Marconi demystified

By Adam Shaw

There's been more confusion over the restructuring at Marconi and what it means for shareholders.

The restructuring means shareholders don't own as much of the company as they did.

But at least they own something. There were genuine concerns for the future of Marconi had the restructuring not taken place.

Background

The company takes its name from the Italian Guglielmo Marconi who was an early pioneer in the development of radio.

The Marconi company began almost 100 years ago, but the group is a combination of companies which have been merged over the years.

The company invested heavily in the telecommunications market just as the industry took a turn for the worse and as a result lost a lot of money.

Poor performance

Even over the past year the shares have lost a huge amount of value and it's lost even more if you go further back than that.

The shares have had a very bad time. And in an attempt to get out of trouble the whole company was recreated and relisted, as Marconi Corporation, on Monday 19th May.

The aim of this restructuring was to rid the company of its £3 billion of debt - which has now been reduced to below £200 million.

That has happened because the creditors agreed to swap their loans for shares in the new company.

Swap

So where does that leave the original shareholders?

If you owned shares in the old company, they have now been swapped for shares in the new Marconi Corporation. But it's not a good exchange rate.

You get 1 new share for 559 old Marconi shares. If you've got 560 shares, it gets rounded down so you still only get one new share.

If you've got less than 559 shares, it gets rounded up so you also get one new share.

That means the shareholders will only own 0.5% of the newly restructured company. The creditors own the rest.

But shareholders also get a free warrant which allows them to buy extra new Marconi shares at £1.50.

You get one warrant for every 56 old shares.

Marconi Communications Director David Beck says that the restructuring, which has reduced the debt burden and the cost base of the company, will mean that the business is now on a firmer footing.

"Markets are tough," says the Marconi spokesman

As for the falling markets which have been at the root of Marconis problems, how will Marconi fare?

"Markets are very tough in the telecoms market, but we do have great technologies and great customers, and we're not going to wait for the market to recover before growing our revenues. We're going to go as aggressively as we can to grow revenues in these tough markets." says David.

David goes on to say, "one of our proudest boasts that through all the restructuring, we've not lost a customer ."

Shareholder offer

Marconi is in the process of writing to all its shareholders to inform them of the number of shares in the new company they now have.

They are being offered a free dealing service until 29th August allowing you to buy or sell shares and warrants for free.

Shareholders will also be offered the chance to donate their old shares to charity.

You can listen to the complete interview with Marconi's David Beck by clicking on the icon above