/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/020311.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Monday, March 11, 2002, Vol. 3, No. 49 Headlines * B E L G I U M * AGFA-GEVAERT: Records EUR 288MM Loss in 2001 * F R A N C E * AIR LIB: Directors Mulls Bankruptcy Filing COMPLETEL EUROPE: Moody's Cuts Completel Ratings to Ca * G E R M A N Y * DEUTSCHE TELEKOM: Financial Crisis Snags UMC Takeover DEUTSCHE TELEKOM: Set for T-Mobile IPO ELSA AG: Company Profile EJAY AG: Empire Interactive Takes Over Ejay Assets KIRCHGRUPPE: DaimlerChrysler Denies Bidding for Kirch's F1 Stake KIRCHGRUPPE: DZ Bank Provides Breathing Space for Kirch KIRCHGRUPPE: May Restructure Management as Part of Revamp KIRCHGRUPPE: U.S. Media Giants Eye Kirch's ProSieben PHILIPP HOLZMANN: Sees Higher Than Expected Annual Loss * I R E L A N D * AIB GROUP: BoI Chief Calls for AIB Merger * N E T H E R L A N D S * KPN NV: EU Clears KPN Acquisition of E-Plus LAURUS NV: Casino Agrees EUR200MM Rescue Package LAURUS NV: Issues EUR400MM of New Equity LAURUS NV: Loses Interim Chairman Konings LAURUS NV: Reschedules Bank Debt Into EUR910MM Credit Facility * P O L A N D * NETIA HOLDINGS: Bares Debt Restructuring Terms * U N I T E D K I N G D O M * BRITISH TELECOMS: Gains Revenue Market Share CORDIANT GROUP: Shares Rise to 79.5p ENERGIS PLC: Bankers Try to Sell Loans at a Discount ENERGIS PLC: Delays Default Decision THUS PLC: ScottishPower Confirms THUS De-merger ============= B E L G I U M ============= AGFA-GEVAERT: Records EUR 288MM Loss in 2001 -------------------------------------------- Mortsel's photo-imaging company Agfa-Gevaert NV posted a net loss of 288 million euros in 2001, down from a 169-million-euro profit in 2000, Dow Jones Newswires reported. The company, which issued profit warnings in September and October a year ago, blamed the global recession and the fast transition to digital imaging for the recent figures. The outlook for 2002 remains cautious. Agfa-Gevaert said the first half of the year looks weak, but that the second half should improve. Agfa-Gevaert is in the midst of a layoff plan called Horizon, which Chief Executive Ludo Verhoeven says should lead to profitability and cost savings of 550 million euros a year from 2004. =========== F R A N C E =========== AIR LIB: Directors Mulls Bankruptcy Filing ------------------------------------------ A leaked memo has revealed that directors at French carrier Air Lib, which filed for creditor protection in July 2001, are again considering filing for bankruptcy, French newspaper Le Figaro reported. The memo reportedly states that the company's funds will neither sustain a far-reaching social plan nor finance all the investment needed to launch low-cost flights, the paper added. To ensure the survival of Air Lib after October 2002, it indicates that the company will need more funds than the business plan provides for. A week ago, Air Lib faced another blow when its cabin staff launched industrial action, to protest what they described as a lack of progress in negotiations over the airline's restructuring plans, aimed at stemming mounting financial losses. The French airline lost an estimated 300,000 euros from ticket cancellations due to the strike. Early this year, Air Lib admitted it has secured some 61 million euros in equity capital from a mysterious financier, allowing the French airline to ward off the specter of bankruptcy. COMPLETEL EUROPE: Moody's Cuts Completel Ratings to Ca ------------------------------------------------------ Moody's Investors Services said Thursday it has lowered the ratings of Completel Europe N.V., the Paris-based provider of local access telecommunications and Internet services. Ratings affected are the senior implied rating to Ca from Caa2, the unsecured issuer rating to Ca from Caa3, the $120.5 million 14.0% senior discount notes due 2009 to Ca from Caa3, and the 120 million euros 14.0% senior notes due 2010 to Ca from Caa3. Moody's said that the ratings downgrade follows Completel's announcement that it is seeking to restructure its debt obligations. The rating agency expects an increased loss severity to bondholders given Completel's considerable funding requirements and uncertain asset values. Moody's believes that Completel's failure to restructure the balance sheet will result in failure of the business. It estimates that the French company has cash resources to fund the business until mid 2002. As of September 2001, Completel had a net debt of 269 million euros and 175 million euros in cash. ============= G E R M A N Y ============= DEUTSCHE TELEKOM: Financial Crisis Snags UMC Takeover ----------------------------------------------------- Deutsche Telekom's plan to take over Ukrainian Mobile Communications has come to a standstill because of its financial problems, reports the Telecom Paper. The German telecom giant, which holds a 16.33% stake in UMC, planned to buy out two stakes of the same size from KPN of the Netherlands and TDC of Denmark, plus an additional 25% stake from telecoms monopoly Ukrtelecom. The transaction is estimated at $240 million (273.1 million euros). DT, according to the report, is not that interested anymore in spending money after the troubles with the cable networks sale. A planned sale of the 60% of cable TV business to U.S. media group Liberty Media collapsed two weeks ago after the German cartel office blocked it. Deutsche Telekom has always considered that the sale of its cable TV network as key element of its plan to reduce debts to $43.5 billion by the end of this year from $56.5 billion now. DEUTSCHE TELEKOM: Set for T-Mobile IPO -------------------------------------- Deutsche Telekom AG's mobile subsidiary T-Mobile International is scheduled to go public in June or November this year, reports Handelsblatt. The Bonn-based telecom giant plans to list between 10% and 20% of T-Mobile's share capital and expects to raise around 10 billion euros. Proceeds from the floatation will be used to reduce the group's debt of 62.1 billion euros. In 2001, T-Mobile International reported earnings before interest, taxes, depreciation and amortization (ebitda) of 3.1 billion euros. The bottom line was still negative as the unit wrote down the value of licenses and brand names. ELSA AG: Company Profile ------------------------ Name: ELSA AG Address: Sonnenweg 11 52070 Aachen Germany Phone: +49 241 606 1144 Website: http://www.elsa.com SIC: Electronics Manufacturing Employees: 637 (09/30/01) Revenues: EUR 57.1 million (09/30/01) Net Loss: EUR 4.9 million (09/30/01) Total Assets: EUR 155.2 million (09/30/01) Total Liabilities: EUR 121.35 million (09/30/01) Type of Business: ELSA Ag is a leading developer and manufacturer of multimedia and communications hardware and video cards. The company's Computer Graphics division operations involve application of graphics solutions and computer monitor manufacturing. The group's Data Communication unit develops communications hardware including the manufacture of routers and terminal adapters, provision of videoconferencing equitpment and other services. Trigger Event: Difficult market conditions and the consequences of terrorist attacks in the U.S. massively burdened the business towards the end of the quarter last year. The management board of Elsa AG filed for insolvency proceedings on February 25, 2002 at the Aachen court in Germany after a banking consortium decided in early February to cancel a 28 million euro loan for Elsa AG. President & Chief Executive: Theo Beisch Chief Financial Officer: Theo-Josef Beisch Chairman: Dipl-Ing Wolfgang Dondorf Insolvency Administrator: Thomas Georg Monning & Georg Law Office Auditor: Arthur Andersen Shares Outstanding: 10.6 million shares (09/30/01) Last published in TCR-Europe on February 27. EJAY AG: Empire Interactive Takes Over Ejay Assets -------------------------------------------------- The insolvent Stuttgart-based music software developer eJay AG has brought its negotiations about the continuation of its business to a positive end. The English publishing and development company of entertainment software Empire Interactive PLC has acquired the materially and non-materially unstressed property assets of eJay AG on March 1. No debts or other liabilities were handed over. Retrospectively from March 1, eJay software products will be continued by the eJay Entertainment GmbH, which is also taken over all employees of the eJay AG. The newly formed company may also carry on the contracts with the existing publishing partners Vivendi Universal Interactive Publishing and Acclaim Entertaiment GmbH. eJay AG itself will be liquidated within the framework of the insolvency procedure. According to insolvency administrator Dr. Tibor Braun of law firm Illig, Braun, Kirschnek, the insolvency creditors of the eJay AG can expect a rate of approximately 10% out of the liquidation process. The responsible local court in Stuttgart had initiated insolvency proceedings over the capital of eJay AG on February 1. The company filed for insolvency in December 2001 after it was adversely affected by its online advertising segment that brought about 3.9 million euros in losses. It was plagued by distribution problems in Germany, which brought 1 million euros in expenses. The balance sheet of Ejay, which also operates in London, Stockholm, Paris and New York, was further troubled due to special depreciation allowances of 2.5 million euros from its Swedish subsidiary eJay AB. For further information, contact Michael Kranzle, Senior Public Relations Manager, at RotebuhlstraBe 87, 70178 Stuttgart, Germany, or through telephone +49-711-62031-150, fax +49-711- 62031-001 or via e-mail at Michael.Kraenzle@eJay.com KIRCHGRUPPE: DaimlerChrysler Denies Bidding for Kirch's F1 Stake ---------------------------------------------------------------- DaimlerChrysler AG has denied Formula 1 carmakers would offer to buy all or most of debt-laden Kirch Group's majority stake in the racing circuit. The Financial Times reported a week ago that Formula One promoter Bernie Ecclestone and the carmakers that sponsor Formula One, including DaimlerChrysler's Mercedes-Benz, Ford Motor Co.'s Jaguar, Renault SA, Bayerische Motoren Werke AG and Fiat SpA, decided to make a bid. A DaimlerChrysler spokesperson said the manufacturers want to protect their interests in Formula One, a major marketing venue. In particular, they fear Kirch may switch the popular sport to pay television, which would limit their audience. KIRCHGRUPPE: DZ Bank Provides Breathing Space for Kirch ------------------------------------------------------- Kirch Group secured breathing space last week after DZ Bank, one of its major creditors, refrained from demanding repayment from the indebted media giant of a loan that has fallen due, Handelsblatt reported, citing bank insiders. DZ Bank, which has an interest in keeping Kirch Group out of insolvency, has yet to provide full details of its loans to Kirch, but reports two weeks ago suggested that the total sum involved was 400 million euros. According to reports from Frankfurt banking insiders on Thursday, the sum is, in fact, 350 million euros, and it is made up of several relatively small loans with a variety of maturation dates. Kirch's most valuable assets, its 40% stake in publisher Axel Springer Verlag AG and the 25% interest in Spanish broadcaster Telecinco, have been used as collateral for loans issued by Deutsche Bank and Dresdner Bank. In the event of insolvency, these two creditors could liquidate these assets. Creditors Bayerische Landesbank, HypoVereinsbank (HVB Group) and Commerzbank, as well as DZ Bank, have only film rights to draw on if Kirch's insolvency comes. KIRCHGRUPPE: May Restructure Management as Part of Revamp --------------------------------------------------------- Kirch Holding GmbH may have to restructure its management to regain confidence from creditors, Sueddeutsche Zeitung reported. The Munich-based media empire, which ran into difficulties after buying broadcasting rights and Hollywood movies to attract more viewers to its unprofitable pay-TV unit, is trying to sell assets to pay $5.7 billion in debt. Kirch will sell unprofitable channels such as its sports channel DSF and three local television channels. It will also offer its service company Sendezentrum Muenchen and the family's stake in the shopping channel Hot to save its main business, the paper added. KIRCHGRUPPE: U.S. Media Giants Eye Kirch's ProSieben ---------------------------------------------------- U.S. media giants Walt Disney Co., Viacom Inc. and AOL Time Warner Inc. are eyeing television broadcaster ProSiebenSat.1 Media AG with a view to a possible offer if the heavily indebted Bavarian media giant Kirch Gruppe were forced to sell the prize asset. The American companies have reviewed the Kirch portfolio and concluded that ProSiebenSat1 was the only attractive asset in the German media empire. Kirch, which owns 52.5% of ProSieben, has already put a number of assets up for sale as it amassed debt of 6.5 billion euros ($5.70 billion). Shareholders and creditors are also demanding their money back. The media group has so far refused to sell ProSiebenSat1. Kirch is set to meet with creditors and insolvency experts today to discuss last-ditch options to rescue the group from its crushing debt. AOL Time Warner, owner of Warner Brothers and HBO cable networks, Viacom, home to Paramount studios and the CBS network, and Disney, owner of the ABC network, all declined to comment. PHILIPP HOLZMANN: Sees Higher Than Expected Annual Loss ------------------------------------------------------- According to the data currently available, the net loss of construction group Philipp Holzmann Group for fiscal 2001 will be substantially higher than last anticipated due to unforeseeable special effects. Sources say that Holzmann is set to book a loss of nearly 200 million euros for its 2001 fiscal year. In fiscal 2000, the group posted a loss of around 80 million euros. The main factor influencing the results is the negative trend in the domestic construction industry. Contrary to the expectations of the entire sector, the domestic construction market slumped once again in 2001. This had a negative effect on the operating result of individual locations and resulted in higher restructuring costs. Moreover, the sale of real estate assets, which was delayed once again, and additional expenses related to real estate weighed on the result. This was attributable to the continued deterioration of the overall economic situation. Chancellor Gerhard Schroder rescued Holzmann from bankruptcy two years ago, but it has failed to make a recovery since then. At the time, creditors came up with a rescue package worth around 1.5 billion euros. In addition, the government made available around 130 million euros in funding. Holzmann's debt mountain already stands at 1.46 billion euros. ============= I R E L A N D ============= AIB GROUP: BoI Chief Calls for AIB Merger ----------------------------------------- Bank of Ireland (BoI) PLC chief executive Michael Soden is calling for a merger between his bank and rival Dublin-based investment bank Allied Irish Banks PLC (AIB), Dow Jones Newswires reports. BoI has always looked abroad for growth on the premise that a combination with AIB would be unthinkable on competition grounds. An analyst said that a merger between the two banks is unlikely, mostly because AIB would not be interested. AIB is now under scrutiny because of massive foreign exchange losses. The bank is facing a number of securities fraud class action suits in the United States District Court for the Southern District of New York. The complaint alleges that AIB's financial reports since 1999 fraudulently failed to reflect at least $691 million of currency trading losses associated with its AllFirst Financial, Inc. subsidiary. ===================== N E T H E R L A N D S ===================== KPN NV: EU Clears KPN Acquisition of E-Plus ------------------------------------------- The European Commission has approved plans by KPN NV, the heavily indebted Hague-based telecom company, to take full control of its key German asset, mobile operator E-Plus Mobilfunk GmbH & KG. The commission said KPN's acquisition of E-Plus, also owned by BellSouth Corp, would not raise any competition concerns in either the German or Dutch mobile telephony markets or in any other related markets. Earlier, KPN chief financial officer Maarten Henderson said that the company has 8.8 billion euros in cash on hand, while net debt as of December 31 is estimated at 16.5 billion euros. LAURUS NV: Casino Agrees EUR200MM Rescue Package ------------------------------------------------ S-Hertogenbosch-based supermarkets and wholesale group Laurus said that French retailer Casino S.A. would become its major shareholder with 37.6% through its subscription to the equity issue for 200 million euros. The exercise of the call option on the shares of ING Bank, ABN AMRO Bank and Rabobank will allow Casino to eventually increase its equity stake to 51%. The entrance of Casino in the share capital of Laurus will not just bring part of the necessary funds to Laurus. Casino has an excellent track record in investing and turning around retail companies within its worldwide activities whilst keeping their own identity. Laurus will be able to benefit from Casino's worldwide retailing management and expertise as well as its purchasing power thereby increasing the success of the turnaround at Laurus. LAURUS NV: Issues EUR400MM of New Equity ---------------------------------------- Laurus N.V., together with its principal banks ING Bank, ABN AMRO Bank and Rabobank and the French retail company Casino S.A., intends to raise 400 million euros of new equity The planned new equity is subject to shareholders and works council approval. As reported earlier, the supermarkets and wholesale group realized very unsatisfactory results in 2001. The conversion started last year of its various supermarket formats in the Netherlands into one single new Konmar format, together with costly back-office integration problems, the heavy capital expenditure needed for the planned store conversions and the heavy losses incurred in Spain during the first half of 2001 led to a serious depletion of the Company's financial resources. As a consequence, the Banks agreed in October 2001 to an extra Standby Facility of 100 million euros and the granting of a subordinated loan of 150 million euros for a period of up to April 10, 2002. At the same time, the indebtedness of Laurus sharply increased as a result of the negative operational cashflows, lower than previously expected divestiture proceeds and increased working capital requirements. DETAILS OF THE EQUITY ISSUE Laurus, the Banks and Casino have agreed that the Dutch company will issue at an issue price of 1 euro per share: * 200 million new Laurus shares to Casino against 200 million euros in cash; * 71,132,808 new Laurus shares to the Banks against conversion of 71,132,808 euros of the existing subordinated bridge loan granted by the Banks in October 2001; these shares will be subject to a lock-up and a call option in favor of Casino to be exercised in part or in full until December 31, 2008; * 128,867,192 new Laurus shares by way of an equity issue to the public against 128,867,192 euros in cash and fully underwritten by the Banks. The 400 million euros proceeds of the share issue will be used to strengthen Laurus' balance sheet, to partially repay existing debt facilities as well as to fund necessary future capital expenditure requirements. LAURUS NV: Loses Interim Chairman Konings ----------------------------------------- The Board of Directors of S-Hertogenbosch-based supermarkets and wholesale group Laurus N.V. said that Jan H. Konings have resigned as interim chairman of the Board of Management effective March 7. The resignation of Mr Konings is in accordance with the agreement made at the end of August 2001, that Mr Konings would hold this position for six months at the maximum. Together with the other members of the Board of Management, Mr Konings contributed greatly to the stabilization of Laurus. Jan Michiel Hessels, as member of the Laurus Supervisory Board, have assumed executive management responsibility for Laurus effective March 7. It is expected that Mr Hessels will hold this position until the envisaged strengthening of Laurus' position has been realized. LAURUS NV: Reschedules Bank Debt Into EUR910MM Credit Facility -------------------------------------------------------------- Laurus, together with its principal banks ING Bank, ABN AMRO Bank and Rabobank and French retailer Casino will reschedule its existing bank debt into a new credit facility of up to a maximum of 910 million euros. The Dutch supermarkets and wholesale group said that the credit facility would be split into 4 tranches: * A five-year Revolving Credit Facility of 450 million euros, to be reduced by 50 million euros, four years after the signing of the Facility Agreement and another 50 million euros four and a half years after the closing date; * A five-year Committed Overdraft Facility of 80 million euros; * A year Bridge Loan of 40 million euros to be repaid out of the net proceeds of the divestments of certain assets; * A three-year Back Up Facility of 340 million euros for the specific funding of the restructuring program in Spain, to be drawn upon in agreement between Laurus and the Banks. At the end of the three-year period, the remaining outstanding amount under this Back Up Facility will be added to the Revolving Credit Facility. With regard to the Revolving Credit Facility, the Committed Overdraft Facility and the Bridge Loan Laurus will have to comply - on a consolidated basis but excluding the Spanish activities and the debt outstanding under the Back Up Facility - with the following financial covenants: * Total Net Debt divided by EBITDA of not more than or equal to five times until the end of the second quarter of 2005, decreasing to four times after the second quarter of 2006; * EBITA divided by Net Interest to be equal to or greater than one and a half times as from the end of the second quarter of 2003 to the end of the second quarter of 2005 and increasing to two times thereafter. In addition to the above-mentioned facilities, the Banks will provide, if necessary, to Laurus' Spanish subsidiary a three year Excess Liability Facility, non-recourse to Laurus, of up to a maximum of 250 million euros. The terms and conditions of the above-mentioned facilities will be fully detailed in the Prospectus to shareholders. CORPORATE GOVERNANCE Upon completion of the various elements of the equity issue and the debt rescheduling, Laurus' Supervisory Board will consist of seven members, three of which will be nominated by Casino. The Chairman will be a Dutch national and will be chosen amongst the members of the Board not nominated by Casino. It is intended that the CEO, to be appointed after the closing of the transaction, will also be a Dutch national. Laurus will remain a Dutch company with its listing on Euronext Amsterdam. It is the parties' intention to maintain a free float as large as possible. It is envisaged that the due diligence by Casino and the Banks will be completed no later than April 15, 2002. The definitive agreement will be signed no later than May 15, 2002. =========== P O L A N D =========== NETIA HOLDINGS: Bares Debt Restructuring Terms ---------------------------------------------- Netia Holdings S.A., Poland's largest alternative provider of fixed-line telecommunications services, announced details of the economic terms of its debt restructuring reached on March 5. Detailed Terms for the Restructuring Currency Swaps: Means the JPMorgan Swaps and any currency swap and related agreements between the Company and/or its subsidiaries, on the one hand, and Merrill Lynch, on the other hand, intended to hedge the Company's obligations with respect to the Notes. JPMorgan Swaps: Means (1) the ISDA Master Agreement dated 18th January 2001 between JPMorgan and BVIII as swap counter-parties and (2) the Letter dated 10th January 2002 between JPMorgan and BVIII relating to the close out of all swap transactions then outstanding under (1) above, and (3) all credit support documents relating thereto including the Deed of Undertaking and Guarantee dated 18th January 2001 provided by South, Telekom and BVIII in favor of JPMorgan, various subordination agreements made between JPMorgan, Telekom, South, BVII and the Company dated 28th February 2001 and the revocable guarantee given by the Company in favor of JPMorgan dated 20th February 2002. Swap Creditors: Means JPMorgan and Merrill Lynch. Restructuring: The Notes (including all accrued interest) and the JPMorgan Swaps will be cancelled, terminated, exchanged and/or setoff (as appropriate) and replaced with: (i) Debt: 50 million euros of new Senior Secured Notes due 2008 with terms as set out in Appendix 1; and (ii) Equity: the Restructuring Shares. As part of the Financial Restructuring, the existing shareholders of the Company will retain 9% of the ordinary share capital of the Company immediately following the Financial Restructuring Consummation. The existing shareholders of the Company will also be issued two and three year freely transferable and assignable Warrants with each tranche covering 7.5% of the equity outstanding immediately following the Financial Restructuring Consummation (and after the provision of 5.0% of the issued ordinary share capital of the Company immediately following the Financial Restructuring Consummation for a management share option plan). The strike price applicable to Warrants in each tranche will correspond to the volume weighted average share price for the 30 trading days beginning 31 days following the Financial Restructuring Consummation in accordance with the terms and subject to the conditions of this Term Sheet and the Restructuring Agreement to which this Term Sheet is attached. The Company will use its commercial best efforts to list the Warrants on the Warsaw Stock Exchange. (iii) Cash: Cash on hand will be retained by the Company. The escrowed funds in respect of the 2000 Notes are presently subject to a TRO obtained by the Company under Section 304 U.S. Bankruptcy Code. It is agreed that the TRO will remain in force until the later of the Financial Restructuring Consummation and the ratification of the Polish Arrangement Proceedings by the U.S. Bankruptcy Court. Prior to the Financial Restructuring Consummation, the Escrowed Funds will remain on deposit with the 2000 Notes' Trustee, State Street Bank and Trust Company. Upon the Financial Restructuring Consummation it is agreed that the Escrowed Funds will be turned over to the Company. Should for any reason the Financial Restructuring Consummation fail to occur upon the terms and subject to the conditions of this Term Sheet and the Restructuring Agreement to which this Term Sheet is attached, then the legal and/or other rights of the Company, State Street and each Consenting Noteholder to seek to set aside the TRO and/or to seek to turn over of all or part of the Escrowed Funds either to the Company, or to each Consenting Noteholder, or to holders of the 2000 Notes, respectively, shall be expressly reserved. The Debt and Equity consideration due to the Noteholders and JPMorgan will be allocated (i) as to the 91% Equity, 9.2% to JPMorgan and 81.8% to the Noteholders and (ii) as to the New Notes, 9.2% to JPMorgan (being the amount of Euro 4,600,000) and 90.8% to the Noteholders (being the amount of Euro 45,400,000). General Unsecured Obligations: All general unsecured trade creditors of the Company will remain unaffected by the proposed Restructuring and will be paid in full as such claims become due and payable. The Noteholders and the Swap Creditors will waive any claims they may otherwise have in respect to the Company Group paying all general unsecured trade creditors in connection with the Restructuring Steps. Ordinary Shares: The Company's shareholders shall be required to consent to the increase of the Company's share capital (and to the exclusion of statutory pre-emption rights within the meaning of article 433 section 2 of the Polish Commercial Companies Code of 15 September 2000) necessary to create sufficient share capital of the Company to enable ordinary shares to be allotted (i) for the purpose of implementing the Financial Restructuring and (ii) to provide for the management share option plan to be established pursuant to the proposed Financial Restructuring. The Restructuring Shares will carry pre-emption rights. Additional anti-dilution rights; subject to further discussion. Following the issue of the Restructuring Shares it is intended that the number of shares will be reduced through a reverse stock split. Structure of Transaction: The cancellation of the Notes and termination of the JPMorgan Swaps in exchange for New Notes and the Restructuring Shares will be implemented through an exchange offer undertaken as part of the Dutch Composition Proceedings and the Polish Arrangement Proceedings. Noteholder Undertakings: The Noteholders shall agree to waive all defaults arising under the Indentures pertaining to the Notes. Noteholders representing at least 95% of the total value of the Notes and JPMorgan shall enter into formal undertakings committing them to support the Financial Restructuring upon the terms and subject to the conditions specified herein and upon the terms and subject to the conditions of the Restructuring Agreement to which this Term Sheet shall be attached. The Restructuring Agreement shall contain appropriate voting undertakings from Consenting Noteholders and JPMorgan which shall ensure that if any such holder sells, assigns or otherwise conveys its respective claim, the transferee's assumption of the undertakings shall be a condition of such a sale, assignment or conveyance of those claims. In the formal undertakings, the Consenting Noteholders shall disclose their identities and holdings of each series of Notes and shall agree to co-operate with the Company in connection with the Restructuring Steps. Management & Shareholder Undertakings: Netia and its management shall take all requisite actions as may be necessary to effect the Financial Restructuring and the Restructuring Steps. Registration Requirements: One or more registration exemptions for the New Notes and the Restructuring Shares will be availed of in the US and/or the UK, failing which registration will take place in the US and/or UK as required by applicable laws. In respect of Poland, registration of the share capital increase contemplated hereunder is subject to notification and/or consent of such increase to the Polish Securities and Exchange Commission (Komisja Papierow Wartosrowych I Gield) as well as the consent of the Warsaw Stock Exchange for listing of the new issue of equity and standard Court --- registration procedure. Senior Credit Facility: Upon the Financial Restructuring Consummation, the Company will use its commercial best efforts to enter into a revolving credit facility up to 50 million euros on terms which are reasonably acceptable to the Committee or its successors. The revolving credit facility will have a first priority secured position over the assets and the undertakings of those companies within the Company's group and be senior to the New Notes. Dividends: Until the Financial Restructuring Consummation, Netia will use its commercial best efforts to have the shareholders cause the Company not to pay dividends. Listings: Netia will use its commercial best efforts to retain the listing of its ordinary shares on the Warsaw Stock Exchange and of its ADSs on Nasdaq and to list the New Notes on the Luxembourg Stock Exchange. Information Rights: Netia will remain subject to the periodic reporting requirements imposed by the Securities Exchange Act of 1934 and the Polish Public Trading in Securities Law of 1997. In addition, the Company proposes to produce quarterly unaudited financial statements and annual audited financial statements, and make these available to the public and to the holders of New Notes in accordance with applicable law. Observation Rights: Consenting Noteholders shall have the observation and other rights at the Supervisory and Management Board meetings of the Company set forth in the Restructuring Agreement. Employee plans: Netia will provide for a management share option plan covering 5% of the Company's fully diluted ordinary share capital immediately following the Financial Restructuring Consummation but before issuance of Warrants to the shareholders of the Company. Options granted will be priced at fair market value at the several date(s) of issuance. The Company also will provide for an appropriate cash retention plan for key employees. Terms of the key employee retention plan, including amounts of cash awards and identities of recipients, will be agreed between the current Supervisory Board and the Committee. The specific identities of share recipients, amounts of share grants, and other terms of the management share option plan shall be as determined by the Company's Supervisory Board following the Financial Restructuring Consummation. Advisory fees: All fees to the professionals incurred as part of the Financial Restructuring shall be paid by the Company in accordance with the terms of engagement agreed in writing with them prior to the Financial Restructuring Consummation. Fee arrangements not previously agreed to by the Company and by the Committee must be reviewed and agreed to by the Company provided that such fee arrangements shall be disclosed to the Committee. Share Allocation - Hypothetical Illustration: Assuming 10,000,000 of the Company's ordinary shares were outstanding immediately following the Financial Restructuring Consummation, 9,100,000 shares (91.0%) would represent Restructuring Shares, and 900,000 shares (9%) would be retained by the existing shareholders as a group. An aggregate of 526,315 additional shares (i.e., 10,000,000 divided by 0.95 minus 10,000,000) would be made available for the management share option scheme. An aggregate additional 1,857,585 shares (i.e., 10,526,315 divided by 0.85 minus 10,526,315) would be made available for the Warrants. APPENDIX 1 Term Sheet for New Notes Original Aggregate Principal Amount: 50 million euros Currency Denomination: Euro Issuer: A Dutch company in the Company's group of companies. Interest: Payable semi-annually in cash or in kind at the Company's option for up to four interest payment periods at a rate of 10% per annum if paid in cash, and 12% per annum if paid in kind. Maturity: Six years from date of issuance. Security and Guarantee: Subject to the first priority secured position of the proposed revolving credit facility, the New Notes shall be secured to the extent permitted by applicable law over the assets and undertaking of the companies in the Company's group of companies, including, for the avoidance of doubt, each of the Company, Telekom and South. The Issuer's obligations under the New Notes will be cross- guaranteed by the significant subsidiaries of the Company. Inter-creditor Arrangements: The relationship between the New Notes and the Senior Credit Facility will be regulated by an intercreditor deed, which will contain usual provisions relating to priority and enforcement. Optional Redemption: The New Notes will be subject to redemption at the option of the Issuer upon such terms to be agreed between the Company and counsel for the Committee. Mandatory Redemption: The New Notes will be mandatorily redeemable at 101% of their principal amount plus accrued interest upon a change of control. The New Notes must be redeemed at par plus accrued interest with the proceeds of asset sales. Covenants: Substantially as set out in the Indentures for the Notes, with such amendments as may be agreed between the Company and counsel for the Committee. Events of Default: Substantially as set out in the Indentures for the Notes, with such amendments as may be agreed between the Company and counsel for the Committee. Listing: Luxembourg Stock Exchange Law: State of New York Contact Anna Kuchnio (IR) at telephone +48-22-330-2061 for further information. =========================== U N I T E D K I N G D O M =========================== BRITISH TELECOMS: Gains Revenue Market Share -------------------------------------------- BT Group PLC has increased its share of retail fixed-line revenue at the expense of cable TV operators, reports Dow Jones Newswires, citing figures from Oftel. In a regular statistical release from the U.K. telecom regulator, BT's revenue rose to 69.1% in the third quarter, from 68.9% in the previous quarter, while market share of cable operators NTL Inc. and Telewest PLC fell to 12.1% from 12.5%. BT's market share gains are strongest in the "other calls" category for residential users, indicating that the operator is a major beneficiary of higher home Internet usage, the report adds. BT's management came under heavy criticism a year ago after the company ran up debt of about 30 billion pounds. It has slashed that debt by more than half, although questions about BT's ability to access large amounts of fresh capital remain. CORDIANT GROUP: Shares Rise to 79.5p ------------------------------------ Cordiant's shares jumped 4p higher on Thursday to 79.5p on hopes that the London-based advertising group that issued three profit warning in 2001 might be the next company to be snapped up, reports The Guardian newspaper. French advertising company Publicis has been touted as Cordiant's buyer. Cordiant Communications Group PLC is seen to dive heavily into the red when it reports its annual results on March 15 because of the cost of taking an expected 200 million pounds ($286 million) write-down on the value of its acquisitions. The Financial Times reported in February that most of the non- cash charge will reflect a reassessment of the value of Lighthouse, the marketing services group Cordiant acquired in September 2000 for 315 million pounds plus the assumption of 65.6 million pounds of debt. Marketing Services Financial Intelligence editor Robert Willott said it would be difficult to place a value of over 125 million pounds on Lighthouse today, 190 million pounds less than Cordiant paid for it. With write-downs on smaller acquisitions also likely, the total value to be written off is expected to reach about 200 million pounds. Cordiant has made a total of 1,100 workers (from 9,500) redundant in 2001. ENERGIS PLC: Bankers Try to Sell Loans at a Discount ---------------------------------------------------- Energis Plc's lenders are trying to sell loans they made to the London-based Internet traffic carrier at discount prices, the Financial Times reported. Goldman Sachs Group Inc, Canadian Imperial Bank of Commerce and US networking company Cisco have been looking for buyers of the loans they made to Energis at below 70% of their face value, the paper said. Analyst John Walter at Equity Investigator speculated that the eagerness of some bankers to sell their debt at low prices indicated they were becoming less confident about a full recovery of their loans. Energis, which has lost 99% of its value over the past year, is close to collapse after it racked up with more than one billion pounds ($1.4 billion) of net debt. Now it will shed its European units and fire 400 workers to save 25 million pounds a year. Company executives are also trying to renegotiate the terms of a 725 million-pound ($1 billion) loan from banks including Dresdner Kleinwort Wasserstein, Bank of America and Barclays Capital. In February, shares in Energis closed at three pence valuing it at just more than 50 million pounds. That compares with a peak of near 14 billion pounds in March 2000. Bonds were further traded at around 15% of their face value, after credit agencies cut their ratings on the company because of fears that it would default on its payments for the 565 million pounds ($804.8 million) of bonds. Founded in 1993, Energis is an IT services and telecommunications solutions provider. It focuses on the business marketplace, offering integrated solutions from a portfolio of data, voice, connectivity, complex managed hosting and managed application services. The company has a significant presence in the U.K., Germany, the Netherlands, Switzerland, Ireland and Poland. ENERGIS PLC: Delays Default Decision ------------------------------------ Internet traffic carrier Energis admitted Thursday that it has not decided whether to default on a 14-million-pound bond interest payment on March 15, London's The Times newspaper reported. Shares in the company jumped 22% after 16 banks, including Dresdner Kleinwort Wasserstein, Bank of America and Barclays Capital, agreed to revise a loan facility worth 725 million pounds that will allow Energis to draw down funds to keep its European operations afloat while it seeks buyers. The default issue will be resolved this week when the banks behind the loan facility responds to the Energis' revised business plan, which includes the disposal of all European assets. THUS PLC: ScottishPower Confirms THUS De-merger ----------------------------------------------- ScottishPower announcesd that, following the closing of THUS plc's 275 million pounds open offer last Wednesday, which is expected to become unconditional on March 12 if the de-merger of ScottishPower's interest in THUS proceeds, ScottishPower shareholders will receive 49.97481096 THUS ordinary shares and 1.34942060 THUS participating preference shares for every 100 ScottishPower ordinary shares held at 5.00 p.m. on March 15. The demerger is itself conditional, inter alia, upon the THUS plc open offer becoming unconditional in all respects and the THUS plc scheme of arrangement becoming effective. As previously announced, fractional entitlements to THUS ordinary shares will not be distributed but will be sold for the benefit of ScottishPower and THUS. If the resolution to approve the conversion of the THUS participating preference shares into ordinary shares is passed, ScottishPower shareholders would receive 2.80346820 THUS ordinary shares for every THUS participating preference share, resulting in ScottishPower shareholders receiving approximately 3.78305773 THUS ordinary shares for every 100 ScottishPower ordinary shares held on March 15. On this basis, the total number of THUS ordinary shares received would be approximately 53.75786869 for every 100 ScottishPower ordinary shares. The THUS demerger is expected to become effective at 4.30 p.m. on March 19, 2002. HSBC Investment Bank plc is acting exclusively for ScottishPower. Thus had bridged its funding gap in December and paid off a debt of 260 million pounds to Scottish Power. The company is valued at about 160 million pounds. ************ S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter -- Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Kimberly MacAdam, Salve M. Mordeno and Maria Lourdes Reyes, Editors. Copyright 2002. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is $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 $25 each. 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