Thomson with liquidity problems

Based on preliminary unaudited financial data, Thomson’s estimated net debt at December 31, 2008 was approximately €2.1 billion, corresponding to a gross debt of approximately €2.9 billion and a cash position of approximately €0.8 billion. At December 31, 2008, following the drawdown of the remaining balance on its syndicated credit facility, Thomson’s cash position amounted to €775 million. Some of the company’s financing agreements (private placement notes) contain covenants requiring the net debt to net worth ratio as at December 31, 2008 not to exceed 1:1. This ratio will be measured based on the company’s 2008 audited consolidated financial statements when available. Based on preliminary unaudited data, it is likely that when the 2008 audited consolidated financial statements are completed and available at the latest by the end of April 2009, this covenant will be breached. Thomson intends to engage with the noteholders to discuss a resolution of any potential future covenant breach so as to avoid a decision by the noteholders to accelerate the notes, which could trigger acceleration of substantially all of the Group’s senior debt. In any case, reinforcing Thomson’s financial flexibility requires the improvement of its balance sheet and is key to the implementation of the Group’s strategy. The Group is reaching out to its principal creditors and potential equity investors to present its strategic framework, engage in a dialogue regarding the Company's balance sheet and address any question of a potential future breach of the net debt to net worth covenant. At this stage, it is not possible to predict the outcome of these upcoming discussions. Strategic Framework As part of an in-depth operational and financial review covering the whole business, the Board of Directors has approved the strategic framework proposed by the Chief Executive Officer. The Group has decided to focus on providing services to content creators, leveraging its position as a world leader in this area, the strength of the Technicolor brand with film and television studios, and its technological assets. Thomson will support and assist its customers in their transition towards a digital and electronic environment, through production, post-production, and physical and digital content distribution. The Group will thus strengthen its market position and growth opportunities in all activities associated with content creators. Thomson’s research activities will underpin this strategic framework and will thus reinforce the Group’s patent licensing business. Asset Disposals The Board of Directors has approved the CEO’s proposal to divest its non-strategic operations. These assets, which include Grass Valley and PRN, accounted for approximately 1€ billion of sales in 2008. These disposals will be made in accordance with applicable local labour laws in countries where Thomson operates. Frederic Rose, Chief Executive Officer of Thomson, commented: “Today we announce the refocusing of our business on content creators, leveraging our technological expertise and our positioning with network operators. Strengthening our balance sheet is the precondition to implementing this strategic framework.”