Vivendi Chief Vows to Fix Its Cash Crisis

Stepping in to restore investor confidence in battered Vivendi Universal, new Chief Executive and Chairman Jean-Rene Fourtou vowed Wednesday to address concerns about the company’s cash needs and make its accounting more transparent to shareholders.

Fourtou was responding to fears among investors and credit agencies that the company would not be able to meet its financial obligations this year. Those worries continued to cause a free fall in the company’s share price, which plummeted more than 30% in two days to close at $15.66 on the New York Stock Exchange on Wednesday.

“In the next two weeks, all possible measures will be taken to improve the situation, particularly in terms of the short-term cash position,” Fourtou said in a statement after an emergency meeting in Paris.

Hours after Fourtou replaced beleaguered Jean-Marie Messier, Vivendi issued another statement saying the company was in talks with banks to obtain new credit lines after downgrades in its debt caused a $97.6 million credit line to be terminated and $878 million in unused credit lines to mature. The firm said the value of its assets far exceeded debts.

Vivendi’s board Wednesday also voted in two new members: Gerard Kleisterlee, CEO of Philips, a Dutch electronics company that is a major investor in Vivendi, and Claude Bebear, the chairman of insurer Axa and a chief Messier critic.

In addition, the board created two committees to evaluate the company’s strategy and finances. Bebear will head the financial committee that will seek to repair relations with French banks that sources said had threatened to withhold credit unless Messier were ousted.

The task facing Fourtou, 63, is considerable. The businessman who helped create the Aventis pharmaceutical giant must outline a clear-cut strategy to reduce billions in debt and address fears that it faces a cash crisis, challenges that ultimately led to Messier’s departure. His resignation was made official Wednesday by the board.

Although Fourtou did not supply specifics, analysts and investors say that in all likelihood the next weeks and months will see the dismantling of the often-puzzling empire that Messier built in the hopes of transforming a onetime utilities firm into a media and entertainment powerhouse to rival AOL Time Warner Inc. But investors were never able to share that vision of merging diverse technology, media and entertainment interests, and soon grew impatient with a string of setbacks and flip-flops by Messier.

Even in his departure, Messier continued to draw controversy: Messier negotiated a $17-million buyout, although his net compensation will be offset substantially by money he must pay back to Vivendi in connection with loans he took out to buy company stock, a source close to the board said.

Such a buyout would be startling because Messier, in his autobiography, “Moi-Meme Maitre du Monde” (“Myself, Master of the World”), vowed he would never take a golden parachute and criticized another European executive for doing so.

Messier declined to comment on the matter Wednesday but has emphatically denied borrowing any money from the company. Vivendi would not comment on the matter.

A two-year buying spree and various contingency payments left Vivendi with $30 billion in debt, including $17 billion from its media and communications business. The company’s financial obligations this year will be $3 billion higher than many analysts expected, according to Standard & Poor’s.

The high debt load means Vivendi needs to raise cash quickly by selling off assets.

The board is seriously considering unloading Canal Plus, the money-losing European pay-TV and film company that could fetch at least $1.95 billion.

Another candidate for sale is Vivendi’s 44% stake in French telecom firm Cegetel, which could raise $5.86 billion to $7.8 billion, said Michael Nathanson, an analyst with Sanford C. Bernstein & Co.

“They need to simplify the company, and they need to dispose of assets,” he said.

The board has yet to decide on the fate of Universal Studios and Universal Music Group. Rather than sell those businesses outright, which would be difficult in the current media market, a more likely scenario is that the companies would be spun off into a separate, publicly owned company run by Hollywood mogul Barry Diller, chairman of Vivendi Universal Entertainment.

A glimmer of good news came Wednesday when top executives from French banks BNP Paribas and Societe Generale tried to reassure investors that Vivendi was not facing a financial crisis.

In addition, Merrill Lynch reiterated its “strong buy” recommendation for Vivendi shares, although it acknowledged that this week’s credit-rating downgrades by Moody’s Investors Service and Standard & Poor’s make things riskier.

Downgrades mean Vivendi will pay higher interest rates on its debt. A 1 percentage-point increase in rates would reduce the company’s 2003 earnings per share by 12%, Merrill estimated.

If Vivendi can successfully refinance $3.3 billion euros of bank loans coming due during the next six months and address other short-term credit issues, its shares “should sharply recover as focus shifts to the company’s strategy and performance,” London-based analyst Neil Blackley said.

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Times staff writer Anita M. Busch contributed to this report.