Banks fund multibillion pound bailout of Marconi

U.K. telecommunication equipment maker Marconi PLC will be able to stay in business, for the time being at least, after reaching an agreement with its banks and bondholders to finance the repayment of its net debt of £2.85 billion (AUD$8.1 billion), the company announced Monday.

As part of ongoing efforts to save the London company from going bust, it will lay off an additional 600 employees.

The company has also appointed a new chairman to its board: John Devaney, Marconi said in a statement. Devaney was most recently chairman of Exel PLC, a vendor of integrated business systems software.

For the first half of its fiscal year, the six months to Sept. 30, Marconi reported an operating loss before goodwill amortization and exceptional items of £235 million. That compares with an operating loss of £238 million in the same period last year, Marconi said. Sales for the first half of the fiscal year stood at £992 million, down £456 million or 31 percent over the same period last year.

Orders for the period were £845 million, down 40 percent or £557 million from the same period last year, Marconi said. Orders fell 41 percent for network equipment and 37 percent for network services when compared to the first half of last fiscal year, the company said.

Sales in Europe, the Middle East and Africa were £570 million in the period, a decline of approximately 24 percent. The company's market decline has been most marked in the Americas, Marconi said, with sales in the U.S. down by 36 percent to £295 million in the first six months of its financial year. Sales in Central and Latin America were £35 million, a decline of 72 percent compared to the same period last year, Marconi said.

Marconi expects to employ about 14,000 people after it completes the latest round of job cuts, the company said. Marconi has undergone numerous rounds of job cuts. After announcing 10,000 layoffs last year, the company had about 23,600 employees at the end of March 2002.

The company's efforts to restructure its business are beginning to show positive results, Marconi's chief executive officer, Mike Parton, said in the statement.

Marconi's largest customers during the first six months of its fiscal year were British Telecommunications PLC (BT), BellSouth Corp., Telecom Italia SpA, Telkom South Africa Ltd., the U.K. government, the U.S. federal government, Verizon Communications Inc., Vodafone Group PLC and Wind Telecommunications SpA.

Despite the agreement over debt relief, the company warned that it was not out of the financial woods just yet and that there is no guarantee that the negotiations relating to the restructuring will reach a satisfactory conclusion.