/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/031128.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Friday, November 28, 2003, Vol. 4, No. 236 Headlines B E L G I U M REAL SOFTWARE: Severs Ties with Chief Financial Officer D E N M A R K MAERSK AIR: Receives Crucial Refinancing from Shareholder F I N L A N D BENEFON OYJ: Proposes Further Cost-cutting Measures F R A N C E ALSTOM SA: Welcomes Increase in Shipbuilding Subsidy BULL SA: Restructuring Plan Could Prompt Downgrade, Says S&P G E R M A N Y DAIMLERCHRYSLER AG: Verdict on Merger Case Delayed Until Feb. DBA: Owner in Search for New Partner to Bring in More Cash H U N G A R Y K&H BANK: Not Making Provisions to Cover Fraud-Related Losses I T A L Y FIAT SPA: Appoints Luigi Gubitosi As New Chief Financial Officer SAFILO SPA: S&P Lowers Bank Loan & Corporate Debt Rating to B TELECOM ITALIA: Outlook Revised to Positive After S&P's Review N E T H E R L A N D S KONINKLIJKE AHOLD: Unveils Terms of Proposed Rights Offering KONINKLIJKE AHOLD: Shareholders Adopt All Agenda Items at AGM KONINKLIJKE AHOLD: Records EUR62 MM Net Loss for Nine Months KPNQWEST N.V.: Further Review to Delay Report on Collapse S W E D E N LM ERICSSON: Raises EUR434 Million from Bond Exchange Offer U N I T E D K I N G D O M ABBEYCREST: Fall in Demand for Gold to Hit Profits BRITISH AIRWAYS: Initiates Passenger Flights to Algiers BRITISH ENERGY: Approaches Government for Additional Loan CONDUIT: Cuts Line of One Call Center in U.K. EASTWOOD CARE: Creditors' Meeting Set for December 10 EQUITABLE LIFE: Passes Opportunity to Buy Unit's Debt EQUITABLE LIFE: Sir Philip Otton to Step Down from Board LEEDS UNITED: Abandons GBP4.4 Million Share Issuance Plan MG ROVER: Industry Insiders Say Work Stoppage is Disastrous NETTEC PLC: Settles Property Issue, Resolves Lawsuit in France NETWORK RAIL: Proposes "Twin Track" Approach to Funding ROYAL MAIL: Postcomm Questions & Investigates Alleged Discounts SKERMAN LIMITED: Schedules Creditors' Meeting on December 5 ST. JAMES'S: Fined for Inadequate Monitoring and Record Keeping ********* ============= B E L G I U M ============= REAL SOFTWARE: Severs Ties with Chief Financial Officer ------------------------------------------------------- Real Software Group announced Wednesday that it has terminated in common agreement its relationship with Philip De Tavernier, Chief Financial Officer. Real Software's Corporate Restructuring Manager, Edwin Van Volsem, who has thoroughly reviewed the company's functioning since June 2001 and has implemented several successful actions in the group, will step in as C.F.O. ad interim as from November 27, 2003. His experience with specialized missions in financing and management, together with the support of a strong Corporate Finance team, will allow a smooth transition. ============= D E N M A R K ============= MAERSK AIR: Receives Crucial Refinancing from Shareholder --------------------------------------------------------- Maersk Air received additional capital of DKK400 million from A.P. Moller - Maersk A/S this week. President of Maersk Air, Flemming Ipsen, sees this as a positive gesture from the shareholder and continues: "During the last few years we have worked hard to trim the Maersk Air Group. We are now completing the framework that will allow us to move forward again. The additional capital is an important piece for the company and the employees and will provide the new president the necessary means to take Maersk Air the whole way through the difficult period for the aviation industry." CONTACT: MAERSK AIR Copenhagen Airport South 2791 Dragor, Denmark Phone: +45 3231 4444 Fax: +45 3231 4490 E-mail: info@maersk-air.dk Contact: Flemming Ipsen, President Phone: +45 3231 4400 ============= F I N L A N D ============= BENEFON OYJ: Proposes Further Cost-cutting Measures --------------------------------------------------- To secure the continuing cost savings needed for the development of the business, Benefon Oyj has proposed to personnel to conduct negotiations according to the industrial co-operation act. The ongoing various forced leave arrangements of the company agreed earlier affect about 100 employees in Finland. The possible new cost saving measures proposed to be negotiated about include part-time work arrangements, forced leaves, employment terminations, retirement arrangements and training and re-location arrangements. The measures would affect at most about 100 people in Finland and they would in part replace the on-going arrangements. The company has no intention to discontinue or transfer its operations in Finland but purports to secure continuing operations here on sound financial basis. The company will negotiate with the employees and the employment officials about arrangements where employment terminations could be minimized. BENEFON OYJ Jukka Nieminen President =========== F R A N C E =========== ALSTOM SA: Welcomes Increase in Shipbuilding Subsidy ---------------------------------------------------- French engineering group Alstom expects to benefit from new rules being proposed by the European Union to encourage research and development in the shipbuilding sector. The scheme, which is separate from emergency aid granted to European shipbuilders last year to compensate for the effect of rival subsidies in Korea, stands to give Europe's shipbuilding sector the chance to receive twice the amount of subsidies for projects from the European Union member states. Europe's last state shipbuilding subsidies were phased out in 2001. Jean-Georges Micol, communications director of Alstom, said the reforms would "obviously be good news for Alstom in helping us to compete with non-European rivals," according to the Financial Times. He mentioned plans to apply for increased subsidies to finance research into new cruise ship and liquid natural gas tanker designs for the group's shipbuilding division, Alstom Marine. The unit has been hit by a sharp drop in its annual order book, from EUR1.8 billion (US$2.1 billion) in the year to March 2001 to EUR163 million the following year. BULL SA: Restructuring Plan Could Prompt Downgrade, Says S&P ------------------------------------------------------------ Standard & Poor's Ratings Services said that the 'T3' short-term ADEF rating on French IT company Groupe Bull SA would likely be lowered to 'T4' if the company's proposed restructuring plans are accepted by bondholders, as approval of the proposal will be characterized as a default under Standard & Poor's criteria. Bull's restructuring plans are part of its efforts to restore positive equity and to dramatically reduce its large debt burden. They entail an approximate 90% reduction in the economic value of the company's EUR204 million convertible bonds. This figure has been calculated by Bull and reflects: (a) A maturity date that would be rescheduled to 2033, from the current 2005; (b) A lower cash coupon; (c) A redemption price reduced to 100%, from 116.5%; and (d) The foregoing by bondholders of the conversion parity adjustment mechanism. "As part of the proposal, Bull is committing to launch a convertible bond-to-equity exchange offer," said Standard & Poor's credit analyst Patrice Cochelin. "However, Standard & Poor's views Bull's offer as coercive, as refusal to accept the exchange proposal would lead to even worse recovery prospects for bondholders." In addition, the proposed restructuring includes an arrangement with the French state in which the state would forgive its outstanding EUR490 million loan (including accrued interest) to Bull in exchange for partial repayment in the form of a tax on any future profits above EUR10 million generated during the next eight years. The resulting liability ("clause de retour a meilleure fortune") would be recorded off the balance sheet. The tax rate remains to be agreed upon, but would likely result in a 90% loss on the French state's loan. "Standard & Poor's will continue to monitor Bull's restructuring efforts. A bondholders meeting to review and vote on the company's proposals will be held on Dec. 11, 2003, the results of which -- along with the company's new operating prospects and improved balance sheet structure -- will determine the future direction of the rating," added Mr. Cochelin. ============= G E R M A N Y ============= DAIMLERCHRYSLER AG: Verdict on Merger Case Delayed Until Feb. ------------------------------------------------------------- The U.S. District Judge Joseph J. Farnan Jr. in Delaware has set deadlines for post-trial briefs filed in the fraud case brought by billionaire investor Kirk Kerkorian against Daimler-Benz officials. Judge Farnan, who is hearing the case without a jury, scheduled Dec. 1 as the first session of the trial. He has set aside three weeks for the proceedings in the federal court in Wilmington. The move is expected to delay the judge's ruling until at least February. The case lodged by Mr. Kerkorian, former largest shareholder of Chrysler, is arguing Daimler-Benz officials concealed plans to take control of the combined carmaker when Daimler-Benz AG and Chrysler Corp. merged in 1998. He alleged that the move is aimed at making the transaction more acceptable to U.S. antitrust regulators and investors, and to save US$10 billion in takeover premium. Mr. Kerkorian is seeking as much as US$3 billion in damages over his stock losses as the merger failed to turn in expected benefits. DaimlerChrysler's shares dived 56% since the completion of the merger in November 1998. Terry Christensen, a Los Angeles-based lawyer representing Kerkorian, said Mr. Kerkorian is seeking as much as US$2 billion in actual damages. Stuttgart-based DaimlerChrysler had US$756 million in losses in the first nine months of this year due to higher than expected rebate costs and falling sales. CONTACT: DAIMLERCHRYSLER AG Epplestrasse 225 70546 Stuttgart Germany Phone: +49 711 170 Fax: +49 711 17 22244 Home Page: http://www.daimlerchrysler.com DBA: Owner in Search for New Partner to Bring in More Cash ---------------------------------------------------------- German millionaire Hans Rudolf Woehrl is urgently looking for a financial investor for German airline Dba, formerly British Airways' loss making Deutsche BA, Intesatrade reports. Woehrl, who bought Detusche BA earlier this year and later renamed it Dba, told Handelsblatt a previous investor broke off talks during warning strikes among pilots and cabin crew that disrupted flights earlier this month. "Another warning strike before Christmas and I'll throw in the towel," Mr. Woehrl said. Dba is aiming to turn a profit in fiscal 2005, which ends March 31. Woehrl plans to increase its aircraft fleet to 18 from 16 in 2004. German airline Deutsche BA is competing against a growing number of no-frills airlines in Germany and Europe. It has been loss making even before British Airways sold the airline to Mr. Woerhl. ============= H U N G A R Y ============= K&H BANK: Not Making Provisions to Cover Fraud-Related Losses ------------------------------------------------------------- K&H Bank is not setting aside any amount that might be needed to cover losses because of fraud at its brokerage business, K&H Equities Rt, as the review of its accounts is still ongoing. Hungary's second largest retail bank is currently poring over the accounts of about 70 clients whose accounts history has been incorrect as a result of falsifications committed by some of its employees and customers. Police say the losses at the brokerage could amount to HUF10 billion, but K&H Bank won't put a number to it until the review is completed, according to Dow Jones. Agnes Baba, K&H's deputy chief executive, told the press: "This was our auditor's opinion. We have an estimate for the loss but we know this figure is wrong and we can't set aside provisions based on a guess." K&H's auditor is Ernst & Young. Ms. Baba says the process will need a lot of time, and in some instances the intervention of the court. Belgium's KBC, which owns 49.9% of the Hungarian bank, is reportedly willing to put aside EUR20 million. Dutch bank ABN Amro Holding N.V., which owns the other 51.1%, hasn't said whether it will make a provision, the report said. Excluding the effects of the alleged fraud, K&H Bank made a net profit of HUF12.69 billion in the first nine months of 2003. ========= I T A L Y ========= FIAT SPA: Appoints Luigi Gubitosi As New Chief Financial Officer ---------------------------------------------------------------- Fiat SpA on Wednesday promoted Luigi Gubitosi from group treasurer to chief financial officer of the troubled Italian industrial group. Mr. Gubitosi replaces Ferruccio Luppi who had spent only one year in the position. Mr. Luppi, the man of the controlling Agnelli family, is being transferred as chief executive of Fiat's non- core business services unit that has revenues of EUR2 billion (US$2.4 billion). Mr. Gubitosi joined Fiat in 1986, and has helped Fiat restructure its lending covenants, cut debt and dispose non-core assets. His appointment came a week after the succession into office of Herbert Demel, a former to executive at Volkswagen, to the helm of troubled Fiat Auto. The promotions are part of a radical shakeup being initiated by the firm's new chief executive, Giuseppe Morchio, who came into the group only in February. Mr. Morchio also installed into office two former executives from tire and cable maker Pirelli. SAFILO SPA: S&P Lowers Bank Loan & Corporate Debt Rating to B ------------------------------------------------------------- Standard & Poor's Ratings Services said that it has lowered its long-term corporate credit rating on Italy-based eyewear manufacturer Safilo SpA to 'B' from 'BB-'. Standard & Poor's also lowered to 'B' from 'BB-' its bank loan rating on the group's EUR650 million senior secured credit facility maturing between 2009 and 2011, and to 'CCC+' from 'B' its subordinated debt rating on the senior notes maturing in 2013 issued by Luxembourg-based subsidiary Safilo Capital International SA and guaranteed by Safilo SpA. At the same time, all ratings were placed on CreditWatch with negative implications. "The downgrade and CreditWatch listing reflect, respectively, Safilo's very weak operating performance in the first nine months of 2003 and a subsequent breach of a covenant in September 2003, for which a waiver has been obtained, however," said Milan-based Standard & Poor's credit analyst Benedetta Rospigliosi. Contrary to Standard & Poor's expectations, Safilo's results did not improve in the third quarter from the weak performance recorded in the first half. EBITDA was down 29% both for the nine-month period and the third quarter. "Such performance, combined with negative cash flow generation, continues to yield very weak credit metrics and materially impair debt repayment capacity," added Ms. Rospigliosi. Poor top-line performance led Safilo to breach its net debt-to- EBITDA covenant in the third quarter. Although a waiver has already been obtained, Standard & Poor's now believes that Safilo will be challenged to meet its financial covenants during the last quarter of the year, thereby introducing substantial risks for the company's unsecured creditors. Resolution of the CreditWatch status will depend on the company's ability to renegotiate the financial covenants on its senior credit facility. "Although management expects to amend its financial covenants to avoid otherwise likely future violations, we are concerned about Safilo's ability to rapidly improve its financial profile," said Ms. Rospigliosi. TELECOM ITALIA: Outlook Revised to Positive After S&P's Review -------------------------------------------------------------- Standard & Poor's Ratings Services said that it has revised its outlook to positive from stable on Telecom Italia SpA, Italy's dominant telecommunications services provider, following a review of the group's business strategy and financial policy for the next two years. At the same time, Standard & Poor's affirmed its 'BBB+' long-term and 'A-2' short-term ratings on the company. The ratings continue to primarily reflect Telecom Italia's superior business fundamentals in both its domestic fixed-line and mobile-telephony businesses, and the offsetting impact of high leverage following the August 2003 merger with former parent Olivetti SpA. At end-September 2003, Telecom Italia's on- balance-sheet net debt was EUR34.3 billion. "Telecom Italia's solid cash flow generation, strong operating performance, and continued focus on debt reduction could lead to credit metrics compatible with a higher rating within the next 18 months," said Milan-based Standard & Poor's credit analyst Guy Deslondes. Any rating upgrade, unlikely before year-end 2004, would be subject to Standard & Poor's revisiting TI's business strategy -- most notably in light of developments in the broadband segment in France and Germany, and expansion in mobile telephony in Brazil - - and financial policy. "A carefully balanced financial policy between shareholders' interests and creditor protection will be required for an 'A' category rating," added Mr. Deslondes. ===================== N E T H E R L A N D S ===================== KONINKLIJKE AHOLD: Unveils Terms of Proposed Rights Offering ------------------------------------------------------------ Ahold announced Wednesday its intention to proceed with a 2 for 3 rights offering of new common shares at an issue price of EUR4.83 per share, raising approximately EUR3.0 billion. The rights offering will be approximately 621.0 million common shares and has been fully underwritten by a syndicate of banks, subject to customary closing conditions at the issue price. The rights offering is part of Ahold's "Road to Recovery" program announced on November 7, 2003, aimed at restoring the company's financial health with the goal of returning Ahold to an investment grade profile by the end of 2005. Launch of the rights offering is subject to adoption of the relevant resolutions at Ahold's General Meeting of Shareholders that takes place Tuesday. Accordingly, the rights offering and all dates mentioned in this press release are subject to change. A further announcement confirming the outcome of the General Meeting of Shareholders will be released after completion of the meeting. Terms of the rights offering Under the rights offering, existing shareholders will be granted rights to subscribe for new common shares at EUR4.83 per share. The subscription ratio for the rights offering has been set at 2 for 3, meaning that eligible holders, subject to certain exceptions, will have the right to subscribe for 2 new common shares for every 3 common shares held on the record date. The record date for determining eligibility for holders of common shares to receive rights is 17:40 hours, Central European time, on November 26, 2003. Holders of ADSs Each ADS held at 17:00 hours, New York City time, on December 3, 2003 will entitle its holder to 1 right. Except in certain circumstances, holders of ADSs will not be entitled to exercise the rights they receive in the rights offering and the rights of such holders on the record date will be sold on their behalf by the ADS Depositary. No new deposits can be made into the ADS facility as of the common share record date. The rights offering comprises a public offering of common shares in the Netherlands and Switzerland and a private placement elsewhere. The rights and the new common shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or under the securities laws of any state of the United States. Accordingly, the rights and the new common shares may not be offered, pledged, sold, resold, granted, delivered, allotted, taken up, or otherwise transferred except only in transactions that are exempt from, or in transactions not subject to, registration under the Securities Act and in compliance with any applicable state securities laws. The material set forth herein is for informational purposes only and is not intended, and should not be construed, as an offer of securities for sale in the United States. The securities described herein have not been and will not be registered under the Securities Act or the laws of any state, and may not be offered or sold within the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state laws. There is no intention to register any portion of the rights offering or the rump offering described herein in the United States or to conduct a public offering of securities in the United States. The information contained herein shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the securities referred to herein, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any jurisdiction. This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom, (ii) have professional experience in matters relating to investments or (iii) are persons falling within Article 49(2) of the Financial Services and Market Act 2000 (Financial Promotion) Order 2001. The shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such shares will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents. CONTACT: AHOLD Corporate Communications Phone: +31.75.659.5720 KONINKLIJKE AHOLD: Shareholders Adopt All Agenda Items at AGM ------------------------------------------------------------- Ahold announced Wednesday that during its Annual General Meeting of Shareholders, the appointment of Peter Wakkie as Chief Corporate Governance Counsel and Corporate Executive Board member was approved. Wakkie's nomination was confirmed by 97.7% of the votes represented in the meeting. Precisely 563 shareholders representing some 482 million common shares -- approximately 40.5% of the total number of Ahold shares outstanding -- also adopted Ahold's 2002 financial statements and all other agenda items including the amendments to the Articles of Association during the AGM, which was held at the Amsterdam Passengers Terminal. Amendments to Articles of Association Authorized share capital These amendments were adopted with regard to the authorized share capital: (a) The authorized share capital of the Company has been increased to EUR1,250,000,000 as a result of the increase of the authorized share capital of (i) the cumulative preferred shares from eight hundred thousand (800,000), of each EUR500, to one million two hundred and fifty thousand (1,250,000), of each EUR500, of (ii) the cumulative preferred financing shares from four hundred million (400,000,000), of each EUR0.25 to five hundred million (500,000,000) of each EUR0.25 and of (iii) the common shares from one billion two hundred million (1,200,000,000), of each EUR0.25, to two billion (2,000,000,000), of each EUR0.25. (b) The number of series of cumulative preferred financing shares have been increased and a new subdivision of such series has taken place. Shares The following amendment has been adopted with regard to shares: (a) One share certificate ("global") for all bearer shares of common stock will be introduced. Corporate Executive Board and Supervisory Board These amendments have been adopted with regard to the Corporate Executive Board and Supervisory Board: (a) A non-binding nomination has been introduced in respect of the appointment of members of the Corporate Executive Board as well as in respect of the appointment of members of the Supervisory Board. The nomination can include only one single person. A resolution to appoint a person as member of the Corporate Executive Board nominated by the Supervisory Board shall be adopted by an absolute majority of the votes cast. (b) The reference to the deputy members of the Corporate Executive Board has been removed from the articles of association. (c) These provision will be included in the articles of association: A resolution to appoint a person as member of the Corporate Executive Board, not nominated by the Supervisory Board shall be adopted by an absolute majority of the votes cast, if such majority represents more than one-third of the issued share capital. The proposed resolution in respect of a resolution to suspend or dismiss a member of the Corporate Executive Board is similar. It has also been resolved to include in the articles of association a similar provision in respect of the appointment, suspension and dismissal of members of the Supervisory Board. (d) The age limit for members of the Supervisory Board as currently included in the Articles of Association of the Company will be removed. Distributions These amendments have been adopted with regard to the distributions on the preferred financing shares: (a) The distributions on the preferred financing shares have been linked up with the arithmetical average of the ten-year Euro SWAP rate. (b) A transitional provision will be included in the articles of association of the Company for existing series of preferred financing shares. The dividend percentages for a particular series shall be adjusted for the first time as of the day when ten years have passed since the date on which for the first time a preferred financing share of a series was issued (and subsequently every ten years thereafter). Authorization to acquire shares Shareholders authorized the Corporate Executive Board for a period of 18 months (i.e. up to May 26, 2005) to acquire as many ordinary shares of the Company as shall be permitted within the limits of the law and the Articles of Association. This has also been approved by the Ahold Supervisory Board. The price may not be lower than one eurocent and not higher than 105% of the average closing price of such shares at the Amsterdam Stock Exchange calculated over the five stock exchange days immediately preceding the date of acquisition. Supervisory Board committee members named During the meeting, the members of the Supervisory Board's three committees -- Nomination, Remuneration and Audit -- were named: (a) Nomination Committee: Karel Vuursteen (chair), Cynthia Schneider and Sir Michael Perry (b) Remuneration Committee: Sir Michael Perry (chair), Karel Vuursteen and Roland Fahlin (c) Audit Committee: Jan Hommen (chair), Lodewijk de Vink and Karel Vuursteen. Set forth are summaries of key points made in the addresses to shareholders by members of the Ahold Supervisory Board and Corporate Executive Board: Peter Wakkie:"Corporate governance a high priority at Ahold" Commenting on corporate governance at Ahold during the shareholder meeting, Wakkie said: "Corporate governance will have a high priority at Ahold in order to regain the trust of all stakeholders. Ahold will incorporate the expected new law that will significantly improve the position of shareholders. With regard to the Tabaksblat code on corporate governance, Ahold will follow the code in principle, and intends to come forward with detailed proposals at a special shareholders' meeting on corporate governance in February 2004." Henny de Ruiter: "Ahold has turned the corner" "Ahold has published a very comprehensive report with respect to the year 2002," said Henny de Ruiter, outgoing chairman of the Ahold Supervisory Board. "It was a disastrous year, as I have said at previous Shareholders' Meetings, but I am at the same time happy that Ahold has recently turned the corner and has set again its sights on the future." De Ruiter admitted that both the Supervisory Board and the Executive Board felt responsible for the events at U.S. Foodservice that led to the announcement of February 24, 2003, but that they were equally misled by the sophisticated fraud perpetrated there. He commented on the negative impact of information withheld from the auditors regarding consolidation issues but was unable to provide more information because investigations were still continuing. De Ruiter commented on the appointments of senior executives, including (chronologically) Dudley Eustace, Anders Moberg and Hannu Ryopponen. He indicated that continuity of management dictates that a change in composition of the Supervisory Board must occur gradually. De Ruiter then formally retired from his position as Chairman of the Ahold Supervisory Board. Effective immediately, his successor will be Karel Vuursteen, a member of the Ahold Supervisory Board since May 7, 2002. Anders Moberg: "Focused on the future" "It is a pleasure for me to talk to you about Ahold, because we are now a company focused on the future," said Anders Moberg, Ahold President and CEO, in his address to shareholders. "To be sure, our past continues to instruct us every step of the way as we move forward to rebuild Ahold." Moberg opened with an outline of the milestones achieved by Ahold since the last shareholder's meeting, and described the main elements of the company's financing plan and strategy. "We launched the 'new Ahold' with the announcement of our 'Road to Recovery' three-year financing plan and strategy. This program is our commitment to Ahold's investors and all other stakeholders to rebuild the value of our company. We are eager for the challenge of turning what has been a loose collection of businesses into a single company with a single focus on creating durable value, based on a superior customer offer." Moberg expressed the importance of rebuilding relationships with stakeholders and strengthening accountability and corporate governance at Ahold. He thanked those who had taken on leadership roles in the company during the period immediately following February 24 and particularly Henny de Ruiter, who was to retire as Chairman of the Supervisory Board later in the meeting. He closed with further remarks on Ahold's view of the past and vision of the future. "Ahold is emerging from the most difficult period in its history to embark with confidence on the road to recovery. Ahold is proud to have a number of new managers in key positions, dedicated staff, powerful brands and solid operating companies with good market positions, all of which will help us establish a robust platform for further value creation. Ahold will once again become a company in which you can take pride, and count on to deliver," Moberg concluded. Hannu Ryopponen: "Publication of 3Q results signals return to reporting calendar" "The results in the first three quarters of 2003 were disappointing," said Hannu Ryopponen. "In all business segments, we were faced with lower operating income partly related to the fact that we continue to suffer from the impact of the issues that Ahold announced on February 24, 2003, and subsequently compounded by very competitive conditions year to date in 2003 in most of our markets...They reflect further slippage of operating income at U.S. Retail due to continued pressure on gross margins as a result of promotional activities and lower leverage on operating expenses and an increase in operating expenses at U.S. Foodservice due to lower gross margins. In Europe, operating income declined with a lower percentage than the run-rate for the first half-year of 2003 . The publication of these results, as scheduled, signals a return to a normal and predictable financial reporting calendar for Ahold. We believe this is a very important step in recovering the confidence of our shareholders and the financial market." Sir Michael Perry, GBE: "Bonus criteria demand dramatic near-term improvement" "We have aggressive challenges before us and we have created an aggressive bonus plan that reflects those challenges," said Sir Michael Perry, GBE, an Ahold Supervisory Board member and chairman of the nomination committee, commenting on the criteria of the bonus compensation for Anders Moberg. "The bonus criteria will be set annually by mutual agreement between the Supervisory Board and Mr. Moberg. Criteria for 2004 will be developed as part of the overall remuneration policy going forward to be presented to shareholders next year. For the year 2003, the bonus will be calculated pro rata from the date of employment: May 5, 2003. If Mr. Moberg achieves all of his performance criteria and delivers outstanding performance in 2003, then the maximum bonus will be 250% of his base salary. Seven criteria have been set for 2003. For pay-out to occur on any of the performance criteria, the target for that specific criterion must be fully met. The criteria have been grouped into three categories: Financial, Strategic and Stabilization." Sir Michael went on to describe the level of performance necessary in the three categories to initiate the bonus compensation. Karel Vuursteen: "Thank you Henny!" "Please allow me to say a few words to you and to thank you for the years you were chairman of Ahold," said incoming Supervisory Board chairman Karel Vuursteen to his predecessor Henny de Ruiter. "This company owes you a lot, much more than many people realize. I am of course referring to what happened in February, a crisis for which no one was prepared. In the most difficult situation in Ahold's existence, you did not hesitate. Your sense of duty did not fail when the company faced disaster. You did a tremendous job as interim CEO spending many days and many nights negotiating with lawyers, auditors and bankers. You kept all of us together, and by doing so, you kept Ahold alive. On behalf of us all, I would like to express our gratitude for what you did. We are both a bit too old to be overly worried about what we sometimes read in the papers. But I know it was not easy for you to read some of the things that were published. History, I am sure, will picture a different image of Henny de Ruiter, the man who made sure Ahold survived. Henny, thank you very, very much." KONINKLIJKE AHOLD: Records EUR62 MM Net Loss for Nine Months ------------------------------------------------------------ Ahold published its results for the first three quarters of 2003. Commenting on the results, Hannu Ryopponen, CFO, said: "The results for the third quarter of 2003 reflected the trends of the first half-year as published on November 7, 2003 with some slippage of operating income in our U.S. retail operations and an increase in operating losses at U.S. Foodservice. Non-recurring items have negatively affected results both at our U.S. retail operations and in U.S. Foodservice. Operating income in Europe declined primarily due to a decrease at Albert Heijn." Net sales The 10.5% decrease in net sales was largely attributable to lower currency exchange rates against the Euro, particularly for the U.S. Dollar. The average U.S. Dollar to Euro exchange rate decreased approximately 16.7% in the first three quarters of 2003 compared to the same period last year. Net sales excluding currency impact increased by 3.3% mainly due to a 3.2% increase in net sales in the U.S. retail trade operations, a 1.3% increase in the Europe retail trade operations and a 1.2% increase at U.S. Foodservice. In addition, net sales in the first three quarters of 2003 were: (a) favorably impacted by the full period consolidation in Ahold's consolidated financial statements of Disco and Santa Isabel in South America, which began to be consolidated in the second and third quarters of 2002, respectively; (b) favorably impacted by the acquisition of Lady Baltimore and Allen Foods in September and December 2002, respectively, which, together with the consolidation of Disco and Santa Isabel discussed above, contributed approximately 1.2% of the 3.3% net sales growth; and (c) marginally negatively impacted by the divestments of Jamin and De Tuinen in The Netherlands in the second quarter of 2003 and of the Company's Chilean, Malaysian, Indonesian and Paraguayan operations and De Walvis in The Netherlands in the third quarter of 2003. Operating Income The 49.0% decrease in operating income was primarily caused by weaker operating performance in all business segments, the weakening of the U.S. Dollar against the EURand higher audit, legal and consultancy fees. In addition, as discussed below, exceptional losses of EUR110 million were recorded in the third quarter of 2003 related to the divestment of a number of foreign subsidiaries, principally Ahold's Chilean activities. Operating income in the same period last year was negatively impacted by an exceptional loss of EUR372 million in the first three quarters of 2002. The exceptional loss was caused by the default by Velox Retail Holdings (VRH), Ahold's former joint venture partner, on bank debt that Ahold had guaranteed. Operating income before impairment and amortization of goodwill and exceptional losses in 2003 decreased by 53.4% compared to the same period last year. Excluding currency impact, operating income before impairment and amortization of goodwill and exceptional losses would have decreased by 45.5% in the first three quarters of 2003 compared to the same period last year. As mentioned above, this decrease was primarily caused by a weaker operating performance across all business segments, as well as higher audit, legal and consultancy fees. Goodwill Amortization Goodwill amortization in the first three quarters of 2003 amounted to EUR131 million, a decrease of 35.1% compared to the same period last year. This decrease was primarily due to lower goodwill balances at year-end 2002 resulting from the goodwill impairment charges of EUR1,281 million recorded in fiscal 2002 of which EUR1,185 million were recognized in the fourth quarter of fiscal 2002 and to the lower average currency exchange rate of the U.S. Dollar against the Euro. Goodwill Impairment No goodwill impairment charges were recorded in the first three quarters of 2003 compared to EUR96 million in the same period last year. The goodwill impairment charge recorded in the first three quarters of 2002 mainly related to the purchase of the remaining shares in DAIH in July and August 2002. Exceptional Losses Exceptional losses of EUR110 million were recorded in the third quarter of 2003 related to the divestment of foreign subsidiaries, principally Ahold's Chilean activities. Of these exceptional losses, EUR70 million related to the recognition of accumulated foreign currency translation adjustments in the statement of operations and EUR36 million to the reversal of goodwill, both of which had previously been charged to shareholders' equity. These exceptional losses were non-cash and had no impact on the overall level of shareholders' equity. Exchange rate differences related to the translation of the financial results of foreign subsidiaries are recorded directly in shareholders' equity. When these exchange rate differences are realized upon the sale or liquidation of the underlying foreign subsidiary, the cumulative foreign currency translation adjustments are recognized in the statement of operations. Also, under Dutch GAAP, goodwill previously deducted directly from shareholders' equity upon acquisition has to be reclassified pro-rata to the statement of operations if sold within six years of the initial acquisition. Net Financial Expense Net interest expense increased by 4.1% due to an increase in banking fees and interest expenses related to the credit facility signed on March 3, 2003, new debt assumed or incurred in connection with acquisitions in the course of 2002 and an increase in cash dividends paid in 2002. This increase in banking fees and interest expenses was partly offset by a favorable currency impact, especially relating to the U.S. Dollar against the Euro. Net interest expense excluding currency impact increased by 18.8%. The increase in banking fees and interest expenses was due in part to the higher applicable borrowing rate for the 2003 credit facility compared with the previous credit facility. The applicable borrowing rate under the 2003 credit facility as of the end of the third quarter of 2003 was LIBOR (or EURIBOR on Euro borrowings) plus 3.25%. The applicable borrowing rate under the previous credit facility as of year-end 2002 was LIBOR (or EURIBOR on Euro borrowings) plus a margin of 0.35% to 0.40%, depending upon the amount of debt drawn under the facility. Ahold's level of borrowing and letters of credit under its 2003 credit facility have increased compared to the level under the previous credit facility. Ahold also has incurred significant fees under the 2003 credit facility and in connection with the extension and amendment of its accounts receivable securitization programs. Ahold's borrowings under the 2003 credit facility as of the end of the third quarter of 2003 were US$750 million and EUR600 million, plus USD 353 million of issued letters of credit that bore a fee of 3.25% of the stated amount. Its borrowings under the previous credit facility as of year-end 2002 were US$80 million, plus US$150 million of issued letters of credit with a fee of 0.40%. The gain on foreign exchange in the first three quarters of 2003 amounted to EUR16 million and mainly related to the positive impact of the revaluation of the Argentine Peso on U.S. Dollar- denominated debt in Argentina. In the first three quarters of 2002, a foreign exchange loss of EUR85 million was mainly incurred related to the negative impact of the devaluation of the Argentine Peso on U.S. Dollar-denominated debt and inflation adjustment losses related to Argentine Peso-denominated debt in Argentina. Income Taxes The effective income tax rate, adjusted for the impact of non- tax-deductible impairment and amortization of goodwill and exceptional losses, increased to 50.9% in the first three quarters of 2003 compared to 30.0% in the same period last year. The main factor contributing to this increase in the effective tax rate was a different geographic mix of earnings, and higher losses in areas where no tax credit could be recorded. Share in Income (Loss) of Joint Ventures and Equity Investees The share in income (loss) of joint ventures and equity investees in the first three quarters of 2003 amounted to an income of EUR139 million, compared to a loss of EUR42 million in the same period last year. The share in income of ICA, included in European joint ventures, increased considerably in the first three quarters of 2003 mainly as a result of a gain related to the sale and leaseback of several distribution centers. The loss in the first three quarters of 2002 was primarily caused by losses at DAIH. The loss at DAIH of EUR126 million reflects the losses incurred at Disco and Santa Isabel at the time that they were not consolidated, which were mainly caused by the negative impact of the devaluation of the Argentine Peso on U.S. Dollar-denominated debt, as well as inflation adjustment losses on third-party Argentine Peso-denominated debt in Argentina. The losses in the first three quarters of 2002 at DAIH were partially offset by income from ICA AB, Jeronimo Martins Retail (JMR) and Paiz Ahold in this period. Net Income (Loss) Net loss in the first three quarters of 2003 was EUR62 million, compared to a net income of EUR17 million in the same period last year. The net loss in the 2003 period was primarily caused by lower operating performance at all business segments and higher audit, legal and consultancy fees, as well as the weakening of the U.S. Dollar against the Euro and the EUR110 million of exceptional losses related to divestments. Net Income (Loss) after Preferred Dividends per Common Share- Basic Net loss after preferred dividends per common share-basic amounted to EUR0.10 per common share in the first three quarters of 2003 compared to a net loss of EUR0.01 per common share in the same period last year. Retail Trade - United States Third Quarter 2003 Operating income before impairment and amortization of goodwill and exceptional losses in the third quarter of 2003 decreased as a result of reduced gross margin due to increased promotional activity, particularly at Giant-Landover and Tops. Stop & Shop continued its solid performance during the quarter. Operating income also was significantly impacted by impairment charges relating to long-lived assets and other non-recurring items. In addition, in the third quarter of 2002, real estate gains totaling EUR29 million had a positive impact on operating income, as reported last year, versus a gain of EUR4 million this year. First Three Quarters 2003 The decrease in net sales in the first three quarters of 2003 was largely attributable to a lower U.S. Dollar to Euro exchange rate. U.S. Dollar net sales increased by 3.2% resulting from comparable sales growth and the opening of new stores. Identical sales increased by 0.1% and comparable sales at existing and replacement stores increased by 0.9%. At Stop & Shop and Giant- Carlisle, U.S. Dollar net sales increased by 6.6% and 7.8%, respectively. Giant-Landover and Tops experienced pressure on net sales due to the weak economy and heightened competition, resulting in only slight increases in U.S. Dollar net sales. Due to the difficult trading environment in the southeastern United States, U.S. Dollar net sales at Bruno's and BI-LO (excluding Golden Gallon) were lower. Operating income before impairment and amortization of goodwill and exceptional losses in the first three quarters of 2003 decreased primarily as a result of the decline in the third quarter. Operating expenses at all of the companies in the U.S. retail operations were impacted by higher pension expenses, as well as continued rising health care costs. The pressure on operating expenses caused by these factors was partially offset by various cost saving initiatives. Retail Trade - Europe Third Quarter 2003 Operating income before impairment and amortization of goodwill and exceptional losses at Albert Heijn in the third quarter of 2003 decreased significantly compared to the same period in 2002. The decrease was primarily due to lower net sales and gross margins partially offset by lower operating expenses from cost reduction programs. As part of these programs, Albert Heijn is restructuring its head office and logistics functions, including through the reduction of 440 jobs. Operating income before impairment and amortization of goodwill and exceptional losses at other Europe retail trade operations increased in the third quarter of 2003, compared to the same period in 2002. This increase was primarily due to a strong increase at Schuitema as a result of higher sales and lower operating costs. In Central Europe, operating loss before impairment and amortization of goodwill and exceptional losses increased partly due to fixed asset impairment charges related to the sale of two hypermarkets in Poland and increased operating costs due to new stores. Spain incurred a small operating loss before impairment and amortization of goodwill and exceptional losses mainly due to slightly lower gross margins and higher operating costs partly related to new stores as well as fixed asset impairment charges. First Three Quarters 2003 Net sales at Albert Heijn in the first three quarters of 2003 decreased by 2.0% compared to the same period last year. Identical sales at Albert Heijn in the first three quarters of 2003 declined by 2.0% primarily due to lower consumer spending and a negative market sentiment towards Albert Heijn. As a result, Albert Heijn introduced a new pricing strategy in October 2003. Net sales at other Europe retail trade operations in the first three quarters of 2003 increased by 4.1% compared to the same period last year, primarily due to strong net sales growth at Schuitema and an increase in net sales in Central Europe and Spain. Net sales were marginally offset by the disposals of Ahold's specialty stores (Jamin and De Tuinen) in The Netherlands, which were completed in the second quarter of 2003. In Central Europe and Spain, net sales increased due to the opening of new stores, however, net sales in Central Europe were negatively impacted by deflation and a negative currency impact. Operating income before impairment and amortization of goodwill and exceptional losses in the Europe retail trade operations decreased primarily due to lower operating income at Albert Heijn. This was principally caused by lower net sales and gross margins, partially offset by lower operating expenses due to the start-up of cost reduction programs. In response to the competitive environment, Albert Heijn announced its price repositioning campaign on October 5, 2003. Operating income before impairment and amortization of goodwill and exceptional losses at other Europe retail trade operations in the first three quarters of 2003 was almost at the same level as the comparable period of last year. Foodservice - United States Third Quarter 2003 The operating loss before impairment and amortization of goodwill and exceptional losses in the third quarter of 2003 was primarily due to continued substantial pressure on gross profit at U.S. Foodservice as a result of its continued focus on controlling inventory levels and, hence, reduced purchases from vendors. As a result of the latter, volume allowances, which are based on purchases from vendors and which are an offset against cost of goods sold, were reduced. First Three Quarters 2003 Net sales at U.S. Foodservice in the first three quarters of 2003 decreased by 15.7% compared to the same period last year primarily due to a lower currency exchange rate of the U.S. Dollar against the Euro. U.S. Dollar net sales increased slightly by 1.2% due to the acquisition of Lady Baltimore and Allen Foods in September and December 2002, respectively, which contributed approximately 1.8% of the increase in net sales in the first three quarters of 2003, meaning that there has been a slight decrease in net sales excluding these acquisitions. The operating loss before impairment and amortization of goodwill and exceptional losses was primarily due to substantial pressures on operating profit at U.S. Foodservice principally as a result of the repercussions from the accounting issues and investigations in 2003. Furthermore, U.S. Foodservice experienced a weakening of its procurement leverage as vendors raised prices and shortened payment terms, resulting in a sharp deterioration in profitability. Food Service - Europe Net sales at the Deli XL food service operations, located in The Netherlands and Belgium, in the first three quarters of 2003 decreased by 3.3% compared to the same period last year. This decrease was primarily due to continuing unfavorable economic circumstances. Operating income at the Deli XL food service operations in the first three quarters of 2003 decreased by 75.0% compared to the same period last year. Other Business Areas Retail Trade - South America Net sales in the South America retail trade operations in the first three quarters of 2003 increased by 13.6% compared to the same period last year. This increase was mainly due to the consolidation of Disco and Santa Isabel since the second and third quarter of 2002, respectively. This increase was partially offset by the impact of the divestment of Santa Isabel's Chilean and, to a lesser extent, Paraguayan operations in July and September 2003, respectively. The operating loss before impairment and amortization of goodwill and exceptional losses in the first three quarters of 2003 was a result of the consolidation of Disco and Santa Isabel since the second and third quarter of 2002, respectively, both of which had operating losses, and the negative impact of lower net sales and lower margins recorded at the company's Brazilian operations. Retail Trade - Asia Net sales in the Asia retail trade operations in the first three quarters of 2003 decreased by 17.7% compared to the same period last year. This decrease was primarily due to the disposal of operations in Malaysia and Indonesia completed in September 2003 and a decline in net sales in Thailand due to strong competition. The increase in operating loss was primarily due to lower net sales and gross margin and to restructuring charges incurred as a result of the divestment program in Asia in the first three quarters of 2003. Other Activities Other activities include operations of three real estate companies which acquire, develop and manage store locations in Europe and the United States and corporate overhead costs of the Ahold parent company. The operating loss before impairment and amortization of goodwill and exceptional losses in the first three quarters of 2003 partially reflected corporate costs of EUR124 million compared to EUR24 million in the same period last year. The higher corporate costs in the 2003 period were mainly caused by the significant costs incurred in connection with the forensic accounting and legal investigations that have been conducted, ongoing litigation and ongoing government and regulatory investigations, as well as higher audit fees in connection with the audit of the company's 2002 financial statements. Furthermore, corporate costs increased as a result of an increase in the company's provision for self insurance and a decrease in gains from the sale of real estate compared to the same period last year. Cash Flow Statement Net cash from operating activities in the first three quarters of 2003 decreased by 48% compared to the same period last year, mainly as a consequence of lower operating income. Changes in working capital resulted in a cash outflow of EUR131 million in the first three quarters of 2003 partly due to shorter payment terms imposed by certain suppliers to U.S. Foodservice as a consequence of the discovery of the accounting irregularities as announced. As a consequence, changes in accounts payable resulted in a cash outflow of EUR532 million in the first three quarters of 2003. This was offset by a cash inflow related to changes in inventory partly as a result of U.S. Foodservices' focus on controlling inventory levels and purchases from vendors. Investments in tangible fixed assets in the first three quarters of 2003 amounted to EUR805 million compared to EUR1,445 million in the same period last year. Divestments of tangible and intangible fixed assets amounted to EUR455 million in the first three quarters of 2003 compared to EUR318 million in the same period last year. Shareholders' Equity Shareholders' equity, expressed as a percentage of the balance sheet total, was 10.0% at the end of the third quarter of 2003 compared to 10.5% at year-end 2002. Debt Position The rolling interest coverage ratio at the end of the first three quarters of 2003 amounted to 1.2, compared to 2.5 at the end of the same period last year. The rolling net debt/EBITDA ratio amounted to 4.3 at the end of the third quarter of 2003, compared to 3.1 at the end of the same period last year. Outlook for 2003 Ahold expects that its consolidated net sales in 2003, excluding currency impact, will be slightly higher than in 2002, primarily as a result of an increase in net sales in the U.S. retail trade operations resulting from comparable sales growth and the opening of new stores. This positive factor will be partially offset by the weakened global economy and strong competition in the markets that the company serves, as well as the need for management to deal with the repercussions of the announcements on February 24, 2003 and related developments. In addition, 2003 net sales will be negatively affected by completed and future divestments closed in 2003. Operating expenses, excluding the impact of currency exchange rates and the impact of goodwill impairment and amortization and exceptional losses, are expected to be significantly higher in 2003 than in 2002. The company expects that net interest expense, excluding currency impact, will be above 2002 levels. Nevertheless, the company expects to report net income for the full year 2003, excluding the impact of any goodwill impairment and amortization that may be incurred in the fourth quarter of 2003 and excluding exceptional losses with respect to its divestments. At the end of 2003, Ahold will evaluate the carrying amount of its goodwill for possible impairment and will determine whether any goodwill impairment charges are required to be taken. No triggering event has been identified in 2003 as of the date of this press release. Ahold expects that it will incur exceptional losses upon completion of the divestitures of certain Latin American operations, which is expected to occur prior to the end of 2003 or in 2004. The completion of these divestitures will lead to the recognition of accumulated foreign currency translation adjustments in the statement of operations as well as in some cases the reversal of goodwill previously charged to shareholders' equity. The cumulative exchange rate differences charged to shareholders' equity at the end of the third quarter of 2003 amounted to EUR265 million and EUR201 million for Brazil and Argentina, respectively. The respective amounts of goodwill reversed should a transaction have taken place at the end of the third quarter of 2003 would have been EUR255 million for Brazil and EUR82 million for Argentina, respectively. The performance of U.S. retail in the fourth quarter of 2003 is expected to improve compared to the third quarter partly due to seasonality. The company expects EBITA margin in the fourth quarter to improve to approximately the level achieved in the first three quarters of 2003. At Albert Heijn, operating profit will be negatively impacted in the fourth quarter by the price repositioning announced on October 5. However, the company expects that this negative impact will be partly offset by higher volume. So far, the customer response to Albert Heijn's price repositioning has been positive. Ahold expects its food service operations in the United States to have a clearly lower operating loss before impairment and amortization of goodwill and exceptional losses in the fourth quarter of 2003 compared to the third quarter of 2003, excluding currency impact. US GAAP Reconciliation The audited 2002 Financial Statements on Form 20-F filed with the U.S. Securities and Exchange Commission contains a reconciliation from Dutch GAAP to US GAAP of net income (loss) and shareholders' equity. Ahold has not provided a US GAAP reconciliation on a quarterly basis in 2003 but intends to do so in 2004. Accounting Principles The accounting principles applied have not changed compared to the accounting principles as stated in the Ahold 2002 Annual Report, which was published in English and Dutch, both of which have been posted on the Ahold web site (http://www.ahold.nl). In November 2002, the Emerging Issues Task Force ("EITF") of the Financial Accounting Standards Board in the United States reached consensus on Issue No. 02-16, Accounting for Consideration Received from a Vendor by a Customer (Including a Reseller of the Vendor's Products) ("EITF 02-16"). Under the consensus, cash considerations received from a vendor should be considered an adjustment to the price of the vendor's products or services and, therefore, characterized as a reduction of cost of sales when sold unless (1) the cash consideration represents a reimbursement of a specific, incremental, identifiable cost incurred in selling the vendor's products and therefore characterized as a reduction of those costs or (2) the cash consideration represents a payment for assets or services delivered to the vendor and therefore characterized as revenue. The Company will adopt the provisions of EITF 02-16 for Dutch GAAP in the fourth quarter of 2003. The Company has not yet completed its analysis of the effect on the consolidated financial statements as a result of the adoption of EITF 02-16. The 2002 numbers included in this press release have been restated as disclosed in note 3 of the Ahold 2002 Annual Report. Other The data included in this press release are unaudited. The balance sheet items as per December 29, 2002 have been derived from the Ahold 2002 Annual Report. Definitions (a) Identical sales compare sales from exactly the same stores. (b) Comparable sales are identical sales plus results from replacement stores. (c) Currency impact is the impact of using different exchange rates to translate the financial figures of subsidiaries to Euros. Where specifically indicated, the financial figures of the previous year are adjusted using the current year exchange rates. (d) The interest coverage ratio is calculated as operating income excluding impairment and amortization of goodwill and exceptional losses, divided by net interest expense. (e) Net debt/EBITDA: Net debt includes long- and short-term interest bearing debt, netted with loans receivable and cash and cash equivalents, divided by EBITDA excluding exceptional losses. (f) Net income (loss) after preferred dividends per common share- basic is calculated as net income (loss) after preferred dividends, divided by the weighted average number of common shares outstanding during the applicable period. To see full copy of financial results: http://bankrupt.com/misc/Ahold_9Months.pdf KPNQWEST N.V.: Further Review to Delay Report on Collapse --------------------------------------------------------- Shareholders and creditors hoping to recover investments in failed KPNQwest N.V. will have to wait until next year to see the report on the inquiry into the collapse of the Dutch data- services provider. The long-awaited report, expected in the third quarter of this year, has been delayed because of further verifications, trustee Jan van Apeldoorn told Dow Jones. The trustees holding the company's bankruptcy had called in Dutch legal accountancy firm SchaapBruinVanVliet B.V. to check certain financial elements and also to double-check information provided by the named parties in the report, such as former board members and house banks of KPNQwest, according to the report. Shareholders and creditors said they are ready to take legal action against former board members of KPNQwest as well as KPN and Qwest in the U.S. and in Europe to recover lost investments. "We think it's no longer realistic to assume we can put out the report in 2003, because we hired accountants who are checking some facts we included in the report, and that will take some more time," Mr. van Apeldoorn said. The former joint venture of Royal KPN N.V. and Qwest Communications Inc. went bankrupt in spring 2002, only four years after its formation. =========== S W E D E N =========== LM ERICSSON: Raises EUR434 Million from Bond Exchange Offer ----------------------------------------------------------- Telefonaktiebolaget LM Ericsson announced the successful completion of its Bond Exchange Offer. The Ericsson Bond Exchange Offer, announced on November 4, 2003, closed at 11.00 a.m. (London) Wednesday. The transaction was well received by the bond market, raising total acceptances of EUR433,818,000. Participants in the Bond Exchange Offer have exchanged their existing holdings in the Ericsson 6.375% Euro Medium Term Notes maturing May 31, 2006 for a new seven-year bond, which is callable after 4 years. The new bond will pay a coupon of 6.75% and was priced to yield 285 bps (annually) over the DBR 5.25% maturing January 4, 2011. Holders of the Notes were offered new bonds at a ratio of 1:1.0855. This ratio generates a principal size of ?470,856,000 for the new 6.75% notes maturing November 28, 2010 (net of bond rounding amounts, to be paid in cash). The Bond Exchange Offer has significantly extended Ericsson's debt maturity profile and has allowed Ericsson to take advantage of excellent credit and interest rate market conditions without raising additional cash. "We are very pleased with the outcome of the Bond Exchange Offer," said Vidar Mohammar, Ericsson Corporate Treasurer. "The offer has achieved excellent financing terms for Ericsson and increased our financial flexibility." The Ericsson exchange offer settles on November 28, 2003. Participants will receive their allocations of new bonds plus accrued interest and any rounding amounts in cash. The offer was open only to professional investors. Ericsson is shaping the future of Mobile and Broadband Internet communications through its continuous technology leadership. Providing innovative solutions in more than 140 countries, Ericsson is helping to create the most powerful communication companies in the world. Read more at http://www.ericsson.com/press CONTACT: LM ERICSSON Investor Relations Phone: +46 8 719 6553, +46 730 371 100 E-mail: lotta.lundin@ericsson.com James Borup, Ericsson Communication Phone: +46 8 719 0952, +46 8 719 69 92 E-mail: james.borup@ericsson.com Dealer Manager: J.P. Morgan Securities Ltd. Paul Hawker - Liability Management Desk Phone: +4420 7777 4185 E-mail: paul.hawker@jpmorgan.com =========================== U N I T E D K I N G D O M =========================== ABBEYCREST: Fall in Demand for Gold to Hit Profits -------------------------------------------------- The finance director of troubled jewelry group Abbeycrest, Phil Walker, warned the company could report full year results that is below market expectations. Pre-tax profits are likely to come near GBP1.7 million, instead of GBP3.7 million expected by analysts. The results is seen to be negatively influenced by a 14% decrease in 9 carat gold jewelry submitted to the U.K. Assay Offices for the second quarter of 2003. In comparison with last year, the figure would be 5% lower, Mr. Walker said. The finance director blames the downturn to the fall in demand of gold jewelry, not because of fashion, but because current high prices are discouraging customers. Gold is now trading at its highest level for five years and the price is around 20% up on the previous year. Abbeycrest's pre-tax loss in the six months to August 31 was of GBP1.2 million, an improvement on last year's GBP3.7 million loss. Turnover increased slightly from GBP39 million to GBP39.4 million. The company is planning to exit unprofitable areas of business at its main U.K. distribution G&A Ltd. to concentrate on areas that offer growth. BRITISH AIRWAYS: Initiates Passenger Flights to Algiers ------------------------------------------------------- British Airways will fly to Algiers for the first time when the airline launches a new service from London Gatwick airport on January 5, 2004. Flights will operate on Mondays, Wednesdays and Fridays on a Boeing 737. In addition, changes to the bilateral air agreement between the U.K. and Libya have enabled the airline to increase its weekly frequency between London Heathrow and Tripoli from three to four flights, from November 30, 2003. It is hoped to increase services further next summer. Martin George, British Airways' director of marketing and commercial development, said: "Algiers is a key business market, particularly in the oil and gas industry, and we are confident that there is a strong demand for additional scheduled services between Algeria and the U.K. "This is also the sixth new destination that we have announced from London Gatwick airport in recent months emphasizing, again, that the airport is key to British Airways' future." Return prices between London Gatwick and Algiers start at GBP382 including taxes, fees and charges. Seats can be booked by calling 0870 850 9850 or via your local travel agent. Services from London Gatwick to Turin started in October 2003 and services from London Gatwick to Bari, Cagliari, Catania and Dubrovnik start in late March 2004. BRITISH ENERGY: Approaches Government for Additional Loan --------------------------------------------------------- British Energy admitted on Wednesday it is in talks with the Secretary of State for Trade and Industry about a possible increase of its GBP200 million credit facility. The troubled energy group did not say how much it is asking, but it is thought to have its eyes on an extra GBJP100 million, according to BBC News. In September, the firm said it had already used up GBP106 million of its current loan. The decision to approach the government regarding an increase came after the unexpected closure of its Sizewell B and Heysham 1 nuclear power stations. The nuclear generator expects the failure to overshoot its GBP20 million to GBP30 million estimate, and hit income. Experts put the cost of the outages at up to EUR50 million. The reactors at Heysham 1 were shut down October 28 due to the failure of a sea water cooling pipe. Sizewell B was shutdown two weeks longer than the normal time for maintenance due to tests conducted to ascertain a suspected "anomaly." The results turned out negative. The site is set to open in the middle of December, three weeks after its supposed restart. CONTACT: BRITISH ENERGY Contact: Paul Heward, Investor Relations Phone: +44 (0)1355 262 201 CONDUIT: Cuts Line of One Call Center in U.K. --------------------------------------------- Directory enquiries company Conduit closed one of its call centers in the U.K. due to a lack of demand, according to BizWorld. The move, which is expected to result to the loss of 100 jobs, ends the struggle of the Irish company to attract customers to its 11 88 88 service, which lost its appeal after the deregulation of the market in Britain. Conduit also brought down the axe to some 250 employees in Britain this year. Troubles in one of Ireland's fastest growing companies led to the resignation of its chief executive in September. The management was then at odds over how to drive the company. Conduit has 11850 directory services in Ireland, as well as directory services in Switzerland and Austria. EASTWOOD CARE: Creditors' Meeting Set for December 10 ----------------------------------------------------- Notice is hereby given pursuant to Section 48(2) of the Insolvency Act 1986, that a meeting of the unsecured creditors of Eastwood Care Homes (Mansfield) Limited (in administrative receivership) will be held at Quality Hotel, Ashby New Road, Loughborough on December 10, 2003 at 10.30 a.m. for the purpose of having laid before it a copy of the report prepared by the Joint Administrative Receivers under section 48 of the said Act. The meeting may, if it thinks fit, establish a creditors' committee to exercise the functions conferred on it, by, or under the Act. Creditors are only entitled to vote if: (a) they have delivered to us at the offices of RSM Robson Rhodes 186 City Road, London EC1V 2NU, no later than 1200 hours on the business day before the meeting, written details of the debts they claim to be due, and the claim has been duly admitted under the provisions of the Insolvency Rules 1986; and (b) there had been lodged with us any proxy which the creditor intends to use on his behalf. Michael John Hore Simon Peter Bower Joint Administrative Receivers EQUITABLE LIFE: Passes Opportunity to Buy Unit's Debt ----------------------------------------------------- Equitable Life Assurance Society is aware of market speculation concerning a potential offer to be made by the Society to purchase some or all of the Bonds issued by its subsidiary Equitable Life Finance plc. The Society regularly reviews the possibility of making an offer for the Bonds but has decided not to make such an offer at the present time. ***** Equitable narrowly escaped collapsed in 2000 when, after losing a legal battle, it was forced to honor guaranteed policies sold in the high interest rate years of the 1970s and 1980s at the cost of GBP1.5 billion. CONTACT: Tony McGarahan Phone: 020 7710 3784 Alistair Dunbar Phone: 01296 561502 EQUITABLE LIFE: Sir Philip Otton to Step Down from Board -------------------------------------------------------- Equitable Life on Wednesday announced that Sir Philip Otton, Deputy Chairman, has decided to retire from its Board of Directors. He will leave the Board at the end of the year. Sir Philip, aged 70, is a former Lord Justice of Appeal and joined the Society in March 2001 as part of the new Board. Sir Philip said: 'Equitable Life has faced an unprecedented minefield of legal issues and, as a policyholder of many years standing, I have been pleased to have been able to assist the Society and my colleagues to seek the most appropriate path forward. The business is now stabilizing, the claims against the Society are under control and the recent Court decisions in the claims against the former directors and Ernst & Young vindicate the Society's action against both parties. I made clear to the Chairman that I would step down at the appropriate time and that time is now.' Vanni Treves, the Society's chairman, said: 'The new Board inherited a myriad of unique challenges and Sir Philip has made an immense contribution to the Society in the past two-and-a-half years as Deputy Chairman, and Chairman of our Legal Audit and Remuneration Committees. Policyholders should be very pleased that we had such expertise and wise legal counsel representing their interests on the Board.' CONTACT: Tony McGarahan Phone: 020 7710 3784 Alistair Dunbar Phone: 01296 561502 LEEDS UNITED: Abandons GBP4.4 Million Share Issuance Plan --------------------------------------------------------- As announced on October 28, 2003 in our preliminary statement of results, the Directors have been negotiating the first phase of a complex debt restructuring of the Group's finances with its principal finance creditors to provide the Group with additional working capital and to give it time to implement a more permanent restructuring plan. In the Preliminary Statement we also referred to a commitment through a share issue to inject GBP4.4 million in cash from Allan Leighton and A.R.M. Holdings Group Ltd. Unfortunately, after a long period of constructive discussions, negotiations have failed to reach a satisfactory conclusion in time to issue a circular and obtain shareholder approval before Christmas. As a result, it has been decided not to go ahead with the planned subscription for shares and, contrary to the expectation expressed in the Preliminary Statement, there will be no circular issued to shareholders. Nevertheless, the Company continues to be in constructive discussions with its principal finance creditors and proposed investors with a view to providing the Group with additional working capital and to give it time to implement a more permanent restructuring plan. In addition, Allan Leighton has already confirmed that his funds remain available for investment in the Group. The Directors are continuing to take steps to manage cash flows, including the implementation of the cost savings described in the Preliminary Statement and management of working capital. The Directors remain of the view that, if all of these negotiations are concluded successfully, they will provide adequate funding for at least three months in which to conclude arrangements designed to achieve a more permanent refinancing of the Group. But, if the negotiations referred to above are unsuccessful, the Directors may be forced to seek the protection of an administration order. A further announcement will be made as soon as the Company is in a position to make one. CONTACT: LEEDS UNITED PLC Professor John McKenzie, Chairman Phone: 0113 367 6000 Neil Robson, Finance Director Phone: 0113 367 6000 Holborn PR Phone: 020 7929 5599 David Bick Phone: 07831 381 201 Chris Steele Phone: 07979 604 687 Trevor Phillips Phone: 07889 153 628 MG ROVER: Industry Insiders Say Work Stoppage is Disastrous ----------------------------------------------------------- MG Rover's decision to suspend production for the rest of this week has speculation on the company's future. Industry insiders warn the move may herald disaster for the firm, The Scotsman said. According to the report, although car firms often halt production briefly, Rover's timing is odd because the U.K. car market is currently strong. TCR-Europe said the decision came after owners of the car manufacturer met with union to discuss the company's finances. Among the topics taken up were the director's pay, the company's GBP70 million plus pensions deficit, and reports that a trust fund had been created for company directors. The company, which has been hit by falling sales, desperately needs a new model to replace the Rover 45 and to boost sales in the mid-market. The Midlands car giant attempted to shrug off the crisis and blamed the strength of the euro, although the currency has been weaker recently. NETTEC PLC: Settles Property Issue, Resolves Lawsuit in France -------------------------------------------------------------- The Board of Nettec plc announces that the lease of Malt House, Kingston has been surrendered to the landlord, in a significant step towards reducing the Group's outstanding issues. There has also been a decision favorable to Nettec in the litigation in France. Nettec plc has paid some GBP1,100,000 plus VAT less the existing rental deposit to the landlord in exchange for the surrender. After professional and other costs related to the surrender and on the basis that the VAT is recoverable, the net cost is not expected to be materially different to the amount of the provisions and deferred income in respect of the property which were included in the interim balance sheet sent to shareholders with the accounts for the half year to June 30, 2003. The Board also announces that the Commercial Court in Paris has found against M Boulet and awarded Nettec plc some EUR8,000 in costs. M Boulet has been sent a notification of the decision and any appeal by him would have to be filed by January 6, 2004. Shareholders had previously been informed in the interim accounts of a possible contingent liability of GBP0.85 million in respect of this claim which was considered to be unjustified. The company's current cash and short term investment balances, after the payments connected with the surrender of the lease are around GBP9,700,000. Jeremy White, Chairman of Nettec, commented: 'The surrender of this lease is part of the Board's strategy of bringing to a conclusion matters from the past in order to position the company strongly to take advantage of future opportunities. The two other outstanding issues are now well on their way towards settlement.' CONTACT: NETTEC PLC David Shaw, Finance Director Phone: 020 7152 6474 CITIGATE DEWE ROGERSON Patrick Toyne Sewell Phone: 020 7638 9571 NETWORK RAIL: Proposes "Twin Track" Approach to Funding ------------------------------------------------------- Network Rail published Wednesday its response to the Regulator's draft conclusions, the latest step in the ongoing interim review of track access charges. This document represents Network Rail's formal response to the draft conclusions, which were published on October 17, 2003. The response welcomes the Office of the Rail Regulator's acknowledgement that we have adopted an open and transparent approach to the review, that we have responded constructively to the challenge of identifying ways of reducing costs while improving performance, and that we are already making progress in addressing many of the issues identified in the draft conclusions. The Office of the Rail Regulator's draft conclusions imply unprecedented efficiency savings over the next five years. Whilst we have made clear our determination to transform the efficiency of the company, and have committed to meeting demanding targets, it must be recognized that this is extremely challenging. Network Rail remains of the view that efficiency savings at around the bottom end of the proposed range in the third consultation document are challenging but realistic. The document suggests that there appear to be a number of inconsistencies which need to be addressed to set outputs, activities, unit costs and, therefore, revenues which must, in the final conclusions, be consistent with each other. The substantial reductions in renewal activity proposed in the draft conclusions have significant implications for the volume of maintenance activity that needs to be carried out if the output targets are to be achieved. The proposed volume reductions would, for instance, limit the effectiveness of high-output track renewal equipment and reduce the scope for savings. The Regulator appears to have made no allowance for additional maintenance where he has proposed further reductions in renewals. In relation to the West Coast Route Modernization project, the document emphasizes that the interim review must provide appropriate funding and an appropriate allocation of risk for agreed outputs. Network Rail agrees with the Regulator that it is important that the interim review places the company on a sound, stable and sustainable financial footing. We have worked closely with the SRA to explore whether it would be possible to reduce our charges through increased borrowing compared to the draft conclusions. We are not yet in a position to confirm that this is possible. Network Rail has therefore proposed a twin-track approach to the interim review conclusions, which would allow a pre-determined reduction in charges to be implemented if specified regulatory criteria are met. Network Rail Chief Executive John Armitt said: "The interim review process is nearing its completion. It is essential that railway finances are placed on a sound, stable and sustainable basis. We will continue to work closely with the Office of the Rail Regulator in the coming weeks." Network Rail is the 'not for dividend' operator of Britain's rail network. The company's objective is to provide safe, reliable and efficient rail infrastructure. It owns and maintains the tracks, signals, tunnels, bridges, viaducts, and level crossings. It also own the network's 2,500 stations, and manage the largest and busiest. The firm provide access to the tracks for every passenger and freight train, timetable their journeys, and operate the signaling, which controls their movements. Network Rail is a company limited by guarantee with members instead of shareholders. It is run as a commercial organization, but any operating surplus is re-invested in the rail network. Its core focus is the operation, maintenance and renewal of existing rail infrastructure, with the Strategic Rail Authority taking the lead on enhancement projects. It has set clear targets to improve performance and reduce costs, but safety is always at the forefront of our activities as we rebuild Britain's railway. Details about Network Rail can be found on the Network Rail web site: http://www.networkrail.co.uk ROYAL MAIL: Postcomm Questions & Investigates Alleged Discounts --------------------------------------------------------------- Postcomm has received information which suggests that Royal Mail is offering substantial discounts to attract catalogue mail. These discounts have not been notified by Royal Mail to Postcomm or published in accordance with Condition 7 of its license. They were also subject to confidentiality agreements. Postcomm accordingly served a provisional enforcement order on Royal Mail on November 25 requiring it to provide detailed information about the alleged discounts, to maintain all documents and records, and to refrain from departing from its published tariffs without proper notice to Postcomm and publication. Royal Mail notified Postcomm on November 26 that it will comply with the order. Postcomm will now continue its investigations into the compatibility of these discounts with Royal Mail's license. SKERMAN LIMITED: Schedules Creditors' Meeting on December 5 ----------------------------------------------------------- Notice is hereby given by Geoffrey Paul Rowley and Michael Jonathan Christopher Oldham of RSM Robson Rhodes LLP, 186 City Road, London EC1V 2NU that a meeting of creditors of Skerman Limited is to be held at Farmborough Holiday Inn, Lynchford Road, Farmborough GU14 6AZ on Friday December 5, 2003 at 11 a.m. The meeting is an initial creditors' meeting under paragraph 51 of Schedule B1 to the Insolvency Act 1986. A proxy form is available which should be completed and returned to me by the date of the meeting if you cannot attend and wish to be represented. In order to be entitled to vote under Rule 2.38 at the meeting you must give to me, not later than 12.00 hours on the business day before the day fixed for the meeting, details in writing of your claim. Geoffrey Paul Rowley Michael Jonathan Christopher Oldham Joint Administrators ST. JAMES'S: Fined for Inadequate Monitoring and Record Keeping --------------------------------------------------------------- The Financial Services Authority has fined St. James's Place U.K. plc, St. James's Place International plc and St. James's Place Unit Trust Group Ltd. a total of GBP250,000 for serious monitoring and record keeping inadequacies. These failings exposed investors to the risk of surrendering existing investment contracts and committing money to new investment contracts in circumstances where this may not have been in their interests. The fine is apportioned equally between the three companies, which are subsidiaries of St. James's Place Wealth Management Group plc. This disciplinary action relates to recommendations made to customers by the firms' Appointed Representatives to surrender and replace existing investment contracts that had been arranged by competitor product providers and the firms' monitoring of these transactions. These two connected transactions are together referred to as 'a replacement sale'. The firms' procedures for monitoring replacement sales failed to detect, and prevent, serious deficiencies in record keeping. This meant that it was impossible to check whether or not the sales had been suitable for the investors without obtaining further information. Andrew Procter, FSA Director of Enforcement, said: 'Firms must understand that procedures to monitor advisers, particularly where high-risk transactions are being recommended, are not a 'nice to have', they are a necessity. It is essential that senior management take responsibility to ensure that procedures are in place to make sure that advisers are doing their job properly.' The problems were identified in August 2001 during a visit to St James's Place U.K. by the Personal Investment Authority, one of the FSA's predecessor regulators. It is noted that: (a) disciplinary proceedings were previously taken by LAUTRO against St. James's Place U.K. plc during 1994 on the grounds of similar failings; (b) The importance of the effective monitoring of replacement sales was highlighted by guidance issued by Lautro on March 11, 1994 (Lautro Enforcement Bulletin 30); and (c) Personal Investment Authority supervision visits to the firms in 1996 and 1998 had identified inadequacies in the documentation of replacement sales, and in the monitoring of these transactions. This should have alerted the firms to the need to ensure that their monitoring of replacement business was adequate and operating effectively, yet the deficiencies continued over a prolonged period of time. They occurred from January 1, 2000 and were not fully rectified until January 13, 2003, a year and a half after they were identified by Personal Investment Authority and as a result of an investigation by the FSA's Enforcement team. In all of the cases reviewed by the Enforcement team, the original customer file contained insufficient information from which to fully assess whether the recommendation was suitable for the customer, in that the original documentation did not make sufficiently clear the client's particular circumstances, financial needs and objectives, or how the replacement sale met those needs and objectives. Each replacement sale to which this documentation related had been pre-approved by the firms' monitoring staff and deemed to be suitable for the customers based on the deficient information, prior to the advice being given. As part of the FSA's investigation, in January 2002, the firms were required to appoint an appropriately qualified 'Skilled Person' (note 8) to review their procedures and help them bring about changes to their existing processes for monitoring replacement business and implement these processes in a more effective manner. The Skilled Person carried out a review of replacement sales transacted by the firms since January 1, 2000 and a review of new replacement sales until January 13, 2003. These reviews considered whether the recommendations were suitable and whether the supporting documentation was adequate. On January 13, 2003 the Skilled Person reported that the firms' own monitoring processes were operating to an adequate standard. The Skilled Person concluded that the firms had recognized that replacement business is a higher risk than most other new business and had appropriately recognized the importance of suitability in giving advice to their clients. However, in the past, the firms had not attached enough importance to the maintenance of sound evidential standards of documentation in client specific files. Nevertheless, the Skilled Person did not identify any systemic issues affecting the suitability of replacement business and did not recommend a further review of replacement sales. In deciding the level of penalty to be imposed, the FSA has taken into account that, while the firms' failings in this case were serious, the firms are considered to have co-operated in the Enforcement investigation and in conducting remedial action where required. This remedial action included the appointment of the Skilled Person and responding to the recommendations of the Skilled Person. In addition by moving quickly to agree the facts of the case and to settle the matter it has helped the FSA to work expeditiously towards its statutory objectives. Were it not for the remedial action taken and for the co-operation demonstrated, resulting in the early settlement of the matter, the financial penalty would have been significantly higher. ********* 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., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland 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 * * *