/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/020503.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 3, 2002, Vol. 3, No. 87 Headlines ********* * G E R M A N Y * BANKGESELLSCHAFT BERLIN: U.S. Bidders Join Forces to Seal Victory KIRCHMEDIA: Axel Springer to Pursue "Option" Through Court LANDESBANK SACHSEN: Fitch Cuts Individual Rating to "C/D" * I T A L Y * FIAT SPA: Chairman Vows to Fast-track Non-core Business Disposal FIAT SPA: Continues to Lose Grip of European, Home Car Markets * S W I T Z E R L A N D * ABB LTD.: Five Original Banks Declined Part in New Loan Facility * U N I T E D K I N G D O M * ARTHUR ANDERSEN: Arm Specializing Bankruptcy Chooses E&Y EQUITABLE LIFE: Only GBP1.1 BB Separates Firm From Insolvency INVENSYS PLC: Names Paolo Scaroni as New Non-Executive Director ITV DIGITAL: Bidders in Six Weeks, Secretary Jowell Assures ITV DIGITAL: Miracle Worker John Batchelor to Bid for Network ITV DIGITAL: Mascot Attracts Attention, But Ownership Questioned ITV DIGITAL: BBC Favored to Assume 3 Licenses Vacated by Network RAILTRACK PLC: CEO says July Exit From Administration Improbable TELEWEST COMMUNICATIONS: GBP5 BB Debt to Overshadow Q1 Earnings UK COAL: Saves 400 Jobs at Ellington Mine With GBP1 MM Outlay ============= G E R M A N Y ============= BANKGESELLSCHAFT BERLIN: U.S. Bidders Join Forces to Seal Victory ----------------------------------------------------------------- Texas Pacific Group and financier J. Christopher Flowers have decided not compete with each other, and instead, have pooled their resources to ensure success in bidding for Bankgesellschaft Berlin. According to analysts interviewed by The Wall Street Journal, the pair could make a EUR2 billion bid for the 81% stake currently held by the Berlin City government. The duo has formed BGB Capital Partners, which will become the vehicle for their bid. A source closed to the situation told the paper that a deal is not expected until late summer or early fall. The partners face a tough rival in state-owned Norddeutsche Landesbank and the German Savings Bank Association, which have formed a consortium to bid for the stakes. If successful, the partnership will be the first American entity to wrestle control of a major German bank, which could sparked a change in Germany's chummy banking business, the paper said. "This would be the biggest distressed-bank deal ever done, so on a combined basis [the partnership] can bring more to the table... Combining forces allows us to sustain the campaign for some time to come," a source close to the partners told The Wall Street Journal. The paper says the bank would have collapsed last year had it not for the EUR1.7 billion cash injection made by the city. Last month, the city also agreed to guarantee billions of euros of the bank's potential liabilities for as many as 30 years. The European Commission is now investigating the matter to see whether the measure falls squarely within the European Union's market guidelines. Mr. Flowers is a former Goldman Sachs investment banker, who gained fame for his efforts to make Japan's Long-Term Credit Bank, now called Shinsei Bank, tougher on delinquent borrowers, the paper said. Texas Pacific, on the other hand, has experience in buying and turning around companies in a variety of sectors, including banks, airlines and clothing chains. The firm is headed by David Bonderman. KIRCHMEDIA: Axel Springer to Pursue "Option" Through Court ---------------------------------------------------------- German publisher Axel Springer Verlag AG confirmed Wednesday that it will sue KirchMedia to enforce a EUR767 million put option it exercised in January, reports Handelsblatt. In suing, the paper says Springer is likely looking at two possibilities: a full payment of the obligation or a EUR500 million payout, which stands for the difference between the price of the put option and the current market value of the ProSiebenSat1 stake -- the subject of the option. In the second scenario, Springer will retain control of the 11.5% stake. It's not yet clear whether the legal action has any chance of success, the German daily says. LANDESBANK SACHSEN: Fitch Cuts Individual Rating to "C/D" --------------------------------------------------------- The individual rating of Landesbank Sachsen (SachsenLB) is down to "C/D" from "C" after Fitch Ratings lowered it due to the continued low profitability of the bank. The ratings agency says it is not impressed with the bank's efforts to expand to higher margin businesses such as synthetic assets, structured and leasing finance and foreign commercial lending. "Lending outside Saxony will be limited to officially rated clients. While this should have a positive effect on revenue diversification, it is likely to increase the bank's earnings volatility and risk profile," Fitch says. "In Fitch's opinion it will be difficult for the bank to build up viable and more profitable businesses to compensate for higher funding costs in the future, as the areas it is targeting for expansion are also targeted by several other German banks, particularly in the Landesbank sector," the ratings agency said. Fitch also noted the bank's poor performance, lagging the sector's average. "Although it has established itself as the only Landesbank based in Eastern Germany and managed to limit its credit risk, Fitch regards SachsenLB as one of the weaker Landesbanks. "With EUR51.7 billion total assets, SachsenLB is the third smallest Landesbank and, unlike other small Landesbanks, it has not linked up with a larger peer," Fitch said. SachsenLB acts as a commercial bank, the bank for the federal state and local authorities in Saxony and as a central bank for the 22 regional savings banks. The bank's 'F1+' Short-term, 'AAA' Long-term (Outlook Stable), '1' Support and 'AAA' Public Sector Pfandbrief ratings remain unchanged. For more information, contact: Andrea Schulz, Frankfurt Tel: +49 (0) 69 7680 7618 or Jens Schmidt-Burgel, Frankfurt Tel: +49 (0) 69 7680 7611 ========= I T A L Y ========= FIAT SPA: Chairman Vows to Fast-track Non-core Business Disposal ---------------------------------------------------------------- Italian industrial group Fiat SpA is going to accelerate its plan to sell non-core assets due to the continuing drop of its shares, which recently reached its lowest level in 10 years. According to The Wall Street Journal, Fiat Chairman Paolo Fresco has widened the range of assets the firm will dispose and it will probably exceed the debt-reduction goals this year. Mr. Fresco was also quoted as saying that deals that have been under negotiations for months now are about to be completed. The first sale transaction could be sealed by the end of the second quarter, he said. "We are seeing investors come to us more aggressively and in greater numbers than we saw in the last quarter of last year, knocking on our doors and asking to bid for some of our properties," Mr. Fresco told The Wall Street Journal. "We are stoking the fires so much that we should be able to pass our asset-sale objectives; we can do better than those objectives," he said. Mr. Fresco, however, clarified that the company wouldn't resort to "fire sale" prices to move its assets. The chairman refused to say which assets are about to go. The range, however, is from cars to farm and construction equipment to services. The paper says it is well known that the group is trying to sell major parts of its Magneti Marelli auto-parts operations, including power trains, suspension and lighting operations. In addition, it has also been rumored that the firefighting division and the armored-vehicle operations of its Iveco truck unit are up for grabs. The paper says Fiat is even considering floating part of its prized Ferrari sports-car unit. The group's net debts currently stand at EUR6 billion. FIAT SPA: Continues to Lose Grip of European, Home Car Markets -------------------------------------------------------------- Italian carmaker Fiat Auto continues to struggle three months since the announcement of a turnaround plan. The company's sales in Western Europe fell 23% in March, decreasing its market share in the European continent from 9.6% to 8% in March 2001. In February, the company's market share in Italy also slipped to 34% from 40%, contradicting the company's ambition to increase its grip of the home market. According to The Wall Street Journal, the deterioration of sales has caused its stock to tumble. The paper says the company is struggling to implement the restructuring program announced in December. The plan involves closing excess capacity, selling EUR3 billion in non-core assets by next year, halving its EUR6 billion in debt and beefing up margins by increasing its exposure to medium and large-sized cars. The paper estimates that the company could show a loss in both its car division and the entire group for the first quarter. Last year, the group's losses reached EUR791 million, the first loss since 1993. Fiat Auto lost EUR549 million during the same period. Despite the declining performance, the Agnelli family, which controls the industrial group, says it will retain Chairman Paolo Fresco and Chief Executive Paolo Cantarella. Giovanni Agnelli, the family's patriarch, said Monday that he intends to re-appoint the two for three more years. The statement sparked a round of buying, and Fiat shares closed up nearly 4% on the day, the paper said. Despite the modest gain, Fiat stocks are still down 7% compared to the past few weeks. Overall, the shares have lost 43% since the Sept. 11 terrorist attacks in the U.S., the paper said. The company will hold an annual shareholder meeting on May 14. ===================== S W I T Z E R L A N D ===================== ABB LTD.: Five Original Banks Declined Part in New Loan Facility ---------------------------------------------------------------- Three banks that chipped in a total of US$465 million to ABB Ltd.'s US$3 billion credit facility in December did not participate in the new loan, Bloomberg learned recently. According to the news outfit, J.P. Morgan Chase & Co., Dresdner Bank AG and UBS AG were not part of the 20 banks that recently extended a new US$3 billion facility to the company. Bloomberg also learned that Credit Lyonnais SA and Bank One Corp. similarly declined any part in the transaction. The news outfit doesn't have data on the pair's contribution in December. None of the banks was willing to explain why they shied away from the new facility. The news outfit, however, noted that companies that don't offer additional business to lenders are finding some banks refuse to extend credit. The facility was arranged by Citigroup Inc., Credit Suisse First Boston and Barclays Plc, which also arranged the sale of the recently completed 5-year convertible bond issue. =========================== U N I T E D K I N G D O M =========================== ARTHUR ANDERSEN: Arm Specializing Bankruptcy Chooses E&Y -------------------------------------------------------- The corporate recovery unit of Andersen U.K., which caters to bankrupt or potentially insolvent companies, has chosen Ernst & Young over Deloitte & Touche. The arm headed by Paul Horn has 10 partners and 200 staff. Andersen spokesman Paul Fleming said the choice of Ernst & Young was made because it presented lesser operational conflicts. "The fit is better. The overlap between Andersen and Deloitte was greater than it is with Ernst & Young," Mr. Fleming told Bloomberg. This unit is the second Andersen arm within the UK practice to refuse a combination with Deloitte. The legal unit also begged off last month, the news outfit said. Mr. Fleming said no money changed hands in the transaction and didn't say what the bankruptcy unit's revenue is. The bankruptcy arm counts among its clients Royal Bank of Scotland Group Plc, Lloyds TSB Group Plc, and Barclays Plc, he said. The unit is currently the administrator of Bioglan Pharma Plc, a U.K. drug-maker that ceased operations in February, Bloomberg said. EQUITABLE LIFE: Only GBP1.1 BB Separates Firm From Insolvency ------------------------------------------------------------- Analysts described Equitable Life as being "on a financial knife edge" after it bared a GBP1 billion drop in spare cash. Without that money, the insurer could now be on the brink of insolvency, they say. The company's annual report released Wednesday blamed the huge drop to a GBP1.2 billion investment loss, the need to pay bonuses and an increase in provisions to pay potential mis-selling claims. These charges completely erased the GBP1 billion savings raised by the firm out of the compromise deal it had inked with policyholders early this year, Times Online says. The spare cash stood at GBP2.3 billion last year, the paper says. An insurer's spare cash is the cushion of assets over liabilities used to pay terminal bonuses when policies mature. An Equitable spokesman said the charges were made upon the advice of Peter Knowle, its appointed actuary. He said should assets fall below liabilities, the firm, under its articles of association, would only have to reduce policy values until the numbers again added up. INVENSYS PLC: Names Paolo Scaroni as New Non-Executive Director --------------------------------------------------------------- Invensys plc announces that Paolo Scaroni has been appointed a non-executive director with effect from May 1, 2002. Paolo Scaroni is the Group Chief Executive of Pilkington plc, one of the world's largest manufacturers of glass and glazing products with annual revenues of 4.6 billion euros, manufacturing operations in 25 countries and employing around 27,400 people worldwide. He is also a non-executive director of BAE Systems plc. Lord Marshall, Chairman of Invensys plc said: "I welcome the appointment to the Board of Paolo Scaroni, with his considerable experience in and knowledge of the global manufacturing sector. This appointment, together with that of Larry Farmer in March, will broaden our diversity and help sharpen our customer focus." For more information, contact: Invensys Plc through Victoria Scarth, 011-44-20-7821-3712 or Taylor Rafferty, 212/889-4350 ITV DIGITAL: Bidders in Six Weeks, Secretary Jowell Assures ----------------------------------------------------------- Culture Secretary Tessa Jowell expects bidders for ITV Digital's service to surface in six weeks, preserving the government's timetable for the switch-off of analogue transmission. The government is looking at 2006 as the earliest time to switch the entire country to digital transmission. Many believe the failure of ITV Digital has pushed this deadline, if not made the plan impossible to achieve. "We expect that within the next six weeks other companies will come forward, they will bid for the service and they will bid to be licensed in order to run the platform," Ms. Jowell was quoted as saying. A spokesman for Prime Minister Tony Blair said: "The Government's digital policy is a long-term policy, we are talking about 2006- 2010, and we are not going to be diverted from that long-term strategy by short-term events." Nevertheless, David Elstein, former chief executive of Channel 5, doubts the success of the government's plans. "2010 was never realistic and I think in many ways the Government bears quite a heavy responsibility for having put forward a target which was never likely to be met and which helped lure Carlton and Granada (ITV Digital's owners) on to the killing fields of digital pay TV," Mr. Elstein said. ITV DIGITAL: Miracle Worker John Batchelor to Bid for Network ------------------------------------------------------------- York City Chairman John Batchelor says he is forming a consortium to bid for ITV Digital and save it from liquidation. According to Ananova, Mr. Batchelor, who also rescued football team Minstermen recently, said he will call on friends from the motor sport and football circles to pull-off a bid. "It is my intention to head up a bid for ITV Digital backed by a consortium of people from motor sport and football. I need to act very quickly after talks with the administrators who said the company would otherwise be broken up very quickly," Mr. Batchelor was quoted by Ananova as saying. "There is no reason why we can't make this work and it will be heavily funded from the motor sport side. I don't have the money required, but I do have the ability to bring people together who do," Mr. Batchelor said. ITV DIGITAL: Mascot Attracts Attention, But Ownership Questioned ---------------------------------------------------------------- The Monkey mascot of ITV Digital has attracted more attention than the pay-TV network, which is now headed into liquidation. The Guardian says Mother, the London agency behind the "Monkey and Al" ads, is threatening to go to court to gain custody of the mascot, which was counted recently by Deloitte & Touche as one of the network's disposable assets. The move comes after cider firm Diamond White and the supermarket KwikSave offered "Monkey" a new work. The two, however, refused to sign any contract pending clear ruling on who owns the mascot. "Everyone we talk to is interested in what's happening to Monkey. He has done his first job but his career is just beginning. There are lots of brands the monkey could work for - or he could perhaps go to Hollywood and make a movie," Mother partner Andy Medd told The Guardian. Mother claims it remains the owner, as it is still owed a six- figure sum by the failed venture. The paper says the agency's contract is believed to contain a clause saying that ownership of the toy transfers to ITV Digital only when all bills for creating him are paid. The paper says woolen versions of Monkey have been selling on Internet auction site eBay for around GBP75. Limited edition Monkey keyrings have been changing hands for as much as GBP100. "Monkey is fun, popular, down-to-earth and irreverent, all of which appeals to the typical Diamond White consumer," a spokesman for the drink's distributor Matthew Clark Plc said in explaining their interest in the Mascot. ITV DIGITAL: BBC Favored to Assume 3 Licenses Vacated by Network ---------------------------------------------------------------- The Independent Television Commission is auctioning the three licenses vacated by ITV Digital and speculations are rife that BBC is in the running to snatch them up, says the Independent. The commission has modified the licenses by deleting the pay-TV element, a move that puts BBC well in front should it decide to bid. Channel 4, which is also interested in the licenses, says it will only bid with the pay-TV component in place. "We are active partners in discussions to try to ensure the continuity of the digital terrestrial platform. We would like it to have pay and free-to-air services," Channel 4 spokesman John Newbigin told the paper. There are rumors that Canal Plus, owned by French media giant Vivendi, is also considering an offer. But Investec Henderson Crosthwaite analyst Kingsley Wilson believes this is unlikely. "I'd be amazed if there wasn't a lot of interest in these licenses but I don't think any foreign player will wade in on its own," Mr. Wilson told the Independent. Despite its position ahead of the pack, BBC denies it is interested in making a bid. A spokeswoman explained that under its charter the company could not run a DTT platform. The closing date for applications is May 30 and the commission expects to announce the award of the licenses on June 13, the paper says. RAILTRACK PLC: CEO says July Exit From Administration Improbable ---------------------------------------------------------------- Railtrack Plc may not be able to exit administration by July as earlier projected, now that Network Rail has missed its own deadline for completing negotiations with the Railtrack Group. The government-backed bidder had pegged completion of the sale agreement with the holding company to end of April. In addition, Network Rail has also failed albeit momentarily to convince banks to back a GBP9 billion bridging loan that will be used to partly finance the takeover. The banks concerned are understood to have doubts about the terms of the support from the Strategic Rail Authority, which would underpin the loan, Times Online says. "September or October seems to be realistic (for concluding negotiations), given a fair wind. Others have talked about earlier dates but that's optimistic," Railtrack CEO John Armitt told The Times. The paper says the delay undermines the GBP300 million aid the government has pledged if the firm exits administration early. In promising the aid, Transport Secretary Stephen Byers reversed his earlier stand not to use taxpayers' money for Railtrack's rescue. A transport department spokesman, however, clarified that no specific date had been set by which the aid would expire. "The offer was made after the administrator said he wasn't expecting an exit from administration before November. The general consensus now is that July is very challenging," the spokesman said. TELEWEST COMMUNICATIONS: GBP5 BB Debt to Overshadow Q1 Earnings --------------------------------------------------------------- Telewest Communications Plc, the other troubled cable operator in Britain, was expected to announce yesterday its first quarter results, which analysts say will boast a GBP90 million to GBP95 million EBITDA. These earnings, however, were expected to be drowned by questions on its ability to sustain its GBP5 billion debt-pile, which many say will force it to follow NTL's debt-for-equity restructuring, the Financial Times says. The paper says the company has shed 83% share value since the opening bell this year as a result of widely held belief that the firm will follow cable peers NTL and UPC. Telewest does not face an immediate cash crunch, though, says the paper. Bear Stearns, however, estimates that it is burning GBP139 million cash each quarter. The company had GBP815 million in cash and bank credit at the end of 2001, virtually ensuring its operations for the next 18 months. On Wednesday, the company downplayed the effects of ITV Digital's collapse, which meant that it lost a GBP6 million annual income for contents provided by subsidiary Flextech. To counter the negative impact, the company offered half-price installation to about 200,000 ITV Digital users who will switch to cable transmission. Sales in the first quarter were estimated to reach GBP335 million. The company was also expected to bare new broadband subscriptions seen to top 120,000. UK COAL: Saves 400 Jobs at Ellington Mine With GBP1 MM Outlay ------------------------------------------------------------- Troubled coal miner UK Coal has invested GBP1 million in its Ellington Colliery, ensuring continued operations of the deep coal mine for the next five years, BBC News said Wednesday. The move also saved more than 400 jobs and was considered by many as a vital vote of confidence in the 93-year-old mine. "It is a massive vote of confidence in what UK Coal knows is an extremely capable and committed workforce... Without this investment Ellington would have been forced to close next summer and the resulting blow to the economy of south-east Northumberland would have been devastating," Ian Lavery, Northumberland secretary of the National Union of Mineworkers, told BBC. A UK Coal spokesman told the news channel that recent improved performances at Ellington justified the investment. The colliery closed in 1994 with the loss of 1,200 jobs, but re-opened a few months later. *********** 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 US$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 US$25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *