The European loan market was closely watching recently restructured ALSTOM, which was trading a touch lower last week after the company announced its performance would be slightly below its previous forecast. ALSTOM's '06 senior bank debt was trading around the 82 range and its '08 subordinated loans were quoted off in the 70-73 range.
While ALSTOM said its orders over the next fiscal year could be higher than previous estimates of about ¤15 billion, its operating margins are expected to come in from the formerly projected 2-2.5% to about 1.9%, explained Emmanuelle Châtelain, an ALSTOM investor relations official. Loan investors have very divergent views on ALSTOM. While to a certain extent investors are comforted that the company's plush book of orders is a sign of improving business, they remain concerned that ALSTOM is sacrificing margins to win the orders, explained loan sources.
If these projections come to fruition, it is likely that ALSTOM will have to amend its EBITDA and consolidated net worth covenants. The company will be able to meet its total debt requirement of less than E4.754 billion, but it could miss its EBITDA requirement of E100 million and its consolidated net worth requirement of E1.4 billion, noted Châtelain. ALSTOM's largest banks include BNP Paribas, Société Générale. Crédit Lyonnais, Crédit Agricole, Natexis Banques Populaires, and CIC Securities.
A faster than expected restructuring process has also caused ALSTOM to raise its restructuring cost projections. The company now expects to record E650 million of restructuring charges compared to the E450-500 million mark it had initially anticipated. Châtelain explained that the company accelerated its restructuring in an effort to speed up its cost saving efforts and bring back operating margins.