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France to rescue Alstom

Alstom SA, the Paris-based engineering company whose power stations generate a fifth of the world's electricity, said it will receive 3.5 billion euros (US$3.99 billion) in a rescue package from banks and the French government.

The state will buy half of the 600 million euros in new stock that Paris-based Alstom plans to sell, the company said in a faxed press release. Alstom also received guarantees, loans and credit facilities, it said.

Chief executive Patrick Kron took over as chairman in March to rescue Alstom, whose trains are used on the Paris Metro and by Amtrak in the US He's selling a quarter of the company to help repay 4.9 billion euros in debt owed to BNP Paribas SA, Societe Generale SA, Credit Agricole SA and other banks.

"There's too much at stake to let Alstom go bankrupt," Andre Chassagnol, an analyst at Paresco Equities in Paris, said in an interview yesterday.

Shares of Alstom will resume trading today after being suspended for two days. They have lost 90 percent of their value since first being sold to the public in June 1998, slashing the market value to 867.5 million euros.

The EU said yesterday the French government planned a rescue package. Competition Commissioner Mario Monti demanded that Finance Minister Francis Mer urgently seek approval, Monti's spokesman Tilman Lueder said.

Monti's staff has "some doubts" whether a rescue package will pass the EU's "private investor test" -- a rule that governments must pursue the same profit motive as outside investors when buying stakes in companies, Lueder said yesterday.

Alstom has posted losses for two years as a drop in demand for its power stations, trains and ships coincided with more than 4 billion euros of expenses to fix power turbines made by a business bought from ABB Ltd in 2000.
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