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Sunday, August 18, 2002


Unfortunately, when things go up too much, they have a nasty tendency to come down too hard. This is the current situation of Vivendi. Of course it is an easy matter to poke fun at the likes of Jean Marie Messier, theatrical and exaggerated, you could say he got his well deserved come-uppance. But what about the thousands of people who earn their livelihood in one of Vivendi's subsidiaries. And what of all the other global media companies AOL Time Warner, Bertellesman etc. It's hard to put all of this down to individual human error. The there is the Telecom sector, again the problem is generalized, so in all the fuss about who did what in the great accounting scandal it's important not to miss the point that there are underlying economic causes for all this debacle, and that those who were all too recently cheering on Schumpeter's creative destruction at work try now to understand the double edged nature of this process. That globalization has lead to increasing poverty in some parts of the world is not in doubt (although as I repeatedly emphasis this is not the total situation) and has often been commented on. Now we can see that these processes can at the same time, by the sheer fact that they move enormous forces, lead to tremendous instability in the most favoured parts of the planet. So we can see that learning to live with globalization and it's its consequences (many of them, of course tremendously beneficial) is going to be a challenge for all of us.

So at least spare a thought for all the men in grey who are now being called in to try to straighten things out. Of course they are well paid, but little in their previous careers could have prepared them for this. Vivendi, for example, appears to be in total rout. A company which was never worth the global value it was assigned, is now worth far more than the takings which will be achieved by selling off the parts at current prices.

According to the Financial Times:

Vivendi Universal, the debt-burdened French media group, is considering a possible demerger and initial public offering of its US entertainment assets dominated by Universal Studios.The option - one of several likely to be presented to the Vivendi Universal board on September 25 - would mark a significant retreat from the creation of a global media and entertainment group by Jean-Marie Messier, who was ousted as Vivendi chairman last month.

Details of a possible demerger coincided with a 12.3 per cent fall in Vivendi Universal's share price on Friday. The shares closed at €9.30 in Paris, valuing the company at €10.1bn ($9.89bn), compared with a market capitalisation of €87.9bn at the peak in January last year.The share decline followed further analyst downgrades, including one by Deutsche Bank, one of Vivendi Universal's main lenders. Deutsche warned: "It is impossible to present a buy recommendation on a stock which is capable of being declared insolvent within two months."

Jean-René Fourtou, Vivendi chairman, this week admitted the group was facing a liquidity problem after announcing a €12.3bn first half loss. He said the group would cut borrowings through a mixture of disposals, improved cash management and lower overheads.


Even worse the money may run out soon if a fix isn't put together quickly:

Vivendi Universal's future is in the hands of its banks. Without their support, the world's second-largest media group will run out of cash within weeks.
The company has stressed it is close to signing a deal with seven banks led by BNP Paribas, Deutsche Bank and Société Générale, for €3bn ($2.95bn) of funding, which will provide €2bn of new funds and replace a €1bn loan obtained from these banks in July. If it does not sign the deal this month, there is a serious threat it may default on financial obligations.

The release of the company's half-year results on Wednesday showed significantly lower-than-expected cashflow generation forecasts for the second half of the year, meaning that a financing gap is looming within weeks. Vivendi Universal has €600m of cash remaining and an unused €1bn loan.The company said it had €300m of debt due this month, €400m in October and €100m in December, as well as a $1.6bn (€1.63bn) bridge loan maturing in November.
Source: Financial Times


Despite the fact that I have just returned from holiday in top form, I cannot help commenting the fact that many in the world are not so fortunate.

The tragic case of the abduction and assassination of two young girls in the UK, Holly and Jessica seems somehow all too reminiscent of the 60's moors murders horrors. The UK as a whole must be traumatized, and my thoughts go out to everyone concerned.

One small detail. The investigators initially suspected that the girls had been abducted via an internet chat. This began to raise all the old prejudices about the dangers and uses of internet. Ultimately it appears that the persons responsible were in contact through the most trusted of institutions - their school. As with the recent scandal about ecclesiastical abuse, it is much too simplistic to simply identify the institution with the problem. Sometimes the danger lurks were you least suspect it.

Not everyone in a chat is a potential menace. On the other hand, especially were children are concerned it is important to have clear rules. I have had a number of eyeball to eyeball sessions with my 13 year old daughter on this one. The internet is the most powerful device ever invented, like so many other things, it can be marvellous if handled with care.

Finally there is the terrible problem of flooding in central Europe. Here the impact is much more potent in a more traditional medium, the TV. The sight of all those poor people with their homes and lives in ruins is something terrible. And, as with the Ukranian display plane disaster, or the Russian children killed on route to their holidays in Spain, I can't help feeling there is something deeply symbolic in all of this. These people who have suffered, and seem destined to suffer, so much.

Is it simply pure chance that the most castigated part of the Federal Republic has been the former DDR. Of course it is, it would be hard to discover 'laws' at work here. Fate as we know is blind and cruel. This however does not, any more than in the case of our enlightenment predecessors faced with the Lisbon earthquake, make it any easier to bear.

Well, I'm back after my ritual summer visit to colorful Provence, and I've put on my favourite pair of shorts coz it's damn hot here in Barcelona at the moment. I've been able to do this since it's nice and early and my wife is still in bed. The only thing near to a serious argument we had on holiday was when she wanted to throw them out with the last load of rubbish before we got in the car to come back. I won't go into any of the numerous problems they suffer from, anyone who has spent any time in a UK university will be only to familiar with the tribe of male staff members who stubbornly persist in wearing their favourite pullovers well past the expiry date. I'm sure most of them have wives (or partners) at home who are none to happy either (my god, I hope no-one is going to construe this as another example of the wicked-mother-in-law stereotype).

Well anyway I'd better get on with it while the going is good, so, as they say, let the blog continue!