Alstom raises capital, share price tumbles

13th July 2004, Comments 0 comments

PARIS, July 13 (AFP) - The troubled French engineering giant Alstom launched a EUR 2.2-billion (USD 2.7 billion) capital increase Tuesday that is seen as critical to its continued operations.

PARIS, July 13 (AFP) - The troubled French engineering giant Alstom launched a EUR 2.2-billion (USD 2.7 billion) capital increase Tuesday that is seen as critical to its continued operations.

The increase, expected to be completed July 30, will help the group secure new guarantees from next month that will enable it negotiate contracts and bid for new jobs.

A refinancing plan for Alstom, which builds high-speed trains, ships and power generators, was approved at a stormy shareholders' meeting last Friday after having been thrashed out by the French government and European Union competition authorities.

News of the refinancing was ill-received on the Paris stock market, where Alstom shares had plunged l0.71 percent in early afternoon trading to EUR 0.75.

Analysts said the market was reacting negatively to an expected sharp dilution in earnings per share. If the capital increase is fully subscribed the number of Alstom shares in circulation will increase five times.

The price of the new shares has been set at EUR 0.40 each in cash and at EUR 0.50 for shares issued to replace debt owed by the company - even though the price has never fallen below EUR 0.66. Analysts said the prices had been determined in order to make the offer as attractive as possible.

"This capital increase is not a surprise but what has caused the share to fall is the level of the prices – EUR 0.40 per share for the main operation is too low," said an analyst from a French brokerage.

The French state, which holds an 18.4-percent stake in Alstom, is committed to exercising its preferential subscription rights up to a maximum of EUR 185 million in cash. It will also take a subscription for EUR 500 million in shares issued in return for waiving debt.

Under terms of an agreement with the EU executive commission, the French state will never take more than a 31.5 percent stake in Alstom and will withdraw from the company by 2008 at the latest.

Alstom chairman Patrick Kron, addressing the general assembly last Friday, said he hoped the participation of the state would bring more stability to the share price.

Since the start of Alstom's woes in 2003, speculative funds have flocked to the group and now account for more than 10 percent of the capital, according to company officials.

Kron said in statement Tuesday that the capital increase was "a major step in the implementation of our financing plan."

"It reinforces our treasury, reduces debt and will allow a program of guarantees that is indispensable to our commercial activities."

 

© AFP

 

Subject: French news

0 Comments To This Article