French govt saves Alstom from collapse

The French government stepped in on Wednesday to help pull the troubled engineering group Alstom back from collapse.

    Alstom set for a smoother ride now

    Alstom, the builder of France's high-speed TGV trains, presented several measures to relieve its debt crisis as part of a 2.8 billion euro financing agreement that included a 600-million-euro capital increase to be submitted for approval by shareholders.

     

    The power and transport giant said the French government would take half of the capital increase, and would hold 31.5 percent of shares and voting rights in the company.

     

    Trading to resume

      

    Though the government is keen to eventually get rid of its stake, it has agreed not to sell the acquired shares until the company's full recovery.

     

    Alstom employs 110,000 people in more than 70 countries, including some 75,000 in Europe, and has annual sales of 21 billion euros.

    Alstom said trading of shares in the company, which was suspended on Monday at its request, would resume Wednesday at 0930 GMT on the Paris, London and New York stock exchanges.

      

    Other chapters of the rescue plan included a six-year loan by 30 international banks of 1.3 billion euros, to which the state is to contribute 200 million euros, and a five-year convertible bond issue worth 900 million euros which could be increased to one billion euros.

     

    Finally, a syndicate of banks is to provide Alstom with a 3.5-billion-euro standby credit, of which 65 percent will be underwritten by the state.

      

    Alstom needs the credit to back guarantees for clients in case the company cannot complete an order.

      

    The group ran into serious problems after it acquired power generation interests from competitor ABB in 1999 and then faced compensation liabilities when its turbines failed to provide customers with guaranteed power output.

      

    Another blow was the September 2001 attack which caused the collapse of Renaissance Cruises for which Alstom had built ships with financial guarantees.

      

    Alstom president Patrick
    Kron: Saved in time 

    Currently the group says it is being hurt by a power generation market which remains at a historically low level.

     

    The French-based group employs 110,000 people in more than 70 countries, including some 75,000 in Europe, and has annual sales of 21 billion euros.

      

    It currently has less than one billion euros in shareholders' equity and carries debt of 4.9 billion euros, with total liabilities, including pensions, approaching nine billion euros.

      

    The group which makes power turbines, ships such as the Queen Mary 2 and trains, also said it had reached agreement on selling its profitable power transmission and distribution (T and D) unit to the French state-owned nuclear engineering company Areva.

    SOURCE: Agencies


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