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/raid1/www/Hosts/bankrupt/TCREUR_Public/020314.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 Thursday, March 14, 2002, Vol. 3, No. 52 Headlines * C Z E C H R E P U B L I C * KTP QUANTUM: Clients Ask Court to Declare Brokerage Bankrupt * G E R M A N Y * KINOWELT MEDIEN: Sells Shares in e.multi Digitale Dienste AG KIRCHGRUPPE: Meeting with Creditor Banks Fails to Draw up Plan KIRCHGRUPPE: WAZ Admits Interest in Springer, But Not Kirch Media PHILIPP HOLZMANN: Bilfinger Berger Revives Bid With a Twist * I R E L A N D * ELAN CORPORATION: Pomerantz Firm Announces Securities Class Suit ELAN CORPORATION: Stull, Stull & Brody Launches U.S. Class Action ELAN CORPORATION: Faces 30 U.S. Lawsuits in Share Collapse * N E T H E R L A N D S * KPN NV: Awards EUR 150MM Contract to Nokia and Ericsson AB * P O L A N D * NETIA HOLDINGS: Issues 317MM New Shares to Fund Debt-Equity Swap * S P A I N * JAZZTEL PLC: Banco Sabadell Cuts Ties, Sells Stakes at a Loss * S W E D E N * ICON MEDIALAB: Releases December 2001 Year-End Report FRAMFAB AB: Appoints New Chief Financial Officer * S W I T Z E R L A N D * ABB LTD: Fund Managers Shun IOUs, Narrowing Funding Options SWISSAIR GROUP: To Forge Alliance to Stay on Top of Market * U N I T E D K I N G D O M * ARTHUR ANDERSEN: Oversight Board Suggests Audit-Consulting Split ARTHUR ANDERSEN: Future Hinges on Cleaner-Than-Clean Image BALTIMORE TECHNOLOGIES: Shares Surge as Investors Like New Deals BRITISH TELECOMS: Issues Invitation for Partial Take in BT Fleet ENERGIS PLC: Bondholders to Present Rescue Plan Later This Week INDEPENDENT INSURANCE: Creditors Won't Let FSA Escape Liability IMI PLC: To Sell GBP300 Million Pipe Unit in Management Buyout =========================== C Z E C H R E P U B L I C ============================ KTP QUANTUM: Clients Ask Court to Declare Brokerage Bankrupt ------------------------------------------------------------ Some 300 clients spearheaded by Orca Group petitioned a court late last week to declare KTP Quantum bankrupt, the Prague Business Journal reported recently. According to the paper, the petition "could be the final nail in the coffin" for the embattled brokerage firm whose clients' accounts worth CZK2 billion are now frozen. The paper says the petition, if upheld, may yet represent the biggest bankruptcy ever involving a brokerage firm in the country. But observers say with or without the petition clients will not likely get back their money. Accordingly, the firm just doesn't have any to return. "The problem is the company no longer really owns many of the shares that it has invested client funds in," said an unnamed analyst interviewed by the paper. "The biggest question now is: Where is the money?" the analyst said. The report says the company is currently in a tug-of-war with Slovak-based investment firm Penta Investments and Ceskoslovenska Obchodni Banka (CSOB) for control over some key assets. Accordingly, Penta Investments has transferred shares in the spa company Lazne Jachymov, owned by KTP sister company Medeia Bohemia (MB), to a third party, Slovak company Invest Kapa, citing breaches of a CZK80 million loan contract. Penta contends it had the right to make the transfer after MB breached the loan contract by transferring up to CZK90 million of the spa's assets to companies owned by KTP Quantum, thereby devaluing the shares. CSOB, on the other hand, has ownership rights on the shares, as collateral for a CZK130 million-loan issued to KTP Quantum by Investicni a Postovni Banka (IPB) before CSOB took it over. CSOB believes it still possesses the right to the shares under Czech laws and will try to wrestle them from KTP Quantum at all cost. The paper says experts believe KTP Quantum's effort to secure a court injunction to prevent the shares from being transferred by Penta will not prosper as the latter's move is above board. Meanwhile, the paper says the company also faces administrative proceedings by the Securities Commission, the country's equity markets watchdog. The Commission is threatening the company with a fine of up to CZK100 million and cancellation of its trading license for failing to withdraw its offer of a fixed return on investments and failing to give more information about shares in its portfolio. ============= G E R M A N Y ============= KINOWELT MEDIEN: Sells Shares in e.multi Digitale Dienste AG ------------------------------------------------------------ Munich-based media business Kinowelt Medien AG has sold its holdings in e.multi Digitale Dienste AG, the company said in a statement. Kinowelt Medien AG sold its 1,020,000 shares in the company, thus divesting itself of its entire 29.1% share in the Ettlingen-based firm. The shares have been bought by Eurotip AG, Munich, a Europe-wide sports betting company. As part of the current restructuring process at Kinowelt Media Group, the sale of these shares represents a further step towards reducing the company's share portfolio and focusing on the Group's core business (theatrical distribution, home entertainment, film rights). Difficulties began for Kinowelt in 1999, when it overstretched itself paying for a film package that proved unsatisfactory. It showed losses of over EUR309 million in the first nine months of 2001 on turnover of around EUR168 million. For inquiries, contact Christin Wegener of Corporate Communications & Investor Relations at telephone + 49 89-30 796 7270 or fax + 49 89-30 796 7330, or e-mail at presse@kinowelt.de or www.kinowelt-medien-ag.de. KIRCHGRUPPE: Meeting with Creditor Banks Fails to Draw up Plan -------------------------------------------------------------- A three-hour meeting with creditor banks Monday evening has failed to come up with concrete solutions for Kirch's woes, the company said in a statement Tuesday. "Yesterday's discussions between the banks, representatives of Kirch and advisors commissioned by Kirch did not produce, as expected, a concrete result," statement read. "However, the banks have signaled their readiness to quickly consider Kirch's suggestions and make decisions. The talks will be continued constructively," it added. Citing industry sources, AFX News said Deutsche Bank AG and Allianz AG's Dresdner Bank AG unit, which are both owed money by KirchGruppe, but are not creditor banks to Kirch Media and Premiere World, were not present at the meeting. At the moment, the only plan that has surfaced so far is the one contained in a report by Sueddeutsche Zeitung last week, which involves hefty job cuts and the closure of loss-making local television channels this year. The report hinted the closure of Kirch's corporate television firm BetaBusinessTV GmbH by end of April in a bid to refocus on its core operations. A Kirch spokesman has already confirmed that the corporate television had not developed as Kirch had hoped, boosting veracity of the report. KIRCHGRUPPE: WAZ Admits Interest in Springer, But Not Kirch Media ----------------------------------------------------------------- German publisher WAZ has denied mulling a substantial investment in Kirch, the troubled German media conglomerate, the Financial Times said Tuesday. The publisher admitted, however, to taking interest in buying a stake in Springer, but not the entire Kirch Media, which includes a stake in ProSiebenSat.1 and the film and sports rights divisions. The news effectively doused speculations that WAZ could be a potential savior of the cash-strapped media giant. The group has been peddling Kirch Media for EUR1 billion. "We only have interest in the Springer stake, not in acquiring a holding in Kirch Media itself," WAZ Chairman Erich Schumann told the paper. PHILIPP HOLZMANN: Bilfinger Berger Revives Bid With a Twist ----------------------------------------------------------- Construction group Bilfinger Berger AG is reportedly rekindling its interest in Philipp Holzmann AG, as the latter faces new woes, Handelsblatt said yesterday. A spokesman for Bilfinger has confirmed said talks, indicating that initial negotiations are currently ongoing with Deutsche Bank, Holzmann's largest shareholder. As this develops, industry observers say this time Bilfinger may be willing to take a substantial share of Holzmann, a move it refused to take in past negotiations. The Mannheim-based firm is known to be eyeing Holzmann's U.S. subsidiary J.A. Jones for a while now. But Holzmann has ruled out any sale of individual divisions. J.A. Jones churned out a total of US$2.9 billion output in 2000, making it an attractive asset for Bilfinger, who if successful in acquiring it, will make a big expansion leap. Already its U.S. subsidiary Fru-Con Holding Corporation grossed EUR580 million in the U.S. and Mexico in 2000. Bilfinger's spokesman, however, stressed that the company will only invest in Holzmann if a clear line is drawn between "liabilities and risks arising from Holzmann's previous business transactions." Last week, Holzmann bared that its losses for 2001 will be much deeper than so far anticipated and the group started new talks with its creditors to find a solution to its fresh financial woes. Analysts say only a due diligence on Holzmann by Bilfinger will signal a real possibility of an agreement. ============= I R E L A N D ============= ELAN CORPORATION: Pomerantz Firm Announces Securities Class Suit ---------------------------------------------------------------- A class action lawsuit was filed by Pomerantz Haudek Block Grossman & Gross LLP -- www.pomerantzlaw.com -- against Dublin- based pharmaceutical group Elan Corporation PLC, on behalf of all persons or entities who purchased American Depository Shares ("ADRs") of Elan during the period between April 23, 2001 through February 4, 2002, inclusive. The lawsuit was filed in the United States District Court, Southern District of New York under Civil Action Number: 02 CV 1021. Shareholders who purchased the ADRs of Elan during the Class Period have until Friday April 5, 2002 to seek appointment by the Court as one of the lead plaintiffs in this action. The lawsuit charges that Elan and three of the Company's senior officials issued materially false and misleading statements to the market concerning Elan's revenues and earnings prospects. In particular, it is alleged that during the Class Period, defendants improperly reported favorable financial results for the Company, which were artificially inflated. Elan allegedly manipulated its results by improperly accounting for joint ventures that it entered into with other companies, the primary purpose of which was to create the appearance of income growth for the Company. The Company invested in these joint ventures, which then used the proceeds to fund purchases from Elan, which Elan then reported as revenues. In an article published in the Wall Street Journal on January 30, 2002, former Securities and Exchange Commission ("SEC") Chief Accountant Lynn Turner reportedly questioned the propriety of Elan's accounting practices. Following this article, the price of Elan ADRs fell from $35.20 to $29.25. Thereafter, on February 4, 2002, Elan shocked the market by issuing a Press Release, which detailed the Company's 2001 financial results and effectively acknowledged the Company's misleading accounting for "off-balance sheet arrangements." The Press Release stated that Elan had two QSPEs ("Qualified Special Purpose Entities") which it had not consolidated in its financial results as presented under Generally Accepted Accounting Principles ("GAAP"). The Company further revealed that if these QSPEs had been consolidated, 2001 profit under GAAP would have been $211.4 million, or $0.59 per share, instead of the reported $347.7 million, or $0.94 per share as was originally reported. Furthermore, if these QSPEs were included, Elan's total debt would have been almost $3 billion, approximately $1 billion more than originally reported. As a result of this news, Elan's ADRs fell, closing at $14.85 a share, a total decline of over 50% from the pre-revelation price. If you purchased the ADRs of Elan during the Class Period, you have until Friday, April 5, 2002 to ask the Court to appoint you as one of the lead plaintiffs for the Class. In order to serve as lead plaintiff, you must meet certain legal requirements. If you wish to review a copy of the Complaint, to discuss this action or have any questions, please contact Andrew G. Tolan, Esq. of the Pomerantz firm at 888-476-6529 (or (888) 4-POMLAW), toll free, or at agtolan@pomlaw.com by e-mail. Those who inquire by e-mail are encouraged to include their mailing address and telephone number. CONTACT: Pomerantz Haudek Block Grossman & Gross LLP Andrew G. Tolan, Esq. (888) 476-6529 ((888) 4-POMLAW) Internet: agtolan@pomlaw.com ELAN CORPORATION: Stull, Stull & Brody Launches U.S. Class Action ----------------------------------------------------------------- Notice is hereby given that a class action lawsuit was filed on March 8, 2002, in the United States District Court for the Southern District of New York, against Elan Corporation, PLC on behalf of purchasers of Elan securities between April 30, 1999 and February 1, 2002, inclusive. The complaint charges Elan and certain of its officers and directors with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder. The complaint alleges, among other things, that defendants issued a series of false and misleading statements regarding the Company's financial condition. The complaint alleges that as part of their effort to boost the price of Elan securities, defendants materially overstated Elan's revenues by creating entities that were essentially controlled by Elan for research and development. Elan immediately took back its investment in the form of a license fee which it recorded as revenue. In some instances the joint ventures had no money left for the development of drugs and Elan ended up lending money to the entity. After the market closed on January 29, 2002, The Wall Street Journal described Elan's accounting as a "charade" and quoted a former SEC accountant as stating that it is like "taking money out of one pocket and putting it in another." On February 1, 2002, Elan announced that earnings for the fourth quarter 2001 would drop 84% and that its profits for fiscal year 2001 would fall well short of estimates. On this news, Elan's ADRs fell $15.10 per share from $29.95 per share to $14.85 per share, a loss of more than 50% of their value in a single day. Plaintiff seeks to recover damages on behalf of class members and is represented by, among others, the law firm of Stull, Stull & Brody. Stull, Stull & Brody has litigated many class actions for violations of securities laws in federal courts over the past 25 years and has obtained court approval of substantial settlements on numerous occasions. For parties who purchased Elan securities between April 30, 1999 and February 1, 2002, inclusive, no later than April 5, 2002, one may request may move the Court as lead plaintiff of the class. If one may wish to discuss this action or has any questions concerning this notice or your rights or interests with respect to these matters, contact Tzivia Brody, Esq. at Stull, Stull & Brody by calling toll-free 1-800-337-4983, or by e-mail at SSBNY@aol.com, or by fax at 212/490-2022, or by writing to Stull, Stull & Brody, 6 East 45th Street, New York, NY 10017; or email at SSBNY@aol.com. ELAN CORPORATION: Faces 30 U.S. Lawsuits in Share Collapse ---------------------------------------------------------- Over 30 lawsuits were filed against the chemicals manufacturing group Elan Corporation in the U.S., a report obtained from the Irish Independent says. As of yesterday evening, about 34 separate law offices based in the U.S. launched class actions against Elan, the report adds. A series of class actions have errupted after Elan's share price plummeted earlier this year following analysts who raised concerns over the pharmaceutical company's accounting practices, as reported in the Wall Street Journal. Elan's stock fell from over 50 euros in January to a low of 15.27 euros on March 1. US law firms focused on faulty accountancy practices to justify their claims, saying it used up to 50 joint-venture vehicles to keep the cost of Research & Development charges off its balance sheets. On claims filed by Slotnick, Shapiro & Crocker, a New York based law firm, Elan directors allegedly boosted the company's stock price, overstating its revenues by creating entities that were essentially controlled by Elan for research and development. The practice at Elan had been to licence joint-venture firms under its control to develop drugs, taking a $15 million fee from the licensed firm and then treating this 15 million as revenue. In some cases the joint-ventures firms left ELAN cash-strapped for its R&D work, therefore, ended up lending them money. Elan, Slotnick, Shapiro & Crocker has recently brought on its board Stephen Oestreich as chairman of the firm's class action department. Oestreich, with 25 years of practice, is a prominent lawyer known to have recovered hundreds of millions of dollars on behalf of shareholder class members, the law firm said. The class lawsuit runs from April 23, 2001, to February 4 this year. Anyone who bought shares in Elan on the New York stock market during the said period may join in the proceedings. ===================== N E T H E R L A N D S ===================== KPN NV: Awards EUR 150MM Contract to Nokia and Ericsson AB ----------------------------------------------------------- The Hague telecommunications operator Royal KPN NV said that its German unit E-Plus had picked Nokia Corp to provide its UMTS network in Germany, along with LM Ericsson AB, in a deal worth EUR150 million. In a statement, KPN said the contract with Nokia will be binding until 2004 for the core network and until 2005 for the radio access network. Horst Lennertz, KPN Mobile chief technology officer, announced that the Dutch company is set to launch its first UMTS trials by the last quarter of this year. =========== P O L A N D =========== NETIA HOLDINGS: Issues 317MM New Shares to Fund Debt-Equity Swap ---------------------------------------------------------------- Debt-ridden Polish telecoms operator Netia has pushed through with its earlier plan to issue new shares to finance a life- saving debt-for-equity swap with bondholders, the Warsaw Business Journal said Tuesday. The company said it will issue 317.7 million new shares in order to fund the deal it made with bondholders on March 5, giving bondholders 91% of the equity after debt restructuring and the share issue. Earlier, Netia contemplated as much as 600 million new shares, on top of the current outstanding shares numbering 31 million. Netia's main shareholders are currently Sweden's Telia and U.S. fund Warburg Pincus. ========= S P A I N ========= JAZZTEL PLC: Banco Sabadell Cuts Ties, Sells Stakes at a Loss ------------------------------------------------------------- Investor confidence in Madrid-based alternative telecoms operator Jazztel Plc continues to drop, as another shareholder divested its stakes with the telecom company, the Financial Times said Tuesday. According to the report, Banco Sabadell opted to sell its 2.5% stake in the company recently at a lost of about EUR35 million. This recent divestment follows a series in the past three months that includes the 6.9% sellout by the company's financial director and chief executive. Apex Partners, a founding investor, also sold a 6.8% stake last year at EUR11.94 per share. Dragados, a Spanish constructor, is maintaining its 2.9 per cent stake but wrote down EUR13.1 million of its value on its books, the report said. The Financial Times says investor confidence began to slip after the company's fourth quarter results recorded a decline in revenues. In addition, a cut in earnings forecast by industry observers dealt it a further blow. The forecast revision was made after Telefonica, Spain's dominant operator, won back market share. Meanwhile, aside from the shares, Jazztel's EUR636 million in corporate notes are also trading at about a quarter of its face value. Moody's downgraded the bonds last month to Caa3. A buy-back of 13.5 per cent of its high-yield bonds in September will save EUR245 million on future principal and interest repayments. But some analysts say the move is a precursor to a default and was completed to improve terms for a possible debt- for-equity swap. "Buying back some of the bonds was great but there just won't be enough money to get the company to the point of free cash flow," a high-yield bond analyst was quoted by the paper. =========== S W E D E N =========== ICON MEDIALAB: Releases December 2001 Year-End Report ----------------------------------------------------- Icon Medialab International AB, the IT professional services provider based in Stockholm, reports its financial results for its fourth quarter and full year ended December 31, 2001. For the year these operating earnings were a loss of SEK 421 .7 million (EUR46.2 million). The company further recorded SEK 41.7 million (EUR4.5 million) in one-time and restructuring charges in the quarter, associated with incremental costs for staff reductions and facilities eliminations announced previously, as well as one time cost incurred for the unsuccessful corporate tax restructuring initiative pursued during the quarter. The run-rate quarterly operating cost level at the end of the quarter was in line with the stated goal and is actually below SEK 300 million (EUR32.9 million). Operating costs, excluding one-time charges, for the quarter were SEK 321.1 million (EUR35.2 million). At the end of the year the company employed 1,082 staff. Operating earnings, before goodwill amortization and provision for social security fees related to employee stock options and one-time and restructuring items, were a loss of SEK 95.3 million (EUR10.5 million) for the quarter. The operating earnings before goodwill amortization and provision for social security fees on stock options were a loss of SEK 137.0 million in the quarter compared to a loss of SEK 144.3 million in the fourth quarter of 2000. Operating earnings after goodwill amortization and provision for social security fees on stock options were a loss of SEK 421.6 million for the quarter, an increase of SEK 1 534.8 million from the prior year. During the year SEK 225.3 million in restructuring and one-time costs were recorded, compared with SEK 124.3 million in 2000. Goodwill write-off and amortization for the year amounted to SEK 432.6 million, compared with SEK 2 288.7 million in 2000. The company amortizes goodwill for each individual acquisition over a period between three to five years, and recorded a one- time adjustment to the goodwill valuation in the fourth quarter of SEK 238.2 million based on an external valuation of the respective subsidiaries in the group. The corresponding one-time adjustment in 2000 amounted to SEK 1 621.5 million and was based on impairment test of the individual acquisitions following the changes of the market's view on the Internet and IT industries. In 2001, no provisions for social security fees related to employee stock option programs have been made. In 2000, reversal of prior provisions had a positive impact on the result by SEK 60.8 million. The company ceased its consulting activities, conducted through its minority interest in Icon Asia, in Asia and Australia during the fourth quarter, but did not incur cash or other operational charges in relation to this. The company wrote down the value of its interest in Icon Asia to SEK 8.5 million (EUR0.9 million) in the year end balance sheet. PARENT COMPANY The parent company recorded net sales, including management fees, of SEK 54.7 million for the fourth quarter, and a net loss of SEK 1 520.8 million. The parent company's annual net sales amounted to SEK 139.3 million and the annual net loss amounted to SEK 1 565.2 million. Investments in 2001 totaled SEK 15.7 million. As of December 31, 2001, the parent company recorded liquid assets of SEK 3.4 million. FINANCIAL POSITION As of December 31, 2001, shareholders' equity totaled SEK 110 million, compared to SEK 984 million on December 31, 2000. Trade receivables as of December 31, 2001 totaled SEK 171 million representing approximately 65 days' sales outstanding, an improvement of 10 days from the end of the third quarter position. Liquid assets on December 31, 2001 totaled SEK 69 million, compared to SEK 267 million as of December 31, 2000. SHARE DATA Earnings per share after tax on a non-diluted basis were a loss of SEK 18.05 for year to date 2001 compared to a loss of SEK 51.52 for the same period 2000. At the end of the period, shareholders' equity per share on a non-diluted basis was SEK 1.53, compared to SEK 16.98 December 31, 2000. The parent company had 71,659,504 outstanding shares (including paid but not yet registered) as of December 31. On a fully diluted basis, including all outstanding options, the maximum number of shares was 98,121,664 as of that date. Operating Earnings for the fourth quarter, before goodwill amortization and write-off, and provision for social security fees on employee stock options, and assuming an effective tax rate of 35 percent, are a loss of SEK 1.03 per fully diluted share. Mail address: Icon Medialab International AB Phone: +46 8 52 23 90 00 Box 863, 101 37 Stockholm, Sweden Fax: +46 8 52 23 90 97 www.iconmedialab.com FRAMFAB AB: Appoints New Chief Financial Officer ------------------------------------------------ Christian Luiga has been appointed as Framfab's new Chief Financial Officer (CFO). Christian Luiga has vast experience of the international consulting and software industries. He joins Framfab from Intentia International, a company listed on the stock exchange. As chief controller at Intentia, he has been responsible for leading and developing financial control, follow up and planning. He is also a member of Intentia's operative executive management team. Prior to this, Christian Luiga worked as the financial manager for the Nordic operations of the US company Intermec Technology Inc. He has also served as chief controller for United Barcode Industries (UBI) and financial manager for UBI's US subsidiary. Christian Luiga has a degree in finance from Stockholm University.Christian will begin his new position on April 25. Johan Haeggman, Framfab's current CFO, previously indicated a desire to resign his position now that Framfab has completed restructuring the business and restored financial stability. After three years at Framfab, he will become a partner with Inveritas, a consulting firm. Johan Haeggman joined Framfab in 1999 and took a leading role in the company's listing on the Stockholm stock exchange. He also took active part in leading Framfab's international expansion and restructuring. He will remain with Framfab until the Annual General Meeting on May 7. Johan Wall serves Framfab as CEO, while Sven Skarendahl is executive Chairman of the the Framfab Board. Framfab is a leading supplier of consultancy services and business solutions based on Internet technology. The company operates in Denmark, France, Germany, the Netherlands and Sweden. Framfab is listed on the O-list of the OM Stockholm Stock Exchange. ===================== S W I T Z E R L A N D ===================== ABB LTD: Fund Managers Shun IOUs, Narrowing Funding Options ----------------------------------------------------------- Investors' interest in the IOUs of ABB Ltd. has gone cold, leaving the company fewer but costly sources of short-term financing, Bloomberg said Tuesday. According to the news agency, fund managers are turning their backs on Europe's biggest electrical engineering firm, citing negative publicity on its recent losses, its first in years. "There is too much negative news flow about this issuer. They have special problems," said Christophe Papereux, who manages more than EUR2 billion at Cardif Asset Management in Paris. The firm is currently offering its commercial paper at rates of about a quarter percentage point more than benchmark money-market rates, or about 2.25 percent for three months, said Jens Jantzen, a credit analyst at Bear Stearns & Co. Last year the company borrowed below money market rates, traders told Bloomberg. Buyers can now get a yield of 8.49 percent on ABB's US$200 million of bonds maturing on July 26, according to ABN Amro prices on the Bloomberg. That yield is up from about 3 percent last month. But there are no takers. "Routes to the short-term debt markets look closed to all intents and purposes," said William Mackie, an equity analyst at Commerzbank AG in an interview by Bloomberg. "ABB will need to seek other sources of finance, which are likely to be more costly," he said. And costly it will be, indeed. In December, the company had arranged a US$3 billion credit line with a group of 24 banks arranged by Citigroup Inc. and Credit Suisse First Boston. The interest rate for this credit line, however, is hinged on the fluctuation of its ratings at S&P and Moody's boards. Bloomberg said the company had agreed to pay 25 basis points over the London interbank offered rate, or Libor, when its credit ratings were "AA-" at S&P and "Aa3" at Moody's. That premium rises with each rating cut to as much as 35 basis points over Libor if ABB is cut to "A-" by S&P or "A3" by Moody's. The Swiss company also pays a fee of 30 percent of the interest margin for access to the money. Bloomberg adds further cuts in ABB's credit rating would also threaten ABB's loan facility. The company has to renegotiate the terms of the loan if its rating falls out of the single-A category with either S&P or Moody's, and banks can cancel the facility if an agreement can't be reached. According to Bloomberg, investors started shunning ABB's IOUs after it announced last month its first annual loss since 1988, as it set aside money to pay for claims related to asbestos. The IOUs or unsecured debt maturing in nine months or less are commonly used by hundreds of companies including General Electric Co., American Express Co. and Vodafone Plc to finance their day- to-day operations. SWISSAIR GROUP: To Forge Alliance to Stay on Top of Market ---------------------------------------------------------- Crossair, the company that will be known as "Swiss" come April, bared recently that it is considering a tie-up with any of the three existing global alliances to stay competitive. According to CEO Pieter Bouw, the tie-up will be necessary if it wants to compete with existing regional carriers in terms of better quality. In addition, better productivity can also be attained through these alliances. Mr. Bouw says the airline is currently in talks with Lufthansa AG's Star Alliance, British Airways PLC's OneWorld and Air France's Skyteam. He said when it comes to the integration of networks, Star Alliance would give relatively less than the two other alliances. But when it comes to a US hub partner, OneWorld's American Airlines gives more than Skyteam's Delta Air Lines Inc., which in turn gives more than Star Alliance's United Airlines, he said. Any alliance must "sound good, be easy and add up," he told AFX News. Meanwhile, he said "Swiss" will focus on the "upper end" of the market, to avoid a head on collision with Ryanair Holdings PLC and Easyjet PLC, who rule the "lower end" of the market. "We do not have the preconditions to be competitive on this (low cost carrier) market," Mr. Bouw admitted. =========================== U N I T E D K I N G D O M =========================== ARTHUR ANDERSEN: Oversight Board Suggests Audit-Consulting Split ---------------------------------------------------------------- The oversight committee tasked to make recommendations to better Andersen's operations has suggested a split in the firm's auditing and consulting arm, reports the New York Times. Paul A. Volcker, chairman of the Independent Oversight Board, also said steps must be taken to ensure that conflicts of interest do not harm the quality of audits. The Board's recommendation changes Andersen's internal structure, centralizing authority over auditing decisions, the report says. Mr. Volcker says his proposals would eliminate "the actual and potential conflicts of interest arising from being part of a financial conglomerate." The paper says Andersen, like other auditing firms, is actually a series of national partnerships with a variety of interlocking agreements. Mr. Volcker suggests separating the consultants from the accountants. "As this reorganization is completed, there will be no partner interlocks, no revenue- or profit-sharing, and no cross subsidies between the 'auditing' and 'consulting partnerships,' " Mr. Volcker's report said. But the new Andersen would not be a strict "audit-only" firm, the report says. It would continue to provide tax accounting for audit clients, as well as help in doing "due diligence" for mergers and some other services. Mr. Volcker says the new firm could still perform some services for nonaudit clients that it could not provide for audit clients, including internal audits, tax work for executives and limited information-technology services for small and midsize businesses. But the most drastic changes must come internally, Mr. Volcker says. He envisions Andersen to become a more centralized firm, with a strong national office whose leading technical partners would "have central and unambiguous authority over new and difficult interpretations of accepted accounting standards," and in making those determinations "the emphasis should be placed on respecting the clear intent of the standard," the report says. In addition, Mr. Volcker also suggested that the partners in charge of a specific audit should be rotated every five years or less, rather than seven as now. He also suggested a "cooling-off period" before an auditor may seek or accept work with a client that he or she audited, the paper bared. Mr. Volcker and his group were commissioned by Andersen on February 3, giving it power to mandate sweeping changes in the company. But according to the report, doubts have grown since then about whether Andersen can survive as an independent firm, making the suggestions hanging in a balance. Clients have been defecting almost daily, with FedEx joining the exodus yesterday, forcing the company to forge a partnership with its rival. Charlie Leonard, a spokesman for Andersen, however, said Mr. Volcker's report "is not inconsistent with anything that Andersen has announced to date." Paul Marinaccio, a spokesman for Deloitte, which is currently locked in negotiations for a possible merger with Andersen, said: "Every good idea deserves a good hearing, particularly ideas from someone as highly regarded as Paul Volcker. While we are still reviewing his document, at this point it is not clear to us how under the proposal audit teams would gain access to all the skills and capabilities necessary for world-class audits." ARTHUR ANDERSEN: Future Hinges on Cleaner-Than-Clean Image ---------------------------------------------------------- Deloitte Touche Tohmatsu will be a perfect suit for Arthur Andersen, the beleaguered accounting firm that is now looking for a partner to stay in business. According to a news analysis of the Financial Times, the recent suggestion of Paul Volcker to split Andersen's accounting and consulting operations will be a good fit for Deloitte. The paper's Lex Column points out that Deloitte has yet to make the split in its own operations, the only one that has not done so among the Big 5 accounting firms. The paper adds PricewaterhouseCoopers may be least likely to acquire the troubled Andersen, as it is already big enough to accommodate more. The news analysis says a tie-up with a rival remains the best option for Andersen, as this will give it greater stability than going forward alone. However, its major roadblock remains to be its uncertain future and its potential legal liabilities, arising from its major role in Enron's debacle. "It is not clear how much more than Andersen's opening gambit of US$750 million it will take to settle the shareholder suits nor how the partnership gains from throwing itself on the mercy of a bankruptcy court," the paper said. But whatever it is that the company will eventually do, it needs to set out the future as a cleaner-than-clean professional services firm by heeding Mr. Volcker's suggestions, the paper said. BALTIMORE TECHNOLOGIES: Shares Surge as Investors Like New Deals ---------------------------------------------------------------- News that Baltimore Technologies had bagged a GBP3.4 million contract to provide a Norwegian firm with its security software has gladdened the market for days now, the FT Investor says. According to the report, investors on Monday took the news positively and responded with a jolt that raised Baltimore shares by almost 16 percent to 12.75p. Early this week, the company announced that it had inked a contract with Bankenes BetalingsSentral (BBS), a leading supplier of payment services and infrastructure to Norway's banks. The company said the major Norwegian banks and the Banking Association had recently established a national Public Key Infrastructure (PKI) - the technology on which Baltimore's key product is based - as a security system for all Norwegian banks. They aimed to use the same system as the preferred form of electronic identification in the country in the long term, the company said in a statement Monday. The company said license and services revenue from the contract would be realized within six months, and five leading banks would initially implement and market its software. Meanwhile, the company also announced early this week that it had won a deal with ID CERT, a Peru-based company. Accordingly, the firm will use Baltimore technology to form the basis of a managed services offering to businesses, government agencies and financial institutions in Peru and the Andean Pacific region of South America, including Venezuela, Colombia, Ecuador, Bolivia, and Chile. Baltimore did not disclose financial terms for the deal, the FT Investor says. BRITISH TELECOMS: Issues Invitation for Partial Take in BT Fleet ---------------------------------------------------------------- Restructuring British Telecoms Group is peddling its commercial vehicles unit for a tie-up or partial acquisition, the Financial Times reported Tuesday. BT Fleet General Manager Janet Entwistle told the paper that the unit is currently drawing up several different structures for the operation. "We are looking for a partner to come on board to help develop the business and exploit potential growth in the sector. It could be a financial institution or a manufacturer interested in multi- marque leasing operations," she told the paper. Ms. Entwistle said the group is going to break from the parent company to become a separate subsidiary in May. She said the unit has been offered an exclusive GBP1 billion contract to manage the fleet over the next five years. In addition, the telecoms group will also pay an estimated GBP200 million a year for fleet services, along with maintenance at 88 workshops around the country. The report says BT Group has issued an "information memorandum" to potential investors, which include financial institutions, carmakers and vehicle leasing companies. Although BT Group intends to retain a significant stake in the business, analysts say this move is a precursor to eventually de- merging the unit. BT Fleet is the largest commercial vehicles fleet in Great Britain, with 56,000 cars, trucks and vans. It has been valued at GBP300 million - GBP400 million. Meanwhile, Ms. Entwistle confirmed BT Fleet has already submitted a formal "indication of interest" in taking over the fleet operations of Consignia, formerly the Post Office. ENERGIS PLC: Bondholders to Present Rescue Plan Later This Week --------------------------------------------------------------- Bondholders of more than half the bonds issued by Energis announced Tuesday that they are willing to infuse money into the company, as WorldCom denied having interest in the firm. According to The Guardian, these bondholders have already appointed legal and financial advisers to broker a meeting with the board later this week. The paper says bondholders will present a rescue plan in said meeting. "It is definitely possible that bondholders will put in more equity...Not all bondholders could, but a pretty substantial group are prepared to get behind a refinancing of the business," a leading Energis bondholder told the paper. The move follows briefly WorlCom's denial that it is tendering or at least considering a bid for the cash-strapped telecom network operator. "WorldCom has not had discussions with Energis about a possible acquisition. It does not plan to have such discussions, nor does it plan to acquire Energis," WorldCom said recently. The erstwhile telecom giant is now facing a wholesale financial restructuring after announcing early this year that a dramatic drop in demand will leave it in breach of covenants linked to its GBP725 million overdraft facility. The company also has GBP550 million of bonds it must restructure. A possible debt for equity swap would leave bondholders with majority control. Bankers last week allowed Energis to use its credit line to keep its U.K. operation going while it seeks to sell its assets in mainland Europe, the Guardian said. Meanwhile, the lifeline earlier thought to have been extended to Energis appears to be just a rumor, as news surfaced that bondholders will push for payment of a GBP14 million coupon this Friday. Early in the week, reports surfaced that the payment for the coupon had been pushed several weeks off, giving the company much breathing room. But the Guardian says the company's banking syndicate does not want its cash used to pay off debt holders, dismissing the rumor that Energis had been thrown the lifeline. INDEPENDENT INSURANCE: Creditors Won't Let FSA Escape Liability --------------------------------------------------------------- Creditors of bankrupt Independent Insurance are keen on pursuing a suit against the Financial Services Authority, revealing Monday its plan to file an application for pre-action disclosure in the High Court. The Financial Times says this move will be the first step towards issuing formal proceedings against the Authority. The creditors maintain that the City regulator was negligent in ignoring the warnings about Independent's solvency from the Commission de Controle des Assurances, its French counterpart. Class Law partner Stephen Alexander, who is representing the creditors, had earlier announced that he now has a way to pin down the Authority despite its statutory immunity. Mr. Alexander said he will use European law to bypass the regulator's immunity from claims and damages. The solicitor also said he is considering a suit against Watson Wyatt, Independent's former actuaries, and KPMG, who were Independent's auditors. For its part, the Authority stands by its earlier claim that the communications with the French authorities did not reveal new information or the existence of any alleged frauds that may have subsequently brought down the insurance company. IMI PLC: To Sell GBP300 Million Pipe Unit in Management Buyout -------------------------------------------------------------- Restructuring engineering group IMI Plc announced recently that it is selling its plastic pipes unit to the division management for as much as GBP300 million. The Times of London says the disposal is part of the firm's continuing efforts to streamline operations, which date back to early last year. Analysts believe the asset is worth between GBP250 million and GBP300 million, the report says. The division management is believed to be raising up to GBP500 million to complete the acquisition and fund its expansion. The report says the unit's top honchos have already approached several venture capital firms with the idea. Since deciding last year to scale down operations, the company has already disposed of some GBP80 million assets, including its shotgun cartridge arm that had long been considered a "sacred cow." The company also axed more than a thousand jobs in March last year. It plans to transfer manufacturing operations to low-cost economies such as Mexico, Eastern Europe and China in two to three years. The group penciled GBP126.1 million in profits before tax and exceptional in 2001. This is way below the GBP154.9 million recorded in 2000. Restructuring costs and currency fluctuations were blamed for the shortfall. The company will pay a final dividend of 9.5p making a 15.5p total for the year. *********** 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, Larri-Nil Veloso and Maria Lourdes Reyes, Editors. Copyright 2001. 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. 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