/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/031008.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 Wednesday, October 8, 2003, Vol. 4, No. 199 Headlines B E L G I U M FORD MOTOR: Workers Protest Job Cuts at Facility in Genk F R A N C E BULL SA: France Bailout of Computer Company Spurs Lawsuit RHODIA SA: Rating Cut to 'BB-' Due to Weak 3Q Results Forecast SCOR: Pursues Incorporation of Life Reinsurance Business G E R M A N Y INFINEON TECHNOLOGIES: Might Slash Staff to Return to Black MG TECHNOLOGIES: On Rating Watch Negative Over Planned Disposals MUK MEDIEN-UND: Claims Suit Against DCI AG Unsuccessful THYSSENKRUPP AG: To Sell Novoferm to Japan's Sanwa Shutter WESTLB AG: Plans To Issue 5-Year Bonds Worth EUR2 Billion H U N G A R Y DUNAFERR DANUBE: Six Companies Vie to Become Majority Owner MALEV RT: To Unveil New Strategy for Long-term Viability I R E L A N D AN POST: Has Less than Two Years to Implement Cost-Cutting Drive INK PUBLISHING: Titles to Disappear from Circulation I T A L Y TELECOM ITALIA: Could Sell Up to US$4 Billion of Bonds L U X E M B O U R G SANITEC INTERNATIONAL: Ratings Downgraded; Outlook Negative N E T H E R L A N D S ISPAT INTERNATIONAL: On CreditWatch Neg Due to Liquidity Worries S W E D E N SCANDINAVIAN AIRLINES: Transfers Maintenance Operations to Oslo U N I T E D K I N G D O M ANITE GROUP: Appoints Steve Rowley New Chief Executive BRITANNIA BISCUITS: Sold to Britannia Biscuits International BRITISH ENERGY: Lough to Resign; Search for Replacement Ongoing CORUS GROUP: Ratings on Watch Negative After Review of Industry CORUS GROUP: In Danger of Breaching Banking Covenants HOBGOBLIN GROUP: Calls in Joint Administrative Receivers MARCONI CORPORATION: To Redeem Junior Secured Notes October 17 MAYFLOWER AEROSPACE: Calls in Joint Administrative Receivers MIDDLETON: To Receive Lifeline While Trustees Seek Investors POCKLINGTON COACHWORKS: Founder Saves Operation in Osbaldwick RELIANCE GROUP: Liquidator Intends to Sell RNIC (Europe) to Omni ROYAL & SUNALLIANCE: Still on Negative Watch After Court Decision ROYAL & SUNALLAINCE: Sells Lenders' Mortgage Insurance Business SFI GROUP: Admits Extent of Damage Caused by Accounting Gap ********* ============= B E L G I U M ============= FORD MOTOR: Workers Protest Job Cuts at Facility in Genk -------------------------------------------------------- Workers at Ford Genk launched a riotous strike over job cuts outside the 40-year old company on Monday, according to Expatica. They burned tires and blocked delivery of spare parts for the company, while union militants prevented all finished vehicles from leaving the plant during the one-day protest. The action is aimed at the management's plan to axe 3,000 jobs to stem losses amid falling sales. Ford Genk employs almost 20,000 people at one point, is yet to identify workers who will be made redundant, and decide whether the plant will close definitely in the future. It is planning to move production of Transit van in Genk to a plant in Turkey in 2004, and transfer investment to its Spanish and German plants -- a move criticized unanimously by politicians. Ford previously promised to invest EUR900 million to produce the new Focus model at Genk, in addition to existing assembly lines for the Transit and Mondeo models. =========== F R A N C E =========== BULL SA: France Bailout of Computer Company Spurs Lawsuit ---------------------------------------------------------- EU Competition Commissioner Mario Monti lodged a lawsuit on the European Court of Justice against France over its bailout of computer company Groupe Bull SA, according to the Wall Street Journal. The Commission previously warned France it would file the suit if French authorities do not recover EUR450 million (US$525 million) it lent to Bull. The move is part of Mr. Monti's drive to limit state aid in an effort to guarantee fair competition among all European companies, and marks the first time that the EU has brought a case against one member states over illegal aid. France disobeyed EU rules that say states can "rescue" companies only once a decade by granting Bull a total of EUR450 million in 2001 and 2000 when it already granted the company EUR2.7 billion within that time span. Mr. Monti initially approved the latest aid as a loan on the condition that Bull repay the French state with interest within a year, but the deadline passed in June without Bull fulfilling the agreement. The European Court of Justice is expected to take about a year to issue a verdict. RHODIA SA: Rating Cut to 'BB-' Due to Weak 3Q Results Forecast -------------------------------------------------------------- Standard & Poor's Ratings Services said that it had lowered its long-term corporate credit rating on French chemicals manufacturer Rhodia SA to 'BB-' from 'BB+', prompted by the group's recent announcement of very weak forecasted third-quarter 2003 results, following a poor second quarter. At the same time, the short-term corporate credit rating on the group was affirmed at 'B'. The outlook is negative. In addition, Standard & Poor's lowered its ratings on Rhodia's senior unsecured debt and subordinated debt to 'B+' and 'B', from 'BB' and 'BB-', respectively. "Although Standard & Poor's expected Rhodia's financial performance to improve in 2003, it has in fact deteriorated from an already weak level at year-end 2002," said Standard & Poor's credit analyst Nicolas Baudouin. "In addition, Rhodia forecasts a sharp decline in EBITDA in third-quarter 2003, raising potential liquidity issues: some of Rhodia's financial covenants will likely be breached when full- year 2003 results are released, which could induce the early repayment of about EUR1 billion of debt, a figure to be compared with about EUR700 million of cash and equivalents available to the group." The ratings continue to reflect Rhodia's average business profile, which is underpinned by its leading position as one of the world's largest specialty-chemicals companies, but also reflects Rhodia's below-average operating margins and lower resistance than chemical industry peers to industry downturns. The ratings remain constrained by Rhodia's consistently aggressive financial profile, despite the many debt reduction initiatives that the company has carried out since 2001. However, Standard & Poor's does not expect Rhodia's free cash flow to be significantly negative at year-end 2003. Earmarked divestitures corresponding to cash proceeds of EUR600 million will alleviate the debt burden in 2004, but will likely also shrink the group's earnings base. The negative outlook reflects the potential liquidity issues linked to Rhodia's tight financial covenants, the weakness of the company's financial measures for the current ratings, and the currently challenging market trends. The current ratings on Rhodia take into consideration the group's need to further reduce debt, notably through disposals. SCOR: Pursues Incorporation of Life Reinsurance Business -------------------------------------------------------- The Board of Directors of SCOR met Friday October 3, 2003 under the presidency of Denis Kessler. The Board received a progress report on the plans to incorporate its life reinsurance business. The Contribution Agreement having already been signed, the Board noted with satisfaction the strict adherence to the schedule for completion. An Extraordinary General Meeting will be convened shortly in order to approve the Contribution Agreement. The Board was informed of the offers received by the advising banks with regards to the potential outside investment into this life reinsurance subsidiary being created. It took note that several companies were to enter the "data room" with a view towards establishing their final proposals before the end of October. In order to be prepared in good condition for the end of year renewals, the SCOR Group will continue to pursue actively the avenues and provide itself with the means that will allow it to strengthen its solvency for the benefit of all its clients. Financial disclosure timetable 3rd quarter 2003 results: November 6, 2003 ***** TCR-Europe reported on September 12, 2003 that A.M. Best Co. has downgraded the financial strength rating to B++ (Very Good) from A- (Excellent) of SCOR (Paris, France) and its guaranteed subsidiaries. At the same time, A.M. Best has downgraded the ratings on debt instruments issued or guaranteed by SCOR. A.M. Best said: "The rating action follows deterioration in SCOR's risk-adjusted capitalization as a result of slower than anticipated improvement in performance despite the positive action taken to curtail underwriting in certain areas." "The company's performance in the first half of 2003 has continued to be affected by adverse development in its reserves for business written prior to 2001 by SCOR Reinsurance Company in the United States and losses arising in its credit derivatives portfolio and from Commercial Risks Partners Limited, Bermuda. A.M. Best believes that these factors may continue to depress SCOR's future performance." ============= G E R M A N Y ============= INFINEON TECHNOLOGIES: Might Slash Staff to Return to Black ------------------------------------------------------------ Infineon Technologies AG might cut jobs at its wireline division in the next few months in order to save cost. Chief Executive Officer Ulrich Schumacher said the division is costing the company highly, according to Euro am Sonntag. Schumacher said in an interview with Euro am Sonntag: "Research costs are too high. We definitely have to react here, including in Germany." Infineon Technologies is hoping to abandon nine straight quarters of losses when it reports results in the three months to the end of September. Chief Financial Officer Peter Fischl is positive that the German chipmaker is "well on the way" to profit. He said he wants to meet consensus estimates of analysts regarding its return to black for the current fiscal fourth quarter. After reporting losses of EUR2.4 billion over the last nine quarters due to the slump in the D-Ram chips market, the product that accounts for 40% of its sales looked set to improve. Meanwhile, Schumacher said results in the wireline division for the fourth quarter to end-September has "definitely" improved on a year-on-year basis. He did not say, however, if it broke even. Regarding memory chips, the German group's biggest and most volatile business, Schumacher mirrored Fischl's projections, saying prices will rise "by the end of the year." However, he said it is "difficult" to forecast how memory chip prices will develop next year because it is unclear what sort of manufacturing capacities will come on line in China. MG TECHNOLOGIES: On Rating Watch Negative Over Planned Disposals ---------------------------------------------------------------- Fitch Ratings, the international rating agency, has placed MG Technologies' Senior Unsecured rating of 'BBB' and Short-term rating of 'F3' on Rating Watch Negative. The rating action follows MG's announcement that it intends to dispose of all or parts of the group's five chemical activities that come under Dynamit Nobel. With the transaction MG wants to strengthen its balance sheet and to improve its financial flexibility to enable the group to undertake selective acquisitions in the engineering sector. Total proceeds from the transaction are expected to be in the range of EUR2-3 billion. The announcement follows the conclusion of a strategic review undertaken by MG's new Chief Executive Officer Udo Stark, who joined the group in June 2003. MG has for long tried to reposition the group's activities, but efforts to reshuffle its portfolio had been hampered by conflicts between MG's previous CEO, Kajo Neukirchen, and its largest shareholder Otto Happel. Happel eventually raised his stake to over 20% in 1H03, forcing Neukirchen to resign. The disposal of Dynamit Nobel -- a specialist in chemicals and materials engineering -- follows MG's earlier move to redefine Solvadis, a low-margin chemical trading company, as non-core business, and will mark MG's exit from the chemical sector. In Fitch's view, the change in strategy will drastically change the group's operating risk profile, as it will lead to the disintegration of its most stable cash flow contributor, which represented about 40 percent of total group sales. In future MG intends to focus on the process engineering operations, currently grouped under GEA AG. Upon the divestment of Dynamit Nobel, MG will experience a relative increase in exposure to the underperforming plant engineering activities, another division of its engineering business. Although MG has announced earlier that it intends to exit from its Plant Engineering activities, Fitch expects this will be achieved by downsizing rather than an outright sale of the operations. The changes planned will lead to one-off charges of some EUR415 million, of which EUR280 million will be restructuring expenses in PE. MG has stated that the reorganization will lead to a pre- tax loss of EUR150-170 million in FY03. Fitch notes that the expected cash proceeds would limit the adverse effect of the change in the risk profile, leading to a complete de-leveraging of the group's balance sheet, which carried financial debt of EUR1,245 million as per June 2003. However, Fitch also notes that MG intends to spend the proceeds on acquisitions, most likely in process engineering business, which will in turn lead to a re-leveraging of the balance sheet. Nevertheless, it is unlikely that MG will undertake one large acquisition. The agency stresses the substantial execution risks involved in the planned disposals of Dynamit Nobel's operations, Solvadis and the exit from Plant Engineering. It will resolve the Rating Watch after discussing details of the financial impact of the planned transactions and timing issues with management in the coming weeks. MUK MEDIEN-UND: Claims Suit Against DCI AG Unsuccessful ------------------------------------------------------- The Berlin Regional Court has dismissed after the first hearing the suit brought by the insolvency administrator of MuK Medien- und Kommunikationsgesellschaft mbH, Berlin, for payment of EUR600,000 from a letter of comfort issued by DCI AG in December 2001 (file number: 94 O 99/03). The judgment is still subject to appeal. Once it has become non- appealable, a provision set aside for this lawsuit by DCI AG can be reversed with effect on the operating result. THYSSENKRUPP AG: To Sell Novoferm to Japan's Sanwa Shutter ---------------------------------------------------------- German steelmaker ThyssenKrupp could include its Novoferm GmbH unit in its asset disposal program aimed at cutting down debt, said people familiar with the matter, according to Bloomberg. Germany's biggest steelmaker previously announced plans to sell business with EUR7 billion in revenues, in part to boost credit ratings. Moody's Investors Service reduced its rating on ThyssenKrupp to Baa3, the lowest investment grade, in July. Early in the year, Standard & Poor's also cut Dusseldorf, Germany- based ThyssenKrupp's rating to BB+, below investment grade. Assets that have so far been sold off are its Huennebeck scaffolding and formwork division, and its polymer business. But Martin Amann, an analyst at Standard & Poor's, said last month: ``ThyssenKrupp has little flexibility to further reduce debt from cash flows from operations in the next two to three years without further asset disposals.'' The company is aiming to bring down its debt to below EUR4 billion. In recent developments, sources who knew the transaction said ThyssenKrupp could announce the sale of the industrial door unit to Japan's Sanwa Shutter Corporation for between EUR150 million and EUR200 million. Novoferm is part of ThyssenKrupp's technologies division and has four factories in Germany. It makes fireproof doors, garage gates and steel casings. The company has EUR300 million in sales and 2,300 employees. WESTLB AG: Plans To Issue 5-Year Bonds Worth EUR2 Billion -------------------------------------------------------- WestLB AG, the state-owned German bank currently trying to recover from a EUR1.67 billion loss in 2002, is planning to issue a 5-year bond worth more than EUR2 billion. A spokesman for the bank told AFX News that the bond will be issued through its Irish subsidiary, with WestLB, ABN Amro, Citigroup and Merrill Lynch acting as lead managers. He added that pricing should be announced on Thursday, although he declined to comment on the reason for the bond issue. WestLB's loss in 2002 was the result of significant write downs on its refinancing of BoxClever, which is not part of the unit's portfolio. It called in administrative receivers for large parts of the troubled television rentals business last month, after months of talks about restructuring its exposure to the former Radio Rentals and Granada TV rentals business. ============= H U N G A R Y ============= DUNAFERR DANUBE: Six Companies Vie to Become Majority Owner ----------------------------------------------------------- The State Privatization and Holding Rt received six offers from companies willing to buy a majority stake in Hungarian sheet steelmaker Dunaferr Danube steelworks Rt. Submission of offers closed October 2. Budapest Business Journal said State Privatization and Holding did not disclose information on the possible buyers on its press release, but business daily Vilaggazdasag reported that British- Indian firm LNM, Russia's Mechel, and Germany's ThyssenKrupp AG, purchased privatization bidding documents -- German steelmaker ThyssenKrupp, though, denied having submitted a bid last week. Russia's Eurosteel and Austria's Voest-Alpine had also expressed interest, the report said. State Privatization and Holding Rt is scheduled to notify the companies about the validity of their bids by October 8, and announce the winner before the end of the year. Last month, Miklos Kamaras, CEO of State Holding and Privatization Rt, said: "We are looking for strategic investors who will invest large amounts of capital into the company and secure its existence for a long time. Price is not a priority," he said. The bidding for 79% of the company was opened September 15. It will close in December 8 as stipulated by the Economy and Transport Ministry. PricewaterhouseCoopers Kft will examine the offers. Dunaferr Danube Steel Works employs 10,000 staff, making it Hungary's eight-largest employer. In 2001, Dunaferr's net revenue of HUT161 billion made it the 15th biggest company in Hungary. According to the report the criteria for evaluating the bids will put a 30% in the prospective buyer's long-term employment policy and capital investment plans. Only 5% will be given to the offered price. Two important conditions for the bid include a commitment to increase Dunaferr's capital by at least HUF13 billion and invest at least EUR250 million into the company's assets, Mr. Kamaras said. Dunaferr posted pre-tax profit of HUF1.7 billion in the first half of 2003, but the firm expects only to break even for the whole of the year. MALEV RT: To Unveil New Strategy for Long-term Viability -------------------------------------------------------- The State Privatization and Holding Rt, owner of Malev Rt, will issue its final decision on the new strategy of the national air carrier in a few weeks, Malev spokeswoman Adrien Drebsz said, according to Budapest Business Journal. The new scheme includes the termination of business class services; reducing prices and level of services; selling the company's two Boeing 767 aircraft serving New York and Toronto; using the flights of other airline companies on certain routes; cutting jobs; and not exercising an option for six Bombardier CRJ-200ER aircraft valid until 2006. "The aim of the new strategy is to reach a significant improvement in the company's results in the short term, and to create a permanently successful, self-sustaining operation in the longer term," Ms. Krebsz said. Malev reported losses amounting to HUF2.78 billion (EUR10.9 million) in 2002, down from previous year's HUF4.7 billion. But the plan did not impress market observers, the report said. There are experts in the industry who considered the program unworkable, and late. "The efforts will create a high-cost, low-fare company, as it has very high fixed costs whatever prices it offers," the report quoted one strategic consultant close to the airline industry saying. He also considered "nonsense" Malev's plan to become semi-discount, semi-network carrier. ============= I R E L A N D ============= AN POST: Has Less than Two Years to Implement Cost-Cutting Drive ---------------------------------------------------------------- The newly appointed chief executive of An Post, Donal Curtin, said the state-owned courier has only 18 months to cut cost in order to ensure its survival, according to BizWorld. An Post is planning to shed 1,450 of its 10,500 staff as part of efforts to restore profitability in the company. It is bringing its three divisions back under a single management structure, a strategy drafted to ensure that the postal agent will break even by 2005. In an effort to cut cost further it is reportedly canceling management bonuses, and banning attendance at international conferences to save on travel and hotel bills and slash its capital expenditure budget. Originally expected to turn in EUR1 million in profits this year, the company surprised many last week when it forecasted a EUR50 million loss instead. The losses are blamed at the slowdown in letter post growth due to economic deterioration and the increased use of email, combined with its own extremely high cost base. INK PUBLISHING: Titles to Disappear from Circulation ---------------------------------------------------- Ink Publishing Ltd., the firm behind Magill, In Dublin, will cease trading along with its associated publishing companies, according to Business Plus. Publisher Mike Hogan, owner, blamed the shutdown to poor trading conditions and falling advertising sales, the report said. Mr. Hogan will discontinue the circulation of Magill, In Dublin, Irish Wedding & New Home and High Ball magazines under the plan. This follows the closing of his woman's title Who in April. The company is to arrange a creditors meeting as soon as possible although no later than the end of October 2003. ========= I T A L Y ========= TELECOM ITALIA: Could Sell Up to US$4 Billion of Bonds ------------------------------------------------------ Europe's third-largest phone company, Telecom Italia, is rumored likely to sell US$3 billion to US$4 billion worth of bonds to help refinance debt due in 2004 and 2005. Bloomberg, citing La Republica's Saturday issue, said the bond issue would be dominated in dollars and sterling, taking advantage of the weakness of the dollar against the euro. It is noted that the euro has gained 10% this year versus the dollar, making U.S. goods and services more attractive in Europe. Foreign banks would manage the sale and the money raised won't be used to fund more acquisitions, the daily paper said, without giving a source. Telecom Italia head spokesman Massimiliano Paolucci, however, declined to comment on the issue. Chairman Marco Tronchetti Provera has been aiming to reduce the telecom's net debt to EUR30.6 billion by the end of 2004. However, financing the debt became harder after Moody's Investors Service in August cut the company's long-term credit rating by one notch to Baa2, saying the merger exposed bondholders to greater risk. =================== L U X E M B O U R G =================== SANITEC INTERNATIONAL: Ratings Downgraded; Outlook Negative ----------------------------------------------------------- Moody's Investors Service downgraded the senior notes of Sanitec International SA, the senior implied and issuer ratings for Sanitec and the rating for the senior secured credit facilities at Sanitec Oy. The affected ratings are: senior implied rating to B1 from Ba3; unsecured issuer rating to B3 from B2; EUR260.0 million in senior notes due 2012 at Sanitec International S.A. to B3 from B2; and EUR555.0 million in senior secured credit facilities at Sanitec Oy to B1 from Ba3. The outlook for all ratings is negative. According to the rating agency, the downgrade reflects Sanitec's highly leveraged capital structure and the limited improvements in credit metrics evidenced to date; the poor operating performance in Q2 2003; ongoing weak market conditions in a number of Sanitec's markets; and short term liquidity concerns. Moody's put the negative outlook to reflect liquidity constrains given Sanitec's low cash balances, continued weak operating conditions and availability restrictions contained in Sanitec's senior secured credit facility. Sanitec is a leading European manufacturer and supplier of sanitary ceramics and bath and shower products. For the twelve months ended 30 June 2003, Sanitec reported revenues of EUR963.9 million and EBITDA of EUR146.7 million. ===================== N E T H E R L A N D S ===================== ISPAT INTERNATIONAL: On CreditWatch Neg Due to Liquidity Worries ---------------------------------------------------------------- Standard & Poor's Ratings Services said it placed its ratings on The Netherlands-based steel producer Ispat International N.V. and related entities, including its 'B-' long-term corporate credit rating on the group, on CreditWatch with negative implications following concerns about the group's liquidity position. "The CreditWatch placement reflects concerns about liquidity at related entity Ispat Inland following high capital expenditure and pension contributions in 2003," said Standard & Poor's credit analyst Tommy Trask. "The placement also reflects the current poor trading performance of another related entity, Ispat Sidbec, and the subsidiary's significant debt refinancing in the next 12 months. The Ispat group as a whole faces challenges such as oversupplied local markets, trade barriers in the U.S. and European markets, an appreciation of local currencies against the U.S. dollar, and pension plan deficits. These factors might contribute to liquidity shortages at certain subsidiary companies such as Ispat Inland or Ispat Sidbec. High capital expenditure at Ispat Inland, however, relates to the relining of its largest blast furnace, which Standard & Poor's understands has now been completed. Because most of the group's rated debt is guaranteed by Ispat and includes cross default provisions, the ratings are assigned on the basis that the group's stronger companies might come to the rescue of weaker entities in case of a temporary liquidity shortage, where covenants permit. There is, however, no guarantee that this will be possible in practice and--in the interest of the ultimate shareholders -- some form of selective debt restructuring, therefore, cannot be ruled out. Standard & Poor's will meet with the management of Ispat in the next three months, with a view to resolving the CreditWatch placement. =========== S W E D E N =========== SCANDINAVIAN AIRLINES: Transfers Maintenance Operations to Oslo --------------------------------------------------------------- Scandinavian Airlines (SAS) delivered inspiring news to more than 100 mechanics at Oslo's main airport at Gardermoen on Thursday. The Norwegian carrier said it is moving maintenance operations for its MD-80 aircraft from Ireland to Oslo, creating the equivalent of 125 full-time jobs. Aftenposten said SAS has cancelled its contract with Lufthansa- owned facility in Shannon, Ireland, where SAS carried out heavy maintenance on its MD-80 fleet for years. The work itself involves comprehensive technical controls of the aircraft taken every 10 years. Each control involves around 20,000 hours of work, with the aircraft out of service for around a month. SAS Technical Director Oernulf Myrvoll said the carrier will also try to drum up new business from other airlines with MD-80 fleets, once the new maintenance operation is up and running. He said: "We'll go out and market our services after 2005." Some of the potential clients could include Finnair, Alitalia and Spanair. "It was nice to finally be able to deliver some good news," Myrvoll said. "There hasn't been much of that lately," he added. SAS has been cutting jobs to return to profitability by 2004. The airline has been reeling from losses at the same time that its relatively high fares virtually priced it out of the market. CONTACT: SAS GROUP Investor Relations Sture Stoelen Phone: +46 8 797 14 51 E-mail: investor.relations@sas.se =========================== U N I T E D K I N G D O M =========================== ANITE GROUP: Appoints Steve Rowley New Chief Executive ------------------------------------------------------ nite Group plc, the worldwide IT solutions and services company, is pleased to announce that it has appointed Steve Rowley (44) as its new Chief Executive, with effect from Monday, November 3, 2003. As previously indicated David Thorpe, currently the Group's interim Chief Executive, will provide support during a transition period and then will revert to being a non-executive director of the Group. Most recently, Steve Rowley was Senior Vice President and General Manager at PeopleSoft Europe. This business, which recently merged with JD Edwards, has annual revenues of around US$270 million, employing over 1,000 individuals. During this time, Mr. Rowley has gained significant experience in both the public sector and financial services, both in the UK and internationally. Prior to PeopleSoft, Mr. Rowley pursued a successful career within 3 Com Corporation where he progressed from initial appointment of Managing Director, U.K., Ireland and the Middle East to final position based in the USA as senior Vice President, Corporate Business Development. Steve Rowley held his first Executive Appointment at BT Cellnet from 1994 to 1996, as Marketing Director and General Manager. Prior to that he held senior positions in management at Hitachi Trading Company (Nissei) U.K. and IBM U.K. Limited, having commenced his career at Hewlett Packard on graduation from Loughborough University. Alec Daly, Chairman of Anite Group plc, commenting on the appointment, stated: "We are delighted to have appointed Steve Rowley as Anite's new Chief Executive. As stated previously, our priority was to find a Chief Executive with the right skill-set for this stage of Anite's development and together with his extensive international management experience, we believe Steve to be the ideal candidate. "Steve's priority is to complete our consolidation within the business, and to provide the leadership and focus on our customers to build the business based on delivering mission critical business solutions. "We look forward to a continuing recovery under Steve's leadership, and our thanks go to David Thorpe for his excellent stewardship during the interim." For further information, please contact: http://www.anite.com ***** In connection with the appointment, Anite also announces that: Mr. Rowley holds no directorships in any other publicly quoted companies and has not done so in the last 5 years; and there are no details to be disclosed under paragraph 6.F.2(b) to (g) of the UKLA Listing Rules. Anite said last month its current financial year started in line with expectations but overall trading conditions remain tough. It predicts profitability in the first half to be down compared to last year's results, but in line with expectations. It also said that though its former chief executive, John Hawkins, made a significant contribution to Anite, the company needed a different kind of Chief Executive to achieve consolidation of the business. CONTACT: ANITE GROUP PLC Phone: 0118 945 0129 Alec Daly, Chairman David Thorpe, Interim Chief Executive Christopher Humphrey, Group Finance Director WEBER SHANDWICK SQUARE MILE Phone: 020 7067 0733 Reg Hoare/Sara Musgrave BRITANNIA BISCUITS: Sold to Britannia Biscuits International ------------------------------------------------------------ Britannia Biscuits International is now the new owner of Britannia Biscuits Co, administrative receivers of the Teesside food factory said, according to the Evening Gazette. Britannia Biscuits Co (U.K.), which was formed through the backing of HSBC and the Department of Trade and Industry in 2001, called in joint business advisers and accountants PFK, of Leeds in July. Explaining the recent transaction Andy Clay, senior manager of PFK, said: "It was the best offer we received, HSBC was happy with it and it was accepted." Britannia Biscuits International shares some common directors with Britannia Biscuits Co, Mr. Clay said. A company spokesman, who confirmed the sale, meanwhile, said a new management team was being put in place and additional funds sought. South Bank Imperial Food Park-based Britannia Biscuits Co will announce future plans at a later date, the spokesman added. Creditors, meanwhile, will be updated about the progress of the takeover on October 9 in Leeds, he said. BRITISH ENERGY: Lough to Resign; Search for Replacement Ongoing --------------------------------------------------------------- British Energy announces that its Finance Director, Keith Lough, has decided to leave the company to pursue other career opportunities. British Energy has started the process of finding a replacement, and Mr. Lough has agreed to continue with his current responsibilities in the interim. Mike Alexander, Chief Executive, said: "Keith Lough has done an exceptional job to secure British Energy's future. He has worked tirelessly to find a solution to a hugely complex situation with many different interests. Only now that creditors have formally signed up to the restructuring has he decided to leave, and he has agreed to stay during the interim period as we seek his replacement. He will leave with our best wishes and gratitude." ***** British Energy was last week able to reach an accord with its banks and bondholders regarding a complicated restructuring package that will leave shareholders just a fraction of the company. The plan is still subject to the approval of the European Competition. The nuclear generator announced losses of GBP4.3 billion in June after slashing the value of its power plants. It is blaming the high fixed costs of nuclear generation and a steep decline in wholesale electricity prices for its woes. CONTACT: FINANCIAL DYNAMICS Andrew Dowler Phone: 020 7831 3113 CORUS GROUP: Ratings on Watch Negative After Review of Industry --------------------------------------------------------------- Standard & Poor's Ratings Services said it placed its 'B' long- term and 'B' short-term corporate credit ratings on U.K.-based steel consortium Corus Group PLC on CreditWatch with negative implications, along with its 'B+' senior secured bank loan and 'CCC+' senior unsecured debt. The CreditWatch placement follows a review of European steelmakers, and reflects concerns about Corus' ability, under current difficult market conditions, to stem losses and improve cash flow generation to levels appropriate for the 'B' rating. "Corus' new management is facing a big challenge in restructuring its heavily loss-making U.K. steel operations," said Standard & Poor's credit analyst Tommy Trask. "The new restructuring plan aims to restore competitiveness vis-�-vis European competitors in two to three years, which is a long time considering that Corus remains free cash flow negative." This is of particular concern as currently many parameters (such as steel price and the U.S. dollar exchange rate) are favorable, although raw materials prices (coke and iron ore) are on the rise, and competitors in countries with a lower cost base are gradually catching up in terms of production efficiency and product quality. In addition, Corus' credit profile remains very sensitive to the British pound sterling-euro, as well as the British pound sterling- and euro-U.S. dollar exchange rates and to an adverse change in working capital. Standard & Poor's will meet with the new management of Corus with a view to resolving the CreditWatch placement in the next three months. CORUS GROUP: In Danger of Breaching Banking Covenants ----------------------------------------------------- Analysts at Citigroup Smith Barney warned on Monday that Anglo- Dutch steelmaker Corus group might breach its covenants next year, according to The Guardian. The report quoted the broker saying: "Based on financial forecasts we believe Corus will breach its net worth banking covenant in 2004, even assuming the company achieves 85% of its targeted cost savings." Corus is Europe's largest producer of free cutting steels and is the world's largest producer of leaded steel bar. But its stock market capitalization went down to less than GBP1 billion in the past year, prompting it to decide in April to restructure its operation to return the U.K. side of the business to profitability. Citigroup said Corus may be forced to launch a rights issue, dispose of loss-making factories or suffer the penalty of higher financing costs, in case it breaches banking covenants. Corus is also currently looking forward to disposing non-core assets -- a move which observers say could raise more than GBP100 million, and lower the amount the company might have to seek through a rumored rights issue or bank loans or bond issues. HOBGOBLIN GROUP: Calls in Joint Administrative Receivers -------------------------------------------------------- Hobgoblin Group Limited (formerly Moskovite 17 Co. Limited) Hobgoblinns Limited Balaclava Pub Company Limited Registered numbers: 03822496; 02751542; 03948160 Nature of businesses: Non-trading company; Bars; Bars Trade classifications: 7499; 5540; 5540 Date of appointment of Joint Administrative Receivers: September 25, 2003 Name of appointer: Bank of Scotland CONTACT: Michael Jonathan Christopher Oldham Simon Peter Bower Joint Administrative Receivers (office holder nos 7817 and 8338) of RSM Robson Rhodes LLP 186 City Road London EC1V 2NU MARCONI CORPORATION: To Redeem Junior Secured Notes October 17 -------------------------------------------------------------- NOTICE OF PARTIAL REDEMPTION OF MARCONI CORPORATION PLC 10% GUARANTEED JUNIOR SECURED NOTES DUE 2008 CUSIP No.: G58129AD2; ISIN No. : XS0166109768 $28.9 million (GBP17.3 million) Junior Notes to be redeemed at 110%, reducing principal amount of Junior Notes to $288.7m (GBP172.9 million) Marconi Corporation plc (London: MONI and Nasdaq:MRCIY) gave notice to the owners of its 10% guaranteed Junior Secured Notes, due 2008 (the Securities) pursuant to Section 3.02 of the Indenture dated as of May 19, 2003 (the Indenture) made between the Company, the guarantors named therein and JP Morgan Chase Bank (the Trustee) that pursuant to Section 3.08 of the Indenture $28,916,278 aggregate principal amount of Securities (the Redemption Securities) will be redeemed on October 17, 2003 (the Redemption Date). The redemption price (the Redemption Price) shall be 110.0% of the principal amount of the Redemption Securities redeemed plus 77 days accrued interest to the Redemption Date. In line with the mechanism used for the previous partial redemption of the Junior Secured Notes, which took effect on September 30, 2003, a pool factor will be applied to every holding. Further details of the pool factor to be applied from the Redemption Date will be announced once the pool factor has been confirmed by the Registrar. This mandatory partial redemption has primarily resulted from the previously disclosed sale of the Group's stake in Bookham Technology plc. The paying agent with respect to the Redemption Securities is: The Bank of New York One Canada Square London E14 5AL England Attention: Corporate Trust Office Any queries in respect of payment, pool factor or related matters should be directed to Emma Wilkes at Bank of New York on (+44) 20 7964 7662, who are the Registrar, the Depositary and the Paying Agent. On the Redemption Date, the Redemption Price, together with accrued interest and any Additional Amounts, will become due and payable. Unless the Company defaults in making the redemption payment, the Redemption Securities shall cease to bear interest from and after the Redemption Date. The Redemption Securities will be cancelled following redemption by the company. CONTACT: MARCONI CORPORATION Investor enquiries: Heather Green Phone: 0207 306 1735 E-mail: heather.green@marconi MAYFLOWER AEROSPACE: Calls in Joint Administrative Receivers ------------------------------------------------------------ Mayflower Aerospace (Fabrications) Limited (formerly Trefn Fabrications Limited, Speed 3818 Limited) Mayflower Aerospace (DIAC) Limited (formerly DIAC Limited) Mayflower Technical Services Limited (formerly Intercede 1681 Limited) Mayflower Aerospace (Hansford) Limited (forermly Hansford Engineering Limited) Mayflower Aerospace (Wrexham) Limited (formerly Trefn Enineering Limited) Mayflower Aerospace (Poole) Limited (formerly Trim Engineering Limited) Mayflower Aerospace (Civil) Limited Mayflower Aerospace (Metal Treatments) Limited (formerly Trefn Engineering (Metal Treatments Division) Limited) Mal Operations Limited (formerly Mal Holdings Limited) Registered number: 02854848; 00552029; 04137196; 02017466; 01396688; 04571049; 04571066; 01665930; 04569033 Nature of businesses: Manufacture Metal Structures abd Parts; Manufacture Metal Structures and Parts; Holding companies including Head Offices; Technical Testing and Analysis; Manufacture Metal Structures and Parts; Manufacture Metal Structure and Parts; None; None; Manufacture Metal Structures and Parts; None Trade classifications: 2811; 2811; 7415; 7430; 2811; 2811; 7499; 7499; 2811; 7499 Date of appointment of Joint Administrative Receivers: September 27, 2003 Name of appointer: The Royal Bank of Scotland CONTACT: RSM Robson Rhodes LLP, 186 City Road London EC1V 2NU RSM Robson Rhodes LLP Centre City Tower 7 Hill Street, Birmingham B5 4UU RSM Robson Rhodes LLP St. George House 40 Great George Street, Leeds LS1 3DQ Contacts: Simon Peter Bower, John Neville Whitfield Charles William Anthony Escott Joint Administrative Receivers (office holder no 8338, 9131 and 8913) MIDDLETON: To Receive Lifeline While Trustees Seek Investors ------------------------------------------------------------- Middleton, the National Botanic Garden of Wales, is poised to receive GBP353,000 in cash that would enable it to find a permanent solution to its problems, Ananova reported. The beleaguered flagship botanical will axe 55 workers, and keep only 15 full-time employees in the process, trustees of the GBP43 million west Wales attraction said. Alan Hayward, chairman of the trustees, said they would receive GBP150,000 from the Welsh Assembly and a further GBP53,000 offered by the Millennium Commission. Carmarthenshire County Council plans to match the Welsh Assembly's GBP150,000 hand-out, subject to ratification by full council on October 14. "The package, totaling GBP353,000, will allow the garden to remain open in the short term," he said. "During this period of financial respite, the Welsh Assembly Government will lead the search to find a funding partner for Middleton, with the full support of the garden's trustees." POCKLINGTON COACHWORKS: Founder Saves Operation in Osbaldwick ------------------------------------------------------------- Fran Johnson former managing director of Pocklington Coackworks, manufacturer of specialist trailers for Formula One motor racing teams, bought the company's most valuable asset in an effort to prevent the winding up of the firm he founded. Pocklington was left inutile after a costly row with a client and after the Formula One industry tightened its budget. A call from banks finally ushered in receivers in August. Receivers put up the business' premises in Osbaldwick near York for sale as a project for redevelopment after they failed to find a buyer for the operation. But Mr. Johnson bought the name, and plans to continue the business only as designer and engineer, outsourcing manufacturing to an unnamed U.K. company. "I hope the business will expand and I'll be able to take on some former staff," said Mr. Johnson. "We would ultimately continue to sub-contract manufacturing but plan to have a final finishing shop," said Mr. Johnson. Pocklington cut 47 staff last year, and a further 46 over the summer before reducing its workforce into a final skeleton of 11 staff. The last of its worker walked off in September. The business had a turnover of GBP4.5 million and specialized in 40 ft. car and hospitality trailers for race teams. RELIANCE GROUP: Liquidator Intends to Sell RNIC (Europe) to Omni ---------------------------------------------------------------- M. Diane Koken, Insurance Commissioner of Pennsylvania, in her official capacity as Liquidator of Reliance Insurance Company, asks the Commonwealth Court to approve the Sale and Purchase Agreement of the Entire Issued Capital of Reliance National Insurance Company (Europe) Limited. Reliance National (U.K.) Limited is a wholly owned subsidiary of RIC. RNUK owns all the shares of RNICE. The Liquidator wants to sell all of the shares of RNICE to Omni Whittington Investments (Guernsey) Limited. RNICE's Business and Financial Condition According to Ann B. Laupheimer, Esq., at Blank Rome LLP, in Philadelphia, Pennsylvania, RNICE sold most of the same product lines as RIC and wrote both direct insured contracts and assumed insurance contracts of others, including RIC. Often, RNICE participated with a "lead" insurer in providing coverage pursuant to London Market Practice. In those situations, RNICE followed the leader in settling claims by accepting the claims handling recommendations of the lead underwriter. RNICE in turn, reinsured most of its coverage and much of the reinsurance was written pursuant to Master International Treaties, which listed RNICE and numerous other RIC affiliates as named reinsureds. Total assets of RNICE peaked in 2000, and Retained Earnings peaked in 1999. However, beginning in 2000, substantial losses emerged and materially eroded the retained earnings and equity in the company. RNICE voluntarily ceased writing new policies early in 2001 and formally entered runoff later in the year. RNICE's financial statements show retained earnings of GBP25,900,000 and equity of GBP111,000,000 at the end of 1999. RNICE suffered a net loss of GBP21,000,000 in 2000 and a further net loss of GBP57,700,000 in 2001, which contributed to its reduction in retained earnings to GBP12,700,000 at the end of 2000 and negative GBP51,300,000 at the end of 2001. In similar fashion, its equity was reduced from GBP111,000,000 to GBP97,800,000 to GBP33,800,000 at the end of 2001. Perhaps even more telling from a financial soundness perspective, as of December 31, 1999, RNICE's equity was 22.4% of its total assets and 47.4% of the outstanding claims against it. As of June 30, 2003, its equity was only 7.6% of its total assets and 9.3% of the outstanding claims. RNICE had value, but it was declining rapidly. The decline in both of these ratios over this time period is a cause for serious concern. Liquidator's Efforts to Sell RNICE In view of the long time it would take to run-off RNICE and in view of the fact that RNICE had value for the Reliance Estate but which value was deteriorating, on February 13, 2002, RNUK and the Liquidator appointed KPMG Corporate Finance to provide financial advice and services in connection with the proposed sale. KPMG Corporate Finance is a division of KPMG LLP, which is a limited liability company organized under the laws of England and Wales. KPMG Corporate Finance is authorized by the United Kingdom's Financial Services Authority to engage in certain investment business activities, and provides advice and assistance to clients on a range of corporate finance matters. Specifically, KPMG was retained to assist RNUK in: (a) preparing a summary of RNICE's business and affairs; (b) soliciting interest from potential bidders in RNICE; (c) assisting RNUK in identifying and contacting potential bidders; (d) distributing the summary to potential bidders on RNUK's behalf; (e) organizing and administering the due diligence process; and (f) analyzing and negotiating the expressions of interest and offers received by RNICE. KPMG advised RNUK to sell RNICE through a "controlled auction process". This methodology was selected to help ensure that RNICE, despite its financial difficulties, could make appropriate disclosures of its financial condition and still be in a position to maintain bargaining power with potential buyers. In February 2002, KPMG and RNUK compiled a list of 30 potential purchasers. The list included companies that specialized in run- off situations and also global reinsurers, regional insurers and insurers. It was determined that seven parties were unlikely to bid based on funding constraints and were excluded from the short list. First Round of Bidding -- March to April 2002 Of the 23 potential purchasers initially solicited to bid for RNICE, 14 requested further information with a view to submitting an offer. Each of those entities was provided with an information memorandum and question and answer sessions were arranged between RNICE management and each of them. Of the 14, six submitted detailed expressions of interest. After extensive evaluation, RNUK determined that is was necessary to request further clarity in proposed terms and means of funding with respect to each of the bids to determine which was the best offer or to whittle down the offers further. Second Round of Bidding -- April to May 2002 Ms. Laupheimer relates that five of the six first round bidders accepted RNUK's invitation to resubmit. At this point, all potential purchasers had experience operating companies in run- off mode. RNUK provided additional information, including a report prepared by a third party actuary regarding RNICE's estimated claims reserves, samples of jointly held contracts and further details on RNICE's financial position. Consequently, one bidder withdrew from the process and RNUK eliminated another because its bid was materially inferior. Third Round of Bidding -- June to November 2002 The remaining three bidders were given access to RNICE's data room, asked to submit a mark-up of a sample purchase and sale agreement and were engaged in further discussions with RNICE management. After extensive discussions and negotiations, Omni's final bid emerged, in the Liquidator's determination, as clearly the best available. After consultation with KPMG, RNUK decided to proceed to negotiate final transaction terms with Omni. Negotiations with Omni Whittington Group In December 2002, Omni offered to pay GBP11,000,000 at closing for the shares of RNICE. Like other offers, Omni was relying on third party funding. Further, completion was subject to the approval of the Financial Services Authority of the United Kingdom and the Bankruptcy Court. While a number of contractual issues had to be worked out, such as warranties involving various contingent liabilities and events, establishing an Escrow Account for certain unresolved and difficult to quantify potential liabilities, and others, the Omni offer was the best one received both in terms of price and in terms of the number of conditions and issues to be resolved. While these issues were being negotiated, RNICE's financial situation continued to deteriorate. Omni made its bid predicated in part on RNICE's financials as of December 31, 2001, which showed equity in the company at about GBP33,800,000. When the 2002 year-end financials became available in early 2003, equity declined to GBP27,400,000. Omni was still prepared to proceed with the transaction on financial terms based on its bid from December 2, 2002, notwithstanding the diminution of equity from GBP33,800,000 to GBP27,400,000 during 2002. However, three major developments occurred during the first half of 2003 that led Omni's anticipated capital funders to decline to participate in the transactions as originally proposed: (a) In the first quarter 2003, RNICE paid out more claims than had been reserved for; (b) In the second quarter 2003, new large claims were incurred in excess of the projected incurred but not reported claims; and (c) detection of an accounting error by RIC that indicated that an additional GBP1,000,000 of expenses should have been booked in a prior period. As a result, Ms. Laupheimer states, Omni and its anticipated funders concluded, with justification, that RNICE's equity has declined to GBP21,000,000 by June 30, 2003. Due to this further deterioration, Omni advised RNICE that it could no longer proceed with its GBP11,000,000 cash offer because its funders were not willing to assume the risk given that the "upside" possible reward was now considerably less. Omni said that it could possibly proceed with a cash offer in the GBP7,000,000 to GBP8,000,000 range, depending on their financial backers, but suggested an alternative that would pay RNUK an initial GBP1,000,000, plus a sharing of future dividends and capital distributions that would likely ultimately produce more than GBP11,000,000. At this point, RNUK's choices were to accept a lesser cash payment from Omni, attempt to negotiate the suggested sharing arrangement with Omni or go back to the other bidders who in 2002 had substantially poorer bids. By this time, RIC personnel had developed a high degree of comfort with the Omni management and their competence and integrity. However, Ms. Laupheimer points out, since a possible sharing arrangement was now being considered, RIC personnel made numerous inquiries within the industry about Omni, its experience and the competence and integrity of its management. The responses to those inquiries were uniformly positive. RNUK decided that going back to previous bidders who had bid lower than Omni before would only produce new bids lower than where Omni now was and would risk losing Omni as a potential buyer. It also decided, given the uniformly positive information being received about Omni, that structuring a sharing arrangement with Omni, which in the Liquidator's view, will likely produce GBP8,000,000 -- the highest cash amount that Omni might pay at that point -- and could produce more than GBP11,000,000 over time, was the best way to proceed. Omni originally proposed management fees to itself of 15% of defined costs and that RNUK and it share all dividends and capital distributions in a ratio of 70% for RNUK and 30% for Omni. The RIC negotiating team decided to negotiate for a sharing arrangement that would maximize the likelihood of obtaining at least the GBP8,000,000 to GBP11,000,000, and would give Omni the incentive to achieve even greater success. Thus, it was negotiated that Omni would pay to RNUK for the RNICE shares: (a) GBP1,000,000 at closing; (b) 90% of the first GBP5,000,000 in dividends or distributions from the future run-off; (c) 80% of the second GBP5,000,000 in dividends or distributions; (d) 70% of the third GBP5,000,000 in dividends or distributions; (e) 60% of the fourth GBP5,000,000 in dividends or distributions; and (f) 40% of all in dividends or distributions thereafter. Under this arrangement, if Omni distributes just GBP10,000,000, RNUK would receive GBP9,500,000 -- GBP1,000,000 + 0.9(GBP5,000,000) + 0.8(GBP5,000,000). Omni would only have to distribute or dividend a little over GBP12,150,000 for RNUK to realize the GBP11,000,000 that was initially offered. Both RIC and Omni believe that there will be total distributions of at least GBP12,150,000 -- of which RNUK will receive GBP11,000,000, counting the initial payment -- and that the total distributions likely will be greater. Under the proposed arrangement therefore, RNUK would receive these amounts assuming various levels of distributions and dividends: (In Millions) Distributed Total to be Amount RNUK Share Initial Payment Received by RNUK ----------- ---------- --------------- ---------------- GBP5 GBP4.5 GBP1.0 GBP5.5 10 8.5 1.0 9.5 15 12.0 1.0 13.0 20 15.0 1.0 16.0 25 17.0 1.0 18.0 Valuation of RNICE Ms. Laupheimer notes that valuation of RNIC is not a simple task. "Valuation in such a circumstance is simply an educated estimate as to what an asset will bring upon reasonable exposure to the marketplace," Ms. Laupheimer says. Given the complexities, the RIC team, together with KPMG, determined that given the numerous uncertainties in any valuation of RNICE, the best way to proceed would be to determine value through the prolonged and extensive exposure to the market. RNIC Sale Should Be Approved Ms. Laupheimer assures the Court that Omni has incentive to produce for RIC the best possible result from the RNICE business in run off. Omni has significant experience in run-off of insurance businesses. Further, it has the ability to place RNICE through a "solvent scheme of arrangement" under British law which has the advantage of expediting and reducing uncertainty of the claims resolution process, and minimizing the time and expenses of the run off. This should assist in increasing the distribution from RNICE's business. Moreover, Ms. Laupheimer says, the proposed sale is structured so that RNUK gets nearly all of the first distributions and Omni only reaps substantial profits if it is successful in administering the run off. The RIC negotiating team believes RNUK will obtain, in addition to the initial GBP1,000,000, at least another GBP10,000,000 in distributions by year 2008. The transaction involves the sale of an illiquid, non-real estate asset believed to be in excess of $5,000,000. Furthermore, the transaction was negotiated at arm's length with the party that made by far the best offer obtained after a substantial marketing effort. (Reliance Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 609/392-0900) ROYAL & SUNALLIANCE: Still on Negative Watch After Court Decision ----------------------------------------------------------------- Fitch Ratings, the international rating agency, maintained the Rating Watch Negative on Royal & Sun Alliance's (R&SA) group entities and debt issues following the recent preliminary court ruling on student loans. Although clearly a negative development for R&SA, Fitch believes that the overall impact of the decision will be relatively moderate. The risks of such a decision have already been largely factored into the agency's ratings. The agency notes that R&SA is likely to appeal the decision once they have received the final opinion from the court and therefore the final outcome of the case is likely to remain unresolved for a number of months. Fitch continues to expect to resolve the rating watch following the third quarter results. The court verdict relates to credit risk insurance policies issued on student loan portfolios and is in respect of claims lodged by Wells Fargo and MBIA. It is anticipated that, if R&SA's appeal of the summary judgment is lost, then Wells Fargo and MBIA will be paid around USD280 million (GBP170 million) including interest costs. Further court cases connected with the student loans are also outstanding and will be resolved following the resolution of this lead case. These cases could lead to additional costs in favor of Wilmington Trust and PNC Bank. As of March 20, 2003, the R&SA group had received claims of around USD450 million in connection with the student loans litigation. Legal fees and other expenses could increase R&SA's potential downside to around USD500 million (GBP300 million). That said, this potential downside would be reduced to a limited extent by some reinsurance protection, the recognition of premiums in respect of the student loans and R&SA's ability to apply the losses against some non-specific provisions held. On September 4, 2003, Fitch took various rating actions on the R&SA group partially as a result of a belief that risk factors surrounding the business had increased relative to the group's ability to cope with potential negative developments or unforeseen events. The agency continues to regard risk factors as being relatively high, particularly when considered relative to the group's potential to absorb further losses. The agency believes that the capacity to raise additional funds over the short term has been diminished by the previously-announced heavily discounted rights issue and the disposal of some of the more saleable areas of R&SA's business. In its review of the third quarter results, Fitch will again consider the risk factors that could affect R&SA's business which include significant litigation (including the student loans), asbestos exposures, collateralized debt obligations, and U.S. and U.K. regulatory capital uncertainties. With this new information, Fitch will also reconsider the risk factors derived from possible future reserve development (particularly from the U.S. operations) as well as that derived from some dependence on a quota-share reinsurance treaty and restricted fungibility of capital between the U.S. and U.K. operations. NOTE: These ratings were initiated by Fitch in response to investor demand. These ratings are based primarily on public information. ROYAL & SUNALLAINCE: Sells Lenders' Mortgage Insurance Business --------------------------------------------------------------- The PMI Group, Inc. announced that its wholly owned subsidiary, PMI Mortgage Insurance Company Limited (PMI Europe), has acquired the U.K. lenders' mortgage insurance business of Royal & Sun Alliance Insurance Group plc. The acquisition of the lenders' mortgage insurance business is subject to regulatory and U.K. court approval, which is anticipated to take approximately six months. Cooperation agreements are in place to provide Royal & Sun Alliance Insurance's clients with access to PMI's products during this interim period and following the acquisition. "We are delighted to acquire Royal & Sun Alliance Insurance's the lenders' mortgage insurance business in the United Kingdom," said Tony Porter, PMI Europe Executive Managing Director. "We will work closely with clients over the forthcoming months to educate them about our business and how our products can assist them to manage the risk of their mortgage books and maximize the use of their asset base," said Mr. Porter. PMI's acquisition of Royal & Sun Alliance Insurance's the lenders' mortgage insurance business reflects a mortgage insurance portfolio that consists of U.K. residential mortgage loans originated in 1993 and subsequent years. Royal & Sun Alliance Insurance has agreed to discontinue writing or renewing lenders' mortgage insurance business, though Royal & Sun Alliance Insurance will continue to manage the existing portfolio of pre- 1993 contracts and the excess of loss contracts. The portfolio covers approximately US$15 billion of original insured principal value, approximately US$2 billion of remaining exposure. Royal & Sun Alliance Insurance will transfer all cash loss reserves, unearned premium reserves and central provisions associated with the portfolio to PMI totaling approximately US$54.6 million as of July 1, 2003. Included in the reserves being transferred is approximately US$23.3 million in unearned premium reserve. In addition, Royal & Sun Alliance Insurance and PMI have an agreement to share the costs or rewards of loss performance worse or better than expected. PMI Mortgage Insurance Company Limited, or PMI Europe, is a mortgage insurance and credit enhancement company incorporated and located in Dublin, Ireland, with an affiliated sales company incorporated in England and located in London. PMI Europe is authorized to provide credit, suretyship and miscellaneous financial loss insurance by the Irish Financial Services Regulatory Authority. PMI Europe's claims-paying ability is rated "AA" by S&P and Fitch, and "Aa3" by Moody's. These ratings are based upon PMI Europe's initial capitalization, its management expertise, a capital support agreement provided by PMI, and a guarantee by The PMI Group, Inc. of PMI's obligation under the capital support agreement. The PMI Group, Inc., headquartered in Walnut Creek, Calif., is an international provider of credit enhancement products and lender services that promote homeownership and facilitate mortgage transactions in the capital markets. Through its wholly owned subsidiaries and unconsolidated strategic investments, the Company offers residential mortgage insurance and credit enhancement products domestically and internationally, title insurance, lender services and financial guaranty reinsurance. Through its subsidiaries, PMI is one of the largest private mortgage insurers in the United States, Australia, New Zealand, and the European Union, as well as the largest mortgage guaranty reinsurer in Hong Kong. CONTACT: THE PMI GROUP, INC. Josh Wozman, Phone: 925-658-6863 (Media) Matt Nichols, Phone: 925-658-6618 (Investors) SFI GROUP: Admits Extent of Damage Caused by Accounting Gap ----------------------------------------------------------- Trouble pub operator SFI group admitted for the first time it has been hit hard by a GBP20 million accounting blackhole last year, and by its subsequent delisting, according to The Times. Recently appointed Executive Chairman Stuart Lawson said in a letter to shareholders the company is now only being sustained by the support of its banks, with whom it owes GBP151.2 million in debt, and GBP6.7 million in unpaid interest and fees. Mr. Lawson said there was "further significant exposure arising from interest rate hedges" that were not covered by the GBP9 million it netted from asset disposals. Mr. Lawson added: "Neither current nor projected trading is sufficient to support repayment of such a high level of debt and the directors believe that the company's equity value is completely eroded." He also said that most of the discrepancy that resulted to the blackhole is due to the result of the pressure put on the finance department by SFI's rapid growth and "operations-driven culture". But he cleared that although some of the gap could be attributed to "earnings manipulation or overly aggressive accounting", there was no fraud involved in the issue. He as well said he was hopeful of securing a longer-term refinancing in the near future. 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 * * *