consolidation loan

“VU was neither exact nor precise nor sincere”

The COB pinpoints the financial communication of the group.

The Securities and Exchange Commission (COB) took the time, but it finally wrote its report on the financial information of Vivendi Universal (VU) under the Messier era. Announced for December 2002 by Gerard Rameix, the director of the COB, this text, signed by Hervé Dallérac, the head of the inspection department of the COB, was finally handed over last Friday to the court, which investigates the same facts. A delay revealing the pressures surrounding this issue. Finally, this investigation report, which Libération has procured, is well below the expectations of those who saw in VU an Enron case in the French way. “The service did not identify any major elements that would have been masked to the public. No massive criminal fraud, no operation involving “intermediaries” has been identified, “believes the COB. This is not to displease Jean-Marie Messier. “The case VU is reduced to its proper proportions,” exiled yesterday the former CEO of VU in Les Echos, further strengthened by the decision of a New York court to award him compensation of 20.5 million euros. ‘euros (see Release yesterday).

The former CEO may be looking forward a little fast. The text is very strict with regard to its financial communication: “The information was given to the public by the VU group in 2001 and 2002 was not accurate, precise and sincere”, summarizes the COB. This led him to open an administrative sanction procedure against him and the company Vivendi. Messier may then have to pay a fine of up to 1.5 million euros, and the French court may decide to indict him for these facts.

The COB accuses the former CEO of VU of the manner of accounting for certain subsidiaries (Cegetel, Maroc Telecom and the Polish Elektrim Telekomunikacja): “The consolidation practiced by the VU group did not strictly comply with the French accounting standards,” said the commission. A point that is very technical, and discussed among professionals. But, more interesting are the developments on the gaps between the information given to the public and the reality known by the leaders, and the existence of possible insider trading.

When Messier was lying

According to the Stock Exchange Constable, VU has been on the brink of financial collapse since its inception in December 2000 after its merger with Seagram. The fault of starting a debt too important, never absorbed since Vivendi continued to buy companies. All this, Messier knew it. According to the COB, as early as early 2001, the finance department had warned it “that the amount of debt was underestimated and that it actually exploded quickly, that it was necessary to urgently dispose of significant assets and that serious liquidity tensions appeared regularly as of March 2001 “. As evidence, the COB quotes the hearing of Dominique Gibert, deputy chief financial officer and internal notes sent by Hannezo to Messier. “Our banks are at a standstill,” worried the chief financial officer in February 2001. “For the first time, I felt the wind of the cannonball that I personally do not want to endure: a crisis of This concern is summed up in a long ironic e-mail of March 2002: “What people are looking for this time is: Is VU a big scam? JMM he completely fooled? […] The debt is still made to be repaid- consolidate debt via over here. How do we do when we do not stop buying because we do not know how to look, and what to sell is a torture, as for a collector? “And Hannezo to be ironic about how Messier could restore the situation: “You get to your ads of 15 billion losses tanned and replete mine, ski back and discussions with Robert Redford” …

In the meantime, Messier gave an exaggeratedly optimistic version of his group’s health or was lying outright. For example, at the end of 2000, he stated that the Vivendi Communication entity “would be net of debt” as of January 1, 2001 (this will be 12 billion euros). March 2002, he says that his group “is better than good” (just after Hannezo’s email). The former CEO of VU then relies on an interim ratio like Ebitda (the gross operating result), which allows, according to the COB, to give “the illusion of a wealth available to the group”. At the same time, he also states that he intends to use the cash flow of the group (his cash) to repay his debt, but the net cash flow is negative.

In addition, Messier maintains confusion over the money that Vivendi can withdraw from Cegetel, one of the only profitable subsidiaries of the group. “He should have informed the public of the restrictions that existed in access to cash Cegetel,” notes the COB. The market gendarme, however, excuses the former CEO of VU for not having revealed the reality of the cash crisis just before his departure in late June 2002. “The advertising made to the market could compromise” the settlement of the crisis, recognizes the COB.

Suspicion of insider trading

In chapter 3 of the report, titled Securities VU Interventions, the COB criticizes the stock options exercised by Messier and Hannezo at the end of 2001, just before the VU price collapsed. Both men “had at the end of 2001 a sum of negative information on the financial situation of VU, not known to the public, some of which were likely to have an effect on the price of the title”. This was the risk of downgrading the UL rating by Standard & Poor’s and Moody’s, known only to Messier and Hannezo. “This fact could justify a duty to refrain from intervention on the title,” judges the COB.

However, Messier then raised 591,912 options, for 18.9 million euros, and sold part of the securities for 15.4 million euros. Hannezo has raised 149,335 options, which it has resold completely, through a forward sale agreement with Société Générale, which allowed it to earn a capital gain of 1.39 million euros. But the two men are not quite in the same situation, judges the COB. Messier sold its securities “to repay a loan related to their acquisition” and continued to buy VU securities in 2002. Hannezo justifies its operation only by a “tax optimization motive in the United States”. Which does not seem to convince the gendarme of the markets? But the latter is careful not to conclude in both cases about the existence or not of insider trading.

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