Marconi on the verge of voluntary liquidation

Shareholders in Marconi are set to watch their investment in the telecommunications equipment company made worthless when a survival deal is finalised this week.

The company, which is all that remains of the once giant industrial conglomerate GEC, could seek voluntary liquidation over the coming days, according to weekend reports.

Under the deal Marconi plc would disappear and will be replaced by a newly-listed company to be called Marconi Corporation which owns all of the assets, cash and debts of the business.

Shares would be distributed between the creditor banks, who are owed £2.3bn, and its bondholders, who are owed a further £1.7bn,

Under this plan investors, who once shared ownership of a company worth £40bn, will be left with nothing. On Friday the share price dropped 30 per cent to 2.52p valuing the business at £70m.

However separate reports over the weekend said that Marconi shareholders might receive a token 1 per cent of the new company.

Either way the deal will draw a line under many months of tortuous negotiations between Marconi and its creditors.

An announcement had been expected on Friday but it is understood it was held up by arguments between the management, which is led by the chief executive Mike Parton, and the creditors over Marconi's £1bn cash pile.

The company had attempted to tackle its £4bn debt mountain but it has emerged that Marconi will be unable to service these loans.

City sources say Marconi turned down the chance to extend its borrowing until 2005 in return for higher interest rates last autumn, in effect forcing it to look for a new corporate structure.

It will also officially mark an end to Marconi's place as a superstar in the stock market firmament. The company was formed out of the industrial behemoth GEC that was built up by the late Lord Weinstock.

The company embarked a radical shake-up, selling off the traditional engineering and consumer product businesses and investing heavily into the fast-growing telecommunications and IT sector.

When the dot.com bubble eventually burst Marconi was left with huge debts but valueless investments.

For its last financial year the company reported a massive £5.7bn loss after writing down the value of a number of its acquisitions from the telecoms and IT sector.

To cut costs the group has slashed thousands of jobs from its workforce in Britain.

Earlier this month it announced another 1,000 jobs cuts, mainly at its Liverpool and Coventry plants.

No one from Marconi was available for comment yesterday.