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        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

            Thursday, August 09, 2001, Vol. 2, No. 155


                            Headlines

* B E L G I U M *

HALO INDUSTRIES: Loss Widens by 2,000%
LERNOUT & HAUSPIE: U.S. Court Favors Bowne & Co Bid
SABENA SA: Board Approves Layoffs and Flight Termination
SABENA SA: Faces Unions' Criticisms on Layoff Reports

* G E R M A N Y *

BROKAT AG: Faces Insolvency Threat

* I R E L A N D *

EIRCOM PLC: Deutsche Bank Owns 8.4% of Eircom

* I T A L Y *

ALITALIA-LINEE: Regional Carrier Cancels Flights Over Crew Strike
BANCA POPOLARE: Fitch Lowers Ratings to C

* N E T H E R L A N D S *

VERSATEL TELECOM: Tumbles After Lowering Revenue Forecasts

* P O L A N D *

NETIA HOLDINGS: Fitch Places Rating on Watch Negative

* U N I T E D   K I N G D O M *

BRITISH BIOTECH: Campion to Step Down From Board
BRITISH BIOTECH: Sells Drug Research Facility for 8.7MM Pounds
BRITISH BIOTECH: Sells Drug Research Facility for 8.7MM Pounds
EQUITABLE LIFE: FSA Seeks Advice on Annuities
EQUITABLE LIFE: Treves Admits Outflow of Policyholders
INDEPENDENT INSURANCE: Faces Threat Over Reinsurance Claim
MARCONI PLC: May Not Meet Debt Target
TELECITY: Will Need Cash if Redbus Merger Fails
VIATEL INC: Euro Network Fails to Receive Viable Bids


=============
B E L G I U M
=============


HALO INDUSTRIES: Loss Widens by 2,000%
--------------------------------------

Nine days after filing for Chapter 11 protection, promotional
products company Halo Industries reported a net loss from
continuing operations of $332 million for the second quarter,
compared with $13.3 million in the same period last year, the
Tuesday edition of Ad Age's Daily World Wire said.

Net loss per share for continuing operations was $4.76, from a
loss of 23 cents per share last year.

The bankruptcy filing included the company's U.S. core
promotional products business and its Lee Wayne subsidiary, but
excluded its marketing services agency Upshot in Chicago, as well
as its Premier Promotions unit in Canada and Halo Sports division
in Europe.

Halo reported second-quarter net sales of $119.3 million, a 20.5%
decrease from $150 million in the second quarter of 2000. Sales
from its marketing services division decreased almost 10% for the
quarter to $21 million.

The decrease in sales was attributed to the softness in the
economy.


LERNOUT & HAUSPIE: U.S. Court Favors Bowne & Co Bid
---------------------------------------------------

The U.S. Bankruptcy Court in Delaware has approved Bowne & Co.
Inc.'s offer to acquire Mendez S.A. and related assets from
Lernout & Hauspie Speech Products N.V. for about $44.5 million,
Dow Jones Newswires reported on Tuesday.

The bankruptcy court's decision confirms an August 2 court-
mandated auction in which Bowne outbid Lionbridge Technologies,
which offered $27 million for Mendez.

The proposed transaction now requires the approval of Commercial
Court in Ieper, Belgium.

Lernout & Hauspie put Mendez up for sale last year after seeking
bankruptcy protection following an accounting scandal.


SABENA SA: Board Approves Layoffs and Flight Termination
--------------------------------------------------------

The board of Belgium's flag carrier, Sabena, said on Tuesday it
has approved about 2,000 layoffs and an end to flights to
Washington, Tokyo, as well as six European destinations, as part
of a restructuring plan.

The exact number of layoffs will be negotiated with the Works
Council in today's meeting.

The Associated Press reported on Tuesday that reductions in
Sabena's 12,000-strong work force would be achieved through
voluntary departures, early retirements and dismissals, to be
carried out over four years.

The plan, prepared by Sabena chief executive Christoph Mueller,
also calls for selling Sabena's two hotels in Brussels, followed
by Sabena's catering and cargo services.

Sabena has received a lifeline last month when co-owners Swissair
Group and the Belgian government agreed to invest 430 million
euros into the Belgian airline over the next two years.


SABENA SA: Faces Unions' Criticisms on Layoff Reports
-----------------------------------------------------

A union representing ground personnel at Sabena SA has criticized
the airline for allowing media leaks of a restructuring plan
involving 2,000 layoffs, the Tuesday edition of Dow Jones
Newswires said.

Jan Coolbrandt of the Christian Democrat union, however, said
there is no legal case against Sabena for breaking Belgian law on
such matters since the information came from someone on the
board, not management.

Under Belgian law, companies must present employees with a layoff
plan before taking any measures to dismiss workers.

Employees are very anxious and want to know what's in the plan.
Unions also want to know how a 430-million-euro rescue plan will
be integrated into Sabena's 1-billion-euro business plan to
revive the troubled airline.


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


BROKAT AG: Faces Insolvency Threat
----------------------------------

Software company Brokat AG is in a desperate search for investors
in its aim to gain fresh liquidity, the Monday edition of
Handelsblatt said.

The company could be forced to file for insolvency as early as
autumn if it fails to find new investors.

Experts believe Brokat is increasingly becoming unlikely that the
company can survive as an independent single company since some
of its products are seen to have very little chance of further
success on the market.

One aspect of Brokat that might make it attractive to a potential
buyer is that the group has accumulated loss carryovers worth
almost 1.1 billion euros. These could be used immediately to save
a new owner several hundred million euros in taxes.


=============
I R E L A N D
=============


EIRCOM PLC: Deutsche Bank Owns 8.4% of Eircom
---------------------------------------------

Deutsche Bank AG and companies associated with it hold 8.4% of
the outstanding shares in fixed-line telecommunications company
Eircom PLC, the Tuesday edition of Dow Jones Newswires said.

Deutsche Bank in London and Frankfurt, Morgan Grenfell & Co.
Ltd., Deutsche Asset Managements Investmentgesellschaft and
Morgan Nominees, along with Taunus Corp., now hold 185.2 million
Eircom shares. Eircom has 2.2 billion shares in issue.

Eircom is in the midst of a takeover battle between rival
consortia e-Island and Valentia.

Deutsche Bank AG London is advising Valentia on the Eircom
takeover. E-Island is backed by J.P. Morgan Chase & Co. and
Spectrum Equity Investors. Its advisers are IBI Corporate
Finance.


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


ALITALIA-LINEE: Regional Carrier Cancels Flights Over Crew Strike
-----------------------------------------------------------------

Alitalia Express, Alitalia's regional airline unit, canceled 47
flights and rerouted eight more on Tuesday because of strikes,
Dow Jones Newswires reported.

The airline canceled 27 domestic and 20 international flights at
airports across Italy during a pilot and flight attendant walk-
out.

The workers are protesting over the company's failure to
implement their contract.

The people most affected by the strike were vacationing Italians.


BANCA POPOLARE: Fitch Lowers Ratings to C
-----------------------------------------

International rating agency Fitch on Tuesday removed the
RatingWatch Negative in place for the Long-term and Individual
ratings of Banca Popolare dell'Emilia Romagna, and lowered the
ratings by one notch to 'BBB+' and 'C' respectively.

The rating action follows Banca Popolare's March acquisition of
Banco di Sardegna (BdS). The new ratings for Banco Popolare
reflect its strong local franchises, reasonable earnings, and
medium size.

The rating also reflects pressure on the group's capital adequacy
ratios, weak asset quality and structural problems in the newly
acquired BdS.


=====================
N E T H E R L A N D S
=====================


VERSATEL TELECOM: Tumbles After Lowering Revenue Forecasts
----------------------------------------------------------

Versatel's shares have slipped 7.4% on Tuesday as the telecom
carrier delivered first-half results but lowered its revenue
estimates for the full year, the Financial Times reported.

The company now expects growth of 54 to 60% in sales from the 182
million euros achieved in 2000, down from its previous projection
of a 66 to 71% rise.

According to chief executive Raj Raithatha, it was becoming
harder to convince customers they needed web-hosting services,
packaged with voice traffic. Bundling was bringing it success in
German regional markets, but in the Netherlands, it was being
hampered by a reluctance of KPN, the incumbent telecom group, to
support newer forms of the digital subscriber line technology.

The company said it was funded with 1 billion euros in cash until
2004. Just as it prepares to break even on top-line ebitda
earnings early next year, it is likely to enter negative equity.


===========
P O L A N D
===========


NETIA HOLDINGS: Fitch Places Rating on Watch Negative
-----------------------------------------------------

International rating agency Fitch on Monday has placed its 'B+'
rating for fixed line telecommunications provider Netia Holdings
(Netia) on Rating Watch Negative.

This rating action reflects heightening concern about the
capacity of the company to raise additional equity or debt to
fund the execution of its business plan until it turns free cash
flow positive.

At the end of March 2001, the business reported a negative free
cash flow for the first quarter of 253 million Polish zloty and
cash balances totaling 845 million Polish zloty. Management has
reported it needs a further 1.5 billion Polish zloty fund
completion of its business plan until it expects to turn free
cash flow positive, sometime in 2003.

Fitch awaits an announcement from telecommunications company
Telia AB as to its plans with regard to its 48% investment in
Netia and the future funding of the business. The agency plans to
meet with Netia's management before the end of September 2001 and
hopes to resolve its Rating Watch designation soon thereafter.


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


BRITISH BIOTECH: Campion to Step Down From Board
------------------------------------------------

British Biotech on Tuesday said that Research and Development
director and chief medical officer Dr. Giles Campion would step
down from the board and leave the company at the end of
September.

Research and Development functions will report directly to chief
executive officer Dr. Elliot Goldstein.


BRITISH BIOTECH: Sells Drug Research Facility for 8.7MM Pounds
--------------------------------------------------------------

British Biotech on Tuesday has made a decisive break from its
troubled past by selling its pre-clinical research operations to
US-based biopharmaceuticals company OSI Pharmaceuticals for 8.7
million pounds in cash.

Under the agreement, is expected to become effective on September
28, 59 British Biotech employees will transfer to OSI, along with
the leases on British Biotech's Windrush Court and Isis House
properties, and some computer equipment and office furniture,
with a total net book value of 5.0 million pounds.

The transaction will also result in a reduction of British
Biotech's annual cash burn by approximately 6.0 million pounds
annually, potentially extending the cash life of the company to
four years at current rates of expenditure.


CLAIMS DIRECT: To Sell Founders' Stake
--------------------------------------

Personal injury claims company Claims Direct said it might have
attracted a buyer for the 43% stake of its two founders, the
Tuesday edition of the Independent News reported.

The company's independent directors are looking to expel former
chairman Tony Sullman and former chief executive Colin Poole from
their positions as non-executives of the company by seeking a
buyer for their stake.

The company said it could only deal with its problems of being
loss-making if Sullman and Poole were no longer involved in the
business.

The two have said they are prepared to discuss offers for their
shares at 10p.


EQUITABLE LIFE: FSA Seeks Advice on Annuities
---------------------------------------------

City watchdog, the Financial Services Authority, is seeking
independent legal advice on whether Equitable Life members who
did not have guaranteed annuity policies were victims of
misselling, the Financial Times reported on Tuesday.

The FSA announced in February it was examining whether Equitable
policyholders who bought policies last year could claim they had
been missold.

FSA's move could affect other pension groups. If the regulator
decides these policyholders were misled and suffered a loss, they
could be eligible for compensation.

"I think it will be a very, very important piece of work for the
industry as a whole, which is one reason why the FSA is taking
its own independent advice upon it," Equitable chairman Vanni
Treves said.


EQUITABLE LIFE: Treves Admits Outflow of Policyholders
------------------------------------------------------

Equitable Life chairman Vanni Treves admitted that there had been
a substantial outflow of policyholders from the with-profits fund
since the society announced last month it was cutting policy
values by up to 16%.

According to the Wednesday edition of Independent News, Treves
also warned that the Government might need to bail Equitable out
if members rejected a compromise deal to cap its liabilities in
respect of guaranteed annuity rate (GAR) policies.

Treves added that in the first six months of the year, 650
million pounds of the total 2 billion pounds was attributable to
policyholders cashing in policies early. The number of people
leaving had increased but the proportion withdrawing policies
early remained the same.

Reaching a compromise agreement with policyholders over capping
Equitable's GAR liabilities was necessary in order to secure the
company's financial stability.

Equitable is also waiting for a report from its lawyers Herbert
Smith over the possibility of suing former directors, advisers
and regulators.


INDEPENDENT INSURANCE: Faces Threat Over Reinsurance Claim
----------------------------------------------------------

General insurer Independent Insurance, according to the
Independent News yesterday, is facing a widening black hole in
its finances due to fears that it will not be able to claim on
its multi-million pound reinsurance agreements.

Companies, which agreed to provide reinsurance of nearly 330
million pounds to Independent Insurance, could now have a
legitimate case that those contracts are invalid due to
revelations that the insurer's true financial situation was not
as strong as it appeared to be when the contracts were taken out
by the company.

There is now a serious danger that every single piece of
reinsurance Independent has bought is under threat.

The Serious Fraud Office is now investigating former chief
executive Michael Bright for fraud and negligence.


MARCONI PLC: May Not Meet Debt Target
-------------------------------------

Telecommunications equipment maker Marconi Plc, according to
Bloomberg's Tuesday report, is unlikely to meet debt, sales and
operating profit targets because the market for phone equipment
is not expected to recover before the middle of 2002.

Marconi said that a 15% decline in revenue would halve operating
profit in the year ending March 2002. It plans to cut debt to 2.5
billion pounds by the end of 2001 as it reduces inventory.

Analyst Alec Schutze of Merrill Lynch & Co. estimated that
Marconi would end the year with net debt of 3.5 billion pounds,
its fiscal 2002 sales to fall 17% and operating profit to slump
70%.

Credit analyst Stephan Michel of Barclays Capital said the debt
reduction would be a challenge because the market for phone
equipment is not expected to recover before the middle of 2002.

Last month, Marconi agreed to sell its medical systems unit to
Royal Philips Electronics NV for $1.1 billion and a further 300
million pounds of assets, including service station equipment.
The sale would ensure it can pay its interest, reorganization
charges of 550 million pounds and capital expenditure.


TELECITY: Will Need Cash if Redbus Merger Fails
-----------------------------------------------

Internet hotel Telecity has cautioned it would need to carry out
a fundraising exercise if a merger deal with rival Redbus
Interhouse did not materialize, according to the Tuesday edition
of Independent News.

The company, which has suffered two profit warnings since its
June 2000 stock market flotation, said it had received
preliminary indications of support from certain key shareholders,
but noted that no assurances can be given as to the level of
funding it can receive.

While analysts saw the logic of a tie-up, they were divided on
whether Redbus would be prompted to pull out of the discussions
after TeleCity's funding problems had come to light.

Analyst Gareth Evans of Investec Henderson Crosthwaite said that
the risk would be that if Redbus leaves it too long, somebody
else would step in and buy TeleCity.


VIATEL INC: Euro Network Fails to Receive Viable Bids
-----------------------------------------------------

Telecommunications-network builder Viatel Inc., which sought
Chapter 11 bankruptcy protection in May, ended its auction due to
inadequate bids for its European network, the Tuesday edition of
Dow Jones Newswires said.

Viatel had set a July 31 bidding deadline for its assets, which
include a network of mostly unused fiber-optic cables connecting
cities in Western Europe, and a fiber-optic cable stretching from
London to New York.

More than two-dozen potential buyers signed agreements, but no
one submitted a viable bid for its trans-Atlantic cable and some
switching equipment housed in New Jersey.

Viatel's management is now in discussion with its creditors about
alternatives to outright sale.

Viatel spokesman Glenn Davidson declined to discuss the value
of the bids, or the names of the bidders.

Before running into financial trouble, Viatel succeeded in laying
a fiber-optic network linking cities in the U.K., France,
Germany, Switzerland, Belgium and the Netherlands.

                               ***********

     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
USA, and Beard Group, Inc., Washington, DC USA. Kimberly MacAdam,
Salve M. Mordeno and Ma. Cristina D. Pernites, Editors.

Copyright 2001.  All rights reserved.  ISSN 1529-2754.

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