London-based Marconi Plc said Wednesday its debt will be reduced from more than $6 billion to less than $500 million when negotiations with its banks and bondholders are completed.
The resulting deal will virutally wipe out current shareholders, who will retain ownership of 0.5 percent of the company and hold warrants that could allow them to purchase another 5 percent of the recapitalized company.
Marconi racked up massive debt when its predecessor, General Electric Co. Plc, a U.K.-based industrial conglomerate, began selling off its old-line businesses and began buying U.S. telecommunications companies, chief among them Pittsburgh-based Fore Systems for $4.5 billion in 1999.
A local Marconi spokesman said yesterday that he cannot elaborate on what the pending financial restructuring will mean for the 1,200 people employed at the company's campus in Marshall Township.
Spokesman James Blew said morale at the Marshall Township campus, headquarters for the company's broadband networking unit, is good as Marconi's business units have been given autonomy to pursue their business plans with minimal oversight.
"We continue to do business as we work to get our balance sheet issues resolved," Blew said. "Just this week, we hosted an important customer here interested in a number of our products."
Marconi has been affected, along with many other telecommunication equipment vendors, by the protracted slump in that sector, which has constrained the capital spending budgets of big carriers such as Sprint, Verizon and SBC Communications, while many smaller competitive carriers have gone out of business.
When Marconi admitted in July 2001 to a sharp decrease in sales, after previously stating it had been unaffected by the sector's troubles, the stock nose-dived and the top management resigned.
The new management subsequently restructured the company by selling off all non-core subsidiaries, such as a washing machine maker in the United Kingdom and a maker of automated gas pumps in North Carolina, and slashing employment in half, from 48,000 to about 24,000.
