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Marconi eyes debt-equity swap

LONDON, England -- Shares in Marconi plunged on Thursday after the troubled UK telecom equipment said it may ask creditors to exchange debt for control of the company.

Marconi (MONI) said it was discussing a debt-for-equity swap with bankers and bondholders which are owed 4 billion ($5.8 billion). It had previously announced the sale of non-core assets as it attempted to cut costs and reduce debt.

"Swapping debt for equity is one of the options," Finance Director Steve Hare told reporters.

His comments came after Marconi announced a pretax loss of 5.7 billion for the year as sales plummeted 34 percent.

Marconi, like other telecom equipment makers, has seen demand dry up as operators -- including BT one of Marconi's biggest customers -- slashed spending in the wake of weak customer demand and the impact of a global economic slowdown. (Full story)

Marconi also said it would float its Strategic Communications business, part of Marconi Mobile, on the Milan stock exchange by the end of September.

Marconi warned last month in a trading update that it expected weak results for the year, and there had been speculation that it would seek a debt-for-equity swap -- similar to the one British cable operator NTL arranged with its credits in March.

The company's share fell 16 percent to 7.65 pence in early London trading on Thursday. Its stock was once worth more than 12.

"The current share price tells you that it [Marconi's financial problems] can't get much worse," Richard Windsor, an analyst at Nomura International, told CNN. "Most of the damage has been done."

The debt talks will focus on the 2.2 billion Marconi owes in syndicated loans with banks and 1.8 billion held in bonds.

Analysts say if they debt-swap goes ahead, shareholders will be left owning little or nothing of the company.

"I think the banks and the bondholders are going to break up the company piece by piece," Per Lindberg, an analyst at Dresdner Kleinwort Wasserstein, told CNN.

"I think it is much easier to take [what is left of] the company private and rename it."



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