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/raid1/www/Hosts/bankrupt/TCREUR_Public/020409.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Tuesday, April 9, 2002, Vol. 3, No. 69 Headlines * F R A N C E * AIR LITTORAL: Seeks EUR15 Million Compensation of Nixed Sale * G E R M A N Y * BAYERISCHE LANDESBANK: Weakening Finances Causes Fitch Review DEUTSCHE TELEKOM: Wants to Sell Anew Cable Assets Within the Year EM.TV & MERCHANDISING: Not Worried About Exposure to KirchGruppe FAIRCHILD DORNIER: Will Cut U.S. Workforce by Half to Stay Afloat FAIRCHILD DORNIER: Gets US$20 Million Funding Boost From Banks KIRCHGRUPPE: Banks to Form New Company Out of KirchMedia Assets KIRCHGRUPPE: Politicians Want to Alienate Investors in New Plan KIRCHGRUPPE: Mediaset, Fininvest Shareholders Reject Rescue Plan QIVIVE GMBH: Declares Insolvency After Rescue Efforts Fell Short WUNSCHE AG: Cinque Unit Blames Parent in Filing for Insolvency * I R E L A N D * EIRCOM PLC: Stakeholders File EUR50 Million in Cash Claims * N E T H E R L A N D S * KPNQWEST NV: Not Worried About Troubled Flag Telecom * P O L A N D * LOT AIRLINES: Lufthansa to Aid Airline's Bid for Star Membership * S W E D E N * LM ERICSSON: Needs 12% Job Cut to Meet Profit Targets * S W I T Z E R L A N D * ABB LTD: Negotiating Sale of U.K. Meters Unit for GBP250 million * U N I T E D K I N G D O M * BIG FOOD: Dismisses British Land's GBP350 Million Bid as Rumor BIOCOMPATIBLES INTERNATIONAL: To Return GBP100 MM to Shareholders BRITANNIC GLOBAL: Retains Bank's Trust Despite Covenant Breach BRITISH AIRWAYS: Warburg Pincus Takes 70% Control of BPO Unit BRITISH AIRWAYS: Impending Board Shuffle Draws Succession Talks CONSIGNIA: No Firm Backing Yet for Redundancy Plan From Unions ENERGIS PLC: Network Provider Sells London Office for GBP20 MM EQUITABLE LIFE: Questions Critic's Use of Mailing List in Drive FUTURE NETWORK: Notification of Major Interests NTL INCORPORATED: Bond-equity Swap Now Likely as Liberty Retreats MARCONI PLC: Bondholders-Bank Cooperation Key in New Salvage Plan RAILTRACK PLC: WestLB Stands Ready to Abandon Railtrack Bid RAILTRACK PLC: Small Investors Reject Government-backed Bid RAILTRACK PLC: Administration Costing Gov't GBP755,000 a Week ROYAL DOULTON: Coughs Up GBP4 Million to Retain Stake Status Quo THUS GROUP: Notification of Interests =========== F R A N C E =========== AIR LITTORAL: Seeks EUR15 Million Compensation for Nixed Sale ------------------------------------------------------------ French regional airline Air Littoral is asking the commercial court of Montpellier to declare directors of bankrupt Swissair liable for EUR15 million in damages, says La Tribune. Owner Marc Dufour argues that Swissair head Mario Corti and the other directors of former Swiss flag carrier were responsible for the non-execution of a sale contract signed in June 2001. The contract covered the sale of Air Littoral for one token euro, as well as the payment by SAirGroup of EUR130 million. Of this sum, EUR15 million was to be paid on September 30, 2001, but the payment was not made because SAirGroup and its subsidiaries were declared bankrupt on October 1. Lawyers acting for Air Littoral claim the directors of the Swiss group betrayed the trust on which the contract was based, the report says. ============= G E R M A N Y ============= BAYERISCHE LANDESBANK: Weakening Finances Causes Fitch Review ------------------------------------------------------------- Fitch Ratings has followed the lead of Moody's Investors Service, placing Friday the "C" rating of Bayerische Landesbank on review. The ratings agency says the review was necessitated by the company's deteriorating asset quality brought about by its exposure to near-bankrupt KirchGruppe and insolvent firms Fairchild Dornier and Philipp Holzmann. Although it acknowledged that the bank has enough hidden reserves to back its obligation, still the rating agency believes the bank will have a difficult year this year. Fitch says the bank's performance has already been dented by rising costs and loan loss provisions in 2001. The bank has the largest of exposure in KirchGruppe at EUR1.9 billion. The ratings agency, however, has maintained the bank's "F1+" Short-term, "AAA" Long-term and "1" Support ratings, as they are based on the guarantees provided by its owners, the Free State of Bavaria and the association of Bavarian savings banks. For more information, contact Andrea Schulz, Frankfurt Tel: +49 (0) 69 7680 7618 or Olivia Perney, London +44 (0) 20 7417 44356 DEUTSCHE TELEKOM: Wants to Sell Anew Cable Assets Within the Year ----------------------------------------------------------------- Debt-laden Deutsche Telekom AG has revived a plan to sell its remaining six regional cable systems within the year, after previously admitting that the sale won't happen until next year. A spokesman told AFX News last week that the German telecom giant is again inviting bidders for the asset days after an exclusivity agreement with Liberty Media expired. In February, the German cartel office rejected Liberty's EUR5.5 billion bid for the cable assets. At the time, the company admitted that it does not expect any sale within the year. In fact, it also rescheduled a debt-reduction program, in which the asset sale was a key element. At present, the telecoms debts total EUR67 billion. Analysts, however, are doubtful Deutsche Telekom can seal a deal this year, let alone find another bidder that can match Liberty's offer. The U.K.'s Compere Associates as well as Deutsche Bank AG's DB Investor are rumored to be among those interested, but analysts doubt the former is a serious bidder, the report says. EM.TV & MERCHANDISING: Not Worried About Exposure to KirchGruppe ---------------------------------------------------------------- Cash-strapped EM.TV & Merchandising AG is not worried about its investments in bankruptcy-bound KirchGruppe, says Dow Jones Newswires. The report says the German licensing and marketing company is confident an insolvency filing will only have a minimal effect on its finances. The firm is connected to Kirch through a 16.7% in Formula One motor racing and a joint venture in kids TV channel Junior. According to the company, the worst-case scenario would be a write-down of its remaining 16.7% in Formula One. But this would depend upon which units in KirchGruppe were affected by an insolvency filing, a source told the newswire. When EM.TV agreed a bailout in 2001, it passed most of Formula One to Kirch Group. Bayerische Landesbank, which financed the deal, insisted all Formula One, including EM.TV's remaining shares, be collateral. EM.TV had to agree, given its financial plight at the time, the report says. This agreement means that KirchGruppe creditors will have first call on EM.TV's Formula One stake, but only if Kirch unit Kirch Beteiligungs GmbH files for insolvency, the source explained. Kirch Beteiligungs manages Kirch's stakes in Formula One, publisher Axel Springer Verlag AG and Constantin Film AG, the report says. EM.TV, on the other hand, has management control of Junior, and so any insolvency of Kirch Group's main unit KirchMedia would have no impact on Junior, the source added. The company recently delayed the release of 2001 results to reexamine the value of its assets, particularly those interconnected with the German media giant. FAIRCHILD DORNIER: Will Cut U.S. Workforce by Half to Stay Afloat ----------------------------------------------------------------- Some 300 jobs in the U.S. plant of insolvent Fairchild Dornier are scheduled to go, as the company struggles to keep itself a going concern while looking for a new strategic partner. "At our American site we are immediately cutting 40 to 50 percent of our workforce. That means of 700 jobs, a good 300 will go," Fairchild board member Thomas Brandt told German daily Die Welt recently. It is not yet clear the fate of the company's 3,600 German staff, Mr. Brandt says. The insolvent aircraft maker last week received US$20 million in fresh loans from creditor banks, but the amount is still US$70 million short of the required money to maintain the company's operations. The firm's U.S. operations consist of a manufacturing and services facilities located in San Antonio, Texas, near the perimeter of the San Antonio International Airport. Wings for the 328JET are produced at this facility. Fairchild Gen-Aero, Inc. dba Fairchild Aircraft Services also operates out of San Antonio, which is the only FAA approved repair station for the 328JET. The company also maintains its headquarters for Sales & Marketing, Corporate Communications, Government Relations, Sales Engineering, Sales Finance, Contracts and Marketing Services in Herndon, Virginia, near Washington, D.C. FAIRCHILD DORNIER: Gets US$20 Million Funding Boost From Banks -------------------------------------------------------------- Insolvent Fairchild Dornier has received the first tranche of a US$90 million financial aid from banks and the German federal and Bavarian state governments, says Handelsblatt. The German daily says the US$20 million initial aid was made available to the troubled aircraft maker late last week. This is the guaranteed contribution from the banking consortium, consisting of HypoVereinsbank, Bayerische Landesbank and Kreditanstalt fur Wiederaufbau. The remaining US$70 million, which is guaranteed by the federal and state governments, are still subject to standard procedural processes, says the paper. Meanwhile, Deutsche Lufthansa AG is reportedly working behind the scenes to ensure the survival of the aircraft maker. Citing high-ranking Lufthansa representatives, monthly magazine DM said the German airline intends to get US aircraft maker Boeing to invest in Fairchild. Lufthansa and Boeing have had a good business relationship over the years. Lufthansa has put a "firm" order for 60 of Fairchild's 728 jet models and a further 60 "option," making it a critical player in the company's survival. The German airline expects the first delivery in the second half of 2003, but said it could cope with a delay in the order, dismissing speculations that it would cancel. "We are committed to the technical decision in favor of the 728 and are convinced by the design of the aircraft," a Lufthansa spokesman told Handelsblatt. KIRCHGRUPPE: Banks to Form New Company Out of KirchMedia Assets --------------------------------------------------------------- KirchMedia appears heading for the bankruptcy court as banks, company advisers and some Bavarian politicians held over the weekend a separate meeting from minority shareholders, purportedly to plan for a post-insolvency scenario. Citing an unnamed source, the Financial Times says those who attended the meeting are allegedly planning to set up a new company that would take over KirckMedia's assets. The company could be headed by Wolfgang van Betteray, one of the insolvency lawyers acting as advisers to Kirch. The paper says Commerzbank, DZ Bank, Bayerische Landesbank and HypoVereinsbank, which together have about EUR2.25 billion in loans outstanding to KirchMedia, would swap some of that debt into shares in the new company and gradually recoup the rest through asset sales. Axel Springer, the Berlin-based publisher, is rumored as a possible shareholder in the new company if it accepts an offer to swap a EUR767 million cash claim to KirchMedia for shares. Last week, a plan to inject EUR800 million into the gasping German media group and extend it a short-term loan fell apart after banks and minority shareholders failed to settle issues key to finalizing a rescue package. Rupert Murdoch, one of the ringleaders of the shareholder block, is now thought to be resigned to trying to get whatever he can back from his investments in Kirch without putting any more money in. KIRCHGRUPPE: Politicians Want to Alienate Investors in New Plan --------------------------------------------------------------- The plan to set up a new company controlled by the creditor banks of KirchGruppe is allegedly designed to lock out Rupert Murdoch and other minority shareholders, says The Guardian. According to the paper, many German politicians, who reportedly include German Chancellor Gerhard Schroder, have been irked by the stance of the KirchMedia minority investors in the rescue efforts. In recent days, reports have surfaced that the investors are responsible for delaying the formation of a final rescue package by refusing to up their participation in a key EUR150 million short-term loan. Accordingly, the investor block is only willing to guarantee 10% of the loan while creditor banks are appealing for a 40% participation. Because of this, rumors say the chancellor allegedly hosted the meeting last week that produced the plan to set up the new company and alienate the group of Mr. Murdoch, which includes firms owned by Italian Premier Silvio Berlusconi and Saudi Prince Al-Waleed. Accordingly, the chancellor have delegated responsibility for this alternative rescue plan to the man regarded as his favorite banker, Deutsche Bank's Rolf Breuer. The new company will allegedly rise from the ruins of KirchMedia and would take its crown jewels -- the television rights to the next two football World Cups and Formula One racing. It will reportedly desert the loss-making Premiere pay-TV business, to which Mr. Murdoch has a "put option" claim worth EUR1.6 billion, payable this October. Under the plan, the new company will allow Premiere to collapse, forcing Mr. Murdoch to join a long queue of creditors. "The German politicians would love this solution, the German trade unions would love this solution and the banks would love this solution. This [plan] will eliminate all the old baggage and the old investors who wanted to pick up the pieces," a source close to the talks told The Guardian. KIRCHGRUPPE: Mediaset, Fininvest Shareholders Reject Rescue Plan ---------------------------------------------------------------- The investors' block in the KirchGruppe rescue negotiations suffered a double whammy last week after shareholders of Mediaset and Fininvest rejected the EUR800 million capital hike that had been planned for the German media empire. Along with Rupert Murdoch's New Corp. and a firm controlled by Saudi Prince Al-Waleed, Mediaset and Fininvest were among those behind the capital injection intended to resuscitate the ailing Kirch. "This [plan] has been rejected in the shareholders meeting as not suitable to resolve the problems of the [Kirch]," a company statement said. The capital hike now appears headed nowhere as creditor banks have also allegedly decided to form a new company out of KirchMedia that will alienate the above minority investors. Mediaset and Fininvest, controlled by the family of Italian Prime Minister Silvio Berlusconi, own nearly 5% of KirchMedia. The Italian companies, however, reiterated support for any Kirch rescue package that will eventually be finalized. "The minority shareholders confirm their continued commitment to seek and put in place an agreement with the banks and KirchGruppe on the necessary initiatives to allow KirchMedia to continue its activities," the company told AFX News. QIVIVE GMBH: Declares Insolvency After Rescue Efforts Fell Short ---------------------------------------------------------------- Sports and musical events ticket issuer Qivive GmbH has filed for bankruptcy after failing to get cash injection from shareholders and a takeover bid by an investor collapsed. According to AFX News, the shareholders gave up on the company, which they considered "a cash-burner." Axel Springer AG and Deutsche Lufthansa AG, which both hold 33% in the ticketing firm, couldn't agree on an additional financing, says another shareholder DEAG. The failed firm was supposed to go public in the first half of this year under the management of Dresdner Kleinwort Wasserstein, says the report. DEAG says the fate of the company was sealed when an investor backed out from a plan to takeover the business. The shareholder refused to identify the potential buyer. DEAG told the news agency that it had completely wrote down its 33% stake in Qivive last year, but added that it still expects proceeds of a double-digit million-euro amount from its existing ticket sales agreements with Qivive. The Bad Homburg-based firm employs 80 workers. WUNSCHE AG: Cinque Unit Blames Parent in Filing for Insolvency -------------------------------------------------------------- Cinque, a fashion subsidiary of textile group Wunsche AG, has filed for insolvency after failing to distance itself from its parent's woes, reports Financial Times Deutschland. The unit, the first to declare insolvency among Wunsche's subsidiaries, also suffered from the cancellation of credit agreements with suppliers, the report says. The company tried but failed to wrestle the 62% stake held by Wunsche in the unit. Management blames the parent's dispute with designer Wolfgang Joop as contributory to its demise. But Wunsche counters that the deterioration of Cinque's finances is the major reason why a rescue package for the Wunsche Group has eluded it. Cinque reported negative results for 2001, booking a 10% fall in turnovers to around EUR40 million. ============= I R E L A N D ============= EIRCOM PLC: Stakeholders File EUR50 Million in Cash Claims ---------------------------------------------------------- Almost 70,000 Eircom shareholders have EUR50 million in claims as a result of the company's takeover of the Valentia consortium group in November, the Sunday Times reports. About 12% of the 574,082 Eircom equity-holders have yet to file claims from Valentia. Instead of automatically paying stakeholders for their shares, the group required shareholders to request their cash settlement. From over 80% of shareholders, Valentia received acceptances for its offer, many of whom were large institutions, allowing it to oblige dissenters to sell. Valentia acquired Eircom at a low value ensuring losses of about a third for shareholders who purchased in June 1999 at a flotation price of GBP3.07. Valentia, which has the unclaimed money, will charge shareholders EUR10 to cover administration costs if they do not apply for their settlements by April 23, Bobby Hassett of NCB Stockbrokers said. Eircom announced to its shareholders in December to send in their share certificates. About 20,000 investors responded. The company sent another reminder in February, after a further 10,000 holders have applied for their claim. To claim, shareholders may contact Computershare Investor Services at telephone no. 01-216 3100. ===================== N E T H E R L A N D S ===================== KPNQWEST NV: Not Worried About Troubled Flag Telecom ---------------------------------------------------- Stricken Dutch data communications firm KPNQwest says it owes Bermuda-based Flag Telecom Holding Ltd. more than the latter owes it, hence it is not worried if the company goes bust. Investors relation head Jerry Yohananov says the company is not worried about what will become of its recent acquisition of a space on Flag's transatlantic fiber optic cables. "It (Flag's transatlantic capacity) is used by a lot of companies, and you couldn't really imagine a scenario where it would make economic sense for it to be taken out of use," Mr. Yohananov told Dow Jones Newswires last week. In addition, he says, Flag had already paid a US$135 million obligation to Global TeleSystems, which KPNQwest acquired last month. Flag is widely considered to be heading for a debt restructuring after it missed a March 30 bond payment. Its auditor Arthur Andersen recently said there is "substantial doubt" as to the company's ability to continue as a going concern. On March 23, KPNQwest announced it had bought space on Flag's transatlantic fiber optic cables in a multi-million-euro deal, says the newswire. =========== P O L A N D =========== LOT AIRLINES: Lufthansa to Aid Airline's Bid for Star Membership ---------------------------------------------------------------- An agreement has been signed between troubled carrier LOT and Deutsche Lufthansa AG, formalizing the membership application of the Polish airline into the "Star Alliance." According to Handelsblatt, full membership could be had in a year's time. The pact also included a code-sharing agreement for routes between Germany and Poland. In addition, the German airline will also assist LOT in bringing its services in line with the high standards of the leading international airline alliance. The carriers plan to combine airport waiting zones, offer joint frequent-flyer programs and cooperate in aircraft maintenance. Lufthansa CEO Jurgen Weber, however, clarifies that the agreement is not an initial step towards investing in the cash-strapped Polish carrier. "It is very important to separate ownership issues from commercial issues. We have said from the very beginning that we aren't interested in taking a stake in LOT," Mr. Weber told the German daily. "It thus remains unclear who will take over the 25% stake still held by Swissair, which collapsed at the end of last year," the paper said. In 2001, LOT booked a record loss of PLN639 million (EUR177 million), after making a small profit of PLN28.2 million in 2000. The entry of LOT into the Star Alliance, which counts 14 member airlines, is expected to boost the group's Central and Eastern Europe route network. =========== S W E D E N =========== LM ERICSSON: Needs 12% Job Cut to Meet Profit Targets ----------------------------------------------------- Ericsson AB, Stockholm-based mobile telecom equipment manufacturer, will miss its financial targets this year unless it will sell its businesses and scale down its workforce by 12% or about 10,000 jobs, Bloomberg quoted investors and analysts as saying. After posting SEK21.3 billion (US$2.08 billion) in losses last year, Ericsson committed to achieve "positive cash flow" and an operating profit of 5% of sales this year. Kurt Hellstroem, the company's CEO slashed 20% of the company's personnel and cancelled managers' bonuses to raise cash and offset huge losses at the start of this year. However, investors said these measures are not enough because sales continue to slide. Should sales plunge to over 10% this year, Ericsson will take "further measures," Hellstroem said at the company's shareholders meeting in March. Further steps need to be taken, said Britta Unterberg, who helps oversee EUR100 billion (US$87.9 billion) at DWS Investment. DWS owns Ericsson shares worth EUR45 million (US$39 million) after selling more than 90% of its stake. Ericsson's shares have dropped 29% in the past year, compared with 15% at rival Nokia Oyj, the second biggest maker of wireless gear, and 6.2% at No. 3 Motorola Inc. According to one analyst, Ericsson may sell some businesses to boost cash flow, which under the company's definition includes asset sales. Ericsson's chip manufacturing unit, which employs 2,200 people may be included in the divestment. Meanwhile, Ericsson intends to sell its fiber-optic and copper cables and equipment-manufacturing unit, news group Direkt said last month, citing an unidentified person within the company. Last year, the group raised SEK16.6 billion (US$161.4 million) by selling assets including computer equipment and offices. ===================== S W I T Z E R L A N D ===================== ABB LTD: Negotiating Sale of U.K. Meters Unit for GBP250 million -------------------------------------------------------------- ABB Ltd., the power technology product manufacturer, was reported to have held talks with HSBC Private Equity and Ruhrgas, the German gas firm, about a possible sale of its water-meter business for GBP250 million. In order to raise cash, ABB plans to sell ABB Metering, its subsidiary that fabricates water and electricity meters for British and overseas markets, according to the Sunday Times. HSBC, a private-equity business with access to large funds, can support ABB's management in a possible buyout of its U.K. metering business. Ruhrgas, which is partly owned by German utility firm Eon, may use the metering operation to complement its existing business, supplying gas to its client base. Despite the Swiss-Swedish company's recent success in renegotiating its US$3 billion (GBP2.1 billion) credit facility, asset disposals are still expected. ABB earlier said it will divest some of its businesses within months but refused to comment on the sale of ABB Metering. ABB, which was until recently regarded as one of Europe's best firms, has seen its market value fall 70% down from a high of US$39 billion. The company globally employs a workforce of 155,000. =========================== U N I T E D K I N G D O M =========================== BIG FOOD: Dismisses British Land's GBP350 Million Bid as Rumor -------------------------------------------------------------- Frozen food retailer The Big Food Group Plc, formerly named Iceland Group, through a company spokesman dismissed reports that British Land Co PLC is forming a joint venture with the food group by launching a GBP350 million offer. According to the AFX News, Big Food's comments came as a reaction from a report on the Sunday Telegraph, stating that British Land had made the bid for a majority of the group's 800 stores. The spokesman said the group had announced last month its intention to sell and lease-back its stores and that a number of companies were expected to bid, but he adds that he did not know when the group would announce who the bidders are. Big Food, which issued three profit warnings last year, has been struggling recently amid rumors to organize a rights issue to pay for necessary investment and to help shave its debt. The Big Food group's debts stood at GBP430.4 million in November. The group has appointed accountant Ernst & Young to examine fundraising options, according to the Troubled Company Reporter. Iceland, which owns the Booker cash and carry business, as well as the frozen food chain, is valued at GBP475 million (US$673.1 million). It employs 28,000 people in the UK. For inquiries, contact The Big Food Group plc Chief Executive Bill Grimsey or Finance Director Bill Hoskins at telephone 020 7796 4133. BIOCOMPATIBLES INTERNATIONAL: To Return GBP100 MM to Shareholders ----------------------------------------------------------------- Cash-strapped Biocompatibles International has succumbed to pressures from shareholders, deciding last week to return GBP100 million of the GBP165 million proceeds from the sale of its "stent" business to Abbott Laboratories. According to Times Online, the company had earlier wanted to hold on to as much cash as possible to later on invest in other ventures involving its unique biocompatible coating. It also hopes to acquire other technologies. But most shareholders, who are reportedly unhappy over the decision to sell the core business, want a windfall if the company wants to get their support later this month. The company needs a 50% backing from shareholders at an extraordinary general meeting later this month for the deal with Abbott to proceed. About 70p a share is being offered in the first cash return and a further 25p is mooted, but will be released only if Biocompatibles overturns a litigation in US brought by a rival company, the report says. Isostent has accused the company of copying its designs for "stents." Biocompatibles says the allegations are without merit and will be defended vigorously. Stents are wire-mesh tubes used like scaffolding to keep collapsed arteries open. Abbott, which will acquire this technology if the sale is approved, has demanded that Biocompatibles retains liability for the litigation. This has forced Biocompatibles to put GBP35 million in an escrow account to cover legal and other potential costs. Analysts say it might take up to two years to resolve the legal dispute. Biocompatibles recently decided to sell both its contact lens division and its stent division after admitting that the company was not big enough to compete with rivals. Contact Information : Biocompatibles International plc Tel: 01252 732732 Crispin Simon Dresdner Kleinwort Wasserstein Biocompatibles Financial Adviser Tel: 020 7623 8000 Charlie Batten Robert Petch Financial Dynamics Tel: 020 7831 3113 David Yates Melanie Toyne-Sewell BRITANNIC GLOBAL: Retains Bank's Trust Despite Covenant Breach -------------------------------------------------------------- Ailing GBP71 million split-capital trust Britannic Global Income announced Friday that it has breached banking covenants, making it the latest victim of the crunch that has hit the sector. But Britannic Asset Management Sales Director Francis Ghiloni says the company still has the support of Bank of Scotland, despite dropping its debt-to-equity cover on the fund to 1.45 percent, against an agreed limit of 1.5 percent. Ordinary income shares in the trust have fallen almost 86 percent in the past year, with zero-dividend preference shares down 63 percent. The trust also suspended its dividend last month after a reconstruction attempt failed, Times Online says. Banks, however, have been generally understanding of the current plight of asset management trusts, holding back foreclosure on loans to ailing split trusts. But analysts say 15 to 20 are "walking dead" - funds whose asset values have fallen so low that wind-up or consolidation appear certain. Analysts blame falling stock prices, excessive gearing, high charges and cross-holdings for the trouble afflicting the GBP13 billion-sector, says the report. Last week, Quilter Global Enhanced Income halted stock trading, while Yeoman Investment Trust suspended its dividend. According to the report, more than 20% of split funds have now suspended dividends, declared a cut or given warning of such action. They include BFS Growth, Aberdeen St David's and Aberdeen Preferred Income. Aberdeen Asset Managers, the largest player, has dropped 9% in the past week, and Exeter Investment Group fell 16% after a profit warning. Credit Lyonnais Securities Europe investment trust analyst Alan Ray believe shareholders are unlikely to receive much return from many split-capital trusts after bank debt is repaid. BRITISH AIRWAYS: Warburg Pincus Takes 70% Control of BPO Unit ------------------------------------------------------------- Warburg Pincus is now the 70% owner of Speedwing World Network Services, the business process outsourcing (BPO) unit of British Airways, reports Investors Access recently. No financial details of the deal have been disclosed yet, but the news source says Warburg is investing GBP220 million in the unit to establish it as a global leader in BPO. "We are looking to grow the firm organically as well as through acquisitions. We are currently looking at a deal in the U.K., although it is in the U.S. that we could really see major growth," the U.S. private equity firm told Investor Access. Warburg Pincus estimates the BPO sector to be worth US$110 billon annually, with year on year growth of around 20%. The British Airways unit, one of the largest BPO companies in India and the U.K., will be renamed World Network Services, the report says Warburg is investing in WNS from its European funds, primarily the Warburg Pincus International and Warburg Pincus Equity funds. Warburg Pincus' European funds have a combined total value of US$7.5 billion, which is the largest pool of private equity capital in Europe. The firm invests across business services, communications, financial services, healthcare and life sciences, IT and media. BRITISH AIRWAYS: Impending Board Shuffle Draws Succession Talks --------------------------------------------------------------- Rumors are rife that Lloyds TSB Chairman Maarten Van Den Bergh will allegedly replace British Airways incumbent Chairman Lord Marshall during the annual general meeting on July 16. The speculation, if true, will make for an interesting AGM as Lord Marshall has expressed this early his desire to seek reelection to the board and the chairmanship. Also Mr. Van Den Bergh's alleged accession could foil the planned turnover of the chair to Martin Broughton, the airlines senior independent non-executive director, who is also chairman of tobacco group BAT. But company sources say Mr. Broughton is still the "favorite" successor of Lord Marshall, when the latter retires in two years. Meanwhile, two non-executives, Michael Davies and Raymond Seitz, will step down at the AGM. Mr. Davies, the National Express and Simon Group chairman, has been a BA board member since 1983. Mr. Seitz, a former US ambassador, retires after seven years. BA says the changes would reduce the number of board members from 12 to 11. CONSIGNIA: No Firm Backing Yet for Redundancy Plan From Unions -------------------------------------------------------------- Although it claims that the redundancy package it is offering is fair and that an initial deal with the unions has already been struck, Consignia hasn't actually gotten firm support to make the process hassle-free. According to AFX News, postal unions have yet to ratify the plan and the CWU union, in particular, has put on standby its 145,000 members who work in Royal Mail for possible industrial action. "We're committed to consulting with the union on the way we handle surplus staff. We've put forward a fair package and we look forward to the union's response," a Consignia spokeswoman told the news agency last week. The pronouncement underlines the thin thread upon which the plan hangs at the moment, says the report. The agreement inked with the union has actually been on the issue that the 30,000 redundancies spread over three years be made voluntary. In addition, the pact also calls for the redeployment of affected employees to other jobs across the former Post Office as the "first option." The plan will reportedly cost Consignia GBP400 million in redundancy and relocation expenses. ENERGIS PLC: Network Provider Sells London Office for GBP20 MM -------------------------------------------------------------- The London headquarters of Internet infrastructure provider Energis has been sold off to real estate developer Chelsfield for GBP20 million, a report obtained from This Is London says. The sale of the Energis offices, the report says, involves 1.2 acres of land. The report adds that Energis have no plans to move out its employees. National Grid Group, the vendor with 7% stake in Energis until 2008, had leased the building to Energis. Energis came close to collapse this year after losing about 70% of its share value in a day. Energis, headed by David Wickham, is understood not to receive a substantial part of the payment from the Chelsfield transaction until the position of the company is settled. According to the Estates Gazette, Chelsfield's investment director David Phillips: "If Energis survives, we have a tenant for another six years. If it does not, we are adequately compensated." EQUITABLE LIFE: Questions Critic's Use of Mailing List in Drive --------------------------------------------------------------- Troubled insurer Equitable Life says it is going to question, if not foil the plan of its opponents to solicit support for a compensation drive against the government. According to the company, it will question the ploy of Equitable Life Members Action Group using the Data Protection Act of the United Kingdom. The group is planning to write the 485,000 policyholders contained in Equitable's membership list, which it was able to buy through the Companies Act. The group aims to recruit members to help fund a drive for compensation from the government for policyholders, some of whom have lost thousands since the mutual fell into difficulties in 2000. "We have asked EMAG to confirm that their proposed mailing will not contravene any part of the data protection act and that this mailing satisfies all relevant rules of the Financial Services Authority," a spokesman for the insurer told Times Online. Earlier this year the insurer secured backing for a financial rescue package designed to stabilize its finances. The group was forced to close to new business after the House of Lords said it must pay guarantees to holders of guaranteed pension plans in full at a cost of more than GBP1.5 billion, the report says. FUTURE NETWORK: Notification of Major Interests ----------------------------------------------- Future Network plc, the international games and specialist consumer magazine publisher, announced last week that Fidelity International Limited, on behalf of Chase Nominees Limited holds 19,023,972 or about 5.93% of the total issued shares. Notification is made in respect of Fidelity International Limited as parent holding company for various direct and indirect subsidiaries, including Fidelity Investment Services Ltd, investment managers for various non-US investment companies and institutional clients. The notifiable interests also comprise the notifiable interest of Mr. Edward C. Johnson 3rd, a principal shareholder of Fidelity International Limited. For more information regarding this announcement, please call: Nina Sparrow at telephone no. 01225 822834 or Rob Day at telephone no. 0207 533 2222. NTL INCORPORATED: Bond-equity Swap Now Likely as Liberty Retreats ----------------------------------------------------------------- It is now becoming clear that bankruptcy-bound NTL Incorporated will be resuscitated through a debt-for-equity swap and not through a cash injection from investors. According to the Financial Times, Liberty Media, rumored earlier to be leading efforts to save the British cable group through a cash infusion, has backed off from the plan. The move signals the likelihood of an equity swap for some US$11 billion worth of bonds. Since purposely missing a US$96 million interest payment last week, speculations on what shape NTL's rescue would take have centered on a debt-equity exchange. However, some observers did not discount the possibility of a cash injection led by Liberty Media, France Telecom or AOL Time Warner. Liberty and France Telecom are shareholders of NTL, while AOL has expressed interest in investing in NTL as part of a restructuring plan. People close to the rescue efforts say the swap will be carried out within the framework of a Chapter 11 bankruptcy filing in the US where NTL is registered. Under the plan, NTL would convert all its bond debt into equity while continuing to service its US$6 billion of bank debt from the cash flows produced by the business, the Financial Times says. But while it may be clear now where NTL's rescue is headed, some say the plan could still fall apart. This as it still requires the approval of NTL's creditors including its bank lenders, the paper says. Meanwhile, Liberty could still come up with an alternative proposal when NTL's plan is presented to the bankruptcy court. However, a more likely scenario is that the company negotiates an equity investment in NTL after the debt-for-equity swap is completed, the paper says. MARCONI PLC: Bondholders-Bank Cooperation Key in New Salvage Plan ----------------------------------------------------------------- Gasping Marconi Plc is set to meet with banks and bondholders on Wednesday to try to revive refinancing talks, the Financial Times reports. Accordingly, the new plan will revolve around a debt-for-equity swap. However, it is important that the banks and bondholders must first iron out their differences for talks to succeed. Animosity runs between the two camps as bondholders were previously excluded from rescue negotiations that ended in nothing recently. Bondholders are asking for equal footing in the talks. Although banks do not have much choice other than to treat the other camp as equal, bondholders are concerned the banks led by Barclays and HSBC will use their ability to call in their GBP2.2 billion loans "on demand" for extra leverage. The bondholders, who are being legally advised by Bingham Dana, have not yet formally appointed financial advisers. The banks are being advised by Clifford Chance and PwC, says the report. The paper says any debt-for-equity swap will require the company to agree a level of debt it can service in the near future. The previous deal was abandoned largely because it would have forced Marconi to spend most of its cash flow paying interest, without reducing the underlying debt. RAILTRACK PLC: WestLB Stands Ready to Abandon Railtrack Bid ----------------------------------------------------------- The German bank WestLB is poised to drop its offer for Railtrack Plc, the troubled rail operator in administration, if the UK government will impose that it be lead underwriter for a GBP9 million bond issue, BBC news said citing a report by The Observer. WestLB will require tens of million pounds in fees as lead underwriter. If WestLB through its bidding vehicle Swiftrail pulls out, the bid of government-backed Network Rail will remain as the sole bidder for the new non-profit company. Railtrack Group, which represents Railtrack shareholders, is expected to recommend Network Rail's GBP9 billion offer. Network Rail's recent bid will be refinanced by securitizing the track operator's track access charges and government grants, the Troubled Company Reporter Europe said last month. The offer was made possible through a bridging loan arranged by its adviser UBS Warburg and led by Barclays Bank and Royal Bank of Scotland. The loan is guaranteed by the government's Strategic Rail Authority. RAILTRACK PLC: Small Investors Reject Government-backed Bid ----------------------------------------------------------- A group of shareholders of Railtrack Group Plc has threatened to sue the government, The Times said Saturday. Andrew Chalklen, representing Railtrack Private Shareholders Action Group composed of about 20,000 small investors, said that Transport Secretary Stephen Byers's plan for a government-backed company to buy the group's assets for about GBP500 million (US$717 million) was not a fair offer. Though institutional investors with 49% stake in the group admitted that the minimal offer is better than nothing, Chalklen said: "We remain of the view that he is trying to purchase the assets cheaply." RAILTRACK PLC: Administration Costing Gov't GBP755,000 a Week ------------------------------------------------------------- Those urging the early exit of Railtrack Plc from administration received a big boost recently after a progress report on the procedure showed it milking government GBP755,000 a week. Ernst and Young said the administration team has already spent GBP7.3 million on external consultants. It has also collected a total of GBP7.8 million in fees for the six months to March 1. The interim administrator valued the company's assets at GBP 9.9 billion. David Harding, CEO of Railtrack Group, the holding company not in administration, says group could seek a reversal of the trading suspension imposed on its shares now there is clarity on the value of Railtrack plc and the other assets within the group. It could be recalled that the suspension was ordered after the transport ministry withdrew financial aid to the tracks and train unit, citing unclear financial status. He says the group will push for the revival of trading ahead of a shareholders vote on a GBP500 million-offer from Network Rail, the government-backed vehicle planning to set up a not-for-profit company out of Railtrack Plc. ROYAL DOULTON: Coughs Up GBP4 Million to Retain Stake Status Quo ---------------------------------------------------------------- After failing to scuttle a GBP19 million rights issue unveiled by Royal Doulton last month, Waterford Wedgwood has now allegedly made a GBP4.2 million payment to maintain its holding. Waterford reportedly wobbled under threat of diluting its 21.2% stake to just 5% if it did not take up its rights in the three- for-one transaction. It took Waterford three weeks to deliberate on the matter. According to Times Online, the investor is still standing by its alternative proposal despite its decision to participate in the rights issue. Waterford Finance Director Richard Barnes, however, admits that the current restructuring plan is "workable," although he doubts whether the plan to production of the Royal Albert range to Indonesia will succeed without significant risks. He warns that if the plan succeeds Royal Doulton will become a more attractive takeover proposition to rivals. He says this is the reason why Waterford has decided to reinforce its stake in the company. "We do not want another ceramics competitor to rival us in term of size and international spread," Mr. Barnes told Times Online. Cazenove is underwriting the rights issue. THUS GROUP: Notification of Interests ------------------------------------- THUS plc, the Glasgow-based Internet service provider, has been informed that, as of March 20, 2002, The Capital Group of Companies Inc. on behalf of its affiliates, including Capital Research and Management Company has 56,279,967 THUS ordinary shares (representing approximately 4.17% of the THUS ordinary shares in issue). The Capital Group Companies, Inc. is a holding company for several subsidiary companies engaged in investment management business. The investment management business is divided into two operational groups, represented by Capital Research and Management Company and Capital Group International, Inc. CRMC is a US-based investment adviser that manages The American Funds Group of mutual funds. CGII is the parent company of five companies that serve as investment managers to various institutional clients around the globe: Capital Guardian Trust Company in the U.S., Capital International, Inc. in the U.S. and Singapore, Capital International Limited in the United Kingdom, Capital International S.A. in Switzerland and Capital International K.K. in Japan. For Further Information, contact Kathryn Rhinds, THUS's Investor Relations Manager at telephone no. 020 7763 3126 or Mark Woolfenden of Smithfield Financial at telephone no. 020 7360 4900. *********** 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, Larri-Nil Veloso and Maria Lourdes Reyes, Editors. Copyright 2001. 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 * * *