Investors’ Faith in Vivendi Rises

Vivendi Universal’s stock climbed Friday, with shares closing 10% higher, as investors gained confidence in a new management team and its ability to avert a feared financial meltdown at the media giant.

The increase was a welcome end to a week in which the stock plunged in the wake of Monday’s tumultuous ouster of Jean-Marie Messier, followed by the selection of respected businessman Jean-Rene Fourtou as interim chairman and chief executive.

“The appointment of Fourtou is likely to add a new element of stability,” Merrill Lynch analyst Neil Blackley wrote in a note to investors. “Confirmed bank support over the next two weeks is essential to allay short-term liquidity concerns.”

The company’s $30-billion debt load means Vivendi needs to raise cash quickly by selling assets, which include Universal’s Hollywood film studio and music group. The board is considering unloading Canal Plus, the money-losing European pay-TV and film company that could fetch at least $2 billion.

Despite speculation the group may be broken up to solve its debt problems, sources close to the board said it was in no rush to do so. French politics could complicate efforts to split the companies into French and American businesses.

France’s culture minister, Jean-Jacques Aillagon, told reporters Friday that he wrote Fourtou to ensure Vivendi would not be dismantled. He was apparently reacting to reports that the company was considering selling Vivendi’s Canal Plus, which finances half of all movies made in France under an agreement with French regulators.

As French politicians debated the fate of Canal Plus, the ousted chairman lashed out at his critics.

In an interview with the French weekly Le Point, Messier accused Charles Bronfman, uncle of Vivendi board member Edgar Bronfman Jr., of using “bootlegger methods” to regain control of the group. The Bronfman family of Canada sold Seagram Co.’s liquor, film and music business to Vivendi 18 months ago in a $34-billion deal.

Charles Bronfman could not be reached for comment.

At one point this week, the stock’s value dropped to a 15-year low after debt downgrades by credit-rating firms Moody’s In- vestors Service and Standard & Poor’s Corp. raised fears of a cash crunch.

Upon taking over Wednesday, Fourtou vowed to immediately address Vivendi’s cash problems and gave himself a two-week deadline. The company also embarked on talks with French banks to obtain new credit lines after downgrades caused a $97.6-million credit line to be terminated and $878 million in unused credit lines to mature.

Underscoring the gravity of the company’s cash position, Vivendi said Wednesday night that it faced $1.75 billion of debts coming due this month and had just $2.7 billion in cash and unused credit lines.

But Fourtou expressed confidence the company would be able to avert a financial collapse, which calmed investors and analysts who were shellshocked by the near-panic selling earlier in the week. The company’s shares closed Friday at $17.27, up $1.61, on the New York Stock Exchange.

The upswing was a sign that although institutional investors are still wary, dealers said, confidence in the new team is slowly coaxing them back.

“There are definitely buyers out there, something we have not seen for a while,” one trader said. “The stock has been completely massacred, so it’s no surprise it is bouncing back.”

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Reuters was used in compiling this report.