Co. seeks short-term bank loans of $2.5 bil
PARIS — Debt-ridden media giant Vivendi Universal said Monday that it expects to resolve its cash problems “very shortly” as it tries to avoid a further financial meltdown following the threat of another credit downgrade.
In a terse statement, the company said it “is in active negotiations with its main credit banks to address its short-term liquidity concerns.”
The release comes after ratings agency Moody’s warned it could face a second downgrade.
Last week, Moody’s downgraded Viv U’s long-term debt to junk status, causing its stock to plummet as investors dumped shares in the beleaguered company.
Moody’s added that even if the company came up with new funds, the terms of the new financing could be less favorable to Viv U and could lead to a downgrade in its own right.
Viv U hopes to keep jittery investors from jumping ship as they did last week. And early signs are that it has succeeded.
Shares up 7%
Viv U shares, which have fallen 70% this year, climbed as much as 7% on relief the group was making progress on tackling its cash position before closing 5.8% up at 18 euros ($17.80) on the Paris stock exchange.
But execs remain tight-lipped about details of the financial negotiations.
The Gallic/American conglom, which ousted topper Jean-Marie Messier in a dramatic boardroom coup last week, has been in emergency talks with its banks after being refused further credit as it grapples with $18.8 billion in debt.
The company is reportedly looking to land $2.5 billion in emergency funds from its creditor banks, which include France’s Societe Generale, BNP Paribas and Credit Lyonnais as well as Germany’s Deutsche Bank.
“The banks will lend, and they will lend shortly,” one Wall Street insider said.
But the company must also sell assets, something that could be part of the conditions exacted by its creditors.
Daniel Bouton, head of Societe Generale, said that while he believed that Viv U was a healthy company, the media conglom’s new topper, former pharmaceuticals boss Jean-Rene Fourtou, must concentrate on selling holdings.
“The crisis at Vivendi Universal is the result of a failed financial strategy, due to too many acquisitions in too little time,” Bouton said. “The new president will have to rapidly readjust the treasury and proceed to asset sales.”
Which assets are headed for the block is a subject of much debate.
Messier transformed a humdrum 150-year-old water company into the world’s second-largest media group in a huge spending spree and his successor reportedly wants to avoid a complete break up of the group.
Cegetel stake eyed
However, Viv U’s stake in Gallic telco Cegetel is a possible early target as Vodafone is considering a $4.6 billion bid for the 44% share.
Vodafone already owns 15% of Cegetel, along with British Telecom, which holds 26% and American phone company SBC that owns 15%.
Some industry watchers doubt the wisdom of spinning off the moneymaker. “It’s hard to believe that Vivendi will sell its phone company now,” one media analyst said. “Why sell off a good thing at a fire-sale price?”
As for Canal Plus, Viv U’s pay TV arm and a subject of much political debate, French reports say Jean-Luc Lagardere, head of Gallic media outfit Lagardere, has told President Jacques Chirac he is interested in the paybox.
Lagardere-Canal Plus rumor
But rumor has linked Lagardere to Canal Plus for months, a link he has just as constantly denied.
Vivendi could also sell a bigger slice of its stake in water and sewage company Vivendi Environment.
Another possibility, and one that seems to be the current wisdom on Wall Street, would be for Viv U to spin off assets in several IPOs.
Casting a shadow over all of Viv U’s negotiations are continuing reports that the company may have engaged in irregular accounting practices.
“Vivendi has two problems — liquidity and credibility,” said one trader. While it looks like they are near to solving the first, people will remain jittery until the deal is done.”
(Reuters contributed to this report.)