Thomson SA warned it was likely to breach certain debt covenants and needed to bolster its balance sheet, notably by selling more non-core activities, sending its shares down more than 15 percent on Thursday.
The loss-making media technology group said it would sell businesses which contributed around 1 billion euros ($1.3 billion) to 2008 sales, including Grass Valley and PRN, for which it has already received expressions of interest, and focus instead on providing services to media content creators.
The group - which said it was in talks with its main creditors and potential equity investors - also confirmed it could seek assistance from the French government's 20 billion euros fund. The fund is aimed at helping small and medium sized business and firms classified as strategically important cope with the financial crisis. "All in all, Thomson's situation is critical. Solutions with finmancial partners still need to be found," Fortis Bank said in a note.
A Paris-based technology analyst who asked to remain anonymous said: "They are breaking the covenants and selling assets, but that means negotiations with the banks are not complete and they have not yet found buyers," At 1033 GMT, Thomson shares were off 17.24 percent at 1.08 euros and the firm's market capitalisation stood at 350 million euros, having lost 90 percent of its value in 2008. "They are not out of the woods. The share could fall to 80 (euro) cents," the same analyst said.
In a statement released overnight, Thomson SA said net debt grew by 800 million euros in the second half of 2008 to stand at 2.1 billion at end-December, due notably to a 350 million euros rise in working capital needs and to exchange rate fluctuations. It said its cash position at end-December was 775 million euros after using up the remaining balance on its syndicated credit facility.