New Marconi milestone as debt is wiped out

Telecoms equipment group Marconi celebrated another milestone today after it wiped out the debt left over from its life-saving restructuring.

The $1.2bn (€984.4m) outstanding from the overhaul 16 months ago has been paid back ahead of the 2008 deadline set by creditors.

The rejuvenated company, which was left with the sum following a £4.7bn (€6.9bn) debt-for-equity swap in 2003, eliminated a potential $100m (€82m) in annual interest charges through the early repayment.

With the exception of a small amount owed by subsidiaries, the announcement means Marconi is debt-free and able to focus on growing the business.

Chief executive Mike Parton said the “re-emergence of Marconi” had been completed through the repayment of the debt.

He added: “The early paydown of all of our restructuring debt is an excellent achievement. We have emerged with a strong balance sheet and can now fully focus our efforts on growing our business.”

The survival hopes of the company had looked in the balance until banks and bondholders agreed to write off most of the debt in return for control of the company. Shareholders saw their holdings virtually wiped out.

Marconi found itself in the crisis after a costly switch from electronics to telecoms saw it pay for companies at peak prices during the tech boom.

Thousands of jobs were lost as a result with Marconi currently employing a third of its 12,400 global workforce in the UK at Coventry, Beeston in Nottingham, Liverpool and Chelmsford.

Today’s repayments follow better than anticipated returns from business disposals and the pick up in the trading performance of the company.

With confidence among telecoms-based customers improving, Marconi was able to announce its first quarterly profits for three years in May.

Last month, the improved trading performance enabled three directors, including Mr Parton, to raise almost £9m (€7.4m) from cashing in options granted after they met performance targets, including on debt reduction.