French chemicals company Rhodia has finally reached an agreement with its creditors to refinance its considerable debt burden, buying much-needed time to continue its restructuring operations.
The company is in the process of selling off assets to help bring down debt that earlier this year topped €2.1 billion. Under the terms of the new refinancing, an existing credit line of €970 million has been maintained, and another of €738 million has been taken out, secured by the company's assets. The company also hopes to raise €700 million from the sale of various businesses, rumoured to include its silicon, phosphate and some food additive product lines.
The news that talks with its banks on renegotiating covenants on the debt have concluded well sent the chemical group's shares up 12.5 per cent to €3.50 yesterday. The shares have fallen by more than half during 2003 as the financial problems besetting the French firm became apparent.
In October, the company's chairman and chief executive Jean-Pierre Tirouflet quit the group. He had been in conflict with minority shareholders who blamed him for failing to improve the performance of the company following its split with Rhone-Poulenc, which merged with the German company Hoechst to form the pharmaceutical group Aventis.
Earlier this month, Rhodia announced another round of 572 job cuts in its French operations as part of an ongoing drive to improve its finances.
The move followed a difficult financial period for the company which posted a first-half loss of €150 million and has said it expects little improvement in the last six months of 2003.