French media giant Vivendi Universal scrambled to haul itself out of a financial crisis today after holding late-night talks with banks to secure fresh funds ahead of a crucial board meeting.
The ousting of Vivendi's unpopular chief executive Mr Jean-Marie Messier after a boardroom coup failed to calm panicked investors who fled the company on debt, accounting and liquidity concerns, sending its stock as much as 40 per cent lower yesterday.
The board meeting is set to formalise Mr Messier's departure and presents the outgoing chief executive with a chance to confront board members who engineered his downfall. Today's Wall Street Journalreported that Mr Messier had negotiated a severance deal worth euro18 million.
A break-up of the Vivendi empire appeared inevitable as the group faced mounting cashflow problems and huge debts piled up in an acquisition spree as Mr Messier transformed a 150-year-old water company into the world's second biggest media group.
Despite investor relief at the departure of Mr Messier, yesterday's stock sell-off was ignited when ratings agency Moody's cut Vivendi's long-term debt rating to high-risk "junk" status, citing growing doubts over Vivendi's ability to repay debts and to refinance its short-term obligations.
Rating downgrades increase a company's cost of borrowing and in the case a "junk" rating make it impossible for some fund managers to invest - leaving Vivendi more exposed to its banks.