Vivendi sinks on cash woes

Fourtou: Reviewing all assets

PARIS, France (CNN) -- Vivendi Universal, the world's second-biggest media company, sank more than 17 percent amid concerns about its ability to pay bills and cut its debt mountain.

Its stock, which has fallen more than 80 percent this year and dropped 25 percent on Wednesday after posting a 12.3 billion euro ($12 billion) loss for the first-half of the year, fell 2.04 euros, or 17.2 percent, to 9.85 euros in early Paris trading on Thursday.

Moody's Investors Service and Standard & Poor's slashed Vivendi's debt rating after Franco-American conglomerate told them it had lowered its cash flow projections. S&P went as far as saying Vivendi's debt and crediting rating was "junk," citing weak cash flow forecasts.

Ousted Chief Executive Jean-Marie Messier racked up debts of 19 billion euros as he went on a $70 billion spending spree to transform the staid water company into a rival to challenge the likes of AOL Time Warner, the parent of CNN.

MORE STORIES • Fourtou: Safe pair of hands?     RESOURCES • Vivendi Universal: Business breakdown

New boss Jean-Rene Fourtou said he planned to sell at least 10 billion euros of assets in an effort to cut debts. Among the assets for sale is Boston-based publisher Houghton Mifflin, which Vivendi bought for $2.2 billion in June 2001. (Full story)

"In the short term, due to the structure of our debt, we are facing a liquidity problem despite the value of our assets,'' Fourtou said. He added the company still faced a "liquidity problem" and needed 5.6 billion euros between now and March 2003.

Vivendi, which owns Universal Studios and record labels with artists like U2 and Eminem, expects to reach a deal on a 3 billion euro credit facility by the end of August. It received 1 billion euros from its banks last month.

Finance Director Jacques Espinasse said: "We are rich in assets but poor in cash." He declined to divulge cashflow forecasts given to ratings agencies, but said management forecasts were more pessimistic than before.

Fourtou said the company hoped to raise 5 billion euros over the next nine months to slash debt.

"If they can achieve (the five billion) or at least finalise agreements by the end of this year, that should go a long way to improving their liquidity position. But investors will want to wait for some action before attributing too much upside to this,'' JP Morgan analyst Mark Harrington told Reuters.