Re Agreement
September 23 2003 - 3:02AM
UK Regulatory
RNS Number:0452Q
Alstom
22 September 2003
AGREEMENT ON REVISED
Euro3.2 BILLION REFINANCING PACKAGE
*Financing package increased from Euro2.8 to Euro3.2 billion
*Long-term measures - equity increase and loans over 15 years - represent over
Euro1.7 billion
*French State contribution of Euro800 million, of which Euro300 million to be
converted into shares subject to European Commission approval
*Short-term facilities increased to Euro1.5 billion
Following the European Commission's announcement that some aspects of the
refinancing package announced on 6 August 2003 were inconsistent with the
Commission's review and approval timetable, new discussions were held over the
last few days between all the concerned parties, including the European
Commission, in order to amend the plan.
A new agreement has been reached which is designed to meet ALSTOM's financial
needs while complying with European Commission requirements. The revised
financing package was approved today by ALSTOM's Board and will be subject to
shareholder approval at an Extraordinary General Meeting to be held on 18
November 2003. As a consequence, the Ordinary and Extraordinary General Meeting
scheduled on 24 September 2003 will not take place.
The main features of the revised refinancing package are:
Strengthening of equity 1200
* Capital Increase 300
* Issue of Bonds Mandatorily Reimbursable
with Shares (ORA), 5-year maturity 900*
Long-term instruments 500
* Subordinated Bond (French State) 300
20-year maturity**
* Subordinated Bond (French State) 200
15-year maturity
Medium-term loans 1500
* Subordinated Loan,
with 5-year maturity (French State) 300
* Subordinated Loans,
with 5-year maturity (Banks) 1,200*
TOTAL 3,200
*ORA may be increased to up to Euro1 billion, with Banks' subordinated loans
correlatively reduced to Euro1,100
** Converted into shares immediately following the European Commission's review
and approval
Short-term facilities, including Euro1.2 billion provided by the French State, are
increased to Euro1.5 billion to cover ALSTOM's liquidity requirements until the new
financing package is fully implemented.
As included in the previous package, a syndicate of banks is providing a
contract bonds and guarantees facility of Euro3,500 million, counter-guaranteed in
part (65%) by the French State, to allow ALSTOM to cover its normal level of
business actvity.
Commenting on the revised package, Patrick Kron, ALSTOM's Chairman & CEO, said:
"The new package provides ALSTOM with a strong base from which to move ahead. It
meets our fundamental objectives: a substantial increase in our equity base,
with the prospect of the French State becoming a shareholder if the European
Commission, following its review, grants approval; adequate medium- to long-term
refinancing and coverage of on-going liquidity and bonding needs.
"Unfortunately, the past period of uncertainty has had a negative impact on our
order intake, which coupled with losses identified on contracts, leads us to
expect disappointing financial results for the first half of the current fiscal
year.
"Today's announcement ends uncertainty surrounding ALSTOM's future and so should
rapidly restore the confidence of our customers, suppliers and employees and
greatly improve our commercial performance. My primary objective, together with
the management team, is to vigorously implement all aspects of the performance
improvement programme we launched in March: to reduce our cost base, improve
profitability and better serve our customers world-wide."
(II) OPERATIONAL AND FINANCIAL UPDATE
Order intake
In addition to weak markets in power generation new equipment, the Group's
commercial activity has been significantly impacted by customer concerns as to
ALSTOM's future and by difficulties in obtaining contract bonds. These factors,
exacerbated by growing uncertainty generated over the last weeks as to the
implementation of the financing package announced on 6 August, have led to a
lower level of order intake.
Orders received in the first half of fiscal year 2004 are now expected to be
around Euro7 billion, approximately 25 per cent below the first half of fiscal year
2003 on a comparable basis (same scope and same exchange rates).
Income and cash flow
As previously announced, a review of the projects managed by ALSTOM's US
Transport business was undertaken and has identified additional costs to
complete some contracts of approximately Euro100 million. Other project reviews
have led management to make more conservative estimates of costs to complete,
with a corresponding negative impact on operating income. In particular, due to
the bankruptcy of two key sub-contractors on a utility boiler contract in the
US, the cost to complete this project has been re-assessed and will lead to a
loss of approximately Euro50 million.
In the light of these developments, an operating margin of just over 1.0 per
cent is forecast for the first half of fiscal year 2004. A net loss of around
Euro500 million is expected for this period due to the lower than expected
operating margin combined with higher financial expenses and restructuring
costs.
Free cash flow will be strongly negative in the first half mainly as a result of
a slowdown in customer deposits and advances caused by lower orders and
insufficient bonding availability, coupled with the scheduled cash outflow from
GT24/GT26 provisions.
Disposals Programme
An agreement with Areva should be finalised shortly for the sale of ALSTOM's
Transmission & Distribution (T&D) activities for an enterprise value of Euro950
million, subject to closing adjustments, with closing expected in early January
2004. The T&D sale will bring total proceeds from disposals since this time last
year to Euro2.5 billion. Other assets sales are currently underway and due to
uncertainties linked to timing, total proceeds secured by 31 March 2004 are
expected to be around Euro2.7 billion.
ALSTOM's results for the first half of fiscal year 2004 will be published on
13 November 2003.
* * *
ALSTOM has requested the Paris, London and New York stock exchanges to resume
trading in its shares from 9.00 am CET tomorrow, Tuesday, 23 September 2003.
ANNEX: DETAILS OF REVISED REFINANCING PACKAGE
Capital Increase
A Euro300 million capital increase will be carried out either with preferential
subscription rights for existing shareholders or through the issuance of
warrants to existing shareholders giving them equivalent rights. The operation
is fully guaranteed by a syndicate of banks.
The subscription price will be Euro1.25 per share.
20-year bond reserved for the French State, reimbursable with shares subject to
European Commission approval
The French State will fully subscribe to a Euro300 million subordinated note with a
maturity of 20 years, which will be reimbursable with shares upon approval from
the European Commission. Principal characteristics:
* Strike: Euro1.25 per share.
* Coupon: Euribor + 500 bps, of which 150 bps capitalised and paid on
reimbursement of the loan's principal.
15-year bond reserved for the French State
The French State will fully subscribe to a Euro200 million subordinated note, with
a maturity of 15 years. Principal characteristic:
* Coupon: Euribor + 500 bps, of which 150 bps capitalised and paid on
reimbursement of the loan's principal.
Bonds mandatorily reimbursable with shares
In parallel with the capital increase, ALSTOM will issue Euro900 million in bonds
mandatorily reimbursable with shares (ORA) fully guaranteed by a syndicate of
banks. This amount may be increased up to Euro1,000 million. Existing shareholders
will have preferential rights to subscribe to such bonds. The principal terms of
the bonds are:
* Coupon: 2%, capitalised for the first year.
* 1 bond will be mandatorily reimbursed with 1 share.
* Issuance price: Euro1.40 per bond.
* Maturity: 31 December 2008.
Subordinated loans
ALSTOM will be provided with a total of Euro1,500 million in subordinated loans.
The French State has agreed to participate in Euro300 million of the total amount,
with the remainder provided by the banks. The amount of the banks' subordinated
loans may be decreased to Euro1,100 million if the ORA offering is increased to
Euro1,000 million. The principal terms of the loans are:
* Interest rate per annum: Euribor + 450 bps, of which 150 bps capitalised and
paid on reimbursement of the loan's principal.
* Maturity: 5 years.
* Early repayment allowed at ALSTOM's option.
Short-term facilities
Short-term liquidity needs will be covered by the banks for Euro300 million and the
French State for Euro1,200 million.
Contract Bonds and Guarantees
A Euro3,500 million contract bonds and guarantees facility has been fully
underwritten by a syndicate of banks, with 65% of each bond counter-guaranteed
by the French State.
Advisors
Lehman Brothers is acting as ALSTOM's sole advisor.
* * *
Press Relations: S. Gagneraud / G. Tourvieille
Tel. +33 1 47 55 25 87
internet.press@chq.alstom.com
Investor Relations: E. Chatelain
Tel. +33 1 47 55 25 33
investor.relations@chq.alstom.com
M Communications: L. Tingstrom
Tel. + 44 789 906 6995
This press release does not constitute anoffer to sell, or a solicitation of
offers to purchase or subscribe for, securities in the United States. The
securities referred to herein have not been and will not be, registered under
the Securities Act of 1933, as amended, and may not be offered or sold in the
United States abasent registration or an applicable exemption from registration
requirements.
Forward-Looking Statements:
This press release contains, and other written or oral reports and
communications of ALSTOM may from time to time contain, forward-looking
statements, within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Examples of such forward-
looking statements include, but are not limited to (i) projections or
expectations of sales, orders received, income, operating margins, dividends,
provisions, cash flow, debt or other financial items or ratios, (ii) statements
of plans, objectives or goals of ALSTOM or its management, (iii) statements of
future product or economic performance, and (iv) statements of assumptions
underlying such statements. Words such as "believes", "anticipates", "expects",
"intends", "aims", "plans" and "will" and similar expressions are intended to
identify forward looking statements but are not exclusive means of identifying
such statements. By their very nature, forward-looking statements involve risks
and uncertainties that the forecasts, projections and other forward-looking
statements will not be achieved. Such statements are based on management's
current plans and expectations and are subject to a number of important factors
that could cause actual results to differ materially from the plans, objectives
and expectations expressed in such forward-looking statements. These factors
include: (i) the inherent difficulty of forecasting future market conditions,
level of infrastructure spending, GDP growth generally, interest rates and
exchange rates; (ii) the effects of, and changes in, laws, regulations,
governmental policy, taxation or accounting standards or practices; (iii) the
effects of currency exchange rate movements; (iv) the effects of competition in
the product markets and geographic areas in which ALSTOM operates; (v) the
ability to increase market share, control costs and enhance cash generation
while maintaining high quality products and services; (vi) the timely
development of new products and services; (vii) the impact of our high levels of
indebtedness; (viii) the ability to renegotiate or renew our existing credit
lines and to meet the financial and other covenants contained in our financing
agreements; (ix) difficulties in obtaining bid, performance and other bonds with
customary amounts or terms; (x) the timing of and ability to meet the cash
generation and other initiatives of the new action plan, particularly, the
ability to finalise the disposal of the Transmission and Distribution business
or to dispose of certain real estate assets on favourable terms or in a timely
fashion; (xi) the results of the United States Securities and Exchange
Commission's ("SEC") investigation and our own internal investigation into
matters relating to ALSTOM Transportation Inc., and the impact of those
investigations on ALSTOM Transportation Inc.'s ability to conduct its business;
(xii) the outcome of the putative class action lawsuits recently filed against
us and certain of our current and former officers; (xiii) the results of the
European Commission's review of the French State's involvement in our recently
renegotiated financing package; (xiv) receipt of shareholder approval of our
recently renegotiated financing package, (xv) the availability of external
sources of financing on commercially reasonable terms; (xvi) the inherent
technical complexity of many of ALSTOM's products and technologies and the
ability to resolve effectively, on time and at reasonable cost technical
problems that inevitably arise, including in particular the problems encountered
with the GT24/GT26 gas turbines and the UK trains; (xvii) risks inherent in
large contracts and/or significant fixed price contracts that comprise a
substantial portion of ALSTOM's business; (xviii) the inherent difficulty in
estimating future charter or sale prices of any relevant cruise ship in any
appraisal of the exposure in respect of the Renaissance Cruises matter; (xix)
the inherent difficulty in estimating ALSTOM's exposure to vendor financing and
other credit risks which may notably be affected by customers' payment defaults;
(xx) the ability to invest in successfully, and compete at the leading edge of,
technology developments across all of ALSTOM's Sectors; (xxi) the availability
of adequate cash flow from operations or other sources to achieve management's
objectives or goals; (xxii) whether certain of our markets, particularly the
Power Sectors, recover from their currently depressed state; (xxiv) the impact
on customer confidence of our ongoing liquidity and other difficulties, and our
ability to re-establish this confidence; (xxv) the effects of disposals and
acquisitions generally; (xxvi) the unusual level of uncertainty at this time
regarding the world economy in general; and (xxvii) ALSTOM's success at
adjusting to and managing the risks of the foregoing.
The foregoing list is not exhaustive; when relying on forward-looking statements
to make decisions with respect to ALSTOM, you should carefully consider the
foregoing factors and other uncertainties and events, as well as other factors
described in other documents ALSTOM files or submits from time to time with the
SEC, including reports submitted on Form 6-K. In particular, we expect our
Annual Report on Form 20-F for the fiscal year ended 31 March 2003 (including
our audited financial statements for fiscal years ended 31 March 2003, 2002 and
2001) to be filed with the SEC in September 2003. Forward-looking statements
speak only as of the date on which they are made, and ALSTOM undertakes no
obligation to update or revise any of them, whether as a result of new
information, future events or otherwise.
FSA/Stabilisation.
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The company news service from the London Stock Exchange
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