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."

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