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BT in record cash call to slash debt By Reuters Thu, 10 May 2001 09:25:24 GMT URL: http://www.zdnet.co.uk/news/2001/18/ns-22729.html Telco launches drastic restructuring plan BT (quote: BT (http://www.zdnet.co.uk/techtrader/top5/bta.html)) asked shareholders to stump up £5.9bn on Thursday under a drastic restructuring plan to end a debt crisis that has cost it its global ambitions and pummelled its share price. British Telecommunications also announced an unexpected goodwill charge of three billion pounds to reflect "reduced expectations" at its German mobile business Viag Interkom. The charge left BT with an annual pre-tax loss of £1.03bn. Britain's largest fixed-line operator said it was axing its dividend, demerging its mobile division, BT Wireless, and spinning off another company called Future BT. The widely expected shake-up, BT's second restructuring plan in six months, will help slice more than one third off a £30bn debt pile accumulated through an aborted international expansion and bids for advanced mobile phone licences. Britain's largest fixed-line operator plans to raise the £5.9bn by selling its shareholders three new shares for every 10 they hold at 300 pence each. The rights issue, three times as large as Britain's previous record, is priced at a discount of 47 percent to Wednesday's closing price to woo sceptical investors and slash underwriting costs. "I think this rights issue is slightly larger than this market was led to believe, and there is an issue of what you are buying, and what will you'll be left with, and if all that will really be exciting anyway," said James Dewhurst, a director at ING Barings Charterhouse. The company has already sacrificed Iain Vallance as chairman, replacing him with Christopher Bland two weeks ago, to win institutional shareholders' backing for the cash call. Coupled with the sale of stakes in Japan and Spain for £4.8bn and a £350m Malaysian sale last week, the rights issue and other moves should allow BT to meet its promise to cut debt by one third this year -- and allow it to retain its top investment "A" grade credit rating. The decision not to pay a final dividend this year will save BT around £850m, but will anger the 1.7 million private shareholders who together own about 18 percent of its stock. "It will require determined and rapid action by management to achieve the transformation of BT," Bland said in a statement. "We have made a good start, the culture is changing, and I am confident that we can complete the process in the best interests of our shareholders, customers and staff." Networks are changing the way we live and work. Find out how with ZDNet UK's Networking Central (http://www.zdnet.co.uk/news/specials/1999/12/net_central/). Have your say instantly, and see what others have said. Click on the TalkBack (http://forums.zdnet.co.uk/community/wwwthreads.cgi?forum=anchordesk&action= list&Cat=&Board=Telecomms) button and go to the Telecoms forum. Let the editors know what you think in the Mailroom ([log in to unmask]). And read (http://www.zdnet.co.uk/news/mailroom.html) other letters. ************************************************************************************ Distributed through Cyber-Society-Live [CSL]: CSL is a moderated discussion list made up of people who are interested in the interdisciplinary academic study of Cyber Society in all its manifestations.To join the list please visit: http://www.jiscmail.ac.uk/lists/cyber-society-live.html *************************************************************************************