Royal Ahold NV, the world's third- largest food retailer, wrote down assets including its U.S. Foodservice unit by 3.2 billion euros ($3.8 billion) after improper accounting brought the Dutch company close to collapse.
The writedown led to a loss ``significantly higher'' than 1.2 billion euros under U.S. accounting standards last year, the Zaandam, Netherlands-based retailer said at a press conference. The company, which in February found it had overstated earnings for three years, submitted its 2002 accounts to banks yesterday, just in time to keep access to a 2.65 billion-euro credit line.
``It's been a lost year, difficult and negative,'' said Chief Executive Officer Anders Moberg. Now ``it's time to move forward.''
Moberg, a former Ikea and Home Depot Inc. manager, was brought in last month to reduce debt and dispose of businesses after a $19 billion acquisition spree by his predecessor, Cees van der Hoeven. Moberg may announce plans to sell shares to current stockholders to trim debt this month. Ahold shares rose as much as 8 percent.
``It's the beginning of a new start,'' said Theo Kraan, who manages the equivalent of about $2.2 billion euros at Cene Bankiers in Utrecht and decided today to keep his Ahold shares. ``What needs to happen now is them selling shares to raise a minimum of 2 billion euros.''
Moberg expects to present a funding plan to investors by mid- October, the company said today. Analysts surveyed by Bloomberg expect a rights offer to raise 3.1 billion euros on average.
Ahold shares rose 53 cents, or 6.6 percent, to 8.76 euros at 11:23 a.m. in Amsterdam. The shares gained because of relief that the company met the deadline for publishing its 2002 accounts, traders said. The stock has more than tripled since reaching a low of 2.47 euros on March 12.
Credit Line
Ahold ranks as the No. 3 retailer behind Wal-Mart Stores Inc. of the U.S. and Carrefour SA of France. The company has a market value of 8.03 billion euros. Its debt totaled 11.6 billion euros at the end of 2002 and has been reduced by 800 million euros so far this year, the retailer said today.
Moberg's predecessor spent more than $19 billion on 50 acquisitions around the world. A probe of the company's books found that the retailer had inflated profit by 970 million euros over three years, Ahold said in July, with most of the problems coming from its U.S. distribution unit, called U.S. Foodservice.
Ahold yesterday submitted audited accounts for the last three years to its creditors, meeting the deadline set by banks to keep access to a 2.65 billion-euro credit line. Chief Financial Officer Hannu Ryoeppoenen said the company probably will not need to use the $915 million unsecured tranche of that credit facility.
`Difficult Road'
Ahold said sales were 62.7 billion euros last year, 10 billion euros less than initially reported in January. The company had to restate revenue after incorrectly reporting sales from joint ventures such as ICA AB in Scandinavia and Portugal-based Jeronimo Martins Retail.
The retailer had fully consolidated sales for those ventures, even though it didn't have controlling stakes in the companies. Ahold now treats the ventures as unconsolidated subsidiaries.
Ahold's 2002 loss was the first since at least 1992, the company said. Ahold said under Dutch accounting standards it would write down the value of its assets by 1.29 billion euros. Under U.S. accounting rules, the retailer will amend the value of its assets by an additional 3.2 billion euros, including 2.7 billion euros in changes to the value of U.S. Foodservice.
``The most positive impact of today's announcement is that it will allow us to move forward and focus our attention back to the business,'' Moberg said at a press conference in Zaandam. ``We still have a difficult road ahead.''
Sell Foodservice?
Moberg, 53, will decide in the next two years whether to sell U.S. Foodservice. Doing so now would be a ``massive destruction of shareholder value,'' he has said. Meantime, a new CEO for the unit will be named within 10 days, the company said.
The bulk of accounting irregularities were related to promotional allowances. Under that program, food companies give rebates to wholesalers and retailers to promote their products.
The cost of insuring Ahold debt against a possible default declined. Its credit-default swaps, which pay out in the event of the company missing bond or loan payments, trade at a mid-price of about 250 basis points, down from 280 basis points yesterday, according to Barclays Capital. A basis point is 0.01 percentage point.
That means it costs 250,000 euros per year to insure 10 million euros of debt for five years, down from 280,000 euros yesterday and about half the cost of protection at the end of June. Ahold owes its bondholders about 8 billion euros, of which 2.6 billion euros is repayable in 2005.
The writedown led to a loss ``significantly higher'' than 1.2 billion euros under U.S. accounting standards last year, the Zaandam, Netherlands-based retailer said at a press conference. The company, which in February found it had overstated earnings for three years, submitted its 2002 accounts to banks yesterday, just in time to keep access to a 2.65 billion-euro credit line.
``It's been a lost year, difficult and negative,'' said Chief Executive Officer Anders Moberg. Now ``it's time to move forward.''
Moberg, a former Ikea and Home Depot Inc. manager, was brought in last month to reduce debt and dispose of businesses after a $19 billion acquisition spree by his predecessor, Cees van der Hoeven. Moberg may announce plans to sell shares to current stockholders to trim debt this month. Ahold shares rose as much as 8 percent.
``It's the beginning of a new start,'' said Theo Kraan, who manages the equivalent of about $2.2 billion euros at Cene Bankiers in Utrecht and decided today to keep his Ahold shares. ``What needs to happen now is them selling shares to raise a minimum of 2 billion euros.''
Moberg expects to present a funding plan to investors by mid- October, the company said today. Analysts surveyed by Bloomberg expect a rights offer to raise 3.1 billion euros on average.
Ahold shares rose 53 cents, or 6.6 percent, to 8.76 euros at 11:23 a.m. in Amsterdam. The shares gained because of relief that the company met the deadline for publishing its 2002 accounts, traders said. The stock has more than tripled since reaching a low of 2.47 euros on March 12.
Credit Line
Ahold ranks as the No. 3 retailer behind Wal-Mart Stores Inc. of the U.S. and Carrefour SA of France. The company has a market value of 8.03 billion euros. Its debt totaled 11.6 billion euros at the end of 2002 and has been reduced by 800 million euros so far this year, the retailer said today.
Moberg's predecessor spent more than $19 billion on 50 acquisitions around the world. A probe of the company's books found that the retailer had inflated profit by 970 million euros over three years, Ahold said in July, with most of the problems coming from its U.S. distribution unit, called U.S. Foodservice.
Ahold yesterday submitted audited accounts for the last three years to its creditors, meeting the deadline set by banks to keep access to a 2.65 billion-euro credit line. Chief Financial Officer Hannu Ryoeppoenen said the company probably will not need to use the $915 million unsecured tranche of that credit facility.
`Difficult Road'
Ahold said sales were 62.7 billion euros last year, 10 billion euros less than initially reported in January. The company had to restate revenue after incorrectly reporting sales from joint ventures such as ICA AB in Scandinavia and Portugal-based Jeronimo Martins Retail.
The retailer had fully consolidated sales for those ventures, even though it didn't have controlling stakes in the companies. Ahold now treats the ventures as unconsolidated subsidiaries.
Ahold's 2002 loss was the first since at least 1992, the company said. Ahold said under Dutch accounting standards it would write down the value of its assets by 1.29 billion euros. Under U.S. accounting rules, the retailer will amend the value of its assets by an additional 3.2 billion euros, including 2.7 billion euros in changes to the value of U.S. Foodservice.
``The most positive impact of today's announcement is that it will allow us to move forward and focus our attention back to the business,'' Moberg said at a press conference in Zaandam. ``We still have a difficult road ahead.''
Sell Foodservice?
Moberg, 53, will decide in the next two years whether to sell U.S. Foodservice. Doing so now would be a ``massive destruction of shareholder value,'' he has said. Meantime, a new CEO for the unit will be named within 10 days, the company said.
The bulk of accounting irregularities were related to promotional allowances. Under that program, food companies give rebates to wholesalers and retailers to promote their products.
The cost of insuring Ahold debt against a possible default declined. Its credit-default swaps, which pay out in the event of the company missing bond or loan payments, trade at a mid-price of about 250 basis points, down from 280 basis points yesterday, according to Barclays Capital. A basis point is 0.01 percentage point.
That means it costs 250,000 euros per year to insure 10 million euros of debt for five years, down from 280,000 euros yesterday and about half the cost of protection at the end of June. Ahold owes its bondholders about 8 billion euros, of which 2.6 billion euros is repayable in 2005.
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