- The Washington Times - Thursday, August 15, 2002

PARIS (AP) Vivendi Universal, the teetering French media conglomerate, reported a loss of $12 billion for the first half of the year and said it will sell $10 billion in assets as it seeks to pare debt, including U.S. publisher Houghton Mifflin.
Adding insult to injury, a ratings agency downgraded the company's debt to junk.
Investors punished Vivendi's shares yesterday on the Paris exchange, sending them down 25 percent to the lowest level since June 1994.
The sale of Houghton Mifflin, which the company bought last year for $1.7 billion, appeared to mark a first step toward breaking up the entertainment and media empire built up by Vivendi's former chairman, Jean-Marie Messier, in a whirlwind of costly acquisitions.
In all, Vivendi said it hopes to dispose of at least $9.8 billion worth of assets half of them within nine months, the rest within two years.
"We are facing a liquidity problem," said Chairman Jean-Rene Fourtou, who took over July 3 after Mr. Messier's ouster. Mr. Fourtou said he would "try to avoid any fire sale, but we have negotiations that could be concluded very soon if the price was lowered."
Despite the announced sell-off, analysts remained concerned about Vivendi's debts of $18.6 billion. If water and waste utilities unit Vivendi Environment is included, company debts stood at $34.3 billion, Vivendi said.
Debt-rating agency Standard & Poor's slashed Vivendi's long-term corporate credit rating to junk status after the company reported net losses yesterday of $12 billion for the first six months of 2002.
Joseph D'Virgilio, telecommunications analyst for French banking giant Societe Generale, called the downgrade "a very serious development" that could "inhibit the company's ability to successfully sort out its liquidity crisis and avoid bankruptcy."
S&P; warned of a further downgrade if Vivendi does not get new funding within a month.
Mr. Fourtou said Vivendi has "reached a framework for agreement" with seven banks for a new $2.94 billion credit facility and expects it to be signed by the end of August. The credit line will include $980 million banks agreed to last month that has still not been used, Mr. Fourtou said.
"This will allow Vivendi to buy the time necessary to implement the best conditions for the necessary sale of businesses," he said.
Vivendi's first-half losses were widened by a $10.8 billion charge to reflect a writedown in the value of its assets and another financial provision of $3.3 billion.
Analysts were expecting better. They had anticipated writedowns of between $4.9 billion and $9.8 billion to reflect the drop in value of media assets and holdings.

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