Man Without Qualities

Tuesday, July 02, 2002

Never Give a Sucker an Even Break! II

Those Vivendi investors seem to have come to their senses and trashed the stock by about 22% in the past 24 hours, and Vivendi's credit rating was cut to "junk bond" status by Moody's Investors Service on concerns about its ability to pay off 3.5 billion euros ($3.4 billion) in debt coming due in the next 12 months.

Let's see, how much of a loss does that mean the Bronfman clan's Hollywood Wunderkind has inflicted on them today? Well, they can take comfort in the facts that today's loss is small potatoes compared to what will happen to the stock price if Vivendi misses that debt payment, and DuPont stock declined about 1% today, too. So there.

Perhaps the Vivendi investors and Moody's are catching on to the likelihood that the future of Vivendi bears an ever closer resemblance to the future of, say, Yugoslavia, circa 1990!

For example, the "favored candidate" to head Vivendi is Jean-René Fourtou, the vice chairman of the board of the French-German pharmaceutical giant Aventis. But the New York Times genteelly reports that a person close to the Vivendi board said "not all of Vivendi directors have yet approved Mr. Fourtou's appointment." Which one can understand, since appointment to that position of a drug company executive with no reported experience in managing companies in crisis or entertainment companies appears to be nuts. He is reported to be favored by the French directors, apparently because he is French. So very French.

The Times also drolly notes that "Other possible contenders include Marc Vienot, honorary chairman of Société Générale, and Charles De Croisset, chairman of Crédit Commercial de France, part of HSBC." Notably lacking in the Times coverage is any indication that the Bronfman family is not prepared to ambush any of these candidates the same way they just "got" Mr. Messier. The amazing focus on the nationality of the new chairman seems to be leading to a kind of corporate "ethnic cleansing."

There is also the exquisitely loopy report that what finally did Mr. Messier in was his actually taking some effective action to address the credit crisis. As the Times puts it:

Vivendi's shares continued to plunge even after the company sold a stake last week in Vivendi Environnement. That move might normally have been seen positively by investors since it raised money to pay down debt. But the stake sale alarmed some of the French directors, who saw it as an impetuous move on Mr. Messier's part that undermined their support, a person close to the board said.

That should certainly concentrate the minds of investors as they realize that (i) Vivendi probably must sell assets to make its debt payments or it will go bankrupt, (ii) Vivendi's best assets are in the United States, but (ii) the French directors on the board were so alarmed by the sale of some underperforming French assets that they withdrew support for Mr. Messier.

As people have been saying a lot recently in other contexts: "It's not that hard to connect the dots."

Too bad that once the dots are all connected the picture looks a lot like a noose around a Bronfman neck.

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