Under its latest rescue plan heavy engineering giant Alstom hopes to raise 3.6 billion euros from a mixture of rights issues and asset sales in a bid to save the group, already groaning under 5.3 billion euros of debt, from financial ruin. The group’s latest predictions show an expected loss of 1.3 billion euros this year which together with lack of faith in the rescue plan sent Alstom’s shares to 1.21 euro, their lowest level on record, in early March. This represents a 10th of their value at the time of the last rescue plan in 2002.
A variety of factors has brought the company to its present position, including punitive payments amounting to 1.2 billion euro linked to turbine installations suffering from technical faults, the bankruptcy last year of a major shipping customer and depressed sales in most of its divisions. The shipbuilding division is being retained, as one of the core businesses along with rolling stock and power generation expected to form the centre of the surviving company, despite frozen orders and liabilities in the form of surplus liners returned to Alstom in the wake of the Renaissance Cruises bankruptcy. Only the T & D division is creating cash, although the industrial turbines division is considered healthy and it is these two sectors that have been added to Alstom’s ‘for sale’ list with the objective of raising 3 billion euros. The industrial turbine division was secretly put on sale in the autumn, and is apparently close to being sold, probably to GE or Siemens. T & D has already received an unsolicited offer from an undisclosed financial buyer. The latest plan is a last ditch attempt to stay independent. If it fails, and it may well do so, Alstom’s last option is to ask for state aid. The company is known to have been in talks with the French and UK governments over such a move.
The response from shareholders, who are being asked to raise 600 million euros from a rights issue that must dilute the value of existing shares to at most half their current value, has been lukewarm in the face of a market valuation (in mid-March) of only 380 million euros and the Damoclean threat of foreclosure on 1 billion euros in bank loans despite a cost-cutting exercise to save 500 m euros in two years.
