Alstom board backs 3.2-billion-euro rescue plan

PARIS, Sept 22 (AFP) - French engineering giant Alstom was saved from near-certain bankruptcy Monday after its directors approved a state-backed 3. 2-billion-euro (3.7-billion-dollar) rescue package that also found favor with EU competition authorities.

A statement from Alstom, makers of fast trains, ocean liners and power stations, said the plan called for contributions from creditor banks as well as 800 million euros provided by the French government.

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"This plan provides Alstom with a strong base from which to move ahead," said company chief executive Patrick Kron.

"Without the implementation of such a plan, Alstom would not have been able to continue."

Earlier Monday the European Union competition commissioner, Mario Monti, welcomed the French rescue plan, saying it was consistent with EU competition rules.

The commission last week rejected an initial French proposal on grounds that it failed to honor such regulations and had given Paris until midnight Monday to draft a new package.

The commission is now expected to take several months to determine if the French plan will harm competition in Europe in sectors such as rail transport, energy production and shipbuilding where Alstom is active.

A definitive ruling from the panel is not likely before June 2004 at the earliest, according to sources close to the matter.

The new plan makes no provision for the French state to take an immediate and direct stake in Alstom, a proposal to which the European Commission objected in the earlier package. That plan called for the state to acquire a 31.5 percent interest.

"We have been able to save Alstom from bankruptcy," French Prime Minister Jean-Pierre Raffarin said, adding that the company had been within "two fingers" of collapse.

"The bankruptcy of Alstom would have been catastrophic," he added.

The company employs 118,000 people worldwide and is considered the pride of French engineering but is currently struggling with a debt of five billion euros.

Addressing a press conference here, Kron said Alstom's 32 French and foreign creditor banks were behind the rescue effort.

The plan provides for long-term and medium-term loans as well as a French state contribution of 800 million euros, of which 300 million euros in what is known as a "subordinated loan" could be converted into shares with approval from the European Commission.

Kron said the scheme meets the company's fundamental objectives -- "a substantial increase in our equity base, with the prospect of the French state becoming a shareholder if the European Commission... grants approval, and adequate medium-to-long-term refinancing and coverage of on-going liquidity and bonding needs."

But he also warned that Alstom in the first half of its 2003-2004 fiscal year -- from April to September -- would run up a net loss of around 500 million euros given the weakness of the market and anxiety on the part of clients.

The revised refinancing package approved by the board of directors Monday will be submitted to shareholder approval at a special general meeting November 18, the company said.

Labor leaders expressed relief on learning that the project had found favor with the EU but also said they feared that demands from banks could threaten jobs.

"Given that the state is going to be involved financially, it must intervene to prevent job cuts from being implemented," said Jean-Marc Perez of the FO trade union.

One of the main French concerns had been the fate of 118,000 employees throughout the world, of whom 75,000 work in Europe and 28,000 in France. In addition, countless sub-contractors and banks are heavily exposed to Alstom's losses.

But other matters lie in the background: the EU authorities are determined to maintain the credibility of their competition policy, and many in EU circles have lost patience with France over its breaches of euro-zone budget rules.

Alstom has been hit by a number of problems, including lawsuits for under-performing energy turbines.

The September 11 attacks on the United States undermined tourism, causing the collapse of the US Renaissance cruise line, the main customer for Alstom's luxury ships.

To win sales, Alstom had financed ships and was stuck with debt liabilities.

In France, which has a tradition of helping companies in trouble and then working out solutions with the EU, national pride is also at stake since Alstom showcases some of the best French engineering, in particular the high-speed TGV train.

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