/raid1/www/Hosts/bankrupt/TCREUR_Public/030408.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 8, 2003, Vol. 4, No. 69
Headlines
* B E L G I U M *
LERNOUT & HAUSPIE: Wants to Pay Employees & Belgian Taxes
* F I N L A N D *
BENEFON OYJ: Directed Share Issue Subscribed Partially
UPM KYMMENE CORP.: Outlook Revised Due to Further Pressure
* F R A N C E *
ALSTOM: Siemens Could Acquire Industrial Turbines Unit Soon
ALSTOM: Receives Second Letter From Mysterious Bidder
A NOVO: Completes Financial Restructuring, Reduces Debt
LE PETIT: Calls in Administrators Due to History of Debts
SCOR GROUP: Offers to Purchase Additional Share Capital in IRP
SUEZ SA: Ratings Off Watch and Affirmed at 'A-/A-2'
VIVENDI UNIVERSAL: Hands Control of Private Equity Fund Manager
* G E R M A N Y *
AWD: Faces Additional Lawsuits for Giving Bad Advice
BAYER AG: Cleared of All Liability in Mississippi Baycol Case
BERTELSMANN AG: Deadline for Springer Bids Set at End of Week
GERLING-KONZERN: Breur Succeeds Jansli as Chairman of Board
HVB GROUP: Launches EUR4.8 Billion Securitization Transaction
* I T A L Y *
FIAT SPA: Carlyle Offers EUR1.6 Billion Bid for Aerospace Arm
* N E T H E R L A N D S *
KONINKLIJKE AHOLD: Investigation Drags Another U.S. Food Company
KONINKLIJKE AHOLD: Company Profile
* T U R K E Y *
TURKISH COMPANIES: Stocks in Danger of Being Barred From Trading
* U N I T E D K I N G D O M *
AMEY PLC: Appointed Preferred Bidder for GBP120M Contract
BRANNIGANS: Remaining Operations Sold to Brannigans Limited
BRITISH ENERGY: Fails to Pay Principal, Rating on Watch Negative
INVERESK PLc: Offers New Shares to Raise GBP4.8 Million
EQUITABLE LIFE: Pursues Case With Auditor Using Narrowed Claims
INVENSYS PLC: Total Break-up Might Come in Latest Development
PIZZAEXPRESS PLC: Third Closing Date Extended to April 10
ROYAL MAIL: Merrill Lynch Chairman Joins Royal Mail Board
ROYAL & SUNALLIANCE: Result Improves, But Still Disappointing
ROYAL & SUNALLIANCE: Sells Healthcare & Assistance Business
SFI GROUP: Puts Plans to Divest Chain of Bars on Hold
SMG PLC: Completes Sale of SMG Publishing to Gannett Limited
SPIRENT PLC: Divests Wago, Secures New Borrowing Terms
STOLT-NIELSEN: Reports Net Loss of US$13 MM for First Quarter
* Large Companies With Insolvent Balance Sheets
=============
B E L G I U M
=============
LERNOUT & HAUSPIE: Wants to Pay Employees & Belgian Taxes
---------------------------------------------------------
Lernout & Hauspie Speech Products N.V. seeks the court's
authority to immediately pay administrative expense claims
relating to:
(1) employee payments owing under Belgian law to
Belgian employees as a consequence of their
postpetition termination on October 31, 2001;
(2) Belgian social security taxes incurred
postpetition;
(3) Belgian employee withholding taxes incurred
postpetition; and
(4) Belgian real estate taxes arising after the
Petition Date.
The Debtor advises that these payments would have been made
under the Plan proposed by the Debtor if it had gone forward.
As an additional sign of growing dissention between the Debtor
and the Creditors' Committee, the Debtor reports that a draft
copy of this request was provided to counsel for the Creditors'
Committee on Friday, March 28, 2003, to be told that the
Committee does not consent to this being heard on an emergency
basis.
Mr. Werkheiser responds that, "the payment of these L&H NV
Administrative Claims should not come as a surprise" to any
party and "is entirely consistent with [the creditors']
expectations." Throughout this case, L&H NV has repeatedly
disclosed to all parties-in-interest the extent of these
liabilities and L&H NV's intention to satisfy them in full
before making any additional distributions to general unsecured
creditors. Mr. Werkheiser assures Judge Wizmur that the Debtor
is not seeking to prevent any party from challenging the
specific amounts, which are to be paid -- only that these
claims, once the amounts are "verified", are entitled to be paid
in full as administrative claims.
Mr. Werkheiser points out that in each Chapter 11 plan filed by
L&H NV in this case, L&H NV provided for full payment of these
claims, and it was not until the Committee's Plan was filed that
payment of these claims was not expressly contemplated in this
case. The Committee's Plan provides that holders of
administrative claims in Belgium will not be entitled either to
seek satisfaction of their claims in the Chapter 11 case or to
look to L&H NV's assets located in the United States for
payment, Mr. Werkheiser concludes.
Furthermore, this request does not address L&H NV's position
with respect to the proposed asset allocation among L&H NV's
assets located in the United States and in Belgium. Instead,
L&H NV seeks to insure that nothing forecloses the Belgian
employees and the Belgian taxing authorities from receiving a
distribution on their claims as administrative expenses in the
Chapter 11 case.
Mr. Werkheiser recounts that the Court issued an order relating
to payment of trust fund taxes. The trust fund taxes include
taxes like income, FICA and Medicare taxes that the Debtors
withheld from their employees' paychecks or pays as a result of
its employees' wages and then periodically remits to the
appropriate taxing authorities. Furthermore, the language of the
Employee Retention Order directs that a key employee retention
program be implemented, one component of which was the payment
of severance pay to employees of the Debtors located in the
United States. The Order also provided that employees located
outside of the United States would be "covered by the statutory
requirements of each host country."
Belgian Employee Compensation
Under Belgian law, each of the claims included in this request
is considered a priority claim and is entitled to be paid in
full before distributions are made to general unsecured
creditors, like the claims of the banks that sit on the
Creditors' Committee. The employee claims relate to 244
employees who were terminated after providing 11 months of
postpetition services, and total EUR13,840,541. L&H NV does not
include the claims of Messrs. Bastiaens, Dammekens, Duerden and
Smolders, and reserves any right to contest and object to
allowance of those claims. L&H NV also reserves its right to
amend the list of employees included in this request to add or
remove any person.
Under the Belgian Labor Act, an employer may terminate an
employee by giving the employee a specific notice of
termination, the length of which depends on, among other things,
the annual salary and position of the employee -- i.e.,
employees with higher salaries are entitled to longer notice
periods. This Act imposes a pre-termination notice obligation
on employers that can be satisfied either by giving the employee
sufficient notice of future termination -- and keeping the
employee working during that period -- or terminating the
employee immediately and paying the notice period to the
employee. L&H NV could not avail itself of the first option
since it was closing its doors and liquidating its assets
beginning October 31, 2001. While the majority of the Belgian
Employee Claims arise under the Labor Act, a portion of these
claims arises under the Belgian Vacation Act -- approximately
EUR$1,500,000, and the Belgian Closure Compensation Act -
approximately EUR$70,000. At present, L&H NV has not made any
payments with respect to these Belgian employees. These claims
total EUR13,840,541.
Belgian Employee Social Security Taxes
L&H NV intends to pay two types of postpetition social security
taxes as administrative expenses relating to wages and the
Belgian Employee Claims. L&H NV is required to pay quarterly
taxes to the Belgian taxing authorities for an employee
withholding portion -- equivalent to 13% of the payment made to
the employee, and an employer portion -- equivalent to 26% of
the payment made to the employee, of social security taxes
relating to the employee's income. L&H NV, therefore, intends
to pay a prorated portion of the postpetition taxes on wages
incurred during the fourth calendar quarter of 2000 totaling
approximately EUR657,683.49.
L&H NV also intends, with respect to certain prepetition Wage
Social Security Taxes incurred in the fourth quarter of 2000,
to:
(a) pay a portion of the Wage Social Security Taxes
under the Trust Fund Taxes Order -- specifically
the employee withholding portion, and
(b) amend the Schedules with respect to the
remaining portion -- specifically the employer
portion -- to reflect the priority status afforded
prepetition taxes under the Bankruptcy Code.
L&H NV is also obligated to pay the employer portion -- 26% --
of the social security taxes with respect to the Belgian
Employee Claims. The Employee Claim Social Security Taxes
relate to the Belgian Employee Claims, are not yet owed to the
Belgian taxing authorities, and will not become due until the
Belgian Employee Claims are satisfied. Notwithstanding the non-
currency of these obligations, L&H NV estimates that the
Employee Social Security Taxes will total approximately
EUR4,440,000 and seeks to reserve that amount of funds for
payment of this postpetition liability.
Belgian Employee Withholding Taxes
L&H NV proposes to pay withholding tax claims arising under
Belgium law relating to the Belgian employees' income for which
L&H NV is liable. Specifically, these taxes relate to income
earned by employees during the postpetition periods -- during
the year 2001 -- and total approximately EUR293,790.
Real Estate Taxes
L&H NV currently owes the Belgian taxing authorities EUR8,887
for real estate taxes relating to its former corporate
headquarters that were incurred after the Petition Date.
Thus, the total amount that L&H NV proposes to pay under this
request is EUR19,200,901.49. (L&H/Dictaphone Bankruptcy News,
Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900)
=============
F I N L A N D
=============
BENEFON OYJ: Directed Share Issue Subscribed Partially
------------------------------------------------------
The investment shares offered for subscription in the directed
share issue, decided upon by the General Meeting of the
Shareholders of Benefon Oyj on March 28, 2003, have been
subscribed partially.
Other than the main investor candidates, ie. creditors,
subscribed for 7,760,162 shares. The Board of Directors approved
of the subscription on the condition that the rest of the share
issue shall be fulfilled.
Neither of the main investor candidates subscribed the shares by
the end of the subscription period. Dr. Philippe Frangie for whom
the set subscription period was too short for releasing the funds
allocated for the subscription is, however, committed to perform
the subscription within the next few days. The Board of Directors
has decided to approve of the subscriptions made after the end of
the subscription period until April 10, 2003. The company shall
report on the development of the subscription situation on a
daily basis.
UPM KYMMENE CORP.: Outlook Revised Due to Further Pressure
----------------------------------------------------------
Standard & Poor's Ratings Services said it revised its outlook on
Finland-based forest products company UPM-Kymmene Corp. to
negative from stable following further weakening in financial
performance and uncertainties over the pace of recovery. At the
same time, Standard & Poor's affirmed its 'BBB+/A-2' corporate
credit rating on UPM-Kymmene.
"The negative outlook reflects the possibility of a prolonged
market downturn (well into 2004), which would prevent a recovery
of UPM-Kymmene's financial profile in the medium term; this could
lead to ratings being lowered," said Standard & Poor's credit
analyst Alf Stenqvist.
"UPM-Kymmene's financial performance is expected to weaken during
2003, as a result of falling prices for printing papers
(newsprint, magazine, and fine papers) and negative currency
effects. This, in combination with relative high debt levels
during a market downturn, is expected to result in weak credit
measures for the ratings in 2003," added Mr. Stenqvist.
Although Standard & Poor's expects a gradual recovery in market
conditions in the medium term, the pace and strength of recovery
is uncertain. This could make it difficult for UPM-Kymmene, in
the medium to longer term, to improve financial measures in line
with the ratings (for example, funds from operations (FFO) to net
debt of 30%-35% and EBITDA net interest coverage of about 6x-7x
on average over the cycle).
The ratings on Finland-based UPM-Kymmene Corp. primarily reflect
the group's diversified earnings base, competitive cost
structure, and moderate financial profile.
Weak market conditions pressured earnings and credit ratios in
2002.
Lease-adjusted FFO to net debt was about 25% and EBITDA net
interest coverage was about 6.5x (aided by low interest costs).
In 2003, demand for printing papers is expected to remain weak
and average prices are expected to be lower than in 2002. In
combination with the expected closing of the announced
acquisition of U.S.-based MACtac Inc. at a cost of $420 million
(EUR390 million) during the year, UPM-Kymmene is not expected to
be able to generate free cash flows for debt reduction in 2003,
and credit ratios are expected to be weak for the ratings.
===========
F R A N C E
===========
ALSTOM: Siemens Could Acquire Industrial Turbines Unit Soon
-----------------------------------------------------------
Alstom's industrial turbines unit may be sold off to German
engineering group Siemens AG for about USD1.07 billion, Reuters
reported, citing sources close to the deal.
According to the report, one source confirmed that although the
deal is not done yet, it is highly probable. "It will be worth
about EUR1 billion," the source added.
Both companies declined to comment on the matter.
If pushed through, the deal would plug a gap in Siemens's power
engineering portfolio and may help the French heavy engineering
group, whose interests range from ultra-fast trains to ships and
turbines, keep its business afloat.
Meanwhile, German media had reported that Japanese firm Hitachi
was also bidding for the unit.
Other sources familiar with the deal confirmed this, saying a
sale could be agreed as early as next week and that Siemens was
at a more advanced stage in the talks than others.
Rumors that Siemens would also buy Alstom's larger transmission
and distribution business were quenched, as the German group is
believed to have no interest in the unit
It is known that Alstom is currently disposing assets to offset
an expected EUR1.3 billion loss in the year to March 2003. It
was able to secure credit lines of EUR1 billion to stave off a
crisis in the short term, but it is reliant on the capital
increase working.
Last month, Alstom pre-announced a EUR1.3 billion net loss for
2002, along with an admission that Alstom would not achieve
financial targets set out in its March 2002 "Restore Value"
restructuring plans.
The sale of the industrial turbines unit would raise between
EUR700 and EUR900 million and that talks had been going on for
about five months.
CONTACT: ALSTOM
Investor relations
E. Rocolle-Teyssier
Phone: +33 1 47 55 25 78
E-mail: investor.relations@chq.alstom.com
ALSTOM: Receives Second Letter From Mysterious Bidder
-----------------------------------------------------
ALSTOM received a second letter on April 3, 2003 from Mr. 'Jean
Mathew', from the company 'MJ Global Acquisitions', giving a
simple e-mail address: mathewjean@hotmail.com The contents of
this letter again call into doubt the seriousness of the previous
letter received by ALSTOM. Enquiries to date have not enabled
identification of either Mr. 'Mathew' or 'MJ Global
Acquisitions'.
ALSTOM believes that these letters may constitute an attempt to
manipulate the Group's share price and, as a consequence, on
April 3, forwarded the relevant documents to the French Stock
Exchange authorities, requesting that an investigation be opened.
ALSTOM again counsels extreme prudence to its shareholders in
this matter.
This press release follows a previous release issued by ALSTOM on
April 1, 2003, after the first letter received from 'MJ Global
Acquisitions'.
CONTACT: ALSTOM
Investor relations
E. Rocolle-Teyssier
Phone: +33 1 47 55 25 78
E-mail: investor.relations@chq.alstom.com
A NOVO: Completes Financial Restructuring, Reduces Debt
-------------------------------------------------------
French electronic equipment company A Novo has completed a
financial restructuring, which reduced its financial debt to a
level the company described as appropriate for it to embark on
its "Genesis" renewal program for a short-term turnaround.
Dow Jones Newswires reported Friday that the company's
restructuring involved the conversion of 97% of its outstanding
convertible bonds for EUR76.5 billion, subscriptions totaling
EUR11.9 million to a EUR16 million capital increase, and debt
restructuring totaling EUR81.2 million.
The plan reduced A Novo's debt to EUR138.5 million from EUR212.2
million, giving a debt-to-equity ratio to 1.06.
The company also said it will continue its asset disposal program
to cover future restructuring charges.
A Novo posted a loss of EUR114 million for the financial year
ended in September, compared with a profit of EUR10.1 million in
the previous 12 months.
LE PETIT: Calls in Administrators Due to History of Debts
---------------------------------------------------------
Administrator Lee Manning has put chef Raymond Blanc's four Le
Petit Blanc's restaurants up for sale.
Mr. Manning, from the corporate recovery arm of Kroll, was
appointed joint administrator for the company that is a 50-50
joint venture between M Blanc and Orient-Express Hotels.
According to Mr. Manning, Le Petit Blanc had a "history of
accumulated losses", with debts of more than GBP1 million. Its
four restaurants in Cheltenham, Oxford, Birmingham and
Manchester, have an annual turnover of GBP5 million to GBP6
million and are expected to fetch more than GBP1 million.
A spokeswoman for M Blanc told the Times that the business has
lacked investment for some time. A significant amount of money
would be needed, considering the general downturn in the
restaurant industry due to the economy, she said.
"We hope that this move results in that investment being made or
allows the business to trade through these difficulties," she
added.
Under the circumstances, M Blanc would retain the ownership of
the brand name. Nevertheless, the spokeswoman did not rule out
the possibility of the restaurants retaining the brand, provided
that M Blanc was happy with the new owners.
"It's up to him whether he sells on the name," she said.
Orient-Express Hotels' bought out Sir Richard Branson's stake in
both Le Manoir aux Quat'Saisons, M Blanc's two-Michelin-starred
restaurant and hotel at Great Milton, Oxfordshire, and Le Petit
Blanc in February last year. The hotel company is believed to
own about 90% of Le Manoir, with the balance still owned by the
chef himself.
Manning emphasized that the appointment of administrators would
have no impact on Le Manoir aux Quat'Saisons. "The two are quite
separate businesses," he said.
SCOR GROUP: Offers to Purchase Additional Share Capital in IRP
--------------------------------------------------------------
SCOR Group communicates that, as a result of recently held
negotiations with one of the shareholders of IRP Holdings Ltd, it
has offered to purchase 6.67% of the share capital of this
company. SCOR currently owns 46.7% of IRP Holdings, an Irish
based company incorporated at the end of 2001.
The other shareholders of IRP Holdings Ltd will be able to
exercise their pre-emptive rights, pro rata to their existing
holdings, over the next few weeks.
This transaction is in line with the Group's objectives of
reinforced control over its activities and will permit an
increased consolidation of the results of this subsidiary in 1H
2003 accounts.
SUEZ SA: Ratings Off Watch and Affirmed at 'A-/A-2'
---------------------------------------------------
Standard & Poor's Ratings Services said that it had affirmed its
'A-' long-term and 'A-2' short-term corporate credit ratings on
France-based multi-utility company Suez S.A. and related
subsidiaries. The outlook is negative. At the same time, the
long-term ratings were removed from CreditWatch, where they had
been placed on Jan. 9, 2003.
"Suez's performance deteriorated substantially in second-half
2002, and both this and the loss in value of its financial assets
should nevertheless be partially compensated by planned
reductions in operating costs and capital expenditures and by the
acceleration of divestments, reducing leverage strongly in 2003
and 2004," said Standard & Poor's credit analyst Karl Nietvelt.
Standard & Poor's has factored in management's very strong
commitment to rapidly reduce financial debt by about one-third by
year-end 2004, through divestments of financial stakes and some
core assets. Suez's net debt was EUR26 billion at year-end 2002
(unadjusted for operating leases and deficits on pensions and
other post-employment liabilities given their limited amounts).
While divestments of stable core activities (such as Elia in
2002) would be positive for Suez's credit protection ratios, as
cash proceeds and debt deconsolidation would significantly reduce
leverage, the assumed loss of some of its most stable, regulated
cash flows would likely penalize the group's consolidated
business profile; the impact, however, would be partially
compensated by strategic refocusing on lower-risk activities and
markets.
"Suez's credit metrics are currently subpar for the rating
category, which requires future consolidated FFO-to-net debt
levels of close to 25% by 2004 (and 15% accounting for Electrabel
by the equity method)," added Mr. Nietvelt.
The negative outlook reflects a degree of execution risk in
relation to asset disposals and cost-cutting measures as per the
strategic plan, together with some uncertainty about the
company's 2003 operational performance in the currently difficult
global economy. Standard & Poor's will closely review Suez's
progress on a half-year basis.
VIVENDI UNIVERSAL: Hands Control of Private Equity Fund Manager
---------------------------------------------------------------
Vivendi Universal has handed down the operations of Viventures
Partners to the care of Californian venture capital house EGlobal
Asset Capital, according to Les Echos.
Global Asset Capital acquired the structure that manages private
equity funds Viventures I and Viventures II for EUR9 million,
beating the undisclosed bid of Compagnie Nationale a
Portefeuille, the holding company of Belgian financier Albert
Frere.
According to the report, Global Capital's bid contains suspensive
clauses. It is believed to allow stakeholders in Viventures II
to abandon 25% of their future commitments.
The plan, which is still subject to the approval of VU employees
and French regulators, provide that a new EUR100 million
investment vehicle be created to co-invest with Viventures II in
the future.
Chief executive officer Jean-Rene Fourtou decided last summer to
stop investing in Viventures II, at a cost of losing the
company's previous investments of US$42 million in total.
But Vivendi maintained 100% control over the management structure
of the fund despite the changes.
=============
G E R M A N Y
=============
AWD: Faces Additional Lawsuits for Giving Bad Advice
----------------------------------------------------
At least 200 additional lawsuits alleging bad advice from German
financial services provider AWD have been filed against the
company.
AWD is facing 50 other cases in relation to the real estate fund
investment it sold and recommended to clients.
The clients were embittered when the fund's value plunged,
following the insolvency of its main asset, musical theatre firm
Stella.
AWD has said it would be willing to consider out-of-court
settlements, on a case-by-case basis.
Last year, a court ruled against the provider in two cases,
ordering it to pay EUR64,000 in compensation because it had not
clarified the risks related to the fund.
AWD said it has appealed the decision, noting that four other
rulings have been in its favor.
Meanwhile, it denied the claim of a law firm that it was facing
as many as 400 lawsuits.
AWD is UK's third-largest independent financial adviser through
its Thomsons Group and Carrington Carr units.
BAYER AG: Cleared of All Liability in Mississippi Baycol Case
-------------------------------------------------------------
Bayer said it is gratified that the jury in the Jackson,
Mississippi, U.S., Baycol trial reached a verdict in its favor,
clearing the company of any liability.
Bayer maintains that the company acted responsibly in the
development, marketing and voluntary withdrawal of Baycol and
that patient safety was always a top priority for the company.
Bayer reaffirmed that it will continue to pursue its settlement
program in which the company is offering to meet with
representatives of anyone who actually experienced serious side
effects while on Baycol to discuss reasonable compensation with
them, on its own initiative and without acknowledging any legal
liability. At the same time, where an examination of the facts
indicates that Baycol played no role in the patient's medical
situation, or where a settlement is not achieved, Bayer will
continue to defend itself vigorously.
BERTELSMANN AG: Deadline for Springer Bids Set at End of Week
-------------------------------------------------------------
Europe's largest media group, Bertelsmann AG, has issued a
deadline for binding offers for the scientific publishing
business, Bertelsmann Springer, according to the Financial Times.
Bertelsmann, which has net debt of EUR2.7bn and is targeting debt
of not more than 1.5 times cashflow, or less than EUR2bn, has
requested binding bids for the business by the end of this week.
It plans to close the deal in the second quarter.
The group has previously obtained firm expressions of interest
from at least seven suitors and is now believed to be aiming for
a EUR900 million to EUR1 billion sale, a far cry from the EUR780
million (USD835 million) value netted by outside observers on the
unit.
The publisher was auctioned off after its parent run into
significant debts after paying EUR2.26 billion for music business
Zomba.
Interested buyers include: Jurgen Richter, Bertelsmann Springer's
former chief executive, who teamed up with CVC Capital Partners
and Blackstone Group; Christophe Czajka and Bernhard von
Minckwitz, two former Bertelsmann managers; Apax Partners, in
partnership with Taylor & Francis, the U.K. publisher, BC
Partners, and Charterhouse.
A report saying the consortium of Cinven and Candover were
already in the lead was denied by a source close to Bertelsmann.
Bertelsmann Springer is comprised of 70 science and business
publishers across 18 countries. It has proven relatively
resilient in the face of the worst economic crisis to hit the
German media sector in decades.
CONTACT: BERTELSMANN AG
Carl-Bertelsmann-Strasse 270
D-33311 GA,AAtersloh, Germany
Phone: +49-5241-80-0
Fax: +49-5241-80-9662
Homepage: http://www.bertelsmann.de
GERLING-KONZERN: Breur Succeeds Jansli as Chairman of Board
-----------------------------------------------------------
Troubled German insurer Gerling-Konzern Allgemeine Versicherungs
AG has chosen Wolfgang Breuer to succeed Bjoern Jansli as
chairman of the management board.
The group recently announced that Bjoern Jansli stepped down from
chairmanship of the board, having been appointed as chairman of
the management board of parent company Gerling Holding on March
1. He also becomes chairman of the supervisory board of Gerling-
Konzern Allgemeine Versicherungs AG.
Breur's appointment is effective immediately, although he will
remain a member of the Gerling Holding management board and will
continue to head the personnel and organization divisions.
Cash-strapped German insurer Gerling-Konzern Allgemeine
Versicherungs AG recently revealed it expects to post a loss of
EUR300 million in the financial year 2002.
CONTACT: GERLING VERSICHERUNGS-BETEILIGUNGS-AG
Gereonshof
50670 Cologne, Germany
Phone: +49-221-144-1
Fax: +49-221-144-3319
Homepage: http://www.gerling.com
Contacts: Heinrich Focke, Chief Executive Officer
Immo Querner, Chief Financial Officer
HVB GROUP: Launches EUR4.8 Billion Securitization Transaction
-------------------------------------------------------------
HVB Group launches with "Building Comfort 2003-1" its first
securitization transaction this year. The second issue under the
Building-Comfort program is one of the biggest ABS transactions
in Germany so far. The residential mortgage-backed securities
(RMBS) transaction has a total volume of EUR4.8bn, securitizing
risks from mortgage loans of HypoVereinsbank private customers.
Building Comfort 2003-1 will reduce HVB Groups risked weighted
assets about EUR1.8bn. It is a synthetic transaction where the
risk is transferred through credit default swaps with a super
senior swap, mezzanine notes as well as a first loss piece into
the market. A total of EUR225m RMBS notes will be placed with
institutional investors in the capital market.
The goal of HVB Groups liquidity and balance sheet management is
to reduce the Bank's risk-weighted assets. Securitization is one
of the main instrument HVB Group employs to achieve this goal. In
the last year the bank stepped up its activities and placed
EUR20.5bn of assets at the capital market, reducing EUR12.5 bn of
risk-weighted assets. In 2003 HVB Group wants to achieve another
substantial increase in the volume of securitization activities.
HVB Group plans to use securitizations not only for reducing the
risked weighted assets but also to lower the funding needs by
introducing true sale transactions.
With this Building-Comfort transaction, the risks from almost
55,000 private mortgage loans with an average size of EUR88,400
on 45,000 properties are removed from HypoVereinsbank's books and
securitized. The pool takes an advantage from its extremely long
average age of the loans of already 5.1 years, which promises
better performance than in the case of more recently concluded
loans. The current indexed LTV of 59.8% (maximum 90% LTV) is low,
compared to other German transactions. The geographic
distribution is very favorable as the portion of loans to
Southern Germany, the most prosperous region within Germany, is
large, being more than 52%.
The pool is static, there is no substitution risk for the
investors. S&P and Fitch gave 94.8% of the pool a AAA rating,
with only 0.50% for the lowest tranche, which shows the excellent
shape of the pool and structure.
The transaction term is expected to be nearly six years. The
Notes have a bullet structure and will get called after 5.8
years, since due to the sequential structure, the transaction
becomes uneconomical for the issuer, as the upper portion of the
portfolio will have diminished by this stage.
CONTACT: HVG GROUP
Presseabteilung
Am Tucherpark 16
80538 Munchen
Phone: (089) 378-2 58 01/-2 55 12
Fax: (089) 378-2 56 99
Dr. Knut Hansen
Phone: 089/378-24644
E-mail: knut.hansen@hvbgroup.com
=========
I T A L Y
=========
FIAT SPA: Carlyle Offers EUR1.6 Billion Bid for Aerospace Arm
-------------------------------------------------------------
U.S.-based Carlyle fund has offered Fiat SpA EUR1.6 billion for
its aero engines and aerospace parts unit, Fiat Avio, according
to an unsourced Sunday report of La Repubblika.
The deal involves Finmeccanica SpA taking a 30% stake in FiatAvio
in the later stage of the transaction. Finmeccanica and Carlyle
were last week finalizing the mode with which to bid for the
aerospace arm.
DaimlerChrysler AG unit MTU could also take up something for
itself, the report.
In a separate article, U.K. private equity firm Doughty Hanson is
said to have teamed up with Italy's Piaggio Aero Industries to
submit a GBP1.2 billion offer for FiatAvio.
Fiat is selling Fiat Avio to reduce debt and raise cash for its
loss-making car division. It intends to raise at least EUR1.5
billion (US$1.64 billion) from the sale.
CONTACT: FIAT SPA
250 Via Nizza
10126 Turin, Italy
Phone: +39-011-686-1111
Fax: +39-011-686-3798
Toll Free: 800-804027
Home Page: http://www.fiatgroup.com/e-index.htm
FINMECCANICA SPA
4, Piazzi Monte Grappa
00195 Rome, Italy
Phone: +39-06-324731
Fax: +39-06-3208621
Home Page: http://www.finmeccanica.it
Contact:
Pier F. Guarguaglini, Chairman and CEO
Roberto Testore, CEO and Managing Director
THE CARLYLE GROUP
1001 Pennsylvania Ave.
NW, Ste. 220 South
Washington, DC 20004-2505
Phone: 202-347-2626
Fax: 202-347-1818
Home Page: http://www.thecarlylegroup.com
Contact:
Louis V. Gerstner Jr., Chairman
Rt. Hon. John Major, Chairman, Carlyle Europe
=====================
N E T H E R L A N D S
=====================
KONINKLIJKE AHOLD: Investigation Drags Another U.S. Food Company
----------------------------------------------------------------
The number of U.S. food companies contacted by federal
investigators looking into accounting problems at Ahold's U.S.
Foodservice unit went up to six with the confirmation of Tyson
Food's that it had been approached by the Securities and Exchange
Commission.
Kraft Foods, HJ Heinz, General Mills, Sara Lee and ConAgra Foods
all admitted having been contacted by the SEC last week. They
signed in to cooperate with the investigation relating to more
than US$500 million profit overstatement in the food service
group's books.
The overruns relate to accounting for vendor allowances, or
volume-related rebates or discounts from suppliers.
According to the report, the company said it had found "multiple"
errors in the amounts, including one which was "off by $US6
million".
All also cleared their names in the issue, but the Financial
Times say, the latest developments are threatening to involve the
US$500 billion US food industry into the controversy.
The discrepancies in the amounts U.S. Foodservice claimed to have
lent some suppliers were discovered during the audit of Ahold's
2002 finances when Deloitte Touche Tohmatsu wrote to suppliers to
confirm the amounts.
KONINKLIJKE AHOLD: Company Profile
----------------------------------
NAME: KONINKLIJKE AHOLD or ROYAL AHOLD
3050
Albert Heijnweg1
1507 EH Zaandam
Netherlands
PHONE: +31 (0) 75 659 91 11
FAX: +31 (0) 75 659 83 50
WEBSITE: http://www.ahold.com/
TYPE OF BUSINESS: Under their own local brand names, Ahold
companies operate approximately 9,000 supermarkets, hypermarkets
and convenience stores in the U.S., Europe, Latin America and
Asia.
In the Netherlands, Royal Ahold owns several retail companies
which operate more than 1,750 supermarkets and specialty stores:
Albert Heijn (supermarkets), Gall & Gall (liquor stores), Etos
(health and beauty boutiques), Jamin (confectionery shops), De
Tuinen (natural products) and Ter Huurne (Dutch-German border
stores). In addition to these retail interests, Royal Ahold is
active in the Netherlands as pharmaceutical wholesaler
(Grootverbruik Ahold GVA) and food products manufacturer &
wholesaler (Marvelo, Meester, Nistria, & Albro). In the United
States, Royal Ahold is one of the leading supermarket
organisations, operating more than 1,000 retail outlets. Food
retail accounted for 78% of 2001 revenues; food service, 22% and
real estate & other, nom.
SIC: Retail - Grocery Retailing
EXECUTIVES: Henny de Ruiter, Chairman of the Supervisory Board
Jan Andreae, Executive Vice President Europe
Dudley Eustace, Interim Chief Financial Officer
Bill Grize, Executive Vice President
Jim Miller, Executive Vice President
Theo de Raad, Executive Vice President
THE TROUBLE: ahold announced in february that its net earnings
and earnings per share under dutch gaap and u.s. gaap will be
significantly lower than previously indicated for the year ended
december 29, 2002 due primarily to overstatements of income
related to promotional allowance programs at u.s. foodservice.
The company believes that operating earnings for fiscal year 2001
and expected operating earnings for fiscal year 2002 have been
overstated by an amount that the company believes may exceed us
$500 million.
NUMBER OF EMPLOYEES: 450,000 (full- and part-time associates)
REVENUE: US$16.187 billion (Q ended Sept. 2002)
TOTAL ASSETS: US$28.616 billion (Q ended Sept. 2002)
TOTAL LIABILITIES: US$23.799 billion (Q ended Sept. 2002)
SALES: EUR 72.7 billion (Consolidated for 2002)
RATINGS: Senior Unsecured - 'BBB- (Fitch)
Short-term - 'F3' (Fitch)
Class A-1 pass-through certificates - 'BB+'(S&P)
Class A-2 pass-through certificates - 'BB+'(S&P)
Class 2001-A Pass Through Trusts - 'BB+' (S&P)
Senior unsecured debt ratings - B1 (Moody's)
Guaranteed entities - B1 (Moody's)
Subordinated debt ratings - B2 (Moody's)
AUDITOR: Deloitte & Touche
P.O. Box 58180
1040 HD Amsterdam
The Netherlands
DEPOSITORY BANK: The Bank of New York
Church Street Station
P. O. Box 11258
New York, New York 10286-1258
Bank of New York
Phone: +1 800 649 41 34
FIRMS THAT LAUNCHED CLASS ACTION LAWSUITS:
Berger & Montague, P.C.
Berman DeValerio Pease Tabacco Burt & Pucillo
Cauley Geller Bowman Coates & Rudman, LLP
Cohen, Milstein, Hausfeld & Toll, P.L.L.C.
Holzer & Holzer
Landskroner - Grieco Ltd.
Milberg Weiss Bershad Hynes & Lerach LLP
Much Shelist Freed Denenberg Ament & Rubenstein, P.C.
Murray & Frank LLP
Pease Tabacco Burt & Pucillo
Pomerantz Haudek Block Grossman & Gross LLP
Schiffrin & Barroway, LLP
Schoengold & Sporn, P.C
Wolf Haldenstein Adler Freeman & Herz LLP
===========
T U R K E Y
===========
TURKISH COMPANIES: Stocks in Danger of Being Barred From Trading
----------------------------------------------------------------
Thirteen Turkish companies are in danger of having their stocks
kicked out of public trading due to weak equity capital as a
result of sustained losses.
A report from daily Sabah citing the Istanbul Stock Exchange said
these companies include Kardemir Karabuk Demir Celik Sanayi ve
Ticaret AS, the country's second-biggest steelmaker, and Gima
Gida ve Ihtyiac Maddeleri AS, the third-biggest supermarket
chain.
Further research by TCR-Europe showed that the list also includes
Dardanel Onentas Gida, EGE Seramik Co. Inc., Berdan Tekstil
Sanayi, Emek Elektrik Endustrisi, Kerevitas Gida, CBS Printas,
Turcas Petrolculuk, CBS Boya Sanayi, Koniteks, EGE Plastik, and
Isiklar Ambalaj.
Turkey is currently experiencing its worst recession since World
War II. Its economy shrank 9.5% in 2001, with the lira going
down more than 50% during that year.
Companies with borrowings in foreign currencies are greatly
affected by the downturn in the economy.
Fitch recently lowered the Republic of Turkey's Long-term local
currency rating to 'B-' from 'B' and its Long-term foreign
currency rating was downgraded to 'B-' from 'B'. The Outlook for
both of the ratings is Negative.
===========================
U N I T E D K I N G D O M
===========================
AMEY PLC: Appointed Preferred Bidder for GBP120M Contract
--------------------------------------------------------
Amey plc, the support services specialist, and its consortium
partner Laing Investments Ltd, have been appointed preferred
bidder for Wakefield District Council's public and street
lighting PFI. The value of the contract is projected to be GBP120
million over 25 years, of which Amey's share is estimated at
approximately GBP90 million. The project, now under final
negotiation, is expected to commence in the summer of 2003.
This is the first joint project to reach preferred bidder stage
since the co-operation agreement with Laing Investments was
announced in January 2003. Amey will be working in partnership
with Laing Roads, a division of Laing Investments, the principal
operating division of John Laing plc.
Under the terms of the contract, Amey Highways Ltd will assume
responsibility for the management and implementation of the
replacement program and ongoing repair and maintenance of the
District Council's entire lighting stock on behalf of the
consortium. The stock of some 40,700 streetlights was identified
in a Best Value Review in 2000 as being in need of investment.
The program is designed to replace and upgrade 30,000 life-
expired lighting stock during the first five years.
The Wakefield project is the second street lighting contract that
Amey has won under PFI since the closure of the Walsall
Metropolitan Borough Council's public lighting PFI contract in
March last year.
Mel Ewell, Amey's Chief Executive, said:
"We are delighted to have been chosen as the preferred partner
for Wakefield's public and street lighting PFI. Our service
management skills and PFI expertise represent a strong offer and
we are confident that we will significantly improve services for
the benefit of Wakefield's community. We are well positioned to
take advantage of the growing public lighting market and look
forward to further strengthening our position."
Tony Reeves, Wakefield Council's Deputy Chief Executive, said:
"This is a big step forward for the District and one we
confidently expect will bring about great improvements. The PFI
Project, which brings in additional financial support from the
private sector, will help us to make our streets safer at night,
with reduced fear of crime and fewer road accidents. This will be
a major contribution to the community safety agenda, which is one
of the Council's top priorities. We are looking forward to
working in partnership with the Amey-Laing team to achieve these
benefits and to do what we as a Council have been unable to do
from our own budgets."
Derek Potts, Laing Road's Managing Director, said:
"As an investor we are delighted to be involved in this project
which will bring many benefits to the residents of Wakefield. Our
on-going partnership with Amey in street lighting and highway
maintenance operations will enable our respective strengths to be
applied to the benefit of the Wakefield project and future street
lighting developments."
CONTACT: AMEY
Jane Beckley, Head of Communications Director:
Phone: 01252 533809
Mobile: 07788 580591
CARDEWCHANCERY
Nadja Vetter
Phone: 020 7930 0777
BRANNIGANS: Remaining Operations Sold to Brannigans Limited
-----------------------------------------------------------
A company backed by businessman and racehorse owner Trevor
Hemmings acquired pub and restaurant chain Brannigans, the
company's administrative receivers said.
Brannigans Ltd., the new owner, was formed especially for the
purpose of the sale.
The acquisition involves the remaining 15 branches that remained
in operation after the chain's owners Mustard Entertainment
Company run into difficulties.
The troubles culminated to the closure of six of the company's 21
stores.
The continuation of the remaining 15 stores was largely due to
the efforts of receivers PricewaterhouseCoopers, which was called
in last November.
More than 400 jobs have been saved following the sale.
BRITISH ENERGY: Fails to Pay Principal, Rating on Watch Negative
----------------------------------------------------------------
Following the recent announcement by British Energy that it had
entered into formal standstill agreements with a number of its
creditors and postponed principal repayment on guaranteed bonds
due March 25, 2003, March 25, 2006 and March 25, 2016, Fitch
Ratings has re-examined the CDO transactions it rates for
exposures to the debt issued by British Energy.
The postponement of principal repayment legitimizes the calling
of a Restructuring credit event under the terms of the standard
credit default swap agreement. The agency's current Senior
Unsecured rating for British Energy is 'C' Rating Watch Negative.
The timing of any future downgrade of British Energy's Senior
Unsecured rating would be dependent upon creditors' formal
agreement to a final form of restructuring or cancellation of the
standstill agreement and resultant formal insolvency procedures.
Twelve publicly rated synthetic CDOs have been identified, with a
total exposure of EUR133 million to British Energy. The exposure
per transaction ranges from EUR4.6m to EUR25m, with an average
exposure of EUR11m per structure. Transaction exposure to British
Energy as a percentage of total assets ranges from 0.16% to
1.45%, with an average exposure of approximately 0.71%.
The majority of identified publicly-rated transactions do not
warrant any rating action at this time since an imminent credit
event of British Energy, including the possibility of default,
had already been factored into the analysis in recent reviews.
Five of the 12 publicly rated CDOs have one or more debt tranches
sufficiently exposed as to warrant placing their ratings on
Rating Watch Negative. In most cases, these CDOs have already
experienced some erosion of collateral credit quality, thereby
increasing the impact of their exposure to British Energy.
The securities placed on Rating Watch Negative are as follows:
BarCLO Finance (1999) Ltd., Class B rated 'A' , Class C rated
'BBB', and Class D rated 'B-'
CDO Master Investments 2 S.A. Class A rated 'AAA', Class B rated
'AA' and Class C rated 'BBB'
Petra I - Classes B rated 'AA+', Class C rated 'A+' and Class D
rated 'BBB+'
Illiad Investments Plc Series 2 Class C rated 'BBB'
Helix Capital (Netherlands) B.V. Series 2002-15 rated 'AAA'
The other seven publicly rated transactions with exposure to
British Energy are listed below. Their ratings and recent rating
actions can be found on the agency's web site, fitchratings.com
Spices Finance Series 2001-5
EPOCH 2000-1
Helix series 2001-9a and 2001-9 notes
Helix series 2001-5A and 2001-5 notes
Vintage Capital
Marylebone CDO II
London Wall 2002-1 plc
CONTACT: FITCH RATINGS
Andrew Jackson
Structured Finance, London
Phone: +44 (0) 207 417 6329
Irina Kissina
Structured Finance Performance Analytics, London
Phone:: +44 (0) 207 417 6307
Michael Gerity
Structured Finance, New York
Phone: +1 212-908-0628
Isaac Xenitides
Corporates, London
Phone: +44 20 7417 4300
INVERESK PLc: Offers New Shares to Raise GBP4.8 Million
-------------------------------------------------------
Introduction
The Company announces today that it intends to raise GBP4.8
million (GBP4.3 million net of expenses) through the issue of
47,983,689 new Ordinary Shares at a price of 10 pence per share
by means of a Placing and Open Offer by KBC Peel Hunt. The
Placing and Open Offer have been fully underwritten by KBC Peel
Hunt.
The Company also announced that new banking facilities have been
negotiated with Bank of Scotland in the form of a working capital
facility, a term loan and other facilities amounting in total to
GBP19.8 million.
Inveresk has been in severe financial difficulties. Since the
announcement of Inveresk's last interim results, there has been a
further significant reduction in the Company's turnover and net
assets and substantial costs have been incurred and provisions
made in relation to the sale of the business and certain assets
at the Caldwells mill, the closure of the Company's head office,
redundancies, further asset value writedowns and impairments. It
is, however, expected by the Directors that this reduction in net
assets will to a certain extent be mitigated by, among other
things, a revaluation of the Company's property assets.
Although the recent placing of new Ordinary Shares has improved
the Company's financial position, the Board believes that the
Company's aggregate level of indebtedness is currently at an
unsustainable level. This will be alleviated by the expected
conversion of GBP2.2 million of unsecured loans into Ordinary
Shares at a price of 10 pence per share. Despite this, the
Directors believe that it is imperative for the Company to raise
new equity finance as soon as possible in order to repair its
balance sheet and to reduce Inveresk's debt to equity ratio to
more normal levels. In the absence of the Placing and Open Offer,
the Board believes that it would have to sell some or all of the
Company's assets, which it does not believe would be in the best
interests of the Company, or its Shareholders, particularly given
the potential for increased profitability at each of Inveresk's
mills.
In order to allow the earlier payment of dividends than would
otherwise be the case, the Company proposes, subject to
Shareholder approval and the sanction of the Court, to cancel the
Deferred Shares and to cancel the amounts standing to the credit
of the share premium account and capital redemption reserve and
to credit those amounts to the profit and loss account, which
currently stands in deficit.
Information on Inveresk
Inveresk owns two paper mills; Carrongrove which is based in
Denny, Stirlingshire and St Cuthberts which is based in Wells,
Somerset. In addition, Inveresk owns the property, plant and
equipment of the Caldwells mill based in Inverkeithing, Fife
which are occupied by and operated under license by Klippan
International plc under a five year lease.
Carrongrove
The Carrongrove mill operates one twin wire paper machine which
is 2700 mm wide with four in-line coating heads. The mill is able
to produce one side coated, two sided coated and embossed solid
bleached sulphate ('SBS') boards ranging in weight from 160 grams
to 515 grams per square metre. In addition, the mill can produce
coated recycled and uncoated SBS boards. In the 13 month period
ended December 31, 2002, the majority of the mill's products were
sold for prices ranging up to GBP1,000 per tonne. The mill has
the capacity to produce approximately 40,000 tonnes of saleable
product per annum and currently employs 149 personnel.
Carrongrove's products are marketed under the 'Gemini' brand name
and are used in a wide variety of high quality graphical and
speciality packaging applications such as book and directory
covers, CD and DVD covers, greeting cards and tickets. The
Directors estimate that in the 13 month period ended December 31,
2002, export sales accounted for approximately 61 %of
Carrongrove's total revenue with the most significant export
markets being Germany followed by the Netherlands. Approximately
85 %of Carrongrove's sales are to paper merchants. In the 13
month period ended 31 December 2002, the mill's top ten customers
accounted for approximately 62 %of total sales, with the largest
customer accounting for approximately 22 %of total sales.
St. Cuthberts
The St. Cuthberts mill operates one single wire paper machine and
one mould paper machine. The mill also has a second mould paper
machine that is used for testing and developing new products. St
Cuthberts currently employs 134 personnel.
The single wire machine produces pre-impregnated foil base paper,
which is used as a covering to give a real wood finish effect to
doors, shelves, cupboards and other laminated furniture. Paper
foils are produced in weights ranging from 50 grams to 100 grams
per square meter and can be produced in any color so that
customers can apply their own graphics in order to create the
wood effect. In addition to furniture base papers, the machine
also produces latex impregnated wallpapers. In the thirteen month
period ended December 31, 2002, the products made by this machine
had an average selling price of GBP1,430 per tonne. With the
capacity to produce approximately 10,500 tonnes of saleable
product per annum, the Directors believe that St. Cuthberts is
the largest producer of pre-impregnated foil base paper in the
United Kingdom.
The mill's mould paper machine produces traditional 'hand made'
style papers for the art market under the brand names
'Bockingford', 'Saunders Waterford' and 'Somerset'. Papers are
also sold to companies such as Winsor & Newton Limited for sale
under their own brand names. Paper weights range from 90 grams to
640 grams per square metre. The mould machine also produces
papers of similar weights and quality for inkjet printers which
are also sold under the 'Bockingford' and 'Somerset' brands. In
the 13 months ended December 31, 2002, these products had an
average selling price of GBP4,095 per ton. This machine
has the capacity to produce between 1,200 and 1,400 tons of
saleable product per annum.
The Directors estimate that in the 13-month period ended 31
December 2002, export sales accounted for approximately 73 %of St
Cuthberts' total revenue which was split evenly between North and
South America and Europe. The majority of the mill's products are
sold directly to end customers. In the 13 month period ended
December 31, 2002, the top ten customers accounted for
approximately 80 %of total sales, with the largest customer
accounting for approximately 20 %of total sales.
Background to and reasons for the Placing and Open Offer
Following losses at a pre-tax profit level in each of the two
years ended December 1, 2000 and 2001, a further restructuring
program was commenced in the first half of the 2002 financial
year by the then board of Inveresk. This included the closure of
the Kilbagie mill in February 2002, the closure of the Westfield
mill in May 2002 and a further restructuring of the Company's
central overheads. As a consequence of the cash outflows
associated with these closures, Inveresk announced on August 16,
2002 that the Company had breached the covenants set out in its
loan agreements with the Royal Bank of Scotland.
On October 30, 2002, Inveresk announced that it was in severe
financial difficulty and that, in the opinion of the directors of
the Company at that time, the working capital available to
Inveresk was not sufficient for its present requirements, that
being, for at least 12 months following the date of that
announcement. In order to alleviate this situation, the Company
disposed of the business and certain assets relating to the
Caldwells mill to Klippan International plc without obtaining
prior Shareholder approval.
The Company announced on December 27, 2002, that it intended to
raise GBP2,000,000 by way of an issue of 20,000,000 Ordinary
Shares at a price of 10 pence per share and that it intended to
enter into an unsecured loan of between GBP2,000,000 and
GBP2,500,000. On the same date, Inveresk announced that in order
to allow Shareholders to clawback partially their interests in
the Company, it intended to offer Shareholders further Ordinary
Shares on a pre-emptive basis. The proceeds of the issue of
Ordinary Shares and a GBP2,200,000 unsecured loan were received
in January 2003.
As at June 1, 2002, the Company had bank borrowings amounting to
more than GBP20 million in aggregate and trade creditors of
GBP17.4 million. Due to the imposition of stricter working
capital controls, the fundraising in January 2003, the sale of
the business assets of the Caldwells mill and the sale of land
and buildings at the Westfield mill, bank borrowings were reduced
to GBP8.9 million at January 31, 2003 and trade creditors, who
have generally been supportive, were reduced to GBP13.7 million
at the same date. Despite these reductions, the Board believes
that the Company's aggregate level of indebtedness is still at an
unsustainable level and must be reduced to more normal levels as
soon as possible. Whilst it may be possible to achieve this
through a disposal of some or all of the Company's assets, the
Board believes that due to the Company's publicized financial
difficulties, it would not obtain a fair price for those assets
if it tried to sell them and therefore does not consider this
option to be in the best interests of the Company or its
Shareholders, particularly given the potential for increased
profitability at each of Inveresk's mills.
Accordingly, the Board intends to reduce the Company's debt to
equity ratio to more normal levels via the Placing and Open
Offer. The Placing and Open Offer have been fully underwritten by
KBC Peel Hunt.
11,073,159 of the Placing Shares, which represent 15 %of the
Company's existing issued ordinary share capital, are not subject
to the Open Offer. The Board believes that it has had to offer
these Placing Shares to institutional and other investors in
order to ensure that the Open Offer is fully underwritten, which
it believes is of fundamental importance to the Company.
The expectation of the funds to be received under the Placing and
Open Offer has assisted Inveresk in connection with its
negotiaions with Bank of Scotland, as discussed below. Following
Admission the net proceeds of the Placing and Open Offer will be
applied towards meeting the Company's working capital
requirements and, in particular, to the repayment of its trade
creditors.
Banking arrangements
The Board has received confirmation from Bank of Scotland of new
banking facilities for Inveresk comprising, inter alia, a GBP10.6
million working capital facility, an GBP8 million term loan and
other facilities, together totalling GBP19.8 million.
The Board shortly intends to draw down GBP8 million under its new
term loan facility in order to repay partially its existing
borrowings and to terminate its existing banking arrangements.
Loan conversion
The Company announced on January 20, 2003, that it had raised
GBP2,200,000 by way of unsecured loans. On 10 February 2003, the
Company announced that in order to reduce the Company's level of
indebtedness, it intended to amend the terms of these unsecured
loans to allow for their conversion into new Ordinary Shares in
Inveresk at a price of 10 pence per share. Full conversion of all
of the unsecured loans will result in the issue of 22,000,000
Ordinary Shares.
The Company has agreed with Klippan AB and Mr Lersten that the
unsecured loans they have made to the Company, amounting in
aggregate to GBP1,293,827, shall not be repaid but shall be
applied in paying up 12,938,270 Ordinary Shares. It is intended
that the 12,938,270 new Ordinary Shares to be allotted to Klippan
AB and Mr Lersten pursuant to the conversion of their loans will
be admitted to trading on AIM on May 2, 2003.
The Board has requested that Mr Bernander and Mr Walker convert
their unsecured loans to the Company into Ordinary Shares as soon
as they are capable of doing so, which is expected to be after
the announcement of the Company's preliminary results for the 13
months ended December 31, 2002.
Current trading and prospects
On August 16, 2002, the Company released its unaudited interim
results for the half year ended June 1, 2002. The financial
results for the six months to June 1, 2002 showed a reduction in
turnover from GBP54.2 million to GBP47.0 million but a reduced
total operating loss of GBP1.2 million, compared to GBP2.2
million in the previous corresponding period. Exceptional charges
from a further restructuring program which was commenced in the
first half of 2002 amounted to GBP11.1 million for the six months
to 1 June 2002 compared to GBP0.5 million, giving rise to an
increased loss before tax of GBP12.1 million compared to GBP3.2
million in the previous corresponding period. The loss per share
for the six months ended June 1, 2002 was 19.7p compared to a
loss of 4.7p per share in the six months ended June 2, 2001.
Since the announcement of Inveresk's interim results, there has
been a further significant reduction in the Company's turnover
and net assets. Substantial costs have been incurred and
provisions made in relation to the sale of the business and
certain assets at the Caldwells mill, the closure of the
Company's head office, redundancies, further asset value
writedowns and impairments. The Directors expect that all costs
in relation to the Company's restructuring and reorganization
will be included or fully provided for in the Group's results for
the 13 month period to December 31, 2002.
In addition, the Directors have reviewed the intrinsic value of
all assets and liabilities with particular regard to the
Company's portfolio of land and buildings. By application of
generally accepted accounting principles, supported by
independent professional valuations, the revaluation of the
Company's land and buildings will to a certain extent offset some
of the exceptional costs incurred and provisions made by the
Company during the 13 months ended December 31,2002. The effects
of any changes to the Company's accounting policies
will be incorporated in Inveresk's preliminary results for the
thirteen months ended December 31, 2002, which are expected to be
released at the end of April, or in early May 2003.
The Company's activities now comprise the two profitable and cash
generative mills at Carrongrove and St Cuthberts. Both these
mills are trading profitably and ahead of budget with order books
significantly ahead of this time last year.
Thanks to the loyalty of the Company's valued customers and the
invaluable support of its major suppliers, the integrity of both
production and distribution has been maintained despite this
challenging period of restructuring. The Directors believe that
the prospects for both mills remain positive.
Following the completion of the Placing and Open Offer, the Board
believes that the Company will have a more appropriate capital
structure and a stronger balance sheet which will establish a
platform for future growth, tightly controlled by the new
management team which has recently been put in place.
Strategy
Since November 2002, the Board has imposed strict working capital
controls onthe Company and has closed the Company's head office,
with the associated costs either being eliminated or
decentralized to each of the mills. The Board intends
to ensure that central overheads are kept to a minimum in future.
At both mills, the Directors intend to improve maintenance
schedules with the aim of minimizing production stoppages. It is
anticipated that this will both increase mill capacity and
improve product quality. Modest capital expenditure initiatives
to further increase mill capacity will also be approved where a
short-term payback period can be demonstrated.
Specific strategic initiatives for each of Inveresk's two mills,
as well as Company-wide initiatives are set out below:
Carrongrove
At Carrongrove, the Directors intend to develop the 'Gemini'
brand and to continue certain product development programmes to
enhance the value and quality of some of its one side coated
board aimed specifically at the greeting cards and DVD cover
markets. The Board also intends to develop the penetration of
Carrongrove's products in certain European countries where it is
not strongly represented, as well as in North America.
St Cuthberts
Strategic programs at St Cuthberts will be focused on increasing
sales of art paper products produced by the mould paper machine
and increasing that machine's capacity as and when appropriate.
Initiatives will include investments in marketing the machine's
higher margin products, such as its inkjet papers.
Investment will also be made in developing new high margin
products for speciality applications, such as high temperature
gaskets. Should there be sufficient demand for this type of
product, the second mould paper machine would form the basis of a
machine to allow for full time production.
Risk management
Following Admission, the Board intends to improve its risk
management procedures, particularly in relation to mill
production levels, currency exposure and raw materials prices.
Due to the Company's financial difficulties, essential
maintenance programs were curtailed during the 13 months ended 31
December 2002. The Directors believe that this factor, combined
with a more difficult insurance market, has prevented the Company
from obtaining what the Directors would regard as being adequate
insurance cover at acceptable premiums for property damage and
business interruption. The Board believes that the introduction
of more rigorous maintenance programs will increase the
likelihood of enhancing the current levels of cover.
Approximately half of the Company's raw material requirements are
priced in US dollars. In the 13 months ended December 31, 2002,
approximately 13 %of the Company's sales were in US dollars and
approximately 52 %were in Euros. The Board intends to explore the
possibility of reducing its exposure to fluctuations in raw
materials prices and to currency movements generally and, if
appropriate, to implement a suitable hedging strategy.
Corporate activity
The Directors recognize that there is scope for significant
corporate activity within the European paper industry. However,
they also recognise that given Inveresk's recent difficulties,
the primary objective should be restoring the Company to
profitable growth. Once this is achieved, the Board believes that
it may be appropriate to start considering how Inveresk may
participate in such corporate activity.
Relationship with Klippan AB and independence of the Board
On completion of the Placing and Open Offer and assuming full
conversion of all the unsecured loans, Klippan and persons acting
in concert with it, which are deemed to include Jan Bernander and
Alan Walker, will be interested in 37,501,003 Ordinary Shares,
representing approximately 26.1 %of Inveresk's enlarged issued
ordinary share capital. The Board has been informed by Klippan AB
that the concert party does not intend to increase its interest
in Inveresk after completion of the Open Offer and the conversion
of the GBP2,200,000 of unsecured loans to the Company.
In order to ensure that it is at all times capable of operating
and making decisions independently of Klippan AB, the Board
intends to appoint two independent non-executive directors such
that no individual or small group of individuals can dominate the
Board's decision taking. Recruitment of suitable individuals is
in progress and we hope to be able to report on this at the
forthcoming annual general meeting scheduled to take place in May
2003.
The Board believes that, notwithstanding the importance that
Inveresk operates independently of Klippan AB, there are
potential benefits available to the Company by entering into
commercial initiatives with Klippan AB. Some of the initiatives
that are currently being explored, which would all be entered
into on an arm's length basis, relate to procurement, sales and
the exploitation of technological and production efficiencies.
Further details will be announced as and when any initiatives are
agreed.
Capital Reduction
Inveresk is currently unable to pay dividends as a result of the
deficit which exists on its profit and loss account reserves. The
reductions of share premium account and capital redemption
reserve resolved upon at the Company's annual general meeting
held on 7 March 2002, which were intended to address the deficit,
are no longer proceeding as the Capital Reduction will be more
effective for this purpose. Following the Capital Reduction, the
deficit will be substantially reduced. As long as a deficit
remains on the profit and loss account, the Company will be
unable to pay any dividends, however the Capital Reduction will
allow the possibility of earlier dividend payments than would
otherwise be the case.
Subject to the approval of Shareholders and subsequent sanction
of the Court, the amounts standing to the credit of the share
premium account (which will have increased to approximately
GBP22,525,000 following the Placing and Open Offer and after
taking into account the placing of 20,000,000 Ordinary Shares
which was completed in January 2003 and assuming the full
conversion of the Company's outstanding unsecured loans) and the
capital redemption reserve will be cancelled and used to reduce
the deficit on the Company's profit and loss account reserves. In
addition, and also subject to the approval of Shareholders and
subsequent sanction of the Court, all 484,389,549 Deferred Shares
in issue will be cancelled and the credit arising from their
cancellation will also be used to reduce the deficit on the
Company's profit and loss account reserves.
A reduction in the capital of the Company and cancellation of its
share premium account and capital redemption reserve requires,
first, that the requisite proposal be approved by Shareholders as
a special resolution. Following the passing of such resolution,
the Capital Reduction must be sanctioned by the
Court. Only if the sanction of the Court is obtained can the
Capital Reduction take effect. The effective date of the Capital
Reduction is the date upon which the Court's order sanctioning
the reduction is registered by the Company with the Registrar of
Companies.
Accordingly, assuming the necessary resolution is passed at the
Extraordinary General Meeting, the Company will apply to the
Court for an appropriate order to sanction the Capital Reduction.
The Court will need to be satisfied that the interests of the
Company's creditors will not be prejudiced as a result of the
Capital Reduction becoming effective. If the amount of the
Capital Reduction exceeds the deficit on the Company's profit and
loss account as at the date on which the Capital Reduction
becomes effective the Company may have to undertake to the Court
not to treat the excess as distributable until certain conditions
are met. The terms upon which the Court is prepared to sanction
the Capital Reduction will be subject to consideration in due
course by the Court and discussion between the Company and its
advisers. The Directors reserve the right to discontinue the
application if they consider it appropriate and in the interests
of the Company to do so.
Details of the Placing and Open Offer
The Placing and Open Offer is intended to raise GBP4.8 million
(GBP4.3 million net of expenses) in aggregate by the issue of the
New Ordinary Shares. Of the New Ordinary Shares being issued,
11,073,159 Placing Shares are not subject to the Open Offer and
have accordingly been placed firm by KBC Peel Hunt with
institutional and other investors. 16,879,176 of the Offer Shares
have also been placed, but are subject to the rights of
Qualifying Shareholders to apply for such shares under the Open
Offer. The Placing and Open Offer have been fully underwritten by
KBC Peel Hunt.
Qualifying Shareholders are being given the opportunity to
subscribe for the Offer Shares under the terms of the Open Offer
at a price of 10 pence per share, payable in full on application.
The pro rata entitlement of Qualifying Shareholders under the
Open Offer is calculated on the following basis:
1 Offer Share for every 2 Ordinary Shares and so in proportion
for any other number of Ordinary Shares registered in the names
of Qualifying Shareholders on the Record Date. Entitlement to the
Offer Shares will be rounded down to the nearest whole number.
The fractional entitlements which would otherwise have arisen
will not be allotted to Qualifying Shareholders but will be
aggregated and, to the extent required, initially used to satisfy
excess applications received under the Open Offer and thereafter,
to the extent that any remain, subscribed under the terms of the
Placing.
Qualifying Shareholders may apply for any whole number of Offer
Shares, either less than or in excess of their pro rata
entitlement. However in the case of applications for Offer Shares
in excess of the pro rata entitlement, the total number of Offer
Shares will not be increased in response to such excess
applications. Excess applications will therefore only be
satisfied to the extent that other Qualifying Shareholders do not
apply for their pro rata entitlements in full. Offer Shares will
be allocated in response to excess applications in the absolute
discretion of the Company.
Undertakings have been given by certain major Shareholders to
subscribe for their full entitlements to 13,412,500 Offer Shares.
The Directors have also undertaken to subscribe in full for their
Open Offer entitlements amounting to 2,355,853 Offer Shares in
aggregate. In total therefore, undertakings have been received to
subscribe for 15,768,353Offer Shares representing 42.7 %of the
Offer Shares.
Klippan AB and Stefan Lersten have given undertakings not to
subscribe for their entitlements amounting to 4,263,001 Offer
Shares in aggregate, which have accordingly been placed firm by
KBC Peel Hunt with institutional and other investors.
The New Ordinary Shares to be issued pursuant to the Placing and
the Open Offer will be issued credited as fully paid and will
rank pari passu in all respects with the existing Ordinary
Shares, including the right to receive all dividends and other
distributions declared or made after the date of their issue.
The Placing and Open Offer are conditional, inter alia, on
Admission becoming effective and the Placing and Open Offer
Agreement becoming unconditional in all other respects.
Application has been made for the New Ordinary Shares being
issued pursuant to the Placing and Open Offer to be admitted to
AIM. It is expected that Admission will become effective and that
dealings will commence in the New Ordinary Shares on May 2, 2003.
Application may only be made on the Application Form, which is
personal to the Qualifying Shareholder(s) named therein and may
not be assigned, transferred or split except to satisfy bona fide
market claims. Qualifying Shareholders who have sold or
transferred all or part of their registered holdings are advised
to consult their stockbroker, bank or other agent through or by
whom the sale or transfer was effected as soon as possible since
the benefits arising under the pen Offer may be claimed from them
by purchasers under the rules of the London Stock Exchange.
The Application Form represents a right to apply for Open Offer
Shares. It is not a negotiable document or a document of title
and cannot be traded. Any rights to subscribe Open Offer Shares
under the Open Offer which are not exercised will lapse.
Extraordinary General Meeting
Notice of the Extraordinary General Meeting, which is to be held
at the offices of Jones Day Gouldens, solicitors to the Company,
Bucklersbury House, 3 Queen Victoria Street, London, EC4N 8NA at
10.00 a.m. on April 30, 2003 will be sent to shareholders.
The Board considers the Capital Reduction and the Placing and
Open Offer to be in the best interests of the Company and
Shareholders as a whole will be unanimously recommending that
Shareholders vote in favor of the resolutions to be proposed at
the Extraordinary General Meeting, as Messrs Bernander and Green
intend to do in respect of their holdings of 4,711,707 Ordinary
Shares, representing approximately 6.4 %of the existing issued
Ordinary Share capital of the Company.
CONTACT: INVERESK PLC
Alan Walker, Chief executive
Phone: 020 7240 1234
Jan Bernander, Chairman
Phone: 00 46 708 556 400
KBC PEEL HUNT LTD
Oliver Scott
Phone: 020 7418 8900
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Record Date for the Open Offer
March 31, 2003
Ex-date for entitlements to the Open Offer
April 4, 2003
Latest time and date for splitting Application Forms
3.00 p.m., April 25, 2003
(to satisfy bona fide market claims only)
Latest time and date for receipt of forms of proxy
10.00 a.m., April 29, 2003
Latest time and date for receipt of completed
Application Forms and payment in full
3.00 p.m., April 29, 2003
Extraordinary General Meeting
10.00 a.m., April 30, 2003
Admission effective and dealings commence in the New
Ordinary Shares May 2, 2003
Crediting of CREST accounts in respect of the New
Ordinary Shares May 2003 2,
Definitive share certificates in respect of the New
Ordinary Shares dispatched by May 9, 2003
EQUITABLE LIFE: Pursues Case With Auditor Using Narrowed Claims
---------------------------------------------------------------
Equitable Life is again taking up the fight to fine its former
auditor Ernst & Young, whom it alleged failed to properly advise
it on certain transactions.
The mutual was allowed to proceed with a new suit, but the claim
is only up to GBP500 million--a sharp drop from the original
GBP2.6 billion claim it filed last year.
One of the main elements of Equitable's original argument is that
it lost an opportunity to find a buyer for the society because of
the auditor's alleged negligence. But the court presiding over
the case ruled this unsustainable and unlikely to yield any
success.
The new claim is trimmed down to focus on the levels of bonuses
declared by the society between 1997 and July 2000.
It asserts a lack of advise on the part of accounting firm
regarding the need for certain provisions or disclosures in its
guaranteed annuity liabilities. This, according to Equitable,
made it blindly declare and pay an additional GBP500 million of
reversionary and terminal bonuses over that three-year period.
"Those are actual liabilities of Equitable, part of which would
not have been incurred had Equitable been warned about the need
for additional technical provisions," Iain Milligan, QC,
representing the society, told the court.
In February, Mr. Justice Langley agreed that "proper claims could
be advanced on" the bonus declaration argument, only that it is
"fanciful in approach and amount."
Equitable claimed its potential savings from reduced bonuses
would have amounted to GBP1.6 billion.
Dismissing moves from Ernst & Young lawyers to strike the claim,
Mr. Justice Langley granted the go-ahead for reasons he is to
disclose later.
A hearing is scheduled on May 19, wherein Equitable will appeal
to widen their case to include much of the original argument, and
Ernst & Young will pursue a cross-appeal.
INVENSYS PLC: Total Break-up Might Come in Latest Development
-------------------------------------------------------------
Speculation is rampant that the new round of asset disposals to
be taken by automation and controls group Invensys could lead to
the break-up of the company.
A company insider denied the rumor saying, "There could be some
asset disposals, but this does not mean Invensys will disappear."
The company itself refused to comment last night, according to
The Times.
The company is expected to announce in its trading update today
that it is reviewing all three of its main divisions for disposal
opportunities as it seeks to cut its GBP1.5 billion debt
mountain, the report said.
Invensys advised of its plan to sell assets during a surprise
profits warning in February, prompting speculations that a
recovery program launched by Rick Haythornthwaite is not going as
planned.
Mr. Haythornthwaite already has sold GBP1.8 billion worth of
assets, but analysts expect another of similar magnitude could
come.
Assets believed to be in line for sell-off includes the company's
energy management and development divisions.
The troubles of the group, which emerged from the GBP9.4 billion
merger of BTR and Siebe, is believed to have started from its
acquisition of Dutch software firm Baan in 2000.
PIZZAEXPRESS PLC: Third Closing Date Extended to April 10
---------------------------------------------------------
The Board of Venice Bidder announces that, as at 3.00 pm on April
3, 2003, being the third closing date of the Offer, Venice Bidder
owns, controls or has received valid acceptances of the Offer in
respect of, in aggregate, 10,373,293 PizzaExpress Shares,
representing approximately 14.5 per cent. of the existing issued
ordinary share capital of PizzaExpress.
The Board of Venice Bidder announces that the Offer has been
extended for a period of seven days and will therefore remain
open for acceptance until 3.00 pm on 10 April 2003.
As at 3.00 pm on April 3, 2003, valid acceptances of the Offer
had been received in respect of 4,241,635 PizzaExpress Shares,
representing approximately 5.9 per cent. of the existing issued
ordinary share capital of PizzaExpress.
On February 27, 2003, Venice Bidder announced that it had
received undertakings to accept the Offer in respect of, in
aggregate, 109,750 PizzaExpress Shares, including undertakings to
accept from parties acting in concert with Venice
Bidder in respect of, in aggregate, 80,750 PizzaExpress Shares.
Valid acceptances have been received in respect of all of these
PizzaExpress Shares and these are included in the totals above.
Following commencement of the Offer Period, Venice Bidder
acquired 6,131,658 PizzaExpress Shares, representing
approximately 8.5 per cent. of the existing issued ordinary share
capital of PizzaExpress.
Immediately prior to the commencement of the Offer Period, Venice
Bidder and persons deemed to be acting in concert with Venice
Bidder owned or controlled 80,750 PizzaExpress Shares,
representing approximately 0.1 per cent. of the existing issued
ordinary share capital of PizzaExpress. This comprised the
beneficial holdings of the Venice Management Team. Save as set
out above, neither Venice Bidder nor any of the directors of
Venice Bidder nor (so far as Venice Bidder is aware) any party
deemed to be acting in concert with Venice Bidder owned any
PizzaExpress Shares or rights over PizzaExpress Shares on 13
December 2002 (the last business day before the commencement of
the Offer Period) nor have they acquired or agreed to acquire any
PizzaExpress Shares or rights over PizzaExpress Shares during the
Offer Period.
Certain terms used in this announcement are defined in the Offer
Document dated February 27, 2003.
CONTACT: VENICE BIDDER
Phone: 020 7499 5311
Luke Johnson
Ian Eldridge
ABN AMRO CAPITAL
Phone: 020 7678 0076
Ian Taylor
HAWKPOINT
Phone: 020 7665 4500
(Financial adviser to Venice Bidder)
Patrick Wilson
Robin Caiger
ABN AMRO Hoare Govett
Phone: 020 7678 8000
(Broker to Venice Bidder)
Chris Zeal
John MacGowan
Financial Dynamics
Phone: 020 7831 3113
(PR adviser to Venice Bidder)
Fergus Wheeler
ROYAL MAIL: Merrill Lynch Chairman Joins Royal Mail Board
-----------------------------------------------------------
Royal Mail's Board has been further strengthened with the
appointment as a non-executive director of Bob Wigley, Chairman
of Merrill Lynch's European Investment Banking Business.
The move was warmly welcomed by Allan Leighton, Royal Mail's
Chairman, who said: "I am delighted Bob has accepted this role.
His wide experience in banking and corporate restructuring will
be an asset to the Board as it continues to drive forward the
company's renewal plan."
Mr Wigley (42) will join the Board this month. He said: "I am
looking forward to the challenge of using my restructuring
experience to help the rest of the team turn Royal Mail into the
best postal company in the world."
*****
Mr. Wigley began his career at British Gas before joining Arthur
Andersen, first as a chartered accountant and then as a
consultant. He spent almost ten years with Morgan Grenfell,
latterly as a Managing Director and member of the global
investment banking management committee. In 1996, he joined
Merrill Lynch, the global financial management and consultancy
firm, where he is Chairman of the European Investment Banking
Business.
The company is currently losing some GBP1 million a day and in
the 2001/2002 financial year, it lost GBP318 million on its day-
to-day operations.
ROYAL & SUNALLIANCE: Result Improves, But Still Disappointing
-------------------------------------------------------------
Financial Highlights
The major feature in these results is the development in the
underwriting loss attributable to prior years, amounting to
GBP595m.
Chairman's Statement
This will be my final year of reporting to you as Chairman. As
many of you will know, I will have retired by the time this
report is published, to be succeeded by John Napier. There will
be plenty of challenges facing him but I firmly believe that,
with the support of the new management team, he will be able to
steer the Group through the issues currently facing it to the
strong position that it deserves.
Program of change
In November last year we announced a program of actions that, we
believe, represent a major turning point for the Group. They will
result in significant changes to the shape of the Company
while being broadly consistent with the strategy that was already
in place.
These are actions that the Board and the management believe are
absolutely essential. All of them have one aim, to produce a
Group that is disciplined, focused, and well positioned to
deliver consistent returns to shareholders.
Your Board is totally committed to achieving these new business
and financial plans. We are closely monitoring their
implementation - holding management accountable every step of the
way. You will have seen changes to the senior management at Group
level.
Over the past year we have also changed the senior teams in the
UK and the US. Duncan Boyle and Steve Mulready were appointed to
head up our operations in those two markets, and they in turn
have been strengthening their own Regional management teams.
The November review has resulted in a number of radical action
plans to reshape the Group, including the proposed Initial Public
Offering of our Australian and New Zealand businesses. We will be
concentrating primarily on markets and businesses where we can
build and sustain competitive advantage, and we will withdraw
from areas that are unprofitable or lack strategic fit. We will
also be seeking every opportunity to maximise shareholder value,
including disposing of businesses whose true value is not
reflected in our share price and is unlikely to be in the
foreseeable future.
We aim to reduce the overall level of personal lines premiums,
with specific emphasis on unprofitable intermediated business in
the UK and in Canada. We do, however, foresee good opportunities
for growth in direct personal lines and carefully selected
intermediated business in these and other markets. We also intend
to increase commercial premiums, particularly in the UK.
Our focus must and will be on profit. If this is at the expense
of volume or market share then so be it.
Operational targets
We remain committed to generating a 10% net real return on
capital. In light of the continued stockmarket volatility and the
lower levels of long-term inflation that we anticipate, we will
adjust down our investment return assumptions with effect from
2003. We now set a target for underwriting profits when market
conditions are positive for the industry, as they are at the
moment.
The results
2002 was not a year of strong performance for the Group. Our
Group operating result based on longer-term investment return was
GBP226m. This is an improvement on our 2001 result but was
overall another disappointing outcome. The Group recognizes both
the need for change and the urgency of taking action to bring
about that change.
As I outlined above, we have already begun to implement a radical
program to ensure it happens.
General insurance
In 2002, we produced a general business operating result of GBP89
million, this is an improvement of GBP100m on last year but still
below the performance that the Group is capable of achieving. The
actions that we have taken to strengthen provisions for general
business claims have of course contributed to this, but this is
not the sole cause. Parts of our book of business continue to
receive remedial action.
However, the general insurance result was not all bad. Many other
businesses, such as U.K. commercial, U.S. personal and commercial
property, Asia Pacific and Latin America & Caribbean, produced
another year of good, solid results, demonstrating the capability
for general insurance to produce acceptable returns on capital.
Life
The overall life result for 2002 of GBP227m contains a one off
contribution of GBP50m from Codan following changes in the way
that Danish insurance companies share profit between
policyholders and shareholders.
In August of 2002 we announced the outcome of our review of the
U.K. Life company. At the end of 2001 we had closed our with
profits funds to new business and, as a result of the review, the
remaining funds closed to new business in September 2002. As part
of our Operating and Financial Review, announced in November
2002, we outlined our plans to run off the business in a cost
effective manner, including seeking to outsource the
administration of the closed funds.
We achieved this goal in February of this year, announcing that
we had secured a competitive and flexible deal with Unisys for
the future administration of the business. As a result 1,700
staff will transfer to Unisys.
The U.K. Life company was fined GBP1.35m by the Financial
Services Authority (FSA).
The fine was for poor implementation and weaknesses in our
controls of the personal pension review. These issues were
uncovered in 2000 and the FSA acknowledged that we had
subsequently undertaken an effective and extensive review.
Regulatory environment
The regulatory position is developing and changing and makes
projections of our regulatory capital inevitably less certain.
Changes, including the EU Groups' Directive and consultation
papers issued by the FSA, followed by further guidance, have
helped clarify the likely requirements, although there remains
considerable uncertainty.
What is certain is that statutory solvency requirements in the
future will change with the trend being towards more
sophisticated risk based models being used to determine increased
required solvency levels.
The regulatory issues, and the uncertainties that relate to
general and life insurance business, are set out in the Finance
Director's report.
Balance sheet
We saw a fall in our shareholders' funds from GBP4.7bn in 2001 to
GBP3bn in 2002. Significant factors affecting this movement
include, writedown of goodwill, exchange losses and weaknesses of
investment markets. While this has clearly not been an easy time
for the Group, the action that we have taken since 1998 to
significantly reduce our exposure to equities, has served to
limit the damage. Over the last few years, we have reduced our
overall equity holdings by nearly GBP12bn.
We have continued to reduce the proportion of our investments
held in equities to approximately 10%, and the general funds -
with equities of around GBP1.2bn - are now at the Group's target
level.
During 2002, we set ourselves a target of releasing GBP800m of
capital by way of a program of disposals and also releases from
the UK Life company. This target was passed within the timetable
we set and serves to strengthen our belief that the disposal
programwe intend for the next two years will succeed.
The program of actions that is now underway will, we believe,
improve our operating performance and strengthen our capital
position. Disciplined underwriting and capital prioritization
should ensure we make better use of the capital available.
Rating agencies
Over the course of 2002, our credit ratings from all of the major
rating agencies were revised downwards. Regaining our target
ratings, which are higher than the ratings we currently have, is
a priority for us and we believe that our plans will achieve
this.
Following the announcement of our plans in November, AM Best
affirmed our 'A -' excellent rating and changed the outlook from
'negative' to 'stable'. Standard & Poor's moved the Group rating
to 'A-' with a 'developing outlook', but indicated that the plans
are expected to improve capital adequacy to strong levels; they
also expect them to be earnings enhancing.
Share price
Our share price over the year has continued to be negatively
impacted by: the state of investment markets generally, the
attitude of investors to the insurance market and our poor
results. There has been concern about our ability to take
advantage of the current strong conditions in the general
insurance market because of the capital constraints that we have
faced. As we reshape the Group and remove that constraint, we
believe that investors will regain confidence in our ability to
deliver on our plans and that we will see an improvement in their
valuation of the Group.
Dividend
For 2002, the Board decided, against the background of the
results for the year and investment markets, to set a final
dividend of 2.0p, giving a total dividend for the year of 6.0p.
Looking forward
Bob Mendelsohn led the Group through difficult times for the
insurance industry. He set a firm strategic direction and did
much to drive change in both the business philosophy and in the
culture of the Group.
However, because progress to extract the greatest benefit from
that work was not fast enough, the Board decided that the
interests of the Group would be best served by a change in the
top management.
Bob Gunn has very effectively steered the Group through this time
of transition and will leave it well positioned for Andy Haste,
who assumes the role of Group Chief Executive at the beginning of
April.
Although Bob was prepared to step in until a permanent Chief
Executive could Sir Patrick Gillam, Chairman be appointed, he
indicated that he did not wish to be considered as a candidate.
During his 30 years of service, Bob has made a tremendous
contribution to Royal & SunAlliance, and I would like to take
this opportunity on behalf of the Group to thank him and to wish
him well in his retirement.
We have an excellent management team in place and a powerful
recovery plan, which has been endorsed by the Board of Directors
and senior management.
I am confident that John Napier and Andy Haste will provide the
leadership to ensure we implement that plan, improve our
performance and deliver stronger results. With their broad
experience outside the insurance industry, they will bring a
fresh perspective to the role and valuable insights into how
change and business improvements have been implemented in other
major companies.
I am confident the future will see Royal & SunAlliance produce
the results that a company with its pedigree should.
Finally, I would like to offer my warmest thanks to all of my
fellow directors, management and staff of Royal & SunAlliance for
all their efforts over my six year tenure. I have enjoyed
chairing the Group.
Industry Overview
2002 was a year of unprecedented financial challenges for the
insurance industry. Balance sheets and investment portfolios have
suffered badly. At the same time we are seeing fundamentally good
signs for the insurance business with continued positive
development on pricing of risks worldwide.
Overall, investment markets worldwide continued to be very
volatile and, for the first time since the 1940s, recorded their
third successive year of overall decline. The FTSE 100 declined
by nearly 25% over the year and the Dow Jones Industrial Average
by over 16%. Investor confidence was further undermined by the
high profile corporate scandals of Enron and WorldCom in the US
during the year and concerns about when, and if so where, it
might happen again. This picture has continued into 2003 as the
international political situation increases negative investor
sentiment.
Insurers worldwide have seen their valuations tumble and their
balance sheets badly affected. The Dow Jones Euro Stoxx Insurance
Index fell by over 50% and the FTSE All Share Insurance Index by
nearly 47% in the year. Issues such as asbestos, further
provisions for other bodily injury claims and concerns over the
solvency of life insurers, have all had an adverse impact on
investors' perceptions of the insurance sector. There has also
been concern about the potential level of exposure that insurers
have to corporate bonds and the impact that further company
failures might have.
As a result of the economic conditions and investor concerns,
Regulators, in the U.K. and U.S. have been working to develop new
approaches on governance controls and risk management. This move
is to be broadly welcomed but, with the long list of issues that
the industry is expected to address, it will be a challenge.
While welcoming the more active regulatory environment, concerns
remain about the potentially damaging nature of any longer term
regulatory uncertainty and we would therefore look for
implementation of any revisions in as timely a manner as
possible.
The continued stock market declines have had one positive side
effect for insurers; they have reinforced the message that
writing with the aim of a breakeven result or an underwriting
profit is essential. In recent years the industry has been able
to rely on investment income to compensate for losses from
writing business at uneconomic rates, but this is a thing of the
past. Helped by this recognition, on the business front the
picture in 2002 was altogether more positive.
The level of natural catastrophes in the year was relatively
benign, as it was in 2001. The attack on the World Trade Center
in 2001 led to insurers losing billions of dollars of capacity,
which served to accelerate the move to realistic pricing of risks
that had begun earlier in 2001. As a result, 2002 has seen
significant price increases being achieved on lines of business
that had previously been very resistant to movement.
Worldwide commercial rates have benefited in particular. That
trend seems likely to continue during 2003 in major commercial
markets. Terms and conditions have also been significantly
strengthened across most lines of business.
The key to success for general insurance companies in the future
will be a sharp business focus, specifically underwriting
discipline and expense control. For all companies the combination
of capital constraints and regulatory pressures will make a more
sophisticated understanding of risk based capital needs
essential.
Insurers who adapt to these changes will create substantial value
for their shareholders.
Chief Executive's Review
Our six core principles for delivering results
-- We will focus on business that has a sustainable competitive
advantage
-- We will ensure capital prioritisation
-- We will enforce the strictest underwriting principles
-- We will put strong emphasis on performance
-- We will ensure rigour and control across all disciplines and
procedures
-- We will focus on adding shareholder value
2002 has not been a good year for the insurance industry, and
certainly not for Royal & SunAlliance. We have probably all spent
time reflecting on recent events within the Group, but the fact
is we are where we are for a number of reasons - some of which
were beyond our control, but by no means all. Now we have to put
all that behind us and move on.
As the Chairman has already said, we recognize both the need for
change and the urgency in bringing about that change. Despite
good performances by many of our businesses, the Group's overall
results in recent years have been disappointing.
The Group operating result (based on LTIR) for 2002 of GBP226m,
is significantly better than that of 2001, but still not
acceptable. This can in part be put down to prior year
deterioration of GBP595m, including the strengthening advised in
the third quarter of 2002. It has also been hit by the industry
environment and events beyond our control. But part of it is down
to our failure to extract the best performance from a number of
areas of our business. We have not executed our strategy as
effectively and as quickly as we should have done, and we have
not produced the results we should.
That said, the outlook for general insurance is very good at the
moment and we are determined to capitalize upon it. We are in a
unique period for the general insurance business. It has been
described as the best and worst of times. Insurers have been
severely impacted by a combination of circumstances and events
that have led to significant stress on the industry. Extreme
weather events, the horrific acts of terrorists, the significant
declines of equity markets and investment returns and some of the
major legacy issues the industry has faced, like asbestos, have
all taken their toll on earnings, balance sheets and management.
At the same time, we finally have market conditions -
particularly for commercial insurance - that are fundamentally
addressing the chronic underpricing and basic weakening of terms
and conditions that have been a feature of this business FOR AS
LONG AS I CAN REMEMBER.
Given these market conditions, and our own position and
circumstances, we determined in August to undertake the detailed
Operating and Financial Review that we unveiled in November last
year.
We have made decisions - some of them hard and many of them
requiring time to execute.
The future shape of the Group Royal & SunAlliance is
concentrating on those markets and businesses where we believe we
can build and sustain competitive advantage. As a result we will
be a smaller, more focused general insurer.
Our primary markets will be those where we have a significant
capability, presence and scale, as well as a solid reputation.
UK
The U.K. is our biggest market, and will continue to be key to
our success as we move forward. We see excellent opportunities
for a well managed, disciplined and focused general insurance
company in this important market.
During 2002, the very strong performance from commercial lines
continued and we produced an underwriting profit for the year,
despite claims provision strengthening across most classes.
Personal lines performed less well, in part as a result of record
levels of weather claims throughout the year. We paid out GBP82m
more to individuals for weather claims in 2002 than in 2001. We
also increased claims provisions, notably for intermediated motor
where we have seen steadily increasing bodily injury claims
payment levels. We have some fundamental underlying issues with
our personal business, around pricing for claims inflation, which
we have now begun to address.
Our direct personal business MORE TH>NT, which we launched 18
months ago with some demanding targets, is well on track to being
one of the top three direct players in the U.K. The advertising
campaigns that have run throughout the year have been very
successful. Indeed, we have won a number of awards for our brand
marketing and websites.
Our intermediated personal lines are the subject of some tough
action. We are going to reshape this business, it will be smaller
and it will be concentrated on business where we believe we can
make a sustainable profit.
We are already achieving a Group target return of 10 per cent net
real return for the commercial business. Our aim is to achieve
this target return on capital for Personal intermediated and MORE
TH>NT by the end of 2004.
USA
The U.S. remains a very significant market for us. During 2002 we
implemented a restructuring plan that streamlined operations to
two divisions focusing on mainstream general (property and
casualty) business insurance and standard & nonstandard personal
insurance. We will continue to restructure and refocus, exiting
six businesses.
Through our actions we aim to reduce expenses in the U.S. by
$115m. In total we anticipate a reduction in headcount of some
1,500 - around 20% of the workforce.
Middle market is the largest portion of our commercial book and
we believe our segmented approach gives us a competitive
advantage. Of the 92 different industry segments that we could
write insurance for, we only work in eight - and we have
dedicated underwriters for each one of these - ensuring
specialist knowledge and understanding.
Our U.S. personal lines business has historically outperformed
the industry. During the year we have significantly reduced the
number of agencies that we work with and also withdrawn from
states where we see no possibility of profit.
Actions taken to increase claims provisions for U.S. personal
auto meant that this line moved to an underwriting loss for the
year.
During 2002, along with most other property and casualty insurers
in the U.S., we increased claims provisions for asbestos and a
number of casualty lines, particularly workers' compensation.
Europe
We are one of the leading insurers in Scandinavia, particularly
in the larger markets of Denmark and Sweden. Results in this
region have been improving and we expect the positive trend to
continue.
During 2002, as part of our overall restructuring plan for the
Region, we disposed of a number of operations across Europe,
notably: the Isle of Man, Germany, Benelux and our Italian direct
operation. We also acquired a commercial portfolio of business in
Scandinavia.
Storms and floods in Germany and Ireland and an unusually high
level of large losses in Benelux and Scandinavia all contributed
to an underwriting loss for the year.
Canada
We also have a strong market position in Canada. We acknowledge
the current performance of our Canadian company is disappointing,
regardless of the fact that the market there generally has been
challenged. Nevertheless, our Canadian company has an excellent
longer-term track record. We believe it is strategically well
positioned and we are confident that management's actions to
improve performance are correct and will produce returns to
justify our confidence.
The Canadian result for 2002 was poor with both personal and
commercial lines producing a significantly worse result than in
2001.
Personal auto has required considerable claims provision
strengthening particularly in respect of bodily injury claims in
Ontario. We also saw a number of large losses towards the end of
the year. We are implementing premium rate increases across this
book of business and are finally seeing real evidence of a market
wide move to higher rates. By contrast household produced an
underwriting profit for the year.
Commercial lines saw a marked deterioration for auto and general
liability, again reflecting claims provision strengthening and
increased levels of large losses. Property and 'other' lines both
produced underwriting profits.
Other markets
We will also remain in other markets where we believe we have a
strong strategic rationale and an operating model that
facilitates the creation of value. This includes a number of
developing markets like India.
Business actions
Obviously, our focus will mean exiting a number of areas. These
include businesses that are unprofitable and we think will
continue to be challenged; businesses where there is a limited
strategic rationale, and that would require an unacceptable
amount of time and capital to solidify longer term advantage; and
businesses where there is a disproportionate risk aggregation,
even though they may, in fact, be profitable.
We continue to seek opportunities to maximize shareholder value,
including divesting of businesses where there is an opportunity
to unlock value at the local level. That is certainly the case
with Asia Pacific, where during the first half of this year we
intend to launch an Initial Public Offering (IPO) for businesses
in Australia and New Zealand, which together constitute the
majority of our presence in the Region. We expect this to create
a major new listed insurance entity in the Australasian market,
while releasing significant value and capital for the Group.
Since we made the announcement in November, we have sold our
German operations, significantly reduced our exposure to aviation
insurance by reducing our participation in Global Aerospace
Underwriting Managers (GAUM) 2003 pool, sold 80% of our holding
in GAUM, and made two disposals in Asia Pacific.
We anticipate completing the sale of RSUI, our US surplus lines
operation, by the middle of 2003.
In February, we announced the outsourcing of the administration
of our closed U.K. Life funds to Unisys, with the transfer of
1,700 jobs.
As I said earlier, we have had to make some very tough decisions.
Inevitably, the actions we are taking will result in a
significant reduction in the number of our employees worldwide.
While many of these employees will be transferred with the
businesses that we are selling or divesting, regrettably, there
will also be redundancies. We have no choice. We have to do what
is in the best interests of the Group as a whole. If we are to be
the focused, competitive, high performing business we wish to be
- and indeed need to be - that means reducing both our portfolio
and our cost base.
Demanding targets/disciplined approach
In terms of the business we write, there has to be a significant
change in our mindset and approach. We are being more disciplined
in adhering to our underwriting principles and are introducing
more rigor and control in our processes. We are writing business
for return on capital - not volume or market share.
Our target return on capital has been maintained at 10% net real
over the cycle. However, given current market realities, in
November we announced a reduction in investment return
assumptions. As a result, from 2003, our combined ratio target
has been adjusted to a more demanding level of 102%. Having said
that, we fully support the view that strong market fundamentals
require strong company performance. We have set ourselves
demanding internal performance targets for those times when
underwriting profits can and should be expected from high
performing companies.
Of course, these targets and goals will not simply be achieved by
decisions about where to compete and where not to, or how we
adjust or change our portfolio of businesses. Fundamental to our
success will be how we deliver the basics of our business, such
as claims, underwriting and expense management - and we believe
there are significant opportunities for improvement in all three.
We have already identified GBP350m of savings that we believe
will be made mostly in the U.K., U.S. and Canadian operations as
they restructure and refocus over the next 18 months. We believe
that there is room for further savings from our other operations.
A focused corporate center A company that is more focused
strategically and operationally requires a more focused corporate
center. We have reviewed the head office operation and also
decentralized or outsourced a number of functions currently
handled at the center. This will result in a reduction in head
office employees from 290 to 150 during the first half of 2003.
We will also be rationalizing locations.
Along with the true corporate functions the primary focus of our
smaller corporate center is on:
-- Risk management
-- Capital management
-- Change management and performance improvement
Underlying our commitment to delivery and execution, each of
these areas is headed by a member of senior management and
supported by dedicated teams at the centre and in the Regions.
During 2002 we appointed heads of Group Risk, Capital Management
and
Change Management.
A solid capital position
The series of actions we have announced will, we believe, not
only improve our operating performance, but also strengthen our
capital position. Disciplined underwriting and capital
prioritization in support of higher performing businesses are
designed to ensure that we make better use of the capital
available.
In looking at our capital requirements, we worked with
independent actuaries to review potential liabilities in the
general and life businesses. Those reviews confirmed that our
provisions in the general business were reasonable, however, we
believed it would be prudent to increase them, which we did in
the fourth quarter.
With regard to our U.K. Life funds, the actuarial reviews
confirmed that there was no requirement for additional capital at
that time. For the Life funds, however, with the expected
regulatory changes in the U.K., we felt it was prudent to assume
that GBP300mof medium term capital support would be required. It
is likely this will be provided by way of contingent loan. This
has been included in our capital projections. The decisions made
in respect of the U.K. pension funds, following their actuarial
reviews, are detailed in the Finance Director's report, which
starts on page 45.
Maximising return on capital
Like many in the industry, we have seen our capital base eroded,
largely due to the impact of falling equity prices worldwide. It
is important to ensure that our capital works harder for us
wherever possible and that we earn better returns. That will mean
withdrawing capital from unprofitable lines and underperforming
businesses and diverting it to businesses that are achieving
better returns.
Business fundamentals
There is a stronger focus on the fundamentals of our business,
our day-to-day operations and actions to improve our performance.
We are seeking to be more disciplined in our underwriting and
risk management; more selective about the risks we choose to take
on; and more accurate in our pricing of those risks. We also seek
to manage our claims more effectively and efficiently, and to
improve our levels of customer management and service.
Governance and control
With the increasing regulatory demands being placed upon the
insurance sector, it is vitally important that we adhere to
consistently high standards of governance throughout our
worldwide operations.
We are, therefore, implementing more rigorous controls from the
centre across all key disciplines. Individual managers still have
the autonomy and flexibility to act and make decisions, but
within a strict set of guidelines.
Summary
We have a strong management team in place who are absolutely
determined to succeed. Improved performance, execution and
delivery are an absolute priority. That is what the management
team - and we as a Group - will be judged on.
Bob Gunn, Acting Group Chief Executive Group
To see financials: http://bankrupt.com/misc/Royal&SunAlliance.pdf
ROYAL & SUNALLIANCE: Sells Healthcare & Assistance Business
-----------------------------------------------------------
- Improves Capital Position by Nearly GBP250m
As part of the program of actions outlined in November 2002,
Royal & SunAlliance has announced the sale of its UK Healthcare &
Assistance business to Oxfordway Limited for a consideration of
GBP147m, payable in cash. As at December 31, 2002 the net assets
of the business that is the subject of the transaction were
around GBP9m and net written premiums for the year were around
GBP273m. The deal is expected to release capital of around
GBP247m, from a combination of the profit on disposal and the
reduction in premium income, and this will be used to support
Royal & SunAlliance's other general insurance business. The sale
is expected to complete in April 2003. The profit for 2002 of the
Healthcare & Assistance business was GBP45m, which included a one
off profit of GBP13m relating to releases of prior year claims
provisions.
Commenting on the deal Duncan Boyle, U.K. Chief Executive of
Royal & SunAlliance, said: 'The November 2002 Operating and
Financial Review identified a number of specific areas of
business that the Group would be withdrawing from. The disposal
of the Healthcare & Assistance business allows Royal &
SunAlliance to unlock significant value from the sale of a
specialist business that is not strategic to the Group. Capital
and resources will be refocused on the growth of other profitable
areas of our core general insurance business.
'All existing Healthcare & Assistance staff will be transferred
to Oxfordway. We believe that our people in our Healthcare &
Assistance business will welcome the opportunity to continue
working with the existing management team, who are committed to
the development of the business.'
Under the terms of the agreement Royal & SunAlliance will sell
its healthcare insurance operations and its subsidiaries,
FirstAssist Group Limited and R&SA Healthcare Administration
Limited, to Oxfordway. These businesses currently transact most
types of private medical insurance, personal accident insurance,
hospital cash plan insurance, travel insurance, creditor
insurance and legal expenses insurance as well as providing a
range of related assistance services. Following completion, Royal
& SunAlliance will enter into a distribution arrangement with the
new company to enable Royal & SunAlliance's customers to continue
to benefit from these types of insurance products and assistance
services.
In order to facilitate the efficient transfer of the business,
Royal & SunAlliance will continue to underwrite the business
transacted by the new company under transitional arrangements
that will continue for up to 18 months following completion of
the transaction. In parallel, a major reinsurer will provide
reinsurance for the existing liabilities and future underwriting
risk of Healthcare & Assistance with effect from completion.
Oxfordway will be responsible for the administration of all of
the business with effect from completion.
Around 1,200 employees that form Healthcare & Assistance will
transfer across. This transfer has been subject to full
consultation with Union representatives.
Oxfordway is a new company that has been formed for the purpose
of acquiring Royal & SunAlliance's Healthcare & Assistance
business. Its management team is composed of existing and former
members of the Healthcare & Assistance management team and it is
funded by a combination of private equity and debt financing.
CONTACT: ROYAL & SUNALLIANCE
Analysts
Malcolm Gilbert
Phone: +44 (0)20 7569 6138
SFI GROUP: Puts Plans to Divest Chain of Bars on Hold
-----------------------------------------------------
Plans to sell SFI Group's Bar Med have been shelved due to a lack
of offers that came anywhere near the GBP30 million sell-off
asking price.
The chain of 29 bars and a separate package of mainly Latin-
themed bars attracted little interest. The best offer, from pubs
entrepreneur Michael Cannon, totaled only GBP10 million.
SFI planned to use the proceeds of the sell-off to reduce its
GBP130 million debt.
In November, the company announced an accounting black hole
amounting to some GBP20 million as a result of ""a significant
overstatement of current assets and liabilities." It suspended
trading while it investigates the depth of its troubles.
PriceWaterHouse Coopers was hired to help finance director Tim
Andrews review the company's finances. It was as well tasked
with finding a buyer for Bar Med, a process dubbed as Project
Houston.
Simmons & Simmons, its solicitors, was also asked to investigate
the reason for the firm's troubles.
SFI, which has been selling unbranded and poorly performing
sites, indicated to look into the value of its pubs. Most
analysts predict further significant writedowns.
Bar Med has a turnover of GBP940,000 per pub in 2001. SFI group
has invested some GBP40 million in the operation since 1996.
SMG PLC: Completes Sale of SMG Publishing to Gannett Limited
------------------------------------------------------------
SMG plc completed the sale of its publishing business to Gannett
(UK) Limited for GBP216 million in cash. The division includes
the Herald and Evening Times newspapers.
The agreed sell-off of the newspaper titles between the parties
in December went off after Competition Minister Melanie Johnson
gave the final regulatory clearance.
Ms. Johnson approved the transaction saying: "As Gannett does not
currently operate within Scotland, the transfer will not alter
the structure of the Scottish market."
SMG sold its publishing division in order to halve its GBP400
million debt and focus on its other businesses, which include
television, radio and cinema advertising.
CONTACT: SMG PLC
Callum Spreng, Corporate Affairs Director
Phone: 020 7882 1199
SPIRENT PLC: Divests Wago, Secures New Borrowing Terms
------------------------------------------------------
Spirent plc, a leading international network technology company,
announces that it has completed the divestment of its interests
in WAGO, its interconnection joint venture, to its joint venture
partners. As a consequence, and given that all the associated
conditions precedent have now been satisfied, the new borrowing
terms attaching to Spirent's syndicated bank facility and loan
notes have become effective.
About Spirent
Spirent plc is an international network technology company
providing state-of-the-art systems and solutions for a broad
range of customers worldwide.
Our Communications group is a worldwide provider of integrated
performanceanalysis and service assurance systems for next-
generation network technologies.
Spirent's solutions accelerate the development and deployment of
network equipment and services by emulating real-world conditions
and assuring end-to-end performance of large-scale networks. Our
Network Products group provides innovative solutions for
fastening, identifying, insulating, organizing, routing and
connectivity that add value to electrical and communication
networks in a wide range of applications. Our Systems group
offers integrated product solutions for the aerospace and power
controls markets.
Spirent plc is listed on the London Stock Exchange (ticker: SPT)
and on the New York Stock Exchange (ticker: SPM; CUSIP number:
84856M209) with one American Depositary Receipt representing four
Ordinary shares.
*****
The divestment of Spirent's interests in the WAGO interconnection
joint venture will raise net cash proceeds of approximately
GBP58.2 million. The company will use the proceeds to pay down
debt pegged at GBP162 million as of December 31, 2002.
Spirent plc recorded GBP1 billion pre-tax loss for 2002.
CONTACT: SPIRENT PLC
Nicholas Brookes, Chief Executive
Phone: +44 (0)1293 767676
Eric Hutchinson, Finance Director
Catherine Nash, Investor Relations
Phone: +44 (0)1293 767676
STOLT-NIELSEN: Reports Net Loss of US$13 MM for First Quarter
-------------------------------------------------------------
Stolt-Nielsen S.A. reported results for the first quarter ended
February 28, 2003. Net loss for the latest quarter was $13.0
million, or $0.24 per share, on net operating revenue of $764.2
million, compared to a net loss of $3.7 million, or $0.07 per
share, on net operating revenue of $611.2 million for the first
quarter of 2002. The basic weighted average number of shares
outstanding for the quarter was 54.9 million compared with 54.9
million for the same period in 2002.
Commenting on the results, Niels G. Stolt-Nielsen, Chief
Executive Officer of Stolt-Nielsen S.A. said, "The results for
the company reflect both positive and negative developments
within each of our businesses. Despite firm markets, results for
the Stolt-Nielsen Transportation Group were down, primarily
because of higher bunker costs and increased tank container
freight costs. Stolt Offshore reported a weak quarter as
anticipated as it continues to progress on low margin contracts
in its backlog. Stolt Sea Farm reported improved, but still
depressed results.
"Before restructuring charges, the Stolt-Nielsen Transportation
Group Ltd. (SNTG) reported income from operations of $24.0
million in the first quarter of 2003 compared to $29.7 million in
the first quarter of 2002.
"SNTG's parcel tanker division reported income from operations of
$16.1 million in the first quarter of 2003 compared to $20.4
million in the first quarter of 2002. The Stolt Tankers Joint
Service Sailed-in Index in the first quarter of 2003 was 7% lower
than in the comparable quarter of 2002 and 5% lower than in the
fourth quarter of 2002. The decline in the index is almost
exclusively attributable to higher bunker costs and weather
related delays in the most recent quarter rather than a weakening
in the market. On the positive side, volumes continue to be
strong. Spot rates are steady, due in part to the strong product
tanker market. We continue to renew our contract portfolio at
close to rollover levels. In addition there have been a number of
recent cases where we have won new business as well as extended
the terms of existing contracts.
"SNTG has also entered into long-term time-charter agreements for
two 31,200 deadweight ton stainless steel ships with Japanese
owners. SNTG now has long-term flexible time charter agreements
for a total of nine ships, with delivery between 2003 and 2006,
to replace tonnage that we expect to scrap over the next several
years.
"SNTG's tank container division's income from operations declined
to $3.4 million in the first quarter of 2003 from $4.8 million in
the first quarter of last year. Market activity continues at high
levels. Utilization in the first quarter rose to a record 78.7%
and shipments were up some 24% compared to the first quarter of
last year and up 7% compared to the fourth quarter. Margins
however continue to be under pressure due to a competitive
pricing environment and difficulty in passing on increased
freight costs to the customers.
"SNTG's terminal division's income from operations was $4.5
million during the first quarter of 2003 which was the same as
the first quarter of 2002. Utilization continues to be high in
all terminal facilities and our expansion programs are
progressing well in our Braithwaite, Houston, and Santos
facilities as well as in our joint venture in Shenzhen.
"Before minority interests, Stolt Offshore S.A. (SOSA) reported a
net loss of $18.3 million compared to a net profit of $0.2
million in the first quarter of 2002. We experienced significant
delays and cost over runs on two major EPIC projects in Africa
due to operating problems, program changes, bad weather and local
community difficulties. The good news is that performance on most
other projects was better than anticipated. Our order backlog now
stands at $1.4 billion of which $864 million is for 2003. This
compares with a backlog of $1.5 billion at this time last year of
which $909 million was for 2002. The level of bids outstanding
now stands at $5.0 billion, which compares to $3.7 billion at
this time last year. 2003 will be a tough year for Stolt Offshore
as we work through the low margin contracts.
"Stolt Sea Farm Holdings plc (SSF) reported a loss from
operations in the first quarter of 2003 of $1.7 million compared
to a loss from operations of $5.3 million in the first quarter of
2002. Prices in the first quarter of 2003 compared to the first
quarter of 2002 were up 20% to 40%. Spot salmon prices in North
America are relatively strong due in part to extreme weather in
the Northeast and low volumes from Chile. However, pricing in
Europe continues to remain depressed. The important Japanese
market was negatively impacted by lower sales volume. The turbot
operations in Iberia continue to perform well.
"On April 2, we closed the previously announced sale of
substantially all of the assets and ongoing business operations
of Optimum Logistics Ltd. (OLL) to Elemica, the market leading
chemical industry consortium.
"I am comfortable with the outlook for SNTG, even with the global
uncertainties we are facing. There are many challenges ahead in
SOSA, but I am excited that the new management team led by Tom
Ehret is now in place and will make good progress on addressing
and solving our problems. We have seen improved salmon pricing in
SSF and are hopeful for further improvements in the latter half
of the year. SSF is operating in an industry where there is a
need for further consolidation, " Mr. Stolt-Nielsen concluded.
Stolt-Nielsen S.A. is one of the world's leading providers of
transportation services for bulk liquid chemicals, edible oils,
acids, and other specialty liquids. The company, through its
parcel tanker, tank container, terminal, rail and barge services,
provides integrated transportation for its customers. The company
also owns 63 percent of Stolt Offshore S.A., which is a leading
offshore contractor to the oil and gas industry. Stolt Offshore
specializes in providing technologically sophisticated offshore
and subsea engineering, flowline and pipeline lay, construction,
inspection, and maintenance services. Stolt Sea Farm, wholly-
owned by the company, produces and markets high quality Atlantic
salmon, salmon trout, turbot, halibut, sturgeon, caviar, bluefin
tuna, and tilapia.
CONTACT: STOLT-NIELSEN
Richard M. Lemanski
USA
Phone: 1 203 625 3604
E-mail: rlemanski@stolt.com
Valerie Lyon
UK
Phone: 44 20 7611 8904
E-mail: vlyon@stolt.com
* Large Companies With Insolvent Balance Sheets
-----------------------------------------------
Shareholders Total Working
Equity Assets Capital
Ticker (US$MM) (US$MM) (US$MM)
------ ----------- ------ --------
AUSTRIA
-------
Libro AG (120) 188 (182)
CZECH REPUBLIC
--------------
Ceskomoravska Kolben &
Danek Praha Holding (3,337) 7,175 (2,186)
Prazske Pivovary AS (1,275) 3,398 190
BELGIUM
-------
Real Software REAL (39) 275 (1)
DENMARK
-------
Elite Shipping (176) 642 19
FRANCE
------
BSN Glasspack (114) 1,293 179
Bull SA BULP (44) 1,698 (17)
Compagnie
des Machines Bull (7) 259 (3)
Compagnie Francaise de
l'Afrique Occidentale (49) 192 21
Cofidur SA (6) 114 19
Docks Des Alcool (31) (163) 46
European Computer System (539) 3,347 377
France Telecom FTE (171) 106,587 (31,035)
Grande Paroisse SA (845) 383 107
Immobiliere Hoteliere HOIN (70) 197 (54)
Pneumatiques Kleber SA (198) 2,843 139
Sa des Usines Chausson (17) 187 35
Soderag (2) 329 N.A.
Sofal SA (248) 5,385 N.A.
Spie-Batignolles (13) 4,297 75
Trouvay Cauvin TRCN 0 147 10
GERMANY
-------
Brau Und Brunnen AG BBAG (164) 570 (210)
Dortmunder
Actien-Brauerei DABG (14) 125 (29)
Edel Music AG EDLG (72) 388 (159)
Eurobike AG EUBG (35) 173 (31)
F.A. Guenther & Sohn AG GUSG (8) 102 N.A.
Mobistar SA MOSG (33) 1,167 (61)
Nordsee AG (18) 431 (31)
ICELAND
-------
Hydrafrystistod
Thorshafnar hf (56) 2,138 (173)
ITALY
-----
Binda SpA BND (10) 110 (20)
Credito Fondiario
e Industriale SpA CRF (199) 4,190 N.A.
Vemer Siber Group SpA VEM (3) 264 (79)
NETHERLANDS
-----------
Baan Company N.V. BAAN (8) 607 46
Laurus N.V. (156) 1,489 (822)
NORWAY
------
Northern Oil ASA NOI (83) 1,831 (272)
Loki ASA LOI (39) 699 (266)
NETnet International SA (12) 225 134
POLAND
------
Animex SA (2) 446 (86)
Centrozap (82) 262 (102)
Exbud Skanska SA EXBUF (35) 1,250 (330)
Ocean Company SA (128) 149 (145)
RUSSIA
------
Samson 124 386 (304)
SPAIN
-----
Altos Hornos de Vizcaya SA (100) 1,104 (278)
Santana Motor SA (36) 174 41
Tableros de Fibras SA TFI (41) (2,006) 116
SWEDEN
------
Infinicom AB INFIb (15) 150 (74)
Nordifagruppen (18) 106 70
SWITZERLAND
-----------
Kaba Holding AG KABZN (64) 515 252
TURKEY
------
AlternatifBank AS (20) 759 N.A.
Yasarbank (948) 623 N.A.
UNITED KINGDOM
--------------
Abbot Mead Vickers (1) 102 (16)
Alldays Plc ALD (84) 176 (202)
Bonded Coach
Holiday Group Plc (4) 114 (44)
Blenheim Group (98) 128 (34)
Booker Plc BKRUY (38) 819 (8)
Bradstock Group BDK (1) 171 5
Brent Walker Group (1,034) 506 (1,157)
British Nuclear Fuels Plc (1,843) 25,510 1,948
British Sky Broadcasting BSY (301) 2,201 (40)
British Telecom Group (286) 27,673 732
Compass Group CPG (452) 2,011 (298)
Cox Insurance
Holdings Plc COX (11) 1,318 N.A.
Easynet Group Plc ESY (7) 206 (53)
Electrical and Music EMI
Industries Group (889) 1,916 (1,158)
Euromoney Institutional ERM (76) 110 20
Global Green Tech Group (96) 251 (18)
Heath Lambert
Fenchurch Group PLC (7) 2,883 (10)
HMV Group PLC HMV (416) 456 (133)
Imperial Tobacco Group ITY (75) 6,472 (190)
Intertek Testing Services ITRK (236) 219 (12)
IPC Media Ltd. (463) 172 16
Lambert Fenchurch Group (1) 1,132 (3)
Lattice Group (905) 8,707 (1,228)
Misys PLC MSY (59) 658 (7)
Orange PLC ORNGF (358) 1,749 7
Rentokil Initial Plc RTO (641) 1,815 (178)
Saatchi & Saatchi SSI (74) 436 (41)
Seton Healthcare (41) 924 5
William Hill WMH (59) 1,344 5
Yell Group PLC (50) 2,201 325
Each Tuesday edition of the TCR-Europe contains a list of
companies with insolvent balance sheets based on the latest
publicly available balance sheet available to our editors at the
time of publication. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell
short. Don't be fooled. Assets, for example, reported at
historical cost net of depreciation may understate the true value
of a firm's assets. A company may establish reserves on its
balance sheet for liabilities that may never materialize. The
prices at which equity securities trade in public market are
determined by more than a balance sheet solvency test.
*************
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, Ma. Cristina Canson, and Laedevee
Gonzales, Editors.
Copyright 2003. All rights reserved. ISSN 1529-2754.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Europe subscription rate is US$575 per half-year,
delivered via e-mail. Additional e-mail subscriptions for
members of the same firm for the term of the initial subscription
or balance thereof are US$25 each. For subscription information,
contact Christopher Beard at 240/629-3300.
* * * End of Transmission * * *