Alstom shares plunge again amid fears of capital raise to trim debt burden

By Jamie Chisholm

Alstom shares plunged by a fifth at one point on Wednesday after the train maker said it would sell assets, cut jobs and consider a capital raise after a cash flow warning in October increased concerns about the company's debt level.

The manufacturer of France's high-speed TGV locomotives said it hoped a divestment program would raise EUR1 billion ($1.09 billion), while costs would be reduced through the trimming of about 1,500 positions as it looked to bolster its balance sheet. Alstom said it is targeting a reduction in its net debt of EUR2 billion by March 2025.

The restructuring follows last month's news that Alstom saw a EUR1.15 billion ($1.2 billion) cash outflow in the first half of its fiscal year, and it expected negative free cash flow of EUR500 million to EUR750 million this year, partly as a result of boosting production to meet new orders and from delays in completing the U.K. Aventra electric train project.

Alstom's Paris-listed shares (FR:ALO) fell by more than a third at the time as investors worried that the cash flow crunch would compromise the servicing of Alstom's net debt, which stood at EUR3.4 billion at the end of September.

Alstom shares rose off session lows on Wednesday, but a 17% decline for the session left them down 48% for the year, with traders particular concerned at the mooted prospect of new issuance to raise capital -- though CEO Henri Poupart-Lafarge told Bloomberg Television it was not the company's preferred option.

"Until the 'will they/won't they' question is resolved on an equity raise, share[s] can remain volatile," Citi analyst Martin Wilkie said in a note.

The broader Paris bourse was chipper however, with the CAC 40 FR:PX1 gaining 0.7% amid an upbeat European session following strong gains on Wall Street the day before.

London's FTSE 100 UK:UKX rose 1% as resources groups were bolstered by better economic data from China and interest-rate sensitive sectors like real estate welcomed news that U.K. inflation dropped to a two-year low in October.

The DAX DX:DAX in Frankfurt climbed 0.7%, as Siemens Energy (XE:ENR) shares recovered more than 6.4% after after the company secured guarantees from the German government and private banks to support order growth as it struggles with problems at its offshore wind unit.

-Jamie Chisholm

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11-15-23 0750ET

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