Marconi's Debt Restructuring
Prof Ian Giddy
Marconi
Explains Refinancing Deal
LONDON -- Marconi plc ("Marconi")
(MONI) announces that it has today concluded non-binding indicative heads
of terms (the "Heads of Terms"), which sets out the principles for the financial
restructuring of Marconi and its wholly owned subsidiary Marconi Corporation
plc ("Marconi Corporation") (the "Restructuring"). The Heads of Terms are
the culmination of good faith negotiations between Marconi, the Co-ordination
Committee of Syndicate Banks and an informal ad hoc committee of bondholders.
Mike Parton, Chief Executive
of Marconi, said:
"The financial restructuring
will allow the Group to emerge with a balance sheet that we believe is robust
and appropriate to the size of our business. This is very reassuring for
customers, suppliers and employees and we are grateful for their continued
support. As always we remain absolutely committed to servicing our customers'
needs.
"The level of cash and non-core
assets retained by the Group allows us to withstand a prolonged market downturn.
Managing our assets for value has been and continues to be an important
part of our strategy. The agreed debt structure, combining a mix of cash-pay
and pay in kind instruments, gives us a stable and flexible balance sheet.
"We have worked hard to refocus
the business and reduce costs in response to the severe market downturn experienced
across the telecom equipment sector. The financial restructuring allows
us to plan our future with renewed confidence."
Derek Bonham, Interim Chairman
of Marconi, said:
"The Heads of Terms we have
set out today recognises the position of the Group's creditors and also allows
Marconi's shareholders to retain an economic interest in the ongoing business
through the equity and warrants that they will receive. We continue to focus
on concluding this complex process as soon as we can."
Key Points:
Marconi Corporation claims to be exchanged for a package of cash, new
equity and new debt securities of Marconi Corporation
Restructuring
to be effected at Marconi Corporation:
- Marconi
Corporation to become new holding company of the Group
- following its scheme, Marconi expected to be "liquidated" on a
solvent basis
Restructuring
targeted to be completed by end January 2003
Restructuring aims
to preserve the ongoing business operations of Marconi Corporation and the
rights of customers, suppliers and employees. Creditor and employee claims
at subsidiary levels will not be involved in the Restructuring and their
claims will not be compromised
The prospective
capital structure has been designed to:
- provide
flexibility for Marconi Corporation's ongoing success
- maximise cash recovery to creditors
- allow existing Marconi shareholders to maintain an ongoing economic
interest in Marconi Corporation
Creditors participating
in the scheme of arrangement of Marconi Corporation will be offered a distribution
pro rata to their claims:
- cash equal
to at least GBP260 million less approximately GBP95 million of accrued interest
to be paid up to 15 October, 2002 in respect of accrued and payable interest
on Marconi Corporation's financial indebtedness
- GBP450 million of new senior secured notes due 2008 bearing quarterly
cash interest at 8 per cent per annum
- redemption from surplus cash at 110 per cent of par, plus
accrued interest following settlement of junior secured notes and limited
recourse notes -
no redemption at Marconi Corporation's option
- GBP250 million of new mandatorily redeemable junior secured notes
due 2008 - two
year interest holiday and thereafter bearing quarterly interest at 10 per
cent if deferred (pay in kind) or 8 per cent if paid in cash
- mandatory redemption at 110 per cent of par, plus accrued
interest from releases of restricted cash (cash collateral and ESOP retention)
and/or from disposal proceeds (non-US Asset disposals and US Asset disposals
after settlement of the limited recourse notes)
- USD300 million (approximately GBP197 million) of new secured limited
recourse notes due 2008
- two year interest holiday and thereafter bearing quarterly interest
at 10 per cent if deferred (pay in kind) or 8 per cent if paid in cash
- secured against, and with limited recourse solely to, the
US Assets of the Group
- mandatory redemption at 110 per cent of par, plus accrued interest
from the disposal proceeds of any US Assets
- 99.5 per cent of Marconi Corporation's issued share capital immediately
following the Restructuring
Existing Marconi
shareholders to receive 0.5 per cent of Marconi Corporation's issued share
capital immediately following the Restructuring and warrants maturing four
years after the Restructuring allowing the purchase of 5 per cent of Marconi
Corporation's issued share capital, with a strike price equivalent to a
post Restructuring market capitalisation of GBP1.5 billion
Restructuring to
reduce significantly Marconi Corporation's debt:
- approximately
GBP4 billion of externally held financial indebtedness, as well as actual
and contingent claims, in aggregate totalling not less than GBP4.9
billion - approximately
GBP0.8 billion of this GBP4.9 billion represents claims by Marconi (or its
subsidiaries), where the principal creditors are, through their
guarantee provisions, the external financial creditors of Marconi
Corporation
Creditors participating
in the scheme of arrangement of Marconi will be offered a distribution
pro rata to their claims of Marconi's assets principally comprising the benefit
it derives from Marconi Corporation's scheme of arrangement
Marconi Corporation
to provide interim security to the Group's syndicate banks, bondholders
and ESOP derivative providers against GBP850 million of the cash held
in the lockbox by 5 September, 2002
On completion
of the Restructuring, Marconi Corporation expected to have approximately
GBP635 million of cash (including approximately GBP320 million of restricted
cash)
- pro forma
total Group net debt expected to be approximately GBP300 million on completion
of the Restructuring
- pro forma Core net debt (excluding the Limited Recourse Notes)
is expected to be approximately GBP100 million
Restructuring based
on Marconi Group's Business Plan, which has been prepared:
- to capitalise
on the Group's strengths and European market leadership in Optical
Networks - to
build on the Group's strong customer relationships and it's "best in class"
solutions - to provide
for sufficient retained cash and adequate working capital to ensure that
the Group can withstand an extended downturn in its markets
- to provide for the transfer of the Outside Plant and Power and
the US Access businesses to Marconi Capital where they will be
managed for value -
to create a firm foundation from which the Group can deliver value for all
stakeholders
Operational restructuring
to deliver the Business Plan is well advanced
Marconi Corporation
intends to apply for a new listing on the London Stock Exchange and to
establish an ADR programme on NASDAQ. Marconi has agreed that it will
begin to file 10-K, 10-Q and 8-K reports with the SEC in an agreed
timeframe and hold quarterly investor conference calls
Completion of
the Restructuring will be conditional on appropriate creditor consent as
well as further due diligence by the syndicate banks and bondholders
This press release
should be read in conjunction with the full text of the announcement and
its related Annexes: Annex A "Summary of Key Actual Claims and Contingent
Claims" and Annex B "The Business Plan".
http://www.marconi.com/html/news/financialrestructuringindicativeheadsofterms.htm
Shareholder Frequently Asked Questions
A Guide to Warrants
|
|
