Marconi hires insolvency experts to tackle £3bn debt

Marconi, the troubled British telecoms equipment maker, is on the verge of announcing the appointment of insolvency experts John Talbot and Chris Hughes to organise its reconstruction.

The move follows a tussle between Marconi's board and its bankers. The bankers, who are owed £1.5bn by the struggling company, favoured bringing in David James, the company rescue specialist who sorted out the some of the problems of the Millennium Dome and has worked on Railtrack's finances.

But Marconi's management and bondholders favoured hiring insolvency experts who might also be more willing to listen to the board's wishes than Mr James. The appointment will come as early as this week.

Mr James has not ruled out taking on an advisory role at Marconi, and is understood to want the option of succeeding Derek Bonham as chairman.

Marconi is saddled with net debt of £3bn and last week announced a massive £5.7bn loss in the year to March, while in the same period sales in core operations fell by one third.

The company said it is considering a debt for equity swap, which would involve shareholders seeing the value of their stakes virtually wiped out.

Marconi shelved its plan to publish its business strategy until it has reached an agreement with bondholders and shareholders. An agreement is expected in weeks.

Meanwhile, Marconi's banks have discovered that their status as creditors is no higher than that of bondholders because their loans were made to the plc rather than Marconi's operating companies.

The development has infuriated the banks, which had thought they would be able to walk away with most of Marconi's remaining £1.4bn of cash as a repayment of their debts.

Sources dismissed reports saying banks were demanding that Marconi hand over the bulk of its cash or risk bankruptcy. Banks could not do this because they do not rank above bondholders.