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/raid1/www/Hosts/bankrupt/TCREUR_Public/030826.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 Tuesday, August 26, 2003, Vol. 4, No. 168 Headlines F R A N C E AIR LITTORAL: Converts Receivership into Bankruptcy Proceeding H U N G A R Y CSEPEL STEEL: Erste Bank, CIB to Decide Future of Steel Company N E T H E R L A N D S AKZO NOBEL: Restructuring Further to Address Underperformance HELIX CAPITAL: Fitch Affirms Ratings on Series 2001-9 Notes KONINKLIJKE AHOLD: Uruguayan Court Paves Way for Disco Sale KONINKLIJKE AHOLD: CEO Shortlist Includes One Preferred Outsider KONINKLIJKE AHOLD: New CEO's Plan Out September 4 ROYAL PHILIPS: Considers Closing a Third of Factories S W I T Z E R L A N D SWISS INTERNATIONAL: To Assess Effects of New Lugano Regulations U N I T E D K I N G D O M AES DRAX: Deadline for Bids Extended to Friday AES DRAX: BHP's Offer Threatens Thousands of Mining Jobs AES DRAX: Possible Deal with BHP Faces Legal Obstacles ALMONDBANK: Government Provides GBP5 Million Lifeline BAE SYSTEMS: Buys GKN's 29% Stake in Alvis for GBP73 Million BRITISH ENERGY: Restructuring Talks Encounter Major Hitch BULLION RESOURCES: Eyes Safer Investments to Contain Losses CARPETS INTERNATIONAL: Irish Plants Attract Potential Buyers CORUS GROUP: Sells Surplus Property to Raise Needed Funding EDINBURGH FUND: Isis Asset Considers Bid Withdrawal ELDRIDGE POPE: CI Traders Plots Strategy, Sparks Bidding War EQUITABLE LIFE: Policyholders Seek Review of Ombudsman's Ruling LEISURE VENTURES: Divests Loss-making Trading Business MYTRAVEL GROUP: Finance Director Resigns with Immediate Effect POWERHOUSE: U.S. Retail Giant GUS Interested in Bidding ROYAL MAIL: Widespread Workers Demonstration Looms SOMERFIELD PLC: Sainsbury Turns off Acquisition Mode TERRA INDUSTRIES: Fitch Downgrades Senior Secured Notes to 'B+' UNITED MILK: Cooperatives Table Bid to Keep Operations Going * Large Companies with Insolvent Balance Sheets ********* =========== F R A N C E =========== AIR LITTORAL: Converts Receivership into Bankruptcy Proceeding -------------------------------------------------------------- French airline Air Littoral, a privately owned former subsidiary of defunct carrier Swissair, has declared bankruptcy. Earlier, a court in the southern city of Montpellier placed the company under receivership upon its behest. According to Expatica France, the company filed for bankruptcy early Thursday because the carrier was unable to make payments on EUR60 million owed to the state. Talks with the state over a moratorium on the debt broke down earlier this year, the report further explained. The court later appointed two administrators for a 45-day period, while the company seeks for a way out. The bankrupt airline is anticipating U.S. investment fund Wexford, in association with European partners, to take over the troubled carrier. Press reports say Wexford Capital LLC, an investment fund based in Greenwich, Connecticut, plans to buy 100% of Air Littoral from current owner Marc Dufour, a longtime company veteran. Wexford already owns U.S. carriers Frontier Airlines and Chautauqua Airlines. Air Littoral, which was retrieved seven months ago by Marc Dufour, now President of the Supervisory Board, went through a trying year in 2001, marked by the folding of its major stockholder Swissair and its former sales partner Sabena, as well as by the crisis engendered in the sector by the terrorist attacks in the U.S. on September 11. The airline company wrapped up a restructuring plan in December, which resulted in 185 job losses with no outright dismissals. In 2002 airline carried 1.6 million passengers and generated sales of EUR250 million, but chalked up a loss of EUR40 million because of the industry-wide slump following the terrorist attacks in the U.S. CONTACT: AIR LITTORAL Route de l'aeroport - CS 10014 34137 MAUGUIO Cedex - France ============= H U N G A R Y ============= CSEPEL STEEL: Erste Bank, CIB to Decide Future of Steel Company --------------------------------------------------------------- The future of Csepel Steel Industry Rt., is hanging on the balance, as Erste Bank Hungary called a meeting to decide what to do with the assets of the bankrupt steel company. According to Budapest Business Journal, Csepel Steel went bankrupt April, with debts of HUF4.5 billion owed to 650 employees and a collection of suppliers, banks and investors. It cited unnamed sources saying Erste Bank and the Central European International Bank Rt. have bought up most of the defunct company's debt at a rate of 40%. No further details of the meeting were reported. CONTACT: Erste Bank der oesterreichischen Sparkassen AG Graben 21 A-1010 Vienna Phone: +43 (0)5 0100 - 10100 Fax: +43 (0)5 0100 9 - 10100 ===================== N E T H E R L A N D S ===================== AKZO NOBEL: Restructuring Further to Address Underperformance ------------------------------------------------------------- Akzo Nobel Polymer Chemicals has announced further restructuring plans to improve its performance. In March 2003 a number of cost savings measures were taken which, however, have failed to improve performance sufficiently. Further restructuring is essential for the future of the business. The restructuring measures, which are additional to the already discontinued production in Gillingham, United Kingdom, and Burt, New York, United States, will result in a reduction of some 150 jobs. The reductions will be in R&D, control & accounting, information management, sales, administration and manufacturing. All regions around the world will be affected. The implementation of this restructuring program will take place during the remainder of this year and continue in 2004. "We are confident that with these measures we will improve our performance," said Bob Margevich, General Manager of Akzo Nobel Polymer Chemicals. "In the past few years our business unit has made significant investments and acquisitions. These, in combination with this restructuring program, will strengthen our strategic position in the markets we operate in and provide the foundation for future growth," he added. HELIX CAPITAL: Fitch Affirms Ratings on Series 2001-9 Notes ----------------------------------------------------------- Fitch Ratings, the international rating agency, has affirmed the ratings of Helix Capital (Netherlands) B.V. Series 2001-9 and Series 2001-9a notes as: EUR75,000,000 Class 2001-9a Notes: 'A+' EUR25,000,000 Class 2001-9 Notes: 'C' The Class 2001-9a Notes were removed from Rating Watch Negative, and the Class 2001-9 Notes remain on Rating Watch Negative pending confirmation of the amount of the next interest payment. The affirmations reflect the higher than expected actual recoveries from British Energy and Solutia, and the relatively smallholding in Mirant, which filed for Chapter 11 creditor protection in July. The issuer, Helix Capital (Netherlands) B.V. is a special purpose vehicle incorporated with limited liability under the laws of the Netherlands. Helix Capital provides protection to Bank of America N.A. on a portfolio of 174 reference entities with a weighted-average credit quality equivalent to a 'BBB' rating using Fitch's rating factors. The value of the portfolio was EUR1.155 billion at the time of issue. But it has since decreased to EUR1.118bn following the credit events at WorldCom, Marconi, Teleglobe, British Energy, Solutia, and Mirant. The actual losses that resulted from recoveries on WorldCom, Marconi, Teleglobe, British Energy, and Solutia have fully depleted the first-loss piece and led to a EUR0.9 million reduction in the principal of Series 2001-9 notes as of July 30, 2003. In January 2004, it is expected that the Series 2001-9 notes will receive a reduced interest payment, which will be viewed by Fitch as a default on these notes. The weighted-average Fitch Factor -- a measure of the quality of the portfolio -- for the reference portfolio has improved marginally from 16.66 in May 2003 to 16.56 in July 2003. Initially all investment grade, the portfolio now contains 27 sub-investment grade names. The agency will closely monitor any changes to the existing portfolio and will take further action as required. CONTACT: FITCH RATINGS Charles Hand, London Phone: + 44 (0)20 7417 3482 Irina Kissina Phone: +44 (0)20 7417 6307 KONINKLIJKE AHOLD: Uruguayan Court Paves Way for Disco Sale ----------------------------------------------------------- A judge in Uruguay has determined that a criminal probe into Dutch food retailer Ahold and its Argentine unit Disco is unfounded, Reuters reported citing the company. Ahold spokesman Walter Samuels welcomed the report a positive news as it would ease out the release of the assets of Disco, which were seized by the court as part of the proceedings. The assets were held after account holders of a failed bank belonging to Velox Group, a former partner of Ahold's Disco, brought a case against the company in Uruguay. The release of the assets is expected to pave the way for the sale of Disco. Ahold is currently divesting Latin American assets to cut debt. CONTACT: KONINLIJKE AHOLD Corporate Communications Phone: +31 75 659 57 20 KONINKLIJKE AHOLD: CEO Shortlist Includes one Preferred Outsider ---------------------------------------------------------------- The supervisory board of Ahold is expected to meet this week to discuss possible candidates for chief executive position at its unit, U.S. Foodservice, according to the Financial Times. The Dutch retailer saw five top senior managers, including CEO Jim Miller, leave the subsidiary after the discovery of a US$856 million profits overstatement at the company. The report, citing people close to the process, said Ahold has drawn up a shortlist with one preferred candidate from outside the company. U.S. Foodservice could fetch US$5 billion and US$7 billion once Ahold's problems are solved, and the management has restored some credibility, Ahold insiders say. KONINKLIJKE AHOLD: New CEO's Plan Out September 4 ------------------------------------------------- Ahold CEO Anders Moberg, who was appointed in May, is expected to present his long-term strategy for the group on September 4. According to the Financial Times, Mr. Moberg, who succeeded Cees van Der Hoeven, is not expected to announce significant strategic shift, but to discuss an assessment of the health of the business based on a fact-finding worldwide tour of its operations and discussions with institutional investors. Most analysts are also not expecting significant divestments, although there could be something about restructuring. Mr. Moberg's presentation comes ahead of the completion of the audit of the company's 2002 accounts on September 30. One person close to the company interpreted this as a sign that there are no more problems hiding within the company. Ahold's finance team agreed to this, but the company and forensic auditors from PricewaterhouseCoopers are still going over more than 400 potential problems that have been identified with the accounts, according to the report. The problems are mostly minor but take longer to resolve, the report added. ROYAL PHILIPS: Considers Closing a Third of Factories ----------------------------------------------------- Royal Philips Electronics N.V. is reportedly weighing whether to close or sell a third of its factories as part of a plan to reduce its manufacturing operations, mainly by contracting production in some of its products to other companies. Quoting Philips Chief Executive Gerard Kleisterlee in an interview with Dutch daily NRC, Bloomberg reported that the Amsterdam-based company is considering closing or selling 50 of its remaining 150 factories to reduce costs. Company spokesman Jules Prast, confirmed the information, saying: "The trend for reducing our manufacturing base will go on, mainly through outsourcing. That could mean, roughly speaking, we could go down by one-third to 100 factories. There are no concrete plans or timeframe." He further said the company would only continue making products that can distinguish it from rivals. Other producers, especially in low-wage countries, will be able to take over production of other products, Mr. Prast added. Since 2001, the company shed more than a fifth of the workforce, moved production to countries with lower labor costs and reined in spending to revive profit after two straight years of record losses. Philips reported net income of EUR42 million (US$45.7 million) in the second quarter, the first profit in five quarters. Last week, Philips said it plans to sell the remaining operations at its semiconductor facility in Stadskanaal, Netherlands to Dutch company Plantin-Q Electronics BV. The company also announced in May the closure of two factories in the U.K. because of falling demand for cathode-ray tubes used in monitors and televisions. ===================== S W I T Z E R L A N D ===================== SWISS INTERNATIONAL: To Assess Effects of New Lugano Regulations ---------------------------------------------------------------- The Swiss Federal Office for Civil Aviation surprised users of Lugano Airport on Thursday, August 21, by proposing new regulations on approaches to the airport. SWISS will be assessing the likely impact of the new regulations on its flight operations over the next few weeks, and will then be submitting its views to the Federal Office for Civil Aviation within the extremely short consultation period given. Flight operations to and from Lugano are not yet affected by the new regulations. SWISS will be making every effort to ensure continued safe and reliable flight operations to and from Lugano Airport in collaboration with the FOCA, its airport partners and Canton Ticino. The company will now be analyzing the situation carefully and at length. Flight operations to and from Lugano will continue as at present until a final decision is taken by the Federal Office for Civil Aviation on the new regulations. CONTACT: SWISS AIRLINES Corporate Communications P.O. Box, CH-4002 Basel Phone: +41 848 773 773 Fax: +41 61 582 3554 E-mail: communications@swiss.com Homepage: http://www.swiss.com =========================== U N I T E D K I N G D O M =========================== AES DRAX: Deadline for Bids Extended to Friday ---------------------------------------------- International Power and Goldman Sachs have extended the deadline of their bid for struggling power station AES Drax after BHP Billiton submitted its last-minute offer for the firm, according to the Financial Times. From a deadline of Friday last week, International Power will now submit its bid on Friday, while Goldman Sachs will make it on Wednesday. Anglo-Australian mining group BHP Billiton has offered 70p in the pound for Drax's subordinated debt, known as the A2 debt, up to GBP95 million, toping earlier bids from International Power and Goldman Sachs. International Power offered 65p in the pound for AES' A2 debt, up to a maximum outlay of GBP100 million. It also decided to bid for Drax's B-class debt, paying 55p in the pound, with a maximum outlay of GBP30 million. Goldman has offered 64p for the A2 debt up to GBP100 million, and 50p for the B debt up to GBP30 million. AES DRAX: BHP's Offer Threatens Thousands of Mining Jobs -------------------------------------------------------- Mining industry leaders say more than 10,000 people in the mining industry could lose their jobs if BHP Billiton succeeded in buying Drax power station, The Observer reports. BHP Billiton's offer, which topped that of investment bank Goldman Sachs and utility International Power, is proposing to supply GBP150 million of coal each year to U.K.'s largest power station for the next 15 years. This will affect AES' contract with UK Coal, with which it has a large order. According to the report, a spokesman for UK Coal said: "If the Drax market was to close, it would have serious implications for UK Coal and the British mining industry." "The British mining industry employs about 3,500 people directly producing coal for Drax, and at least 6,000 people supplying services and machinery for these mines," the spokesman said. AES is the largest customer of UK Coal, cornering around a third of its 15 million tons annual output. Drax uses 8 million tons of coal a year, mostly coming from UK Coal. BHP Billiton is offering up to 70p in the pound for Drax's A-2 bonds, beating offers of 65p from Goldman Sachs and 64p from International Power. It denied that a possible transaction with AES threatens thousands of jobs, according to the Telegraph. AES DRAX: Possible Deal with BHP Faces Legal Obstacles ------------------------------------------------------ U.K. Coal is considering filing a legal action to block a possible acquisition of AES Drax by BHP Billiton due to anti-competitive concerns, according to The Observer. As part of its up to 70p offer for U.K.'s largest power station, the world's largest mining group is proposing to supply GBP150 million of coal each year to Drax for the next 15 years. This means U.K. Coal could lose a contract for a third of its 15 million tons of annual output. "We would be very concerned about competition implications if the market was foreclosed to U.K. Coal-mined coal that was competitive with import," a spokesman said, according to the report. The Telegraph, meanwhile, quoted U.K. Coal CEO Gordon McPhie saying he would consult the Office of Fair Trading about whether BHP Billiton's coal supply arrangement is anti-competitive. U.K. Coal has a five-year supply deal with Drax in 2001. BHP Billiton for its part is understood to have already sought extensive legal advice on the competitive elements before bidding. A spokesman for the group refused to comment on potential legal action, but said BHP Billiton intended to honor all of Drax's existing coal supply contracts, according to the report. "What we have offered to do is be coal supply manager for Drax, which means we will source coal from everywhere," the spokesman said. ALMONDBANK: Government Provides GBP5 Million Lifeline ----------------------------------------------------- The Ministry of Defense invested GBP5 million in troubled military engineering base Almondbank, easing slightly tensions that hang over the firm's workers. Adam Ingram, the armed forces minister, who was visiting to open a hydraulic facility at the Almondbank base said: "Time and again, industry leaders praise the knowledge and commitment of Almondbank employees, so it is important to invest in their capability." A spokesman for the Defense Aviation Repair Agency, which runs the Perthshire engineering base plant, however, cautioned that the move should not be linked to the likely outcome of the ministry's review into the firm's GBP77 million Red Dragon project. The ministry holds the key to whether the core maintenance project would continue or not. The contract accounts for the bulk of the Defense Aviation Repair Agency's work. Some 4,000 people, including 300 at Almondbank, could lose their jobs if the ministry of defense decides to end the operation. The spokesman did not assure that jobs in Perthshire are secured. According to him, "We are simply looking beyond Red Dragon and are committed to finding new customers." He said Defense Aviation Repair Agency cannot rely solely on U.K. military contracts in the long term. Jack Dromey, chief executive of the Transport & General Workers Union, on the other hand, said around tenth of the workforce is secured by the government's move. "This investment will help secure jobs but the threat to the Defense Aviation Repair Agency remains. I think Almondbank was always going to remain open, the question is, with how many workers?" BAE SYSTEMS: Buys GKN's 29% Stake in Alvis for GBP73 Million ------------------------------------------------------------ BAE Systems plc announces that it has agreed to purchase 31,882,534 shares, representing approximately 29% of the issued share capital, in Alvis plc from GKN plc for GBP73 million in cash (equivalent to 230p per Alvis share). Alvis is one of the world's leading manufacturers of armored fighting vehicles. It has operations in the U.K., Scandinavia and South Africa. Its vehicles combine advanced software and electronic systems with leading-edge vehicle, weapon and protection technology. Commenting on the transaction, Mike Turner, Chief Executive of BAE Systems, said: "Alvis is an excellent company. We believe that this investment will result in new opportunities to work together, in a combination that is good for U.K. Land Systems capability, and will further enhance Alvis's strong growth potential." Completion of the acquisition remains conditional upon BAE Systems receiving regulatory clearance in Germany. BRITISH ENERGY: Restructuring Talks Encounter Major Hitch --------------------------------------------------------- The rescue of troubled nuclear generator British Energy is in danger of falling off as it emerged that management and creditors could not agree on one of the terms of a proposed restructuring. British Energy needed to hammer out a viable restructuring within the next five weeks to secure the support of the Department of Trade and Industry for its GBP4 billion-plus-bailout. But a major problem was encountered when creditors, which are owed around half of the company's GBP1.3 billion debts, insisted that shareholders, should get absolutely nothing of their investments to follow the trend of recent restructurings of companies like Marconi, NTL, and Telewest. British Energy wants to give them around 5% of the equity of the restructured business. Under the proposed plan, the government will take on the company's GBP3 billion worth of nuclear liabilities, while banks and bondholders will be given new bonds and become majority shareholders. Shareholders already saw their investments lost 95% of their value since the government bailed the firm out last September. According to the report, one source said, if management refuses to agree, "Forcing [British Energy] to de-list or go into administration is not out of the question." Neither side would comment openly on the negotiations, according to the report. The Department of Trade and Industry has given the parties until September 30 to reach an accord. BULLION RESOURCES: Eyes Safer Investments to Contain Losses ----------------------------------------------------------- Gold miner Bullion Resources decided to seek alternative investment opportunities following losses of GBP1.7 million in the full year. The loss for the year to December was incurred due to currency factors and the closure of its two key mines: Drylands, which has been previously plagued by delays; and Palmietfontein, site of an accident involving the death of one person. Chairman Johan Meiring said three major investments have been identified and discussions are presently underway with a view to reaching an early conclusion. Without specifying the venture, the chairman only assured that it "must be one of substance and one which will not involve any unacceptable risk or significant outlay of the company's funds in the acquisition cost." He also said that the group's priority is to restore shareholder value as quickly and "safely" as possible. The company is mulling a restructuring that would see new appointments in the board, including a new executive head. To recall, managing director Johnny van den Berg left the company after it run into troubles. Fanie Mellet, meanwhile, resigned as director, leaving Mr. Meiring, in the interim, to oversee the day-to-day operation of the company. The company plans to make use of 80% of the two directors' shareholding for future acquisitions, as part of incentive packages for new employees and directors and for transfer to investors. It has three subsidiaries -- Black Reef Gold Ltd. and its two mining operations in South Africa, Addeney Investment Holdings and Drylands Goldmine Ltd. The group's shares were restored to trading after the submission of the delayed financial results. CARPETS INTERNATIONAL: Irish Plants Attract Potential Buyers ------------------------------------------------------------ Indications of interest were already received for two of the seven Carpets International factories that the company's receivers are trying to sell. Garth Calow, a partner in PricewaterhouseCoopers business recovery service in Belfast, said there are already indications of interest for the company's two factories in Killinchy and Donaghadee, Co Down in Northern Ireland. The factories employ 289 in Donaghadee and 144 in Killinchy. Carpets International's employees across the U.K. number 1,200. "We have had preliminary approaches from several interested parties, but have yet to establish where these might lead," Mr. Calow, who was appointed as a joint administrative receiver in Northern Ireland, said. He also disclosed: "Although there are orders for the next four weeks, we are trying to determine how profitable these orders will be and if there is sufficient raw material to complete them." He reassured on Friday there will be no announcements of redundancies in the Irish plants, but that a staffing position will be reviewed again early this week, depending on the immediate availability of raw material. "We will be advertising the Carpets International business for sale -- collectively or as individual plants -- at the beginning of [the] week and are hopeful of generating interest in some or all of the manufacturing operations," he said. The country's largest carpet manufacturer also has a factory in Blackwood, south Wales where 320 jobs are at risk. CORUS GROUP: Sells Surplus Property to Raise Needed Funding ----------------------------------------------------------- Anglo-Dutch steel maker Corus is preparing to sell 7,000 acres of surplus property, according to the Telegraph. Some of the sites still needs expensive cleaning, making a valuation still impossible. The glitch is that the remediation work -- which Corus is legally liable -- could sometimes cost more than the value of the port, according to the report. The move is part of the troubled steel producer's effort to streamline business ahead of a restructuring of its U.K. operations. The plan involves plant closures resulting to job cuts numbering 1,100 in addition to the 10,000 already made. The number stands to increase by another 2,000 if its Teesside steel plant does not turn around. The cost of redundancies is estimated at GBP250 million. Corus also needs money for investment in the modernization of two or three steelworks in the U.K. Corus CEO Philippe Varin said the money is required "the sooner the better". EDINBURGH FUND: Isis Asset Considers Bid Withdrawal --------------------------------------------------- The bidding war for Edinburgh Fund Managers, the struggling investment house, has taken a new twist, as Isis Asset Management is reportedly considering withdrawing from the battle. According to the Financial Times, the fund manager has grown increasingly frustrated at the protracted decision-making of Edinburgh Fund board over rival expressions of interest since it announced in early June it was in potential bid talks. It further explained that Isis is growing increasingly concerned that the uncertainty over the future of Edinburgh Fund could undermine confidence among clients, particularly the roster of investment trusts it manages. Edinburgh Fund has been the center of a bidding war over the months, with Isis, Aberdeen Asset Management and Glasgow-based life assurer and asset manager Britannic as the potential bidders. Last week, its board met Thursday and Friday to consider its future, but is understood not to have reached a conclusion. Part of the delay has resulted from differing views on potential offers between board members and Edinburgh Fund's two largest shareholders, Hermes Pensions Management and Artemis. Aberdeen is thought to be offering slightly more than Isis in a largely share-based offer, but there are concerns about the quality of Aberdeen's shares as a result of the controversy over the mis-selling of split capital trusts. Edinburgh Fund continues to lose asset management contracts, including that of Bank of Scotland pension fund and Edinburgh Small Companies Trust. It is now left with GBP3.2 billion trusts under management, mainly investment trust, unit trust and venture capital funds. It has been in trouble since rejecting a takeover approach last year by Hermes, the BT pension fund manager and its biggest shareholder. Four non-executives and the chief executive resigned in the wake of that move. ELDRIDGE POPE: CI Traders Plots Strategy, Sparks Bidding War ------------------------------------------------------------ CI Traders, the Channel Islands-based company, is reportedly drawing up plans to bid for Eldridge Pope, the West Country pub operator being stalked by Michael Cannon, the serial leisure entrepreneur. According to The Times, CI Traders, which holds about 2% of Eldridge Pope, has come close to making a formal offer for the company of about 180p a share. The amount values Eldridge at about EUR44 million. A spokesman for CI Traders confirmed that "discussions have taken place" with Eldridge Pope's board, although such talks were understood to be informal. "CI Traders will consider its various options during the course of the week," he added. The tender closes on Thursday of this week, after which CI Traders, will decide whether to go ahead with an offer, The Times said. Recently, Cannon tabled a 165p-a-share tender offer for 19.31% of Eldridge Pope. If shareholders accept the offer it will take Cannon's stake in the firm to 29.9%, just below the level at which he would be forced to make a full takeover bid. Eldridge Pope, however, has urged shareholders to reject the offer which it describes as "opportunistic," claiming that Cannon is trying to "seek to influence" without offering shareholders a "full exit." It remains unclear how many investors would accept Cannon's tender offer by the deadline. Eldridge owns 121 managed and 54 tenanted pubs, mostly in its heartland of Devon, Dorset and Hampshire. Earlier this year Michael Johnson was ousted as chief executive, after takeover talks with a number of groups collapsed. EQUITABLE LIFE: Policyholders Seek Review of Ombudsman's Ruling --------------------------------------------------------------- Representatives of Equitable Life policyholders plan to contest the Parliamentary Ombudsman's ruling on its probe into possible misadministration of the insurer by the Financial Services Authority, according to The Observer. Policyholders, who stand to receive state-funded compensation once the Ombudsman identified weaknesses in government regulation of Equitable Life, were disappointed when the investigator cleared the financial watchdog of responsibilities for the failure of the firm. Ombudsman Ann Abraham said she is prevented by law to look at the role of regulators before 1999, during which Equitable Life was regulated in separate periods by the Department of Trade and Industry, and the Treasury. She also said that the Financial Services Authority could not be expected to offer complete protection for investors. Members of the Equitable Members Action Group have appointed a solicitor and barrister to file legal proceedings seeking for a judicial review within the next month, according to the report. They must file the claim by the end of September, three months from publication of the Ombudsman's report. The Ombudsman is due within 21 days to answer claims. A High Court judge will then issue a final ruling on the matter. The Ombudsman's office said it was unable to comment because it had not yet received notification of the proceedings by the action group. LEISURE VENTURES: Divests Loss-making Trading Business ------------------------------------------------------ Leisure Ventures plc announces that it has completed the sale of 100% of the share capital of its wholly owned subsidiary The International Academy Plc (TIA) to Thomson Travel Group (Holdings) Limited for a consideration of GBP2 million in cash, of which GBP1.8 million is deferred and subject to the future performance of TIA. The deferred consideration is payable over a period of 4 years following completion. TIA is the only trading business of the company and is a specialist leisure company providing holidays combined with sports coaching. In addition to two established skiing businesses, TIA has more recently expanded into the soccer arena. It has negotiated agreements with many of the world's leading football clubs in order to offer soccer-coaching holidays for young people from around the world. TIA was acquired in August 2002 for a consideration of GBP8.3 million, satisfied by the issue of 100.8 million new ordinary shares in the company. At the time of the company's purchase of TIA, the Directors believed that it had established a new market niche in the sport-related travel sector and that TIA's contractual arrangements with FIFA and many of the world's leading football clubs would quickly generate considerable growth, particularly in the USA. Whilst growth has been achieved in some markets, the aftermath of September 11th, the continuing terrorist threats, the SARS outbreak and, most recently, the Iraq War have placed significant and unforeseen pressures on non-essential travel, especially in the USA where the Directors were anticipating most of TIA's growth. In the year ended April 30, 2003, the turnover of TIA was GBP3.5 million and its post-acquisition loss was GBP1.4 million. As at April 30, 2003, TIA had net liabilities of GBP2.4 million inclusive of debts of GBP1.1 million to the company which are to be written off under the terms of the agreement with TTGH. As a result of the performance of TIA, the company has made a significant loss in the financial year ended April 30, 2003. This loss has absorbed most of the cash resources of the company. After consulting with advisers and major shareholders, the Directors for the company pursued a number of alternatives in order to secure the long term financial stability of the company and concluded that it was best to sell TIA to an organization which is better placed to secure the necessary future funding requirements of the business. TTGH is part of TUI, one of the world's largest travel organizations and as such is clearly more favorably positioned to further develop TIA and its concepts and thereby secure the future earnings of the company. Immediately following completion of this sale, the company will effectively be a shell company with cash resources of approximately GBP210,000 after receipt of the initial consideration from the disposal, and liabilities of a similar amount. It will have no commercial or trading operations. It is the intention of the Board of Leisure Ventures to establish or acquire companies, or interests in companies or businesses, which would benefit from a quotation on the AIM market and access to the capital markets. David Wright, Director and company Secretary of the company and Managing Director of TIA, has today resigned from the boards of both companies and the Directors express their thanks to him for his past services. Commenting on the disposal, Harry Coe, Chairman, said: "A series of unforeseen external factors have hampered the short term growth potential of The International Academy, specifically with regards to customers from the USA who were to be the real drivers for the soccer-training part of the business. Against this background and with no sustained respite in these difficult trading conditions, the Board has taken the decision to dispose of the business to an organization with more resources in place to develop further this innovative, sports-training concept." Issued on behalf of Leisure Ventures plc by Biddicks CONTACT: LEISURE VENTURE PLC Harry Coe, Chairman Phone: 020 7448 1000 James Benjamin, Biddicks Phone: 020 7448 1000 David Youngman, W.H. Ireland Limited Phone: 0161 832 6644 MYTRAVEL GROUP: Finance Director Resigns with Immediate Effect -------------------------------------------------------------- MyTravel Group plc announces the resignation of Kazia Kantor as group finance director with immediate effect. She is succeeded on an interim basis by John Darlington, who will act as chief financial officer while arrangements are made to appoint a permanent successor. Chairman Eric Sanderson said: "Kazia joined the board of MyTravel in 2002 as a non-executive director. She took on the role of group finance director at a critical point for the company in November 2002 and has played a vital part in carrying out our strategic review and putting in place the refinancing which enables us to implement our turnaround plan. We are all very grateful to her for stepping into this position, completing these tasks and seeing us through a difficult period." Group chief executive Peter McHugh said: "With our refinancing in place, Kazia is able to relinquish her post, and I am delighted that in John Darlington we have someone who has the skills and experience to serve as interim chief financial officer in our turnaround phase. Meanwhile the Board will put in hand arrangements for finding a successor as finance director for the longer term." John Darlington is a turnaround specialist whose most recent appointment was as Special Adviser to the Group Board at HP Bulmer Ltd. 2002-03, where he also had responsibility for the group finance function. ***** John Darlington has worked on a number of turnaround situations, including HP Bulmer Ltd., NMEC Ltd (the Millennium Dome) and the Robinson Group of Companies. He is a founding member and director of the Society of Turnaround Professionals. His previous experience includes a period as Finance Director of the British Shoe Corporation. He qualified as a chartered accountant with Price Waterhouse in 1982. CONTACT: MYTRAVEL GROUP PLC Brunswick Phone: 020 7404 5959 Fiona Antcliffe Sophie Fitton POWERHOUSE: U.S. Retail Giant GUS Interested in Bidding ------------------------------------------------------- Argos-to-Homebase retail giant Gus has emerged as a possible contender to buy all or part of PowerHouse, the electrical retail chain that collapsed into receivership last week. According to The Scotsman, GUS is understood to have already made contact with Deloitte & Touche, the receiver that is seeking a buyer for 130 PowerHouse stores. The two sides are expected to hold further talks this week. Electricals giant Dixons, which owns Currys and PC World, is also thought be interested in making a bid, while Comet owner Kesa Electricals is said to be looking at a selected number of stores. Industry analysts believe Gus could either convert the PowerHouse stores into Argos units or trade them as a standalone brand. The stores would make good additions to the GUS portfolio, the report said. A spokeswoman for GUS, however, declined to confirm talks were taking place with Delloite & Touche. With 223 outlets, PowerHouse had been the U.K.'s biggest independent electrical retailer and third overall behind high street giants Dixons and Comet. The future of the company was placed into uncertainty following the pullout of trade insurers from PowerHouse suppliers on fears that the company's risk profile had become doubtful, preventing the company from buying stock on existing payment terms. The move resulted in plans to close 93 PowerHouse of 223 stores by the end of the month. Deloitte is now looking to sell the rest of the business as a going concern. ROYAL MAIL: Widespread Workers Demonstration Looms -------------------------------------------------- Royal Mail invited union leaders for further negotiations on Tuesday at Acas, the conciliation service, in an effort to prevent a first national strike in seven years, according to the Telegraph. The Communication Workers Union, which is set to ballot postmen and women over an industrial action, has not yet confirmed whether it will respond to the invitation. The parties are at odds over pay and jobs cuts. Royal Mail is offering a pay increase of 14.5% over 18 months, and would budge no more; CWU is demanding an unconditional, immediate increase of 8%. Royal Mail is proposing to increase the staff's payout by 3% in October, and 1.5% in April. It promised to implement the remaining increases provided the workers accept changes in working practices, including a shift to single daily postal deliveries. The parties left discussions without an agreement 10 days ago. A Royal Mail insider expects the balloting of employees to go in the next few days once the union leaders fail to turn up on Tuesday. A possible industrial action is disastrous to Royal Mail, as it could drive customers away to rivals. The courier is at present also at odds with the regulator Postcomm regarding charge to open its postal delivery network to competition -- a move that could erase up to GBP280 million from the firm's profits over three years, according to chairman Allan Leighton. SOMERFIELD PLC: Sainsbury Turns off Acquisition Mode ---------------------------------------------------- Competition Commission Chairman Sir Derek Morris has written to the Department of Trade and Industry, to seek its consent to "lay aside the reference," relating to the proposed acquisition by J Sainsbury plc of 171 Somerfield stores from the "Springwater" bidding group, made on July 30, 2003. The move follows J Sainsbury plc telling the Commission that they have abandoned the proposal to make arrangements for the acquisition, within the terms of section 75(5) of the Fair Trading Act 1973. The Commission will therefore no longer be requiring evidence. ***** The reference was made by Patricia Hewitt, Secretary of State for Trade and Industry, under The Fair Trading Act 1973 (see DTI Press Notice P/2003/424) which empowers the Secretary of State to refer to the Competition Commission actual or proposed mergers which create or increase a market share of 25% of the supply of particular goods or services in the U.K. or a substantial part of the U.K., or involve the transfer of assets exceeding 70 million. Section 75(5) of the Act provides that, if it appears to the Commission that the proposal to make arrangements such as are mentioned in the reference have been abandoned, it shall, if the Secretary of State consents, lay the reference aside. CONTACT: COMPETITION COMMISSION Home Page: http://www.competition-commission.org.uk TERRA INDUSTRIES: Fitch Downgrades Senior Secured Notes to 'B+' --------------------------------------------------------------- Fitch Ratings has downgraded Terra Industries' senior secured credit facility and senior secured notes to 'B+' from 'BB-' and has affirmed the senior secured second priority notes rated 'B-'. Fitch withdraws the rating for the senior unsecured notes, which were rated 'B-'. The notes have been placed on Rating Watch Negative. The ratings downgrade reflects Terra's weak operating results during the second quarter, higher than expected leverage; its exposure to natural gas price volatility; and a decline in the company's liquidity. This level of performance was expected to a certain degree, considering the poor volumes sold during the spring planting season and the higher average natural gas costs (a raw material). Unfortunately, performance was so weak that Terra had to draw on its previously undrawn credit facility. Looking forward, Q3 is of particular concern from a liquidity standpoint. The risk is that margins will remain negative and operations will use cash rather than provide cash. This situation would require continued use of the credit facility to fund cash needs. Continued use of the credit facility could force Terra to violate its minimum cash flow/EBITDA and minimum availability covenants. Moreover, the availability of the credit facility has declined, leaving Terra in a potentially vulnerable situation where the company is unable to meet interest payments. Improvement in cash flow will be affected by demand (fall season and spring prepayments) and margin. The Negative Watch captures the uncertainty in near-term future performance, the potential for covenant violations and the possibility of further liquidity deterioration. Terra issued US$200 million 11.5% senior secured notes in May 2003. The rating of 'B-' reflects the potential principal recovery related to the notes' second priority interest in accounts receivable and inventory where the senior secured credit facility has a first priority lien. The rating also considers that the second priority interest is shared equally and ratably with the existing US$200 million 12.875% senior secured notes. The proceeds from the new 11.5% note issuance have been used to retire the US$200 million 10.5% senior unsecured notes that were due in 2005. Fitch withdraws the rating on these notes. Terra Industries is a major North American producer of ammonia, UAN solutions, and methanol and a leading producer of ammonium nitrate in the U.K. The company also produces urea. Its nitrogen products are used as fertilizer in agriculture. Methanol is used in fuel additives and industrial chemicals. In 2002, Terra had revenue of US$1 billion and EBITDA of approximately US$99 million. UNITED MILK: Cooperatives Table Bid to Keep Operations Going ------------------------------------------------------------ Three major milk cooperatives made an offer to buy out United Milk, Britain's largest farmer-controlled milk processor that called in receivers last week. According to The Scotsman Dairy Farmers of Britain, First Milk and Milk Link said they had lodged a bid to receivers at PricewaterhouseCoopers. The country's largest farmer-controlled milk processor is designed to give farmers a secure future by providing them with a direct route to market for their milk, processing 800 million liters of milk a year into skimmed milk powder, cream and butter. But it might not soon be able to after incurring debts that industry analysts estimated at GBP5 million on top of capital debts of about ten times that figure. The GBP45 million-operation is owned by 400 dairy farmers and is backed by more than GBP10 million of their own money. It employs 125 people and has an annual turnover of GBP100 million. * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Shareholders Total Working Equity Assets Capital Ticker (US$MM) (US$MM) (US$MM) ------ ----------- ------ -------- AUSTRIA ------- Libro AG (111) 174 (182) BELGIUM ------- Real Software REAL (35) 244 (1) CZECH REPUBLIC -------------- Ceskomoravska Kolben & Danek Praha Holding (89) 192 (2,186) DENMARK ------- Elite Shipping (28) 101 19 FRANCE ------ Banque Nationale de Paris Guyane (41) 352 N.A. BSN Glasspack (102) 1,151 179 Bull SA BULP (760) 893 (130) Compagnie des Machines Bull (116) 136 (20) Compagnie Francaise de l'Afrique Occidentale (65) 256 21 Cofidur SA (5) 102 19 Dollfus-Mieg & Co. DOLP 0 187 28 European Computer System (110) 682 377 Grande Paroisse SA (845) 383 107 Pneumatiques Kleber SA (34) 480 139 Sa des Usines Chausson (23) 249 35 SDR Picardie (135) 413 N.A. Soderag (3) 404 N.A. Sofal SA (305) 6,619 N.A. Spie-Batignolles (16) 5,281 75 St Fiacre (FIN) (1) 111 (33) Trouvay Cauvin TRCN 0 134 10 Usines Chauson (23) 249 35 GERMANY ------- Dortmunder Actien-Brauerei DABG (13) 118 (29) Edel Music AG EDLG (66) 353 (159) Eurobike AG EUBG (32) 158 (31) F.A. Guenther & Sohn AG GUSG (8) 111 N.A. Kaufring AG KAUG (19) 151 (51) Nordsee AG (8) 195 (31) Schaltbau AG SLTG (16) 163 20 Vereinigter Baubeschlag-Handel Holding AG VBHG (24) 307 (63) ITALY ----- Binda SpA BND (11) 129 (20) CIRIO FINANZIARI CBDI (422) 1,583 (396) Credito Fondiario e Industriale SpA CRF (200) 4,218 N.A. NETHERLANDS ----------- Baan Company N.V. BAAN (8) 610 46 NORWAY ------ Pan Fish ASA PAN (117) 806 259 Petroleum-Geo Services PGO (32) 2,963 5,250 POLAND ------ Animex SA (1) 108 (86) Exbud Skanska SA EXBUF (9) 315 (330) SPAIN ----- Altos Hornos de Vizcaya SA (116) 1,283 (278) Santana Motor SA (46) 223 41 Tableros de Fibras SA TFI (43) (2,107) 116 SWITZERLAND ----------- Kaba Holding AG KABZN (64) 515 252 UNITED KINGDOM -------------- Abbot Mead Vickers (2) 168 (16) Alldays Plc ALD (120) 252 (202) Amey Plc AMY (49) 932 (47) Bonded Coach Holiday Group Plc (6) 188 (44) Blenheim Group (153) 198 (34) Booker Plc BKRUY (60) 1,298 (8) Bradstock Group BDK (2) 269 5 Brent Walker Group (1,774) 867 (1,157) British Energy BGY (5,342) 3,438 229 British Nuclear Fuels Plc (2,627) 36,359 1,948 British Sky Broadcasting BSY (459) 3,364 (40) Compass Group CPG (668) 2,972 (298) Costain Group COST (34) 329 (12) Dawson Holdings DWSN (32) 135 (25) Easynet Group Plc ESY (12) 332 53 Electrical and Music EMI Industries Group (885) 3,053 (435) Euromoney Institutional ERM (119) 173 20 Gallaher Group GLH (543) 5,527 68 Gartland Whalley (11) 145 (8) Global Green Tech Group (156) 408 (18) Heath Lambert Fenchurch Group PLC (10) 4,109 (10) HMV Group PLC HMV (211) 762 (66) Imperial Tobacco Group ITY (117) 10,083 (190) Intertek Testing Services ITRK (134) 425 (67) IPC Media Ltd. (685) 254 16 Lambert Fenchurch Group (1) 1,827 (3) Lattice Group (1,290) 12,410 (1,228) Misys PLC MSY (161) 949 41 Orange PLC ORNGF (594) 2,902 7 Regus PLC RGU (46) 367 (60) Rentokil Initial Plc RTO (1,130) 2,809 (37) Saatchi & Saatchi SSI (119) 705 (41) Seton Healthcare (11) 157 (0) Yell Group PLC (196) 3,964 289 Each Tuesday edition of the TCR-Europe contains a list of companies with insolvent balance sheets based on the latest publicly available balance sheet available to our editors at the time of publication. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. ********* 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. Larri-Nil Veloso, Ma. Cristina Canson, and Laedevee Gonzales, Editors. Copyright 2003. 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 * * *