Alstom to ask shareholders for US$1bil in rights issue to slash debt

French train maker Alstom on Wednesday said it would ask shareholders for around 1 billion euros ($1 billion) through a rights issue as part of a plan to slash debt and bring its finances back on track.

Alstom had flagged a potential capital increase late last year, sending shares tanking after a cash-flow warning in October made clear to investors it was struggling with debt.

It plans to execute the capital increase no later than September.

Adjusted earnings before interest and taxes (EBIT) for the year rose 17% year-on-year to 997 million euros, beating the 985 million expected on average by analysts in a company-provided consensus.

"Altogether, Alstom is now set on stronger foundations to deliver sustainable profit and cash generation," CEO Henri Poupart-Lafarge said in a statement.

Its two main shareholders, Caisse de dépôt et placement du Québec (CDPQ) and Bpifrance, which hold stakes of 17.4% and 7.5% respectively, have agreed to participate in the capital increase.

Alstom is the world's second-biggest train maker after China's state-owned CRRC and has contracts on its order books from Britain for its HS2 high-speed railway and for the largest train tender in Danish rail history.

Its cash problems are due in part to inheriting problem contracts after the 2021 acquisition of Bombardier's rail business.

Net debt for the full year was 2.99 billion euros, up from 2.14 billion a year earlier.

It plans to cut net debt by 2 billion euros by March 2025 and to that end, it also said on Wednesday that it will issue hybrid bonds for around 750 million euros.

It has also been selling parts of the business. In April, it agreed to sell its North American conventional signalling business to Germany's Knorr-Bremse for about 630 million euros, and it has sold its stake in Russia's Transmashholding (TMH).

Alstom posted a cash outflow of 557 million euros for the year ended March 2024, compared to an inflow of 199 million a year earlier. It also said it would pay no dividend.

For the current fiscal year, it expects an inflow of between 300 million and 500 million euros. - Reuters