Financing Rumors Mar Marconi
There has been wide speculation that the company is proposing a debt-for-equity swap, in which bondholders would swap the money they're owed for a stake in Marconi. Marconi spokesman Jim Blew says nothing of that sort has been officially announced.
The only thing Marconi has said publicly on the matter is that it is working on presenting the banks with a revised business plan and more refinancing options (see Marconi Gives Trading Update). Last month, Marconi's shares took a huge dive when the company rejected a refinancing agreement that had been several months in the making (see Marconi Tanks Big Time). "We do not intend to declare bankruptcy," Blew says. "But until we get things sorted out with the bankers, there will be a certain amount of volatility in our share price."
If Marconi fails to devise a plan the banks can support, its creditors would have the option of breaking up the company and selling the pieces in order to recover some of their investment. However, many on Wall Street aren't convinced that things will go that far.
"It's in the bank's best interest for Marconi to survive," says a source familiar with the situation, who spoke on condition of anonymity. "The banks realize that if they break up Marconi, they'll only get pennies on the dollar for its pieces in the current market."
Marconi shares were down $0.02 (9.36%) to $0.18 in late morning trading on Monday. The company's market capitalization is $252.2 million, which means it is now closer in value to a small, single-product company such as Tellium Inc. (Nasdaq: TELM) than to its peers of comparable size.
— Phil Harvey, Senior Editor, Light Reading