Working out Marconi

18 March 2003

Based on the group s new sales indications, it is possible to estimate an enterprise value for the restructured entity. This will merely determine creditors’ recovery rates. Existing shareholders will be left with next to nothing.

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Marconi, the UK telecoms equipment manufacturer, on Monday filed the full documentation relating to its proposed financial restructuring with the High Court of England and Wales.

The company proposes to distribute £340m of cash to its creditors. This would represent 7.5% of the money they were originally owed.

Marconi also envisages retaining £304m of junior notes and £450m of senior notes. Valued at par, these would represent recoveries of 10.1% and 6.8% respectively.

The restructuring would also create a new listed company. Of its new shares, 99.5% would belong to creditors and 0.5% to old shareholders.

The value of these shares and whether the new bonds trade at par will depend on the market's estimate of the new company's worth.

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