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/raid1/www/Hosts/bankrupt/TCREUR_Public/021028.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 Monday, October 28, 2002, Vol. 3, No. 213 Headlines *F R A N C E* PPR: Freezes Finaref's Takeover of Conforama * G E R M A N Y* DEUTSCHE TELEKOM: May Freeze Dividends, Sell More Assets COMMERZBANK AG: Sues Morgan Stanley on Interest-Rate Swap *I T A L Y* TELECOM ITALIA: Announces Completion of Imser Split *P O L A N D* DAEWOO-FSO: To Sign Contract with MG Rover By Year-End ELEKTRIM SA: Takes Actions To Dispose Stake in Elektrim Megadex NETIA HOLDINGS: Schedules Shareholders' Meeting on November 14 *S L O V A K R E P U B L I C* ZETOR: New Operator to Displace 1000 Employees *S W E D E N* LM ERICSSON: To Develop and Supply Solutions for WLAN Access LM ERICSSON: To Supply MMS and 2.5G Solution in India *S W I T Z E R L A N D* ABB: To Sell Oil, Gas and Petrochemical Business To Cut Debts ABB: Acts To Lower Cost Base After Weak Third Quarter Results CREDIT SUISSE: Moody's Downgrades Management Rating of Unit CREDIT SUISSE: Ties with ABB To Compound Own Losses CREDIT SUISSE: Asset Management Launches More Traded Index Funds *U N I T E D K I N G D O M* AES DRAX: Parent Sees Need for Additional Funding AMEY PLC: Shareholder Asks for Break-up or Sale of Business CABLE & WIRELESS: Signs Services Agreement with America Online P & O PRINCESS: Withdraws Recommendation Of Caribbean Proposal P&O PRINCESS: Franklin Resources Issues Notice of Dealing ROYAL & SUN: Must Decide On Share Issue Fast - Analysts ROYAL & SUN: S&P Puts Insurance-Related Deals on CreditWatch THE BIG FOOD: Baugur's Full Takeover Offer Not in the Near Future THE BIG FOOD: Baugur Group Acquires Strategic Stake TXU EUROPE: AES Drax Receives Payment Under Hedging Contract =========== F R A N C E =========== PPR: Freezes Finaref's Takeover of Conforama from Cetelem --------------------------------------------------------- French retail conglomerate, Pinault-Printemps-Redoute, froze implementation of a deal that should have resulted to its unit, Finaref, taking over management from Cetelem of EUR1.2 billion in customer credits at retailer PPR's home furnishing chain Conforama. The move is seen to clear the way for a EUR3 billion-plus sale of Finaref, PPR's consumer credit arm, people familiar with the matter told Dow Jones. The move to sell Finaref, its profitable arm, is an attempt for PPR to trim down EUR7 billion of debt and shore up battered balance sheet. The deal, which was originally signed in September last year, provides that Finaref takes over full management of the Conforama credit business this month from Facet, a joint venture between PPR's consumer finance unit and Cetelem. Cetelem agreed at the same time to sell its 39% stake in Facet, which is understood as an important part of the Finaref sale as it accounts for around 20% of the consumer credit arm's outstanding credits. Since Cetelem is interested in buying Finaref, "there would be no point in parting with its share of the business only to buy it back," said a retail analyst in Paris, who resolved to remain anonymous. Cetelem, the largest consumer credit company in the country, is a unit of BNP Paribas. It is vying with Sofinco, the consumer finance arm of bank Credit Agricole SA and market number two, in the race for Finaref. A spokeswoman for PPR reportedly refused to comment, while a spokeswoman for Cetelem confirmed that it is indeed interested in Finaref. CONTACT: PPR Investor Relations: David Newhouse Phone: +33 1 44 90 63 23; E-mail: dnewhouse@pprgroup.com or Alexandre de Brettes Phone: +33 1 44 90 61 49; E-mail: adebrettes@pprgroup.com Media Relations: Juliette Psaume Phone: +33 1 44 90 63 02; E-mail: jpsaume@pprgroup.com or Taylor Rafferty London: Tel: +44 20 7936 0400, New York: +1 212-889-4350; E-mail: ppr@taylor-rafferty.com ============= G E R M A N Y ============= DEUTSCHE TELEKOM: May Freeze Dividends, Sell More Assets -------------------------------------------------------- Deutsche Telekom AG may decide to sacrifice dividends and sell more assets to reduce EUR64.2 billion (USD62.5 billion) in debt. Europe's largest phone company may opt to reduce or omit its 2002 dividend and sell its Asian mobile-phone businesses, a company spokeswoman told Bloomberg. Jens Raiser, who helps manage EUR7.5 billion in stocks including Deutsche Telekom shares for Trinkhaus Capital Management in Dusseldorf, affirmed that they could use the money to service obligations of "higher priority". Interim Chief Executive Officer Helmut Sihler is targeting to reduce the company's debt burden to EUR50 billion by the end of 2003 through asset sales and cost cutting measures. The company last week announced plans to eliminate as many as 55,000 jobs through 2005 to cut costs-a move which board member Josef Brauner said would save the company as much as EUR2 billion annually after they are completed. The company's strategic review, which is expected to reveal the freezing of dividends, is scheduled for release on November 14. COMMERZBANK AG: Sues Morgan Stanley on Interest-Rate Swap --------------------------------------------------------- Commerzbank AG filed a lawsuit against Morgan Stanley for EUR985,000 (USD960000) plus interest that the securities firm allegedly did not make payments in an interest-rate swap. According to court filings cited by Bloomberg, the deal was agreed between the parties on June 17 through brokerage Tradition U.K. Ltd., via telephone calls and e-mails. On July 4, Commerzbank requested Morgan Stanley via e-mail to confirm the swap, which the latter denied having knowledge about. The swap amounted to a EUR985,000-loss on Commerzbank's account, and the German bank is claiming those damages and interest at money-market rates plus 2% points. Commerzbank wanted to execute the swap to insure other trades it had used to hedge an option on a swap, or swaption, that it exercised June 17, the Bloomberg report says. The German bank is also suing Tradition on grounds that the brokerage has the responsibility to make sure that the trade is executed. Spokesperson from all the concerned companies reportedly declined to comment. ========= I T A L Y ========= TELECOM ITALIA: Announces Completion of Imser Split --------------------------------------------------- Today the split of Imser S.p.A., a real estate company 60%-owned by Beni Stabili and 40%-owned by Telecom Italia, established following Telecom Italia´s property spin-off undertaken in 2000, was finalized. Following the split, 100%-controlled Telecom Italia Company EMSA Srl will acquire a real estate portfolio consisting of 158 buildings with a balance sheet value of around EUR820 million (prior to depreciation). This portfolio will become part of Progetto Tiglio. Lazard acted as advisor to Telecom Italia for this operation. Under the terms of the agreement, Imser 60 Srl is taking over a real estate portfolio comprising 227 buildings with a balance sheet value of some EUR1,230 million (prior to depreciation). This company will be 98% owned by Beni Stabili (directly and through 100% Beni Stabili subsidiary Immobiliare Italia), and 2% owned by Telecom Italia. Imser 60 is in the final stages of restructuring its debt through the securitization of cash flow generated by rental fees from its properties. Lehman Brothers and Morgan Stanley are lead arrangers for this deal. =========== P O L A N D =========== DAEWOO-FSO: Contract with MG Rover To be Signed By Year-End ----------------------------------------------------------- The final contract between British carmaker MG Rover and creditors of Daewoo-FSO to create a business, which will engage in construction of Rover cars in Poland, is expected finished by the end of the year. The New Small Company is scheduled to start operation in the second half of 2003, a report from Warsaw Business Journal says. Daewoo-FSO shareholders on Wednesday have agreed to provide PLN1.6 billion to help the debt-laden manufacturer pay loans to Daewoo Motor Co., the company's parent, which filed for creditor protection in Korea. It was decided, and agreed by the court commissioner of Daewoo headquarters in Korea, that debts totaling PLN 1.6 billion will be swapped for Daewoo-FSO shares. The amount has been estimated to cover net losses of PLN1.1 billion in 2001. The deal, however, is still subject for approval from the Korean commercial court and the company's creditors. A pronouncement on the decision is expected on December 31, 2002. ELEKTRIM SA: Takes Actions To Dispose Stake in Elektrim Megadex --------------------------------------------------------------- The Management Board of Elektrim S.A. announces that it has taken actions aimed at disposing of 26,953,290 shares (100% of shares held) of Elektrim Megadex SA. The nominal value of the above shares is PLN 26,953,290 and they represent 98.7% of EMSA's share capital. On 18 October 2002, Elektrim S.A. started sending individual invitations relating to the sale of the above mentioned stake to several Polish and international companies, primarily significant engineering and construction firms specializing in the power sector. This step had been preceded by preparatory actions conducted by Elektrim S.A., EMSA and Elektrim's advisor in this matter - TDI Towarzystwo Doradztwa Inwestycyjnego Sp. z o.o., which included, among others, the preparation of an investment memorandum and a series of sounding discussions with potential investors. The list of companies interested in the transaction has not been closed yet. The deadline for placing initial bids is 8 November 2002. Elektrim's intention is to appoint an investor for EMSA by the end of 2002. The reason for the sale of EMSA is the need to meet liabilities towards bondholders and other creditors. The sale will also enable to strengthen EMSA's market position as the main contractor in the EUR 377 mm project of a 460 MW unit in Zespól Elektrowni Patnów-Adamów-Konin S.A. power plants (Patnów II project). Owing to the importance of Patnów II project for PAK as well as Elektrim S.A. it is Elektrim's intention to attract an investor for EMSA with a strong position, primarily in the power sector, who would significantly strengthen the Company and enhance its credibility for clients and financial institutions. NETIA HOLDINGS: Shareholders' Meeting to Convene on November 14 --------------------------------------------------------------- Netia Holdings S.A. (WSE: NET), Poland's largest alternative provider of fixed-line telecommunications services (in terms of value of generated revenues), will hold an Extraordinary General Meeting of Shareholders in Warsaw on November 14, 2002, to re-adopt certain shareholders' resolutions from the Ordinary General Meeting of Shareholders held on June 18, 2002. Netia is proposing to re-adopt the resolutions regarding the issuance of series "H" shares, previously adopted by the Ordinary General Meeting of Shareholders on June 18, 2002, pursuant to resolutions adopted by the Extraordinary General Meeting of Shareholders on March 12, 2002, in connection with the Company's ongoing restructuring. Pursuant to Polish law, a resolution increasing the Company's share capital may not be filed with the registry court later than six months after its adoption. The re-adoption therefore extends the time during which the share capital increase can be registered until at least December 31, 2002. Arrangement proceedings in connection with Netia's restructuring were opened in Poland on May 15, 2002. Netia Holdings SA's 13.125% bonds due 2009 (NETH09NLN1), DebtTraders reports, are trading at 17 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NETH09NLN1 for real-time bond pricing. ============================= S L O V A K R E P U B L I C ============================= ZETOR: New Operator to Displace 1000 Employees ---------------------------------------------- Slovak HTC holding, the new owner of Zetor, plans to lay off around 1000 staff or about one-third of the tractor producer's current workforce, says Prague Business Journal. Zetor, which launched a restructuring process last year due to production problems, expects to make another loss this year after draining CZK178 million in the first seven months of 2002. HTC Holding acquired a majority stake in Zetor for CZK310 million while the Brno-based company was in liquidation. Zetor, which gets 95% of its sales from exports, projects to increase total production to around 4,300 tractors from the 3,500 productions last year. =========== S W E D E N =========== LM ERICSSON: To Develop and Supply Solutions for WLAN Access ------------------------------------------------------------ Ericsson (Nasdaq:ERICY) chooses Agere and Proxim to jointly develop and supply telecom operators with complete end-to-end solutions for WLAN (Wi-Fi) access, integrating hot spot access with mobile 2G and 3G networks. Local access to high-speed data (called WLAN or Wi-Fi) is an increasingly important service for users of handheld devices like laptops and notebook computers. Ericsson believes that integrating indoor and Public WLAN "Wi-Fi hotspots" with mobile 2G and 3G networks is a winning business concept for the future. The unique combination of the three undisputed leaders in WLAN-technology and mobile systems respectively will ensure that mobile operators get a leading edge in this fast growing market. The new partnership brings new benefits to both operators and end-users. Ericsson's Mobile Operator WLAN enables operators to integrate WLAN with their existing 2G and 3G mobile business, reusing investments made in core infrastructure, subscriber management, billing and authentication. "The operators can offer customers attractive value added service packages, combining the different features of both WLAN and mobile technologies, also creating new revenue streams from locally adapted content," says Torbjorn Nilsson, Senior Vice President, Marketing & Strategic Business Development, Ericsson. "And since the solutions are based on standard mobile phone SIM-card technology, using public WLAN will be as easy to use as a mobile phone." From the end-users point of view, it allows them to take advantage of WLANs at hotspots, and roam between cellular and WLAN networks. This is a part of Ericsson's "Always best connected" concept. It also means simpler handling, added security and cost control through unified billing. Ericsson will tailor solutions for different emerging needs of both fixed line and mobile operators, based on open standards. They will include all necessary components like 802.11b modules, software and SIM technology provided by Agere, 802.11 compliant Access Points for 2,4 and 5 GHz bands provided by Proxim, and IETF/3GPP compliant Authentication Servers provided by Ericsson. Ericsson is shaping the future of Mobile and Broadband Internet communications through its continuous technology leadership. Providing innovative solutions in more than 140 countries, Ericsson is helping to create the most powerful communication companies in the world. Read more at http://www.ericsson.com/press About Proxim Proxim Corporation is a leading provider of high-performance wireless local area networking (WLAN) and wireless wide area networking (WWAN) products. The company holds leading shares in the markets for 802.11b, 802.11a, and license-exempt fixed wireless networking systems. Proxim's systems securely connect networks within buildings, as well as between locations up to 40 miles apart, providing enterprises, service providers, and consumers with unprecedented networking capacity and mobility. Proxim Corporation was created by the merger between Proxim, Inc. and Western Multiplex Corporation in March 2002. Its web site is http://www.proxim.com. About Agere Agere Systems is a premier provider of advanced integrated circuit (IC) solutions that access, move and store network information. Agere's IC solutions form the building blocks for a broad range of communications and computing applications. The company is the leader in providing storage solutions for hard disk drives with its read-channel chips, preamplifiers and system-on-a-chip solutions, and the No. 2 provider of Wi-Fi solutions for wireless LAN applications. For network equipment providers, Agere is a leading supplier of ICs for wired communications, network switching and access, and ATM and SONET/SDH solutions. In addition, Agere is the No. 2 supplier of application-specific ICs (Asics) for communications applications. More information at http://www.agere.com. CONTACT: Ericsson, New York Communications: Kathy Egan Phone: 212/685-4030 Email: Pressrelations@ericsson.com or Investor Relations: Glenn Sapadin Phone: 212/685-4030 Email: Investor.relations@ericsson.com LM ERICSSON: To Supply MMS and 2.5G Solution in India ----------------------------------------------------- Ericsson (Nasdaq:ERICY) has been selected by Hutchinson Group in India as sole supplier of an end-to-end MMS solution and GPRS infrastructure for all mobile networks it operates in India. Ericsson will supply GPRS infrastructure and integration services to upgrade Hutchinson's four existing GSM mobile networks in Mumbai, Delhi, Kolkata, Gujarat. "Hutchison is one of the fastest growing cellular operators in India. Ericsson's MMS solution allows it to offer more value to its customers and will also add to its revenues through increased network traffic and new tariff options," says Jan Campbell, Managing Director, Ericsson India Pvt. Ltd. Ericsson's GPRS system makes it possible for Hutchison to offer users an always-on connectivity and higher bandwidth for data packet transfer. MMS takes clear advantage of these two features, enhancing personal connectivity and productivity through more immediate exchange of rich content. With Ericsson's GPRS and MMS solutions, Hutchison is also taking an important step forward in the evolution to 3G mobile networks. Last year, Ericsson won contracts in a separate deal to provide GSM/GPRS infrastructure for Hutchison's three new mobile networks in Karnataka, Andhra Pradesh and Chennai. Ericsson is the undisputed market leader for MMS, with 50% of MMS subscribers worldwide. Ericsson has 36 commercial agreements and more than 90 trials at customer sites in all major markets and through its Mobility World. Ericsson's MMS solution is fully 3GPP compliant and is an open multivendor solution. Ericsson is shaping the future of Mobile and Broadband Internet communications through its continuous technology leadership. Providing innovative solutions in more than 140 countries, Ericsson is helping to create the most powerful communication companies in the world. About Hutchison The group has identified and nurtured several pillars that will sustain growth and give it a real competitive advantage: world-class customer service, innovative value-added services and reliable technology. Hutchison has recently been rated by an independent survey as "second to none on transparency, organizational ethics, social responsiveness, service quality and customer satisfaction." This researched article (India's Most Respected Companies-Sectoral Snapshots) appeared in Business World dated 24 September 2001. About Ericsson India Ericsson India has been offering a complete spectrum of solutions to the Indian telecom industry for close to 100 years and contributed to its growth and development. Ericsson has played a key role in spreading the cellular revolution in India. With 29 out of the 57 existing GSM networks supplied by Ericsson in India, the company today has a market share of more than 40 per cent. Today, Ericsson's digital switching systems handle over 75% of the internati onal calls made through VSNL gateway. Ericsson has also installed over 1.3 million fixed lines in India besides supplying telecom infrastructure equipment in the area of switching and transmission to BSNL, MTNL, Defence and Indian Railways CONTACT: For Ericsson Communications Kathy Egan Phone: 212/685-4030 E-mail: Pressrelations@ericsson.com or Investor Relations Glenn Sapadin Phone: 212/685-4030 E-mail: Investor.relations@ericsson.com ===================== S W I T Z E R L A N D ===================== ABB: To Sell Oil, Gas and Petrochemical Business To Cut Debts ------------------------------------------------------------- Swiss engineering company, ABB Ltd., plans to sell its oil, gas and petrochemical unit in the next 12 months after announcing its intention to abandon profit goal due to a continued market weakness. The oil, gas and petrochemicals unit is the company's second least profitable, producing USD33 million in quarterly earnings. Halliburton Co., Cameron Cooper Corp., Baker Hughes Inc., FMC Corp. and Amec Inc. are prospective bidders, says Nils Hovtun, an analyst at brokerage Fondsfinans ASA. ABB has earlier put up its building-service and financial divisions for sale. Dormann plans to cut costs by USD800 million over the next 18 months from merging its main businesses into two units to help pay off debt. Without naming any figures, he also did not rule out the possibility of cutting jobs. The Swiss company projects to generate USD18 billion in annual revenue, less than half the USD50 billion target ABB aimed for three years ago. Chief Executive Officer Juergen Dormann disclosed that losses in the third quarter widened to USD183 million from USD13 million in the last three months. ABB: Acts To Lower Cost Base After Weak Third Quarter Results ------------------------------------------------------------- ABB today announced measures to lower its cost base after a fall in orders and earnings before interest and taxes (EBIT) in the third quarter of 2002. The decline was due to a weakening economic climate, higher project execution costs, investment write-downs by New Ventures, and later-than-expected benefits of the restructuring program initiated in July 2001. "Given the weaker economic climate, many of our businesses performed well, with three out of five divisions increasing EBIT margins," said chairman and CEO Jürgen Dormann. "But it is clear our overall cost base is still much too high, and that the benefits from our restructuring program have been slower than expected."Dormann announced a series of measures to increase operational performance and cash flow, and said ABB will streamline its divisional structures to boost its leading positions in its core power and automation technologies, secure greater external focus and build a sustainable lower cost base. The Executive Committee will be reduced from eight to six members. The core businesses will be combined into two divisions, Power Technologies and Automation Technologies. The Oil, Gas and Petrochemicals division is kept as a separate unit, and will take an active part in the sector consolidation. The Group Processes division will be dissolved. In addition to the ongoing program to lower costs by US$ 500 million - which will have full effect from mid-year 2003 - the Board of Directors decided to initiate measures to further reduce the cost base by around 4 percent of revenues, or US$ 800 million over the next 18 months. "Our organizational measures will allow us to build on our leadership positions in power and automation technologies, and secure competitive cost and profitability levels even in a weak market," Dormann added. "Achieving a significantly lower cost base is a key priority." Dormann said ABB's financial position had improved considerably since March, and confirmed that it was on track to reduce net debt by at least US$ 1.5 billion by year-end 2002 from US$ 4.1 billion at year-end 2001. Results summary (third quarter 2002 compared to third quarter 2001) - Orders down 13 percent in local currencies due to weaker markets and lower large orders (down US$ 508 million) - Revenues decreased 7 percent in local currencies - EBIT fell 72 percent due to weaker markets, restructuring costs of US$ 54 million, higher project execution costs, and investment write-downs of US$ 17 million - Net income amounted to US$ -183 million compared to US$ 23 million in the third quarter of 2001 after US$ -125 million in discontinued operations, arising from the sale of Structured Finance - Cash flow from operations was USD -138 million compared to US$ 202 million in the same period last year, after asbestos cash payments of USD 54 million (included for the first time in net cash provided from operating activities in order to simplify the cash flow presentation) - Net debt was USD 5.5 billion at the end of September compared to USD 5.2 billion at the end of June, mainly due to higher operational investments -U.S. subsidiary Combustion Engineering reported a 5 percent increase in new asbestos claims compared to the second quarter of 2002. Settled claims (excluding West Virginia) rose 9 percent over the same period. - - Claims outstanding stood at 111,000, up from 102,700 at the end of the second quarter. Cash payments were down slightly at US$ 54 million (second quarter 2002: USD 55 million). To see full Disclosure: http://bankrupt.com/misc/ABB.pdf To see Financial Results for the Third Quarter: http://bankrupt.com/misc/ABBfinancials.pdf CREDIT SUISSE: Moody's Downgrades Management Rating of Unit ----------------------------------------------------------- Moody's Investors Service downgraded the management quality rating of Credit Suisse Asset Management Immobilien Kapitalanlagegesellschaft mbH (Credit Suisse) to A3. The rating agency notes that after rapid significant turnover of staff at both senior and secondary positions, the open-ended real estate fund management arm of Credit Suisse has put the current management structure under performance pressure. The turnover as well as the dramatic inflows of money into CS Euroreal has stressed the management's ability to keep the fund invested in real estate, says Moody's. As a result, Moody's also lowered CS-Euroreal's investment quality rating to Aa2 from Aa1. The failure of CS Euroreal resulted to liquidity levels momentarily exceeding 50% of the value of the entire fund, the rating agency says. Moody's also notes Credit Suisse's plan to improve their IT systems, which will allow them to better monitor and control the management of their properties. Although Moody's does not project a negative opinion of the investment, the rating agency takes into consideration that "these recent events represent a significant change to the investment style of the fund and intrinsically increases the fund's risk profile." CREDIT SUISSE: Ties with ABB To Compound Own Losses --------------------------------------------------- Financial troubles that plague engineering company ABB Ltd. may also pull down Switzerland's No. 2 bank. ABB has revised its 2002 earnings outlook downward as a result of lingering market weakness and slower than expected benefits from its cost reduction program. Credit Suisse Group stands to incur additional losses because of a USD260-million loan to ABB Ltd., Bloomberg says. The company is also seen to lose from ABB shares that are deposited with stock of seven other companies as collateral for loans of about CHF1 billion (USD663 million) to Martin Ebner's BZ Group Holding AG, analysts say. Ebner is reportedly scheduled to meet with his lenders to discuss declines in the shares. The value of some of the securities went down with the recent price fall of ABB, said Pictet & Cie analysts Claudia von Tuerk and Peter Thorne. Analyst Christian Stark of Credit Agricole Indosuez Cheuvreux estimates Credit Suisse's potential losses from ABB and Ebner's BZ Group to total CHF650 million or about 2% of the bank's market value of CHF29.4 billion. The shares in the Swiss bank fell 8% Wednesday as investors worry that the bank may sustain losses from loans to ABB and Ebner. Swiss financier Martin Ebner is Credit Suisse's largest shareholder. His stakes in companies including ABB, Credit Suisse and Hero AG have lost CHF90 million after Ebner's lenders gave him until July 2003 to repay loans, sasys Zurich's Tages-Anzeiger. CREDIT SUISSE: Asset Management Launches More Traded Index Funds ----------------------------------------------------------------- Credit Suisse Asset Management is expanding its range of exchange traded funds with the launch of four new XMTCH products on October 24, 2002. Credit Suisse Asset Management is expanding its range of exchange traded funds with the launch of four new XMTCH products on October 24, 2002. Exchange traded funds (ETFs) are investment funds that are listed on an exchange and are traded continuously. Most of them are passively managed funds whose objective is to track the performance of an underlying index. The liquidity, transparency and cost-effectiveness of ETFs make them an attractive instrument for passive investors. The market in traded index funds is growing at an impressive rate. Since the launch of the first ETFs in Europe last year, assets under management have soared to USD 9 billion. This year has seen a record number of traded index fund launches in Europe, with a total of 35 new ETFs brought to market. In March 2001, Credit Suisse Asset Management launched XMTCH on SMI®, the first Swiss ETF. XMTCH on SMI® has since become a leader in the ETF market: with total assets of CHF 1.1 billion it is Switzerland's biggest traded index fund, and the third largest in Europe. Now investors can choose from an additional four products in the XMTCH family: one country fund and three global sector funds. - XMTCH (Lux) on MSCI Euro Tracks the MSCI Euro IndexSM, which contains the 120 biggest companies in the euro area. - XMTCH (Lux) on DJ Banks Titans Tracks the Dow Jones Banks Titans 30 Index® of the 30 leading companies in the global banking sector. - XMTCH (Lux) on DJ Healthcare Titans Tracks the Dow Jones Healthcare Titans 30 Index® of the 30 leading companies in the global healthcare sector. - XMTCH (Lux) on DJ Technology Titans Tracks the Dow Jones Technology Titans 30 Index® of the 30 leading companies in the global technology sector. When creating the new XMTCH funds we found excellent partners in Morgan Stanley Capital International Inc. and Dow Jones Indexes, two of the leading index providers worldwide boasting vast experience and global recognition. Like the XMTCH on SMI®, the new XMTCH funds have been admitted for trading on the SWX Swiss Exchange and may be bought or sold at the prevailing market price through a bank or broker at any time during normal trading hours. The fact that they are continuously traded means that XMTCH funds have similar flexibility and liquidity to equities. Henry Wegmann, CEO CSAM Switzerland comments, "This is another innovation from CSAM: now, for the first time ever, global sector ETFs can be traded on the SWX." XMTCH funds are suitable for a wide variety of investment strategies. Both private and institutional investors can use them as a core instrument for index tracking or cashflow and risk management, and they are also an ideal asset reallocation tool. Markus Hübscher, XMTCH ETF fund manager, says, "After the overwhelming success of XMTCH on SMI® we are confident that the new ETFs will also generate a lot of interest." Fund details Name of fund: XMTCH on SMI® Index: SMI® Swiss Securities Number: 889976 ISIN: CH0008899764 Fund currency: CHF Management fee p.a.: 0.35% Financial year: June 1 - May 31 Distribution: once or twice yearly Exchange listing: SWX Swiss Exchange Trading currency: CHF First day of trading on the SWX: March 15, 2001 Name of fund: XMTCH (Lux) on MSCI Euro Index: MSCI Euro IndexSM Swiss Securities Number: 1480005 ISIN: LU0154139132 Fund currency: EUR Management fee p.a.: 0.40% Financial year: June 1 - May 31 Distribution: once or twice yearly Exchange listing: SWX Swiss Exchange Trading currency: EUR First day of trading on the SWX: October 24, 2002 Name of fund: XMTCH (Lux) on DJ Banks Titans Index: Dow Jones Banks Titans 30 Index® Swiss Securities Number: 1480007 ISIN: LU0154141468 Fund currency: USD Management fee p.a.: 0.50% Financial year: June 1 - May 31 Distribution: once or twice yearly Exchange listing: SWX Swiss Exchange Trading currency: USD First day of trading on the SWX: October 24, 2002 Name of fund: XMTCH (Lux) on DJ Healthcare Titans Index: Dow Jones Healthcare Titans 30 Index® Swiss Securities Number: 1480006 ISIN: LU0154140650 Fund currency: USD Management fee p.a.: 0.50% Financial year: June 1 - May 31 Distribution: once or twice yearly Exchange listing: SWX Swiss Exchange Trading currency: USD First day of trading on the SWX: October 24, 2002 Name of fund: XMTCH (Lux) on DJ Technology Titans Index: Dow Jones Technology Titans 30 Index® Swiss Securities Number: 1480012 ISIN: LU0154141542 Fund currency: USD Management fee p.a.: 0.50% Financial year: June 1 - May 31 Distribution: once or twice yearly Exchange listing: SWX Swiss Exchange Trading currency: USD First day of trading on the SWX: October 24, 2002 Credit Suisse Asset Management is the institutional and mutual fund asset management arm of Credit Suisse First Boston, part of the Credit Suisse Group, one of the world's largest financial organizations with approximately USD 867.6 billion in assets under management. Credit Suisse First Boston (CSFB) is a leading global investment bank serving institutional, corporate, government and individual clients. CSFB's businesses include securities underwriting, sales and trading, investment banking, private equity, financial advisory services, investment research, venture capital, correspondent brokerage services and asset management. CSFB operates in 77 locations in 36 countries across six continents. The Firm is a business unit of the Zurich-based Credit Suisse Group, a leading global financial services company. For more information on Credit Suisse First Boston, please visit our Web site at www.csfb.com. As of June 30, 2002, Credit Suisse Asset Management employed 2,262 people worldwide and had global assets under management of approximately USD 306.9 billion. Please note that this is not an offer for advisory services by Credit Suisse Asset Management. For more information on Credit Suisse Asset Management, please visit our Web site at www.csam.com. "Dow Jones", "Dow Jones Healthcare Titans 30 Index", "Dow Jones Banks Titans 30 Index" and "Dow Jones Technology Titans 30 Index" are service marks of Dow Jones & Company, Inc. "MSCI Euro IndexSM" is a service mark of Morgan Stanley Capital International Inc. "SMI" is a registered trademark of the SWX Swiss Exchange. Neither Dow Jones & Company, Inc. nor Morgan Stanley Capital International Inc. nor SWX Swiss Exchange sponsor, endorse, sell or promote the XMTCH ETFs, nor do they make any recommendation that any person invest in them. MSCI Euro Index is a trade or service mark(s) of Morgan Stanley Capital International Inc. ("MSCI") and its affiliates and has/have been licensed for use for certain purposes by Credit Suisse Asset Management Fund Service (Luxembourg) S.A. XMTCH (Lux) on MSCI Euro, based on the MSCI Euro index, has not been passed on by MSCI as to its legality or suitability, and is not issued, sponsored, endorsed, sold or promoted by MSCI. MSCI makes no warranties and bears no liability with respect to the Fund. MSCI has no responsibility for and does not participate in the management of the Fund assets or sale of the Fund shares. The Prospectus contains a more detailed description of the limited relationship MSCI has with Credit Suisse Asset Management Fund Service (Luxembourg) SA and the Fund. No purchaser, seller or holder of this security, or any other person or entity, should use or refer to any MSCI trade name, trademark or service mark to sponsor, endorse, market or promote this security without first contacting MSCI to determine whether MSCI's permission is required. Under no circumstances may any person or entity claim any affiliation with MSCI without the prior written permission of MSCI. The fund manager of the investment fund under Swiss law, XMTCH on SMI®, and representative in Switzerland of the umbrella fund under Luxembourg law, XMTCH (Lux), is Credit Suisse Asset Management Funds, Zurich. The custodian bank of XMTCH on SMI® and paying agent in Switzerland for XMTCH (Lux) is Credit Suisse, Zurich. Subscriptions are only valid on the basis of the current sales prospectus and latest annual report (or six-monthly report, if this is more recent). Sales prospectuses, copies of the contractual terms and conditions and the latest annual or six-monthly report may be obtained free of charge from any bank in the Credit Suisse Group. Note: Credit Suisse Group reports a net loss of CHF 579 million and a net operating loss, excluding the amortization of acquired intangible assets and goodwill, of CHF 285 million in the second quarter of 2002. CONTACT: Sandrine Mehr SWX Swiss Exchange Corporate Communications Telephone Phone: +41 (0)1 333 4248 Drew Welton Credit Suisse Asset Management Funds Sales & Marketing Telephone Phone: +41 (0)1 333 4959 Sandra Brändli SWX Swiss Exchange Corporate Communications Telephone Phone: +41 (0)1 229 23 85 Carlo Kraus MSCI, Zurich Telephone Phone: +41 (0)1 220 93 00 Simona Deckers Dow Jones Europe team Telephone Phone: +49 (0)69 971 42894 Stephanie Schleidt Dow Jones Europe team Telephone Phone: +49 (0)69 971 42893 =========================== U N I T E D K I N G D O M =========================== AES DRAX: Parent Sees Need for Additional Funding ------------------------------------------------- US Energy group, AES, warns that it may have to provide fresh funding for its UK operation, AES Drax, due to the latter's exposure on a market that suffers from a large power contract with TXU Europe. The group expects to provide USD900 million (GBP645 million) before tax on the unit, which struggles with overcapacity in the wholesale electricity market, says Times Online. TXU Europe recently resorted to selling its electricity business to Powergen to avoid going into administration. According to the report, AES said TXU Europe had paid its GBP20 million bill but the hedging arrangements were being negotiated. Standard & Poor's, which cut AES Drax's rating to default early this week, doubts that bondholders would be able to recover investments after the sale of TXU Europe. TXU Europe has about GBP1.2 billion outstanding senior and GBP270 million subordinated debt. AMEY PLC: Shareholder Asks for Break-up or Sale of Business ----------------------------------------------------------- Support services group, Amey, whose shares has fallen by 93% since January, has been urged to decide on what action to take in order to raise investor value, says Times Online. Amey is currently selling off equity stakes in PFI projects in a deal that could raise about GBP70 million for its battered balance sheet. Fund management group, Meditor, reportedly asked the troubled group's chairman, Sir Ian Robinson, to choose between breaking the business up and offering it for sale. Meditor has a 15% stake in Amey. The shareholder sees the options as the most attractive one in the short term and had encouraged Amey's board to weigh alternatives. Amey maintains roads and railways and is one of the largest contractors involved in the Government's Private Finance Initiative program. The company's shares went into trouble as a result of accounting change that saw its EUR55 million profit turning into a EUR18 million loss in March. The company is worth EUR70 million after accounting revisions dragged down share value. It went down again to 60% after Michael Kayser, previous finance director, resigned last Thursday only after serving five weeks in the job. Mr. Kayser is understood to have left the post after a conflict with Brian Staples, the company's chief executive, on writing down the value of some company assets. CABLE & WIRELESS: Signs Services Agreement with America Online -------------------------------------------------------------- Cable & Wireless (NYSE: CWP), the global telecommunications group, on Tuesday announced a multi-year agreement with America Online, Inc., the world's leading interactive services company, to become one of America Online's global providers of optical capacity. Under the agreement, America Online has purchased trans-Pacific network capacity from Cable & Wireless to expand the reach of America Online's global network. Cable & Wireless' solution will support America Online's network services through a variety of platforms. "Cable & Wireless is focused on providing its customers with the global network infrastructure and services to help them open new markets and drive revenue growth," said Jon Yount, senior vice president, Service Providers Americas, Cable & Wireless. "Our agreement with America Online is further evidence that our solution can deliver both quality of service and flexibility." "Cable & Wireless' global network solutions provide us with trans-Pacific capacity that is both reliable and cost-effective, and their ability to meet our aggressive delivery schedule was a key issue in our decision to expand our relationship with Cable & Wireless," said Mark Muehl, vice president of Internet Operations, America Online, Inc. About Cable & Wireless Cable & Wireless is a major global telecommunications business with revenue of over GBP5.9 billion (USD8.6 billion) in the year to 31 March 2002 and customers in 80 countries and consists of two core and complementary divisions: Cable & Wireless Regional and Cable & Wireless Global. Cable & Wireless Regional offers a full range of telecommunications services in 33 countries around the world. Cable & Wireless Global's focus is on IP (internet protocol) and data services and solutions for business customers. It has developed advanced IP networks and value-added services in the US, Europe and the Asia-Pacific region in support of this strategy. With its financial strength and the capability of its global IP infrastructure, Cable & Wireless holds a unique position in terms of global coverage and services to business customers. For more information about Cable & Wireless, go to www.cw.com. CONTACT: Rolyn Parker Cable & Wireless Tel: 1 415 738 4643 E-mail: rolyn.parker@cw.com P & O PRINCESS: Withdraws Recommendation Of Caribbean Proposal -------------------------------------------------------------- Amicable arrangements for termination of existing agreements with Royal Caribbean The Board of P&O Princess Cruises plc welcomes the announcement today from Carnival Corporation of its commitment to make an offer of a dual listed company ('DLC') combination with P&O Princess. This offer is subject to the Takeover Code and is dependent upon satisfaction of certain pre-conditions. This proposal from Carnival comes after two weeks of productive negotiations, which were initiated by P&O Princess after FTC approval was received. Carnival DLC Proposal Full details of the Carnival DLC proposal are included in Carnival's announcement. A copy of that announcement will be sent to P&O Princess shareholders shortly and will be placed on the Carnival website (www.carnivalcorp.com) in due course. In summary, the Carnival proposal provides for: - The formation of a DLC in which each P&O Princess share would be equivalent to 0.3004 Carnival shares, the same ratio as in Carnival's existing share exchange offer which was announced on 7 February 2002. - A partial share offer that would enable P&O Princess shareholders to exchange their existing P&O Princess shares for newly issued Carnival shares on the basis of 0.3004 new Carnival shares for each P&O Princess share (the 'Partial Share Offer'). The Partial Share Offer is limited in aggregate to a maximum of 20 per cent. of P&O Princess' issued share capital and will provide for pro ration if acceptances exceed this limit. - A DLC structure in which the boards of Carnival and P&O Princess would be identical, with the combined companies managed by a unified executive management team. The DLC agreements between the two companies would align their economic interests and enable them to operate as a single economic enterprise. - The expected continuation of the existing primary listings of Carnival on the NYSE and P&O Princess on the London Stock Exchange and the existing index participation of Carnival in the S&P 500 and of P&O Princess in the FTSE 100, subject to the normal approvals. - Depending on the extent to which the Partial Share Offer is accepted, between 21 per cent. and 26 per cent. of the economic and voting interest in the combined entity would be represented by the P&O Princess shares listed on the London Stock Exchange. Based on yesterday's closing price this would translate into an aggregate market capitalisation of between Ł2.6 billion and Ł3.2 billion. If Carnival's DLC offer is accepted and approved by the Board and shareholders of P&O Princess, completion of Carnival's DLC proposal would be expected to occur during the first quarter of 2003. Carnival's offer is subject to a number of pre-conditions which are within the control of P&O Princess and its shareholders. These are: - the P&O Princess board withdrawing its recommendation of the Royal Caribbean DLC proposal within 48 hours after Carnival's announcement and not reinstating that recommendation; - the Royal Caribbean DLC being abandoned; - the joint venture between P&O Princess and Royal Caribbean being terminated as described in Carnival's announcement; and - P&O Princess accepting, and its Board approving and recommending, the Carnival DLC offer. If these preconditions are not satisfied or waived by 10 January 2003 then the DLC offer would not be made and Carnival would be obliged to proceed with its Existing Share Exchange Offer. In addition, Carnival will be permitted to withdraw its DLC offer prior to 10 January, 2003 in certain limited circumstances, including if: (i) the Board announces that it is not going to recommend Carnival's DLC proposal; (ii) the Board recommends a competing offer; or (iii) a third party makes an offer subject to the Takeover Code, or otherwise legally binding, which Carnival reasonably determines is likely to be more attractive to P&O Princess shareholders than its DLC offer. In these circumstances, if it chooses to withdraw its DLC offer, Carnival would be obliged to proceed with its Existing Share Exchange Offer. Assuming the pre-conditions are satisfied or waived and Carnival's DLC offer is made and accepted by P&O Princess, Carnival will not be obliged to, and will not, proceed with the Existing Share Exchange Offer. In particular, if P&O Princess' shareholders do not approve Carnival's DLC offer at the Extraordinary General Meeting held for that purpose, the Existing Share Exchange Offer would not be re-instated. P&O Princess' welcomes Carnival's proposal The Board welcomes Carnival's DLC proposal because: - by offering a DLC, Carnival have committed to a takeover structure that allows those P&O Princess shareholders who are unable or unwilling to hold US-listed shares to retain their interest in the combination. This avoids the prospect of these shareholders being forced to sell for cash at a time not of their choosing and when it might not be in their best interests to do so; and - by offering a partial share exchange alternative Carnival have also sought to accommodate those P&O Princess shareholders who would prefer to hold their interest in the combination in the form of US-listed shares. The Board believes that a DLC combination with Carnival would be an attractive opportunity for P&O Princess shareholders. The structure would allow all shareholders to retain their exposure to the cruise industry and its significant growth potential in North America, Europe and the rest of the world. Combining Carnival and P&O Princess would create the leading company in the industry, with a wide portfolio of complementary brands, including some of the best known and respected cruise brands in the world. Furthermore, the Board believes that significant synergies would be realised by the combination. The Board notes that the Carnival DLC would be structured in broadly the same way as the proposed DLC combination with Royal Caribbean, although the UK-listed company would be smaller relative to the size of the US-listed company. In addition, shareholders should note other differences between the two proposals, relating mainly to certain circumstances in which the DLC structure could be unwound without a majority vote of the shareholders of the UK-listed company, as detailed in Carnival's announcement. However, the Board is satisfied that this could occur only in exceptional circumstances and further has been assured by Carnival that it is committed to maintaining the DLC structure. Board Recommendation To date the Board has been recommending the Royal Caribbean DLC proposal. The Board believes that a DLC combination with either Carnival or Royal Caribbean has the potential to accelerate the creation of value for shareholders. Having considered the terms of the two DLC proposals, the Board has determined that a DLC combination with Carnival would be financially superior for P&O Princess' shareholders compared with the DLC combination with Royal Caribbean. Since its previous announcement on 4 October 2002 P&O Princess has negotiated the detailed agreements that would implement Carnival's DLC proposal. The pre-conditions that Carnival has attached to its DLC proposal are within the control of P&O Princess and its shareholders. The other limited circumstances in which Carnival can elect not to proceed with its DLC proposal are situations that are likely to benefit P&O Princess shareholders. Based on the foregoing, the Board is satisfied that Carnival is committed to the DLC offer. Accordingly, the Board has withdrawn its recommendation of the Royal Caribbean proposal and has so advised Royal Caribbean. Prior to the 10 January 2003 deadline, the Board will review the Carnival DLC proposal and determine whether, in view of the circumstances at the time, P&O Princess should accept, and the Board should approve and recommend, Carnival's DLC offer. Termination agreement with Royal Caribbean P&O Princess has today signed an agreement with Royal Caribbean, the main points of which are as follows: - the Southern European joint venture agreement will terminate on 1 January 2003 as long as no change of control of either P&O Princess or Royal Caribbean has occurred prior to that date. Accordingly, the benchmark provisions are no longer relevant; - P&O Princess and Royal Caribbean have given each other mutual releases from any liability relating to the joint venture agreement, with these releases being effective immediately. They will remain in effect unless a change of control occurs or is approved by the Board or the shareholders of P&O Princess before 1 January 2003 - the implementation agreement relating to the DLC Combination between P&O Princess and Royal Caribbean has been terminated and both parties have given each other mutual releases from any liability relating to that agreement; and - in light of the Board's withdrawal of its recommendation of the Royal Caribbean DLC proposal, P&O Princess has paid the $62.5 million break fee to Royal Caribbean as contemplated by the implementation agreement. A copy of the new agreement with Royal Caribbean will be available on P&O Princess' website (www.poprincesscruises.com) in due course. Peter Ratcliffe, Chief Executive Officer of P&O Princess said: 'Following our constructive negotiations over the past two weeks, we are pleased that Carnival has put forward a committed DLC offer that would allow all of our shareholders to retain an ongoing interest in a combination of Carnival and P&O Princess. This is important to us given the growth potential of the cruise industry and the exciting prospects for a combined Carnival and P&O Princess group. 'Our Board has determined that the DLC proposed by Carnival would be financially superior to the DLC with Royal Caribbean. With Carnival now committed to make their DLC offer, the Board has decided to withdraw its recommendation of the Royal Caribbean proposal. 'We are also pleased to have been able to put in place arrangements for terminating our agreements with Royal Caribbean on an amicable basis.' CONTACT: P&O Princess Cruises plc Phone: +44 (0) 20 7805 1200 Caroline Keppel-Palmer Phone: +44 (0) 7730 732015 Schroder Salomon Smith Barney Phone: +44 (0) 20 7986 4000 Robert Swannell Wendell Brooks Peter Tague Ian Hart David James (Corporate Broking) Credit Suisse First Boston (Europe) Ltd Phone: +44 (0) 20 7888 8888 Tom Reid (Corporate Broking) Brunswick (London) Phone: +44 (0) 20 7404 5959 John Sunnucks Sophie Fitton Brunswick (New York) Phone: +1 212 333 3810 Steve Lipin Lauren Teggelaar Home Page: http://www.poprincesscruises.com P&O PRINCESS: Franklin Resources Issues Notice of Dealing -------------------------------------------------------- Date of dealing: October 23, 2002 Dealing in: P&O Princess Cruises Plc Class of securities: Ordinary Amount sold: 29,000 Price per unit: 4.7000 Resultant total of the same class owned or controlled: 25,981,213 Percentage of class: 3.7489% Party making disclosure: Franklin Resources Inc. Name Of Fund Management Organisation: Franklin Resources, Inc And Its Affiliates Reason for disclosure: Disclosure because of ownership or control of 1% or more of the class of relevant securities dealt in Signatory: Robert Rosselot Phone: 954-527-7413 ROYAL & SUN: Must Decide On Share Issue Fast - Analysts ------------------------------------------------------- Insurer Royal & Sun Alliance has to decide to ask additional cash from shareholders before other cash-strapped companies beat it out, says analyst. With many other insurance companies in need of capital injection, Royal & Sun may risk losing the opportunity if it does not act soon. ``There is only a finite pool of capital and the longer Royal & Sun waits the more that pool will be depleted,'' said Larissa Knepper, a credit analyst at Barclays Plc. Britain's No. 2 property-casualty insurer has lost 74% of its value this year. It is the second-worst performer in the benchmark FTSE 100 Index as gathered by Bloomberg. Last month, the insurer signed to decide whether it would sell stock on Nov. 7, which if so happens, would be in a rights offer. The firm also declared it may sell more units, reallocate capital from underperforming businesses or buy reinsurance. It also might lower its dividend for a second straight year. The insurer needs additional cash so it can write more business as fees for cover rise at the fastest pace in decades following the Sept. 11 terrorist attacks in the U.S, the report says. Shareholders said, however, that Royal & Sun wouldn't be able to sell stock until the company picks a new CEO to replace Bob Mendelsohn who was fired last month. It is noted, however, that rivals have already completed rights offering while Royal & Sun still looks for the new CEO. ROYAL & SUN: S&P Puts Insurance-Related Deals on CreditWatch ------------------------------------------------------------ Standard & Poor's Ratings Services placed its ratings on various synthetic securities related to Royal & Sun Alliance Insurance Group PLC and its related entities on CreditWatch with negative implications. The action follows the placement of the ratings on Royal Indemnity Co. and Royal & Sun Alliance Insurance PLC on CreditWatch negative on Oct. 23, 2002, and reflects NS Repack Ltd., FSL Funding 3 Ltd., and FSL Funding Ltd. transactions on Royal Indemnity Co. and Royal & Sun Alliance Insurance PLC for additional credit enhancement. According to S&P, Royal & Sun Alliance Insurance Group PLC's subordinated guaranteed bonds are the underlying collateral held by the Corporate Backed Trust Certificates transactions. Ratings Placed On Creditwatch With Negative Implications NS Repack Ltd. USD94 million notes Rating Class To From Notes A/Watch Neg A FSL Funding 3 Ltd. USD40 million floating-rate secured notes Rating Class To From Series 1 A/Watch Neg A FSL Funding 3 Ltd. USD60.5 million floating-rate secured notes Rating Class To From Series 2 A/Watch Neg A FSL Funding Ltd. USD74 million notes Rating Class To From Notes A/Watch Neg A Corporate Backed Trust Certificates Series 2001-12 Trust USD48 million corporate-backed certs Rating Class To From A-1 BBB+/Watch Neg BBB+ Corporate Backed Trust Certificates Royal & Sun Alliance Bond Backed Series 2002-2 Trust USD49.5 million corporate-backed certs Rating Class To From A-1 BBB+/Watch Neg BBB+ Corporate Backed Trust Certificates Royal & Sun Alliance Bond Backed Series 2002-11 Trust USD66.816 million corporate-backed certificates. Rating Class To From A-1 BBB+/Watch Neg BBB+ THE BIG FOOD: Baugur's Full Takeover Offer Not in the Near Future ----------------------------------------------------------------- Baugur's purchase of a 15% stake in The Big Food Group paves the way for a full takeover bid for the troubled frozen foods wholesale company; the Icelandic retailer, though, denies having intention to do so for the present time. Yet, according to Times Online, Jon Asgeir Johannesson, chairman and chief executive, does not rule out the possibility of making an offer in the future. The news of the Bagur's acquisition hoisted BFG's share price 14p or nearly 60 per cent, to 38p. Bagur paid GBP18 million for BGP's shares at up to 40p a share in a transaction dealt through Deutsche Bank. Baugur had earlier offered to takeover for Arcadia but lost to Philip Green in a GBP780 million deal. THE BIG FOOD: Baugur Group Acquires Strategic Stake --------------------------------------------------- Acquisition of a strategic stake in The Big Food Group plc Baugur Group HF has informed The Big Food Group plc (The Big Food Group) that it has a notifiable interest in 51,426,945 shares, representing 14,99% of the issued share capital of The Big Food Group *. This notifiable interest represents a strategic stake in a business that Baugur felt was undervalued by the stock market. Baugur has no current intention to make a bid for The Big Food Group. Jon Asgeir Johannesson, Chairman of Baugur, commented: "We believe that The Big Food Group is an undervalued business. We intend to be a supportive shareholder and look forward to developing a constructive relationship with The Big Food Group's board in due course". * assuming that the total issued number of ordinary shares of 10p is 343,109,788. CONTACT: Gavin Anderson & Company Halldor Larusson Phone: 0207 554 1443 Chris Salt Phone: 0207 554 1464 TXU EUROPE: AES Drax Receives Payment Under Hedging Contract ------------------------------------------------------------ On October 14, 2002, TXU Europe Group plc (TXU Europe), the guarantor under the Hedging Contract with AES Drax Power Limited (AES Drax Power), the operator of the Drax Power Plant, was downgraded by Standard & Poor's to B+ from BBB-. On the same day, AES Drax was also downgraded by Standard and Poor's to B, negative outlook, which resulted in all three rating agencies, including Moody's and Fitch, rating AES Drax's senior debt, its Eurobonds (which were financed by a syndicate of banks) and senior bonds (which are secured and rank pari passu with the Eurobonds), below investment grade (as of October 22, 2002 current ratings are Standard and Poor's: CC; Moody's: Caal; and Fitch: CCC). The high yield notes of AES Drax Energy, which are structurally subordinated to AES Drax's senior debt, were also downgraded to C by Standard and Poor's; Ca by Moody's; and CC by Fitch. Also on October 14, 2002, Moody's downgraded TXU Europe to below investment grade, to B3 from Baa3. Due to the downgrade to below investment grade by Moody's, Standard & Poor's as well as Fitch, of TXU Europe on October 14, 2002, and the announcement by TXU Corp, the parent company of TXU Europe, that it would not inject any additional capital into TXU Europe, AES Drax was requested by TXU Europe and TXU Europe Energy Trading Limited (TXU Energy), the hedge counterparty under the Hedging Contract, to restructure the Hedging Contract. In accordance with the Hedging Contract, AES Drax was due a payment of GBP25,536,456 on October 14, 2002 from TXU Energy. This payment was made on October 17, 2002. Since October 14, 2002, AES Drax and TXU Europe have been engaging in discussions regarding a restructuring of the Hedging Contract. The Hedging Contract accounts for over 60% of the revenues generated by AES Drax Power. As a result of TXU Europe's ratings downgrade and TXU Energy's failure to make payments due under the Hedging Contract on October 14, 2002, AES Drax Power: -gave notice, as of October 15, 2002, to TXU Energy to deliver a letter of credit for the benefit of AES Drax Power in accordance with the terms of the Hedging Contract. Failure to issue the letter of credit within 20 days would permit AES Drax Power to terminate the Hedging Contract. -delivered, as of October 15, 2002, a demand for non-payment and notified TXU Energy that AES Drax had rights to terminate due to TXU Energy's inability to pay its debts as they fell due as evidenced by its failure to make the payment due to AES Drax on October 14, 2002. The demand for non-payment no longer has any effect now that TXU Energy has made payment. As a result of AES Drax's credit ratings downgrade, TXU Energy gave notice, as of October 15, 2002, to AES Drax Power to deliver a letter of credit for the benefit of TXU Energy in accordance with the terms of the Hedging Contract. Failure to issue the letter of credit within 20 days would permit TXU Energy to terminate the Hedging Contract, but such termination right is subject to rights which AES Drax and the security trustee who acts as trustee for all the secured senior creditors of Drax (including the holders of the Eurobonds and the senior bonds) have under a Direct Agreement with TXU Energy which grants certain cure and other rights for an additional 90 days following the expiration of the 20-day period. Upon any termination of the Hedging Contract by AES Drax Power, under the terms of the Hedging Contract, AES Drax Power would be entitled to receive a termination sum from TXU Energy of not less than GBP270 million. This amount is guaranteed by TXU Europe. Although it would be entitled to receive such payment, AES Drax Power would lose the benefit of the favourable pricing in the Hedging Contract and would need to replace it with contracts which, under current market conditions, would result in lower prices per MWh. AES Drax cannot provide any assurance that a termination of the Hedging Contract would not have a material adverse effect on its financial condition or results of operations. Termination by AES Drax Power of the Hedging Contract requires the consent of the Senior Lenders. Although any such termination would constitute a default under the senior bonds and the high yield notes, varying grace periods and cure rights would apply to the senior bonds and the high yield notes before such default would become an event of default. Under certain circumstances TXU Energy would be permitted to terminate the Hedging Contract. On any such termination TXU Energy would be entitled to receive a termination sum from AES Drax Power of GBP170 million. As of October 24, 2002, AES Drax has sufficient cash flow to meet all of its current operational costs and is currently operating the Drax Power Station as normal. AES Drax cannot provide any assurance that this will continue. In addition, apart from the request from TXU Energy for a letter of credit under the Hedging Contract, certain of AES Drax's counterparties under power purchase agreements have requested additional credit support pursuant to such contracts triggered by the downgrades of AES Drax. AES Drax is currently making necessary arrangements to have such credit support available. As a result of these events, AES Drax began discussions with its Senior Lenders and key suppliers during the week of October 14, 2002 regarding appropriate actions that should be taken in view of the events described above. AES Drax has been working cooperatively with its Senior Lenders to address the liquidity needs of the project, including letters of credit which would be required for trading AES Drax Power's output, in the event that AES Drax Power was to terminate the Hedging Contract as a result of a breach of the Hedging Contract by TXU Energy. The discussions between AES Drax and its Senior Lenders have been constructive to date. On October 21, 2002 TXU Europe announced the sale of its UK retail and generation assets to Powergen, a wholly owned subsidiary of E.ON AG. The purchase price for the assets was announced as cash of GBP1.37 billion and the assumption of GBP247 million of securitised receivables. Immediately following the announcement of the sale, TXU Europe met with all but one of its current Power Purchase Agreement (PPA) counterparties, including AES Drax. At this meeting, TXU Europe proposed that all of its PPA counterparties execute a standstill arrangement to provide TXU Europe additional time to evaluate various options and renegotiate certain contracts. Subject to receipt of additional information AES Drax intends to consider TXU's proposal to execute a standstill arrangement. AES Drax has made no commitment to TXU Europe or any other party regarding its willingness to enter into any such standstill arrangement. Upon the occurrence of any event of default under our outstanding debt obligations, the rights of our Senior Lenders, senior bondholders and high yield noteholders to bring any enforcement actions will be subject to various intercreditor arrangements entered into at the time of the original financing, as amended. As required by the Eurobonds and the indentures for the senior bonds of AES Drax Holdings and the high yield notes of Drax Energy, notices and other information as required will be delivered to the Eurobond Trustee, Senior Lenders and the trustee for the senior bonds and high yield notes. AES Drax Holdings and AES Drax Energy will furnish a Form 6-K with additional information to the US Securities and Exchange Commission. 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 Ma. Cristina Canson, Editors. Copyright 2002. 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 * * *