Shareholders of the debt-laden ABB engineering company have approved the issue of new shares worth $2.6 billion (SFr3.38 billion) to boost the firm’s balance sheet.This content was published on November 20, 2003 - 15:02
The issue of 840 million shares is part of a multibillion-dollar package to give the power and automation technology group a fresh financial start.
It comes one day after ABB completed the first stage of its refinancing plan with a bond sale worth €650 million on Wednesday.
Addressing the special shareholders’ meeting in Zurich, chief executive Jürgen Dormann said ABB saw an economic upturn next year and in 2005. But he repeated that the group would not make a net profit this year.
No net profit
“I talked… about an unexpected net profit this year. Despite substantially improved revenues in the core business, this will not happen,” he said.
Dormann also told shareholders that a definitive agreement on the sale of its oil, gas and petrochemicals business – considered vital to cut debt – should be signed before the end of the year and the sale completed in the first months of next year.
Analyst Mark Diethelm at Zurich cantonal bank was upbeat about this week’s company news.
“The capital increase will put ABB on a financially more sound footing,” he commented.
ABB almost collapsed last year under a debt mountain built up during a rapid expansion phase, which left it heavily exposed when the economic downturn hit demand for its products.
The refinancing package comes after a court in the United States approved a $1.2 billion asbestos liability settlement that effectively puts a ceiling on claims against ABB.
The settlement concerns an ABB subsidiary, Combustion Engineering, which made industrial boilers insulated with asbestos.
A final ruling on appeals is set for January 12 after this week being postponed a month.
ABB expects its debt, which stood at $8.3 billion at the end of September, to fall to $7.3 billion at the end of the year.
Last month, the company reported a third-quarter loss of $279 million, much higher than the $5 million loss predicted by analysts.
swissinfo with agencies
ABB shareholders have given the go-ahead for a share issue valued at $2.6 billion at an extraordinary meeting in Zurich.
It follows a successful bond sale of €650 million on Wednesday.
CEO Jürgen Dormann has repeated ABB will not make a net profit this year.
The company expects net debt at the end of the year to fall to $7.3 billion.
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