
was the hostile bid that sparked the start of the liquidation
programme.

News of the tender offer came as Electra posted first-half
results. Its net asset value rose to o11.65 per share by March
31, up 22 per cent from September 30. However, the shake-out in
valuations of high-tech companies has led to a 7.6 per cent drop
in the net asset value since March 31.

Electra borrowed o550 million to fund the first tender offer and
has now repaid all but o30 million of that debt.


GREENWICH MEAN TIME: Notice of Creditors Meeting
------------------------------------------------
Insolvency  UK

Company Name : Greenwich Mean Time Ltd
IA 1986 Section : 98 Creditors
Meeting Time : 12.30 pm
Meeting date : 31/05/00
Meeting address : Hilton Hotel Eastern Road
Meeting City Code : Portsmouth
Authorised by : K W Felder Administrative Receiver
Last day for proxy: 30/05/00
Liquidators  : Gallagher & Co
Proxy address : Titchfield House 69-75 Tabernacle Street
                    London EC2A 4RR

Address  : Titchfield House 69-75 Tabernacle Street
London EC2A 4RR


MILLENIUM DOME: Closure Could Cost up to o200 Million
-----------------------------------------------------
Financial Times   May 24, 2000

Early closure of the Millennium Dome could cost up to o200m, it
emerged on Wednesday, raising the prospect of further cash
handouts to keep it going as a cheaper alternative to shutting
it.

Ministers said they were being "held to ransom" as a result.

The Millennium Commission, which distributes lottery money and is
chaired by Chris Smith, culture secretary, may even give the Dome
a further subsidy following a review of the attraction's
financial position in July. The commission decided this week to
give the Dome another o29m after being told that shutting it
early would cost between o100m and o200m in redundancy payments
and payouts to sponsors for ending contracts prematurely.

One minister said on Wednesday night: "They [the Dome company]
are holding us to ransom. They know we can't close them down and
the more cynical among us think they will come back for more
money."

The latest bail-out led to protests from politicians hostile to
keeping the troubled attraction afloat. Sixty-four MPs signed a
Commons motion Wednesday expressing "deep concern and alarm" at
the extra funds. The government attempted to distance ministers
from the decision to force Bob Ayling's resignation as chairman
of the New Millennium Experience Company, which runs the Dome.

Mr Ayling was asked on Monday to leave as a condition for the
o29m grant.

One senior government member said Mr Smith and Mo Mowlam, cabinet
office minister - who attended the commission meeting on Monday -
were taken by surprise by requests for Mr Ayling's head.

David Quarmby, one of the NMEC's directors, was Wednesday
confirmed as the new chairman, after Michael Grade, one of his
NMEC colleagues, turned down the job. Mr Quarmby said: "The
important thing now is to look to the future and to build on what
has already been achieved."

The NMEC had originally asked the commission for o38.6m. An NMEC
insider on Wednesday night admitted that the board intended to
lobby the commission for the extra o10m it was denied. "David
[the new chairman] will go back in and bat at the commission.
Somehow we're going to need that extra bit."


PJ AMBLER: Notice of Creditors Meeting
--------------------------------------
Insolvency UK

Company Name : P J Ambler Construction Ltd
IA 1986 Section : 98 Creditors
Meeting Time : 11.30 am
Meeting date : 31/05/00
Meeting address : St George Hotel 7-8 New Road Avenue
Meeting City Code : Chatham ME4 6BB
Authorised by : P J Ambler Director
Last day for proxy: 05/05/00
Liquidators  : Nola Barber
Firm Name  : Lines Henry
Address  : 27 The Downs Altrincham WA14 2QD


REDSTONE TELECOM:  Sharp Increase on Losses
-------------------------------------------
Citywire   May 24, 2000

Redstone Telecom unveiled a sharp increase in pre-tax losses this
morning. Redstone saw losses of o10.4 million in the year to 31
March from a loss of o3.2 million the previous year. Losses per
share were 13.2p from a loss of 4.7p and, not surprisingly, there
is no dividend again this year. The shares dropped 22.5p to 220p
on the back of this morning's results, down severely from a high
of 949.5p on 25 February. They stood at 166.25p last October.


SALIDA EXHIBITION: Notice of Creditors Meeting
----------------------------------------------
Insolvency UK

Company Name   : Salida Exhibition Services Ltd
IA 1986 Section : 98 Creditors
Meeting Time : 11.00 am
Meeting date : 31/05/00
Meeting address : 1-2 Little King Street
Meeting City Code : Bristol BS1 4HW
Authorised by : J M Cooper Director 28/04/00
Last day for proxy: 30/05/00
Proxy address : 1-2 Little King Street Bristol BS1 4HW
Liquidators  : Peter A Lawrence
Firm Name  : Moore Stephens Booth White
Address  : 1-2 Little King Street Bristol BS1 4HW


SEGAR ELECTRICS: Notice of Creditors Meeting
--------------------------------------------
Insolvency UK

Company Name : Segar Electrics Ltd
IA 1986 Section : 98 Creditors
Meeting Time : 12.00 pm
Meeting date : 31/05/00
Meeting address : 25 Harley Street
Meeting City Code : London W1N 2BR
Authorised by : S Braddick Director
Last day for proxy: 30/05/00
Proxy address : 25 Harley Street London W1N 2BR
Firm Name  : Gerald Edelman
Address  : 25 Harley Street London W1N 2BR


SOMERFIELD: Woes Worsen, Sales Fell to o5.47 Billion
-------------------------------------------
This is London    May 24, 2000

Somerfield landed another unpleasant surprise on its shareholders
today when it warned a slump in sales during its latest quarter
would push annual operating profits to the low end of forecasts,
writes James Mclean.

The beleaguered group said comparable sales in 13 weeks to 29
April fell 9.8%. Its 802 Kwik Save stores led the decline with
sales down 16% over the same period. The 558-store flagship
Somerfield chain recorded a 5.1% decline, and the depressed
figures mean the group's sales fell 7.3% to o5.47 billion over
its 53-week year. Somerfield said the 'very poor result' meant
operating profits for the year would be at the lower end of
forecasts which range from o74 to o103 million. It said
Somerfield stores were hit by preparations to sell 46 outlets and
uncertainty over the future of the business.

But performance at Kwik Save, which the group has decided not to
sell, had stabilised, with sales holding at about o37 million a
week.

The shares fell 2p to 52p, just 2 1/4p off record lows.



S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Trenton, NJ,
and Beard Group, Inc., Washington, DC.  Peter A. Chapman and
Sharon Cuarto, Editors.

Copyright 2000.  All rights reserved.  ISSN 1529-2754.

This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing  and photocopying) is strictly prohibited without
prior written permission of the publishers.  

Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.

The TCR Europe subscription rate is $575 per half-year, delivered
via e-mail.  Additional e-mail subscriptions for members of the
same firm for the term of the initial subscription or balance
thereof are $25 each.  For subscription information, contact
Christopher Beard at 301/951-6400.


             * * * End of Transmission * * *