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Toronto stocks closed weaker on Tuesday, dragged into negative territory by tarnished gold stocks and profit-taking. The Toronto Stock Exchange's key 300 Composite Index fell 37.92 points to finish at 6075.98, the TSE's second straight day of losses. Trading was brisk at 120.9 million shares worth C$2.1 billion ($1.57 billion). Heavily-weighted gold stocks began the day stronger, but turned softer amid volatile bullion prices. "We had a negative reversal in gold," said MMS International analyst Katherine Beattie. Midland Walwyn analyst Dunnery Best said investors reaped the benefits of Toronto's recent rally by selling some holdings. "Little bit of profit-taking here and there," Best said, adding "it's been a heck of a run." Toronto posted four record closing highs during a seven-day winning streak which was broken by Monday's decline. Beattie said short-term losses could be expected after a gain of about 215 points. "A one-to-three day pull-back is not surprising," she said. Traders began the day nervously awaiting comments by U.S. Federal Reserve Chairman Alan Greenspan on the U.S. economy, but his generally upbeat assessment was a boost for Wall Street equities. In Toronto, all 14 sub-indices slipped except transportation, pipelines and real estate. Falling sectors included consumer products, conglomerates, oils and media. Declining stocks outnumbered advances 559 to 454 with 274 issues unchanged. Active stocks included oil and gas shares. Petro-Canada fell 0.20 to 21.50 on almost 6.1 million shares, topping the most-active list. Gold prospector Bre-X Minerals Ltd. fell 0.40 to 22.60 while Barrick Gold Corp. inched up 0.05 to close at 36.15. Barrick said on Tuesday the only obstacle to a joint venture over the Busang gold deposit is agreements with two of Bre-X's Indonesian partners. Northrock Resources Ltd. rose 0.35 to a close at a 52-week high of 15.35 after announcing it would be flush with cash following a sale of non-strategic oil and gas properties.

Toronto stocks ended mixed in thin dealings on Monday, resisting New York's continued sell-off with the help of stronger key gold issues. The Toronto Stock Exchange's key 300 Composite Index rose 7.18 points to reach 6040.76 in turnover of 87 million shares worth C$1.29 billion ($961 million). But declining issues beat out advancing ones 510 to 460. Another 296 ended flat. "Stocks didn't do too badly today, thanks to strength in the gold sector," said ScotiaMcLeod's senior vice-president Fred Ketchen. Trading was thin ahead of Tuesday's U.S. fourth quarter Employment Cost Index. Last week, U.S. Federal Reserve Chairman Alan Greenspan expressed concern over rising wages. Toronto's 14 sub-indices were evenly split. The strong side was led by a 1.6 percent gain in precious metals, followed by consumer products and conglomerates. Weak groups included transportation, forestry products and financial services. Golds were among actively traded issues. Golden Rule Resources Ltd. added 0.55 to 13.10 while Placer Dome Inc. rose 0.80 to 28.30. Telecommunications conglomerate BCE Inc., Canada's largest publicly traded firm, slipped 0.10 to 65.65 after posting fourth quarter results that were in line with market expectations, traders said. Beer and entertainment conglomerate Molson Companies Ltd. rose 1.10 to 22.95. Molson announced plans to sell a 50-percent stake in retailer Reno-Deport Inc. for C$62.25 million ($46.34 million). Telecommunications firm Northern Telecom Ltd. saw shares dip 1.30 to 92.30 despite posting a strong fourth quarter profit of $1.23 a share versus year ago $0.98.

Toronto stocks posted their 51st record close of 1996 on Monday, powered by a rally in interest-sensitive issues ahead of an expected cut in Canadian interest rates, analysts said. "(The) market is looking for yet another Bank of Canada cut," said MMS International analyst Katherine Beattie. Canada's central bank has dropped short-term interest rates 19 times since May 1995, slashing the key bank rate by 4.75 percent to stimulate a lackluster economy. "If there's another Bank of Canada cut, the bank stocks will continue rallying," Beattie said. The Toronto Stock Exchange's key 300 Composite Index gained 17.95 points to close at 5609.26 points, reaching its 51st record close of 1996. However, the overall market was mixed despite the rally in bank stocks. Declining issues outnumbered advances 478 to 447 with 300 issues unchanged. A total of 88.7 million shares were traded worth C$1.28 billion (US$958 million) at Canada's largest stock exchange. "Everybody is still looking at low interest rates and wondering where to put their money. They jump on the bandwagon of recent movements," said Ron Meisels, president of P & C Holdings Ltd. The financial services sector extended its long rally, adding more than two percent on Monday. The group led half of Toronto's 14 sub-indices higher. Other strong sectors included real estate and utilities. Base metals, conglomerates and communications led the weak side. Among hot stocks, Edper Group Ltd. receipts soared C$7.50 to close at C$78.50 on 4.2 million shares amid market speculation that talks over the World Financial Center in New York would soon conclude, leaving majority shareholders' Bronfman group in clear control. * Bank of Montreal jumped C$1.10 to C$42.70, while National Bank of Canada rose C$0.40 to C$13.65. * Air Canada shares gained C$0.45 to close at C$5.80 as investors appeared to shun troubled Canadian Airlines Corp. in favor of Canada's largest air carrier. * Canadian Airlines fell C$0.36 to C$1.25 today after announcing a four-year C$800 million (US$599 million) restructuring plan on Friday.

- The chief financial officer of debt-ridden Rogers Communications Inc., resigned suddenly Monday. Graham Savage, well-respected by analysts and considered a restraining force on flamboyant president Ted Rogers, had been with the firm for 21 years. He resigned to "pursue other interests," the company said. "Of all the senior individuals who have left Rogers in recent times, the departure of Savage is the most detrimental to the company, given Savage is the man who has held it all together for the past few years," said Lawrence and Co. analyst Andrew McCreath. Analyst John Drolet at Toronto's Yorkton Securities said, "This is not good for Rogers at all. I wouldn't be surprised if other people left." Rogers, which also owns Rogers Cantel, a wireless communications firm, has shed U.S. and Canadian assets in the past year in an attempt to cut its debts. Rogers piled up most of its debt load when it acquired Maclean Hunter Ltd., along with the Toronto Sun group, for C$3.1 billion ($2.26 billion). Total long-term debt grew to C$4.88 billion ($3.56 billion) as of June 30 from a year-earlier C$4.07 billion ($2.97 billion). In 1995, Rogers had revenue of C$2.69 billion ($1.96 billion). "Graham Savage was a pretty good guy. He was able to keep the wolves away as ... Ted Rogers kept adding on assets. But I guess he finally realized that there's an end to the line," Drolet said. Alan Horn, vice-president of administration, will serve as acting chief financial officer until another is found, the company said. In a statement, Ted Rogers said: "We remain committed to the near-term financial priorities of improving our balance sheet and increasing revenues as we invest in new businesses." Rogers' stock, after being halted earlier in the day on the Toronto Stock Exchange, fell 80 cents to close at C$9.25. In New York, Rogers fell 50 cents to $6.875 on the New York Stock Exchange.

Heavily weighted bank stocks pushed the Toronto Stock Exchange to stronger territory at Monday's close, despite the fact that more issues fell than climbed. The TSE's key 300 composite index gained 34.61 points to end at 5952.41, a little shy of its recent record close of 5966. Turnover was 94.1 million shares worth C$1.4 billion (US$1.04 billion). "At the end of the day, it was only the banks and the utilities," said John Kellett, Royal Bank's vice-president of equities. "When the banks do well, it certainly gives a good tone to the market." Declining issues edged out advancing ones 486 to 473. Another 288 traded flat. Bank stocks soared ahead of year-end results, which will kick off with Bank of Montreal earnings on Tuesday. Canada's big six banks are forecast to unveil record profits for the third year in a row. And analysts consider Canadian bank stocks still undervalued compared to U.S. issues. "Today I think really what happened was U.S. banks were really on wheels," Kellett said. "Suddenly Canadian banks, which already had gone a long way, looked good." The important bank sector led eight of Toronto's 14 sub-indices higher, gaining nearly 3.3 percent. Transports, consumer products and utilities followed. The key gold group and base metals lost the most ground. Among the hot stocks, the nation's second largest bank Canadian Imperial Bank of Commerce rose C$2.25 to C$59.60 on 640,000 shares. The Royal Bank of Canada, the largest, gained C$2.10 to C$48.75 on more than one million shares. Weakness in gold bullion prices in both London and New York hit gold stocks. However, Bre-X Minerals Ltd., which still embroiled in an ownership dispute over its huge Busang gold discovery in Indonesia, lost more ground due to the uncertainty. Shares fell C$1.35 to reach C$22.55. Biotechnology firm Biovail Corp. International rose C$2.25 to C$40 in light trading after news that it settled patent litigation with Elan Corp. Plc after Elan had alleged infringement of drug patents by Biovail. Biovail, which also announced that it would list on the New York exchange on December 12, said it and Elan agreed to various cross-royalty payments on some current and future products. Convenience store company Silcorp Ltd. rose C$0.15 to C$18.40 after news that it signed a definitive deal to buy the assets of Becker Milk Co Ltd. Alimentation Couche-Tard Inc. said it extended its takeover offer for Silcorp to December 23.

The Toronto Stock Exchange's key index ended higher on Wednesday, but the overall market finished mixed in thin trading as many money managers decided to place their bets on fixed income investments. The TSE 300 Composite Index rose 24.57 points to close at 6071.28 in turnover of 105.3 million shares worth C$1.4 billion ($1.04 billion). Almost all of Toronto's 14 sub-indices ended higher except transportation. Despite these gains, declining stocks outpaced advances 492 to 483 with 281 issues unchanged. "I think the market's kind of jittery," said Oppenheimer & Co Inc chief strategist Michael Metz. ScotiaMcLeod's director of investment research Jim Doak agreed. "People are being cagey, not going to equity funds," he said. Many mutual fund managers are trading cautiously and awaiting direction in the market after this week's volatility, analysts said. New York soared 84.7 points to close at 6740.7 following yesterday's roller-coaster ride in North American markets. Media, consumer products, golds and real estate posted the strongest gains among Toronto's rising sectors. Smaller issues, including some heavyweight gold stocks, we're sold off in thin trading, one trader said. Golden Rule Resources Ltd. lost 2.70 to 10.05 on more than three million shares. Brokerage firm ScotiaMcLeod recommended selling the prospector after shares nearly tripled since January 6 on initial results from its Ghana property. Bre-X Minerals Ltd. slipped 0.05 to 21.65 while potential partner Barrick Gold Corp. rose 0.20 to 37.05. Both denied an earlier report which said Bre-X may be able to hold an auction for control over its huge Busang gold deposit in Indonesia. Shares in Placer Dome Inc., Barrick's possible rival, rose 0.70 to close at 28.60.

Toronto stocks ended mixed on Tuesday, with a focus on falling pipeline and gold issues after the market gained nearly 300 points thus far in August. "This is a momentum that cannot be maintained, so this market is giving back some of its gains," said P and C Holdings President Ron Meisels. "I think it'll take a few more days before it sells off enough" for investors to return and hunt for bargains. The Toronto Stock Exchange's key 300 Composite Index lost 12.8 points to close at 5173.9 points for its second straight losing session. However, advancing issues edged out declining ones 444 to 438. Another 310 stocks ended unchanged. More than 88 million shares were traded worth C$1.42 billion (US$1.04 billion.) Since July 30 the key 300 index has climbed from 4891 points to today's close of 5173, a gain of 282 points. Market players have been hurt by vacations ahead of a long holiday weekend, Meisels said. Canadian markets will be closed on Monday, September 2, for Labor Day. All of Toronto's 14 sub-indices fell except for conglomerates and retail issues. Pipelines, golds, transports and forestry products dropped the most. Among the hot stocks, banks were briskly traded. National Bank of Canada rose C0.10 to C$11.90 in turnover of 2.5 million shares. Today Canada's third and fourth largest banks, the Bank of Montreal and the Bank of Nova Scotia, kicked off the reporting period for financial institutions by posting better-than-anticipated third quarter profits, said Richardson Greenshields of Canada analyst Dunnery Best. Rogers Communications Inc. was also active. The nation's largest cable-television firm saw shares slip C0.05 to C$9.20 on 2.4 million shares, continuing Monday's fall. Chief financial officer Graham Savage resigned yesterday, the second senior executive to jump ship this year. Barrick Gold Corp. closed its deal with small gold prospector Arequipa Resources Ltd. today, paying C$30 a share in cash and Barrick shares after sweetening its original offer of C$27. Barrick stock slipped C$0.15 to C$37.55 on nearly 1.6 million shares.

Toronto stocks ended softer on Thursday, snapping a recent winning streak despite strength in the gold and real estate sectors. The Toronto Stock Exchange's key 300 Composite Index slipped by 10.69 points to reach 5739.23 points, after adding more than 1.5 percent yesterday. "After yesterday's remarkable action, it's time for a pause," said RBC Dominion Securities analyst Dunnery Best in a report. "The golds have ignited on the quick rise in bullion prices that came late morning," Best said. COMEX December gold ended up US$0.90 at US$379.60 an ounce, after hitting a six-day intraday high at US$382.00. The yellow metal soared briefly after comments by a Japanese official which indicated Japan will no longer tolerate a weak yen. This pushed the U.S. dollar lower while investors rushed to sell the currency and buy gold, but the dollar recovered after the U.S. government had a strong 30-year Treasury bond auction, said Maison Placements Canada trader Rolie Bradley. Toronto trading was brisk at 99.8 million shares worth C$1.7 billion (US$1.28 billion). Advancing issues outnumbered declining ones 522 to 488 and 289 traded flat. Half of Toronto's 14 sub-indices eased, led by pipeline stocks, banks and consumer products. Golds, conglomerates and real estate issues rolled higher. "The lower interest rates are really stimulating the whole real estate situation," Bradley said. Among hot stocks were the banks, which sank after a month's worth of gains. Royal Bank of Canada topped Toronto's most active stocks, falling C$0.90 to C$47.90 on nearly 2.7 million shares. "Our favourite group, the banks, which got a pasting today, likely will go up tomorrow," Bradley said. Telecommunications firm Northern Telecom Ltd. lost C$2.55 to reach C$86.95 in heavy trading. It said on Thursday that it agreed to buy the assets of a California-based software firm, AGL Systmes Inc., for an undisclosed sum. Funeral homes operator Loewen Group Inc. slipped C$0.75 to C$51.75 in light dealings. The closely watched firm, which has made headlines for its battle against hostile bidder Service Corp. International, said it expects to make acquisitions worth US$600-US$700 million next year.

The Toronto stock market ended weaker on Friday, but recovered most of its losses after sinking nearly three percent on comments by U.S. Federal Reserve Chairman Alan Greenspan. The Toronto Stock Exchange's key 300 Composite Index fell 31.69 points to close 5810.06 after experiencing its worst intra-day decline in nine years. The key index sank 171 points, the most severe fall since a 176.5-point decline on October 22, 1987. Trading was moderate with 80.8 million shares changing hands worth C$1.4 billion (US$1.03 billion). "For a volatile market that has been looking for a reason, any reason, to correct, last night's comments by Federal Reserve Chairman Alan Greenspan were just the ticket," RBC Dominion Securities analyst Dunnery Best said in a report. In a speech Thursday night, Greenspan warned that "irrational exuberance" was infecting financial markets, sparking heavy selling in equities markets worldwide. By the end of Friday's session, Toronto recovered most of its losses, while the Dow Jones average lost 55.16 points. Analysts said mutual fund institutions were bargain hunting on the TSE today. "Canadian institutions came in late in the day and established themselves for the RRSP (Registered Retirement Savings Plan) season," said Jim Doak, investment research director of ScotiaMcleod Inc. Despite Toronto's steep decline, analysts expect the Canadian market to resume its upward march and outperform Wall Street in 1997. All of Toronto's 14 sub-indices lost ground except pipelines and industrial products. Declining stocks outnumbered advances 705 to 320, while 259 traded flat. Among hot stocks, Bre-X Minerals Ltd. rose C$0.15 to C$20.15 in heavy trading. Barrick Gold Corp. is in the midst of finalizing a deal with Bre-X over ownership of Bre-X's massive gold deposit in Busang, Indonesia. Barrick closed down C$0.05 at C$40.20. Canadian Imperial Bank of Commerce, Canada's second largest bank, fell C$0.85 to C$56.15 on 1.8 million shares. Fuelled by record earnings and low interest rates, bank stocks have soared to new heights since September.

Toronto stocks added almost one percent in value on Tuesday, posting their 52nd record close of 1996 on rallying bank stocks and stronger bond and currency markets, analysts said. "We got a new high on the Canadian dollar. Second, we have a big increase in the Canadian bonds. Thirdly, we had a very strong Dow Jones (Industrial Average)," said Rolie Bradley, an institutional salesman with Maison Placements Canada Inc. "As a result of all that, you have almost panic buying in Canadian interest-sensitive stocks," Bradley said. The dollar rallied to close at C$1.3301 (US$0.7518), its strongest level since October 30, 1995. Currency traders said the unit was helped by bullish technical momentum and strong U.S. interest in Canadian bonds. The Canadian 30-year benchmark bond jumped C$2.00 to close around C$114.55 to yield 6.807 percent. The TSE, Canada's largest equity market, gained 55.21 points to close at 5664.47. In New York, the Dow Jones Industrial Average added 39.50 points to end at 6081.18. Toronto traded a total of 105 million shares worth C$1.83 billion (US$1.37 billion). Advancing issues outnumbered declines 505 to 445 with 300 stocks unchanged. "The banks are driving Toronto to yet another new high," said RBC Dominion Securities analyst Dunnery Best. The financial services sector rose by 2.8 percent, leading 12 of Toronto's 14 sub-indices higher. Other strong groups included pipelines, conglomerates, consumer products and transports. The only weak sectors were golds and oils. Among hot bank stocks, Bank of Montreal added C$1.75 to C$44.45 on 1.8 million shares. Toronto-Dominion Bank gained C$1.15 to C$34.25 in heavy trading after it was upgraded to an outperform rating by U.S. brokerage Morgan Stanley. Canada's largest publicly traded firm, BCE Inc., rose C$1.10 to close at C$62.20 on over 1.5 million shares. Growing interest in the Internet, the world-wide computer link-up, is attracting investors to telecommunications firms like BCE, Bradley said.

At Wednesday's closing siren the Toronto Stock Exchange rang up a 60 point gain for its key 300 Composite Index, driven by an investor buying frenzy. The TSE 300 Composite Index added 60.55 points to end at 5966.10 points, which was its 61st record close of 1996. Canada's largest exchange also hit an new intra-day high of 5986.80 points on Wednesday, closing in on the important 6000-point level. Toronto, which handles more than 80 percent of Canada's equities transactions, has gained 85 points in the past two sessions. "The big stocks are doing extremely well, and at this stage it's a momentum driven market," said Wood Gundy Inc's chief strategist Subodh Kumar. "It's being driven by two things: ... lower interest rates and cash inflows for investors from the mutual fund areas." Bond yields have dropped in Canada and the U.S. this year as central banks in both countries slashed short-term interest rates to stimulate their sluggish economies, analysts said. Investors and mutual fund companies are searching for high yield vehicles to improve their returns. "Right now the pressures (by mutual funds) are to allocate funds," Kumar said. ScotiaMcLeod's senior vice-president Fred Ketchen said Toronto's gains has lagged behind New York's rallies for the last year and a half. Toronto lost ground during Canada's political uncertainty in late 1995 when residents of the French-speaking province of Quebec deliberated whether to separate from Canada. New York powered ahead during that time but Toronto is slowly closing in. "I think we're sort-of playing catchup and will continue to play catchup because we're further behind than what we should be," Ketchen said. Today the Dow Industrial Average gained 32.42 points to close at 6430.02 points. Toronto also has enjoyed a near-continuous rally since mid-September when the 300 index broke through the 5300-point level. Today 132.8 million shares were traded worth C$2.1 billion (US$1.57 billion), Toronto's fifth highest trading value on record. All of Toronto's 14 sub-indices powered ahead, except for the financial services sector. The key gold group added more than two percent of its value today, leading media, transportation, consumer product and other issues higher. On the broader market 616 stocks advanced, beating out 370 declining issues. Another 280 issues traded unchanged. Among the hot stocks, Edper Group Ltd. shares bucked the slipping trend in the financial services area. The conglomerate saw C$0.25 added to close at C$7.95 on 6.1 million shares. Fertilizer firm Potash Corp. of Saskatchewan gained C$2.90 to C$96.40 in active dealings.

Toronto's stock market drifted lower in moderate trading to close softer on Monday, weighed down by a battered oil and gas sector despite firmer bank issues. The key 300 Composite Index fell 20.47 points to end at 6081.27 in trading of 93.9 million shares worth C$1.4 billion ($1.04 billion). "The energy sector's the one that got clipped here," said fund manager Josef Schachter. The oil and gas group lost almost 2.4 percent and led eight of Toronto's 14 sub-indices south. Other falling sectors included conglomerates, transportation and golds. The stronger side was led by consumer products, heavily weighted banks and pipelines. Wilf Gobert, Peters & Co. analyst, said several factors hit energy issues including weaker oil prices for most of Monday, recent news that Canadian Natural Resources Ltd. will cut back on production soon and Canadian 88 Energy Corp.'s failure to take over Morrison Petroleum Ltd. In a surprise move Canadian 88 said on Sunday that it withdrew its hostile bid for Morrison Petroleum. Declines raced ahead of advances 456 to 362 while another 283 traded unchanged. Schachter forecast that Toronto's weakness was only short term. "This is just a buying opportunity." Energy stocks were heavily traded on Monday. Morrison shares lost 0.35 to end at 9.65 on half a million shares while Canadian 88 slipped 0.25 to 5.15 on 1.1 million shares. Poco Petroleums Ltd. lost 0.30 to reach 13.75 on more than two million shares. Pacalta Resources Ltd. managed to buck the falling trend, gaining 1.45 to hit a new high of 12.90. Fairfax Financial Holdings Ltd. topped Toronto's gainers after rising 3.50 to 299.00.

The chief executive of Zellers, a major Canadian retailer, aims to boost sales per square foot by more than a third over three years as the discount chain seeks to regain market leadership from U.S. invader Wal-Mart. Millard Barron, a former executive at Wal-Mart Inc. - which ousted Zellers as Canada's top discount store chain -- told Reuters in a recent interview he planned to increasesales from C$157 ($117) a square foot for fiscal 1997 ending Jan. 31. "We are at least a third below where we should be. We should be (C$)225 ($168) to (C$)250 ($187) a square foot and my goal is (that) over the next three years," said Barron, who took the top job at Zellers last September. Zellers is a unit of Toronto-based Hudson's Bay Co., the owner of Canada's biggest department store chain. Wood Gundy retail analyst David Brodie called Barron's goal ambitious. "Wal-Mart has the momentum. These guys (Zellers) don't," said Brodie, who estimated that Wal-Mart had sales of C$220 ($164) a square foot in Canada, a number Barron called "overstated." Brodie estimated Zellers' market share had fallen to 42 percent since Wal-Mart's arrival in 1994 from about 50 percent. Wal-Mart's Canadian market share was estimated at about 43 percent. Barron landed the chief executive's job at Zellers at a crucial time. The commpany's operating profit was halved by the arrival in Canada of Bentonville, Ark.-bbased Wal-Mart, America's bigg 536870913 1702065184 Zellers' fiscal 1996 operating profit plunged to C$106.7 million($79.8 million) ffrom C$215.6 million ($161.2 million) in 1995. Barron said his mission was to improve technology and communications, move more staff to the sales floor, pay more attention to rural stores and renovate the chain's 299 outlets. He did not forecast fiscal 1998 sales, but said Zellers would post fiscal 1997 revenues of about C$3.4 billion ($2.5 billion), versus C$3.5 billion ($2.6 billion) in fiscal 1996. He said that crucial holiday sales in December jumped by double digits for the first time in three years. Barron said that Zellers' capital spending would increase to between two and three percent of fiscal 1998 sales. Retailers usually spend one to two percent. About 20 percent of planned capital spending would be for technological upgrading, with Barron saying Zellers was four years behind other retailers in technology. "By the end of 1997, we will be as technologically proficient and productive as any retailer in North America," Barron said. Zellers said Canada would open up to 12 stores this year, expand 10 and update up to 70.

The Toronto Stock Exchange closed mixed in heavy trading on Friday, but its key index managed to stay above to the 6000 point mark. The TSE 300 Composite Index closed 1.98 points lower at 6016.67, after falling 6000 points earlier. On the broader market, advancing stocks outnumbered declining ones 558 to 398. Another 318 traded unchanged. "These markets are holding up really well," said RBC Dominion Securities private client strategist Dunnery Best. "The fact that Canada held on to big gains is very powerful." The TSE 300 Index gained about 90 points this week. Trading volume was 96.7 million shares worth C$1.58 billion (US$1.17 billion). The activity was surprisingly heavy since analysts had expected trading to fall off after the New York Stock Exchange closed early for the U.S. Thanksgiving long weekend. Best expected further gains for the TSE as the year end approaches and Canadians think about buying mutual funds for their registered retirement savings plans. Ten of Toronto's 14 sub-indices ended higher, led by conglomerates, media, transport and real estate. But the key index was depressed by soft bank stocks and a weak gold sector which lost nearly one percent. Among the hot stocks, the bank stocks suffered profit taking after strong gains earlier this week on record year-end earnings. Canadian Imperial Bank of Commerce fell C$1.10 to close at C$60.70. Toronto-Dominion Bank dropped C$1.00 to C$36.00 on 1.3 million shares. Barrick Gold Corp lost C$0.70 to end at C$40.50 on 3.7 million shares as it continued talks with Bre-X Minerals Ltd. Barrick said on Friday it expects to strike a deal with Bre-X over the Busang gold deposit early next week. Bre-X shares fell C$0.35 to C$20.65 on 2.4 million shares. Copper and base metals miner Aur Resources Inc gained C$0.10 to reach C$8.35. Cominco Ltd. sold its minority stake in one block of 4.2 million shares. Geac Computer Corp Ltd. rose C$3.25 to C$26.00 in active dealings.

The Toronto Stock Exchange snapped a seven-session winning streak to close softer on Monday, depressed by weak gold stocks. The TSE's key 300 Composite Index lost 24.90 points to end at 6113.90 points, in turnover of 104 million shares worth C$1.58 billion. "We had a really nice seven-day rally," said MMS International analyst Katherine Beattie. "You're bound to have some kind of correction." Gold bullion prices tumbled today in both London and New York, pushing Toronto's heavily weighted gold stocks into weaker territory. Some U.S. traders were off for the U.S. Martin Luther King holiday. Despite weaker golds, Toronto stocks did not fall that far. "Actually we didn't have such a bad day today," said Maison Placements Canada president John Ing. Investors are nervously awaiting comments by U.S. Federal Reserve Chairman Alan Greenspan on Tuesday, Beattie said. "The market's on edge. Greenspan is scheduled to testify on the state of the economy to a Senate Budget committee hearing starting at 1000 EST/1500 GMT. All of Toronto's 14 sub-indices lost ground except for oil and gas. The weak side was led by a 1.7 percent drop in golds, followed by media, transportation and forestry products. Declining issues outnumbered advances 528 to 474, with 291 stocks unchanged. Gold stocks were active today. Bre-X Mineral Ltd. fell 1.40 to 23.00 on over 1.8 million shares. Indonesia's Mines and Energy Minister Ida Bagus Sudjana earlier today gave Bre-X and potential partner Barrick Gold Corp. one month to settle with their local partners in the huge Busang gold find. Barrick's shares dipped 0.75 to 36.10. Golden Rule Resources Ltd. closed up 0.95 to 9.35 after earlier hitting a 52-week high of 9.65. Oil firm Canadian Occidental Petroleum Ltd. rose 0.30 to 25.60, topping Toronto's most active list on volume of nearly four million shares.

Toronto stocks closed on a firmer note on Friday, boosted by a party in the bond market and strength in the heavily weighted banking and gold sectors. The Toronto Stock Exchange's key 300 Composite Index rose 29.85 points to reach 6101.74, with 111 million shares traded worth C$1.74 billion ($1.29 billion). North American markets surged after the release of the U.S. January jobless rate. It edged up to 5.4 percent from 5.3, providing indications that the job market has not tightened enough for employers to bid up wages and that the Federal Reserve may not raise interest rates. Bonds rallied dropping yields, so Canadian investors fled to the high-yielding Toronto stock market. "It's acting on any piece of news," said Montreal-based strategist Bill Ram. Advances inched ahead of declines 507 to 490 while another 276 traded flat. Of Toronto's 14 sub-indices, banks rose the most, adding two percent to hit a new high of 5972.59 points. Other strong groups were consumer products, golds and base metals. The weaker side included conglomerates, oils and pipelines, which kept Toronto from jumping as high as Wall Street. The Dow Jones Industrial Average soared 82.74 points to 6855.80. Over the course of the week Toronto's stock exchange retraced its steps from a new lifetime high of 6159.18 points on Wednesday to today's close. Among active issues, food services firm Cara Operations Ltd. class A rose 0.05 to 4.15 on three million shares after announcing positive third quarter results yesterday. Viceroy Homes Ltd. shares lost more than half their value, falling 5.40 to 5.00 after reporting lower than forecast fourth quarter earnings today. Net income for the quarter plunged 61 percent to C$409,000 ($300,740). Royal Bank of Canada, the nation's largest, rose 1.40 to 52.40 on more than 1.7 million shares. Shares in the Canadian Imperial Bank of Commerce, the second biggest, gained 1.35 to 64.60.

Toronto stocks ended firmer in brisk dealings on Friday, adding another 10 points to the week's gains of 90 points and bringing the key 300 index closer to breaking its all-time high. "We just refuse to move lower," said MMS International analyst Katherine Beattie. "We're just ignoring all the bad news." The Toronto Stock Exchange key 300 Composite Index rose 10.9 points to end at 5193.0 points on Friday. The TSE 300 has recovered from its lows in July and is climbing towards its all-time high of 5248.37 points reached in late May. The index may test the high next week, Beattie said. On Thursday Canada's central bank cut short-term interest rates by 25 basis points, easing the key bank rate to 4.25 percent. This will help keep up interest in Toronto's important bank issues, analysts have said. During the week, investors picked up the heavily weighted gold stocks as gold prices edged closer to the psychological high of US$400 on New York's COMEX, analysts have said. Canadian forestry products were hot today with U.S. market players as well, said ScotiaMcLeod's director of investment research Jim Doak. Nine of Toronto's 14 sub-indices rose, led by golds, forestry products, base metals and transports. Falling sectors included media issues, oils and utilities. Advancing stocks outnumbered declining ones 481 to 371, while 310 traded flat. Golds were among the most actively traded issues. Meridian Gold Inc. led the pack, rising C0.30 to C$6.20 on more than two million shares. It topped Toronto's most actives list. Forestry products firm MacMillan Bloedel Ltd. gained C0.30 to C$20.00 in heavy trading. Fertilizer firm Potash Corp. of Saskatchewan Inc. rose C$2.00 to C$106.00 on strong turnover.

Despite the Toronto Stock Exchange's steep decline this week, analysts expect Canada's biggest equity market to resume its upward march and continue outperforming Wall Street in the New Year. Early on Friday, Toronto's key 300 Composite Index posted its largest intraday drop in nine years, losing 171 points or almost three percent to 5670. It was Toronto's biggest intraday fall since a 176.5 point slide on October 22, 1987, a few days after the Black Monday market crash of October 19, 1987. The index has slid from a record of 6018 on November 28. Toronto stocks recovered partly by Friday afternoon, when they were down 40.55 points to 5801.20. Toronto's losses on Friday were sparked by comments late Thursday by U.S. Federal Reserve Chairman Alan Greenspan that were interpreted as suggesting that U.S. equity markets may be overvalued. Profit-taking also hit Toronto stocks this week as investors cashed in on recent spectacular gains. Montreal-based investment adviser Ron Meisels forecast more weakness in the next few weeks, before a return to strength. "I think Toronto will probably outperform New York in the first quarter of 1997," Meisels said. Meisels said Toronto stocks traditionally outpace Wall Street in the late stages of a bull market as investors flock to Toronto's natural resource sector. This year's boom has been fueled by U.S. economic growth and declining interest rates that prompted low returns on bonds and other fixed-income instruments, analysts said. Toronto's key index has jumped almost 28 percent this year, versus a 23 percent gain by New York's Dow Jones Industrial Average. Meisels said Toronto should also benefit later this year as Canadians make their annual contributions to tax-sheltered pension funds, many of which include mutual funds. "There's an enormous amount of mutual fund money being committed to the market," ScotiaMcLeod's director of investment research Jim Doak said. In the near term, Toronto could extend this week's 4.3 percent decline, some analysts said. "I think we're looking at at least a (total) 10 percent correction," said MMS International analyst Katherine Beattie.

The Toronto Stock Exchange's key index turned in another solid performance on Friday, posting a fourth record close for 1997 and hitting a new intra-day high as well. The TSE 300 Composite Index added 35.14 points to close at 6138.80 in a seven session winning streak. Trading again was brisk: 120.3 million shares moved worth C$1.85 billion ($1.38 billion). The new lifetime high is now 6144.29 points. "Stocks are terrific. Another up day, in Toronto, across the board," said Maison Placements Canada president John Ing. "Gold stocks were very strong." Bullion prices managed to push heavily weighted golds higher. Comex February gold rose $1.40 to finish at $356.40 on Friday. Toronto's market has also benefitted from a recent influx of cash. Canadians are turning some bank savings into tax sheltered pension funds ahead of an end-February deadline for 1996 retirement plans, analysts said. Of Toronto's 14 sub-indices, all but three -- real estate, forestry products and utilities -- climbed. Consumer products, golds, conglomerates and media stocks surged the most. Advancers outpaced decliners 603 to 430 while 263 traded unchanged. Tiny Mineral Resources Corp. topped Toronto's most actives. Shares rose a cent to seven and a half cents after news it plans a takeover bid for ailing Anvil Range Mining Corp. Canadian Occidental Petroleum Ltd. jumped 1.25 to 25.30 on nearly 3.5 million shares, helped by firmer energy prices. Bre-X Minerals Ltd. slipped 0.30 to 24.40. It said it was reviewing Placer Dome Inc.'s C$5 billion ($3.7 billion) offer and comparing it to Barrick Gold Corp.'s unpriced bid. Despite Bre-X's response, a source in the Indonesian mines ministry said the Indonesian government, which suggested a Bre-X-Barrick partnership, was not likely to approve Placer's plan. The government has the final say over which companies will develop the huge Busang gold deposit in Indonesia. Placer shares gained 0.20 to 29.15 while Barrick rose 1.05 to 36.85.

Toronto's stock market ended lower on Wednesday, dragged down by Wall Street after U.S. high technology stocks were hit by profit-taking. The Toronto Stock Exchange's key 300 Composite Index lost 33 points to end at 6112.41. Turnover was heavy at 130.5 million shares worth C$2.04 billion ($1.52 billion). The Dow Jones Industrial Average lost 86.51 to close at 6746.90 as major high tech issues sold off, traders said. North American markets were looking for an excuse to reap profits after recent highs, said portfolio consultant Ron Meisels. Investors decided to sell after the U.S. Federal Open Market Committee decided to keep short-term interest rates unchanged as expected by analysts. "In spite of the good news, people decided to take profits," Meisels said. All but three of Toronto's 14 sub-indices slipped into negative territory. Transportation posted the biggest decline, followed by oils, golds and conglomerates. The TSE posted gains in pipelines, consumer products and real estate. Declining issues outpaced advances 441 to 539 with 300 stocks unchanged. Among active stocks, Morrison Petroleum Ltd. lost 0.15 to close at 10.15 on over three million shares. Morrison is still seeking a white knight to oppose a hostile takeover bid from Canadian 88 Energy Corp. Canadian 88 shares rose 0.25 to close at 6.00 in active trading. Bank of Montreal lost 0.50 to finish at 47.95 after hitting a new high of 49.15 earlier in the session. Canadian Imperial Bank of Commerce rose 0.70 to 63.40 on 1.7 million shares after reaching a 52-week peak of 63.95. Potash Corp. of Saskatchewan Inc. continued to lose ground after Tuesday's drop, falling 4.50 to 105.00 on 86,000 shares.

Toronto stocks rallied to close higher on Tuesday, surging ahead on strength in the important resource sectors. "Canadian gold stocks led Canadian stock prices higher," said Richardson Greenshields analyst Linda Lehman in a market report. The Toronto Stock Exchange's key 300 Composite Index jumped 33.32 points to reach 5150.89 points. So far in August the key index has climbed out of its July lows to reach heights it has not hit since early June. "We're not far from our highs," said P and C Holdings president Ron Meisels. Toronto's key index hit its all-time high of 5248 points on May 28, 1986. At this point in the bullish economic cycle, market players are investing in resource stocks, Meisels said. Trading reached 87.98 million shares valued at C$1.25 billion (US$910.4 million.) Markets are also now debating whether the Bank of Canada will ease short-term interest rates since the U.S. Federal Open Market Committee did not raise rates at its meeting today, analysts have said. Canada's central bank can risk the rate cut without excessively widening bond spreads between the two nations. This may help boost interest in equities. Golds led all of Toronto's 14 sub-indices higher, gaining 1.38 percent. They were followed by transportation issues, base metals and media issues. Advancing stocks beat out declining ones 507 to 361, while 275 traded unchanged. Among active stocks, heavyweight Barrick Gold Corp. jumped C$0.35 to C$37.90. Black Swan Gold Mines Ltd. was Toronto's most active stock in turnover of 2.7 million shares. The small prospector slipped 0.06 to 1.44 after recent strength as investors await drill results. -- Reuters Toronto Bureau (416) 941-8100

The Toronto Stock Exchange's key index set records for a second straight session on Wednesday, achieving new closing and intra-day highs. The TSE 300 Composite Index rose 10.48 points to end at 6065.34, after earlier setting an intra-day high of 6080.15. Trading was brisk with 114.6 million shares changing hands worth C$1.7 billion ($1.27 billion). A rally in Canada's currency boosted investor interest in equities. "It is encouraging that we're up despite the 35-point drop in the Dow," said MMS International analyst Katherine Beattie. The dollar strengthened by more than a full Canadian cent, ending at C$1.3413 (US$0.7456) from Tuesday's close of C$1.3519 (US$0.7397) and propelled the TSE to its second record close of 1997. A bullish article on Canada in Britain's Financial Times newspaper sparked the rally, a dollar trader said. Toronto posted gains in all but three of its 14 sub-indices -- forestry products, real estate and industrial products. The strong side was led by base metals, pipelines, banks and transports. Advancing stocks outpaced declines 508 to 466, with 294 flat. Small gold prospector Bre-X Minerals Ltd. was among the hotly traded stocks. Bre-X rose 1.10 to 24.45 on 2.2 million shares after Tuesday's announcement that Placer Dome Inc. offered a deal to share in the huge Busang gold deposit. Placer finished flat at 28.10 while shares in Barrick Gold Corp., which is also negotiating a deal with Bre-X, dipped 0.40 to 35.05. Investors shrugged off news that Indonesian businessman Jusuf Merukh had filed a C$2 billion ($1.49 billion) lawsuit in Canada against Bre-X, claiming part ownership of Busang. Repap Enterprises Inc. fell 0.47 to 2.90 on doubts that its Avenor Inc. takeover would proceed. Telecommunications firm Mitel Corp. jumped 0.90 to a new closing high of 10.10 after an analyst upgraded Mitel to buy from market perform and raised his 12-month target to 14 from 11. Copper giant Rio Algom Ltd. fell 2.00 to 31.90 on 1.5 million shares after some investors decided to buy into a newly announced convertible debenture issue.

Toronto stocks ended softer on Monday after the important gold sector crumbled under the weight of falling bullion prices. The Toronto Stock Exchange's key 300 Composite Index fell 31.70 points to 5984.97, below the 6000 level. Trading was brisk at 92.6 million shares, worth C$1.6 billion (US$1.2 billion). The heavily weighted golds group lost more than 2.5 percent after bullion prices dropped in New York. February COMEX gold finished the day US$4.10 cheaper at US$370.90 an ounce. "The gold index is finally bowing to reality" after recent gains, said RBC Dominion Securities strategist Dunnery Best in a market report. This year the TSE's 300 index has jumped about 27 percent since the start of trading, aided by a surge in gold stocks. Ten of Toronto's 14 sub-indices finished weaker, led by golds and financial services. The gaining groups were conglomerates, transports, retail and pipelines. "The banks were significantly weaker," one trader said. "That's going to take the market lower." Falling issues powered ahead of advancing ones 596 to 380. Another 277 traded flat. However, traders said today's weakness was a temporary blip ahead of more year-end gains. In the past mutual fund managers tended to shuffle portfolios before Christmas to provide a strong finish to their year, which has boosted equities markets, they said. Among the hot stocks, shares in gold prospector Bre-X Minerals Ltd. were still volatile ahead of a potential partnership deal with Barrick Gold Corp. over Bre-X's huge gold discovery in Busang, Indonesia. Bre-X dropped C$2.90 to C$17.75 on trading of nearly six million shares while Barrick, the world's third gold producer, lost C$0.95 to C$39.55, also in brisk dealings. The nation's largest bank, Royal Bank of Canada, fell after influential U.S. investment firm Morgan Stanley & Co Inc. downgraded the stock to neutral from outperform, saying it was fairly valued. Shares in Royal closed C$0.85 weaker at C$49.00 after sky-rocketing this month. Integrated oil company Suncor Inc. climbed to new year highs in Toronto as rumors circulated that it could be the target of a takeover bid. Suncor shares rose C$1.40 to C$60.30 in light trading.

The Toronto stock market ended weaker in brisk trading on Wednesday, pulled down by investor profit-taking in every sector except for surging golds. The TSE's key 300 Composite Index dropped 30.08 points to 5910.65, losing ground for the third day in a row. Since Monday the 300 index has fallen 106 points or more than 1.7 percent. "The market is a little shaky right now, and I imagine there's some people taking profits," said MMS International analyst Katherine Beattie. Market players sold stocks to reap profits after big gains earlier this year. Trading was brisk with 111.3 million shares changing hands worth C$1.8 billion. "Another one of those middle-cycle corrections," said ScotiaMcLeod senior vice-president Fred Ketchen. "I expect this to be short-lived." Ketchen said he expected Toronto to continue to rise since investors have nowhere to turn. Fixed income markets generally provide lower returns than equities, especially since Canadian interest rates have fallen dramatically this year. The important gold sector rose nearly three percent today, which prevented a further decline in the index. The other 13 sub-indices were led lower by conglomerates, media, transports and banks. Declining issues beat out advancing ones 581 to 428 while 272 were left unchanged. Among the active stocks were Bre-X Minerals Ltd. and Barrick Gold Corp. Bre-X jumped C$1.30 to C$20.20 on more than five million shares. Bre-X said today that it and Barrick have made some progress on an ownership deal over Bre-X's huge Busang gold discovery in Indonesia. The Indonesian government, which advised a joint venture between the two, has not yet extended today's deadline. Barrick stock rose C$1.45 to C$39.30. Northern Telecom Ltd. fell C$2.50 to C$84.30 in brisk dealings after news that delays in testing software would stall the roll-out of a personal communications network for Sprint. Officials said Nortel would not sustain a material financial impact from the delay. Biovail Corp. fell C$2.35 to C$35.85. Partner Forest Laboratories Inc. said it would reduce inventory levels but Biovail said it would not affect inventories of its flagship hypertension drug Tiazac.

Canada's largest stock exchange's key index broke through the psychological barrier of 5500 points on Monday to a new closing high of 5518 points. The Toronto Stock Exchange's 300 Composite Index rose 25.5 points to hit 5518 points by day's end, propelled by soaring gold issues and surging oil stocks. The 300 Index reached 5000 points on Feb. 1. Today, "we have gone through the 5500 barrier," noted ScotiaMcLeod's senior vice-president Fred Ketchen. Another trader said: "There seems... to be foreign interest in Canada." Overseas investors are eyeing Canada's falling interest rates and declining deficit financing needs, analysts said. Trading volume totalled 858 million shares valued at C$1.25 billion (US$929 million). Advancing issues beat out declining ones 561 to 420, while 276 traded unchanged. Nine of Toronto's 14 sub-indices gained ground, led by the heavily weighted gold sector, which rose 1.2 percent, and the oil group which jumped 1.7 percent, along with stronger base metals and media issues. Falling groups included consumer products, conglomerates and forestry products. Among Toronto's hot stocks were fertilizer firms. Viridian Inc. said it agreed to a friendly C$1.33 billion (US$988 million) merger with Agrium Inc. Viridian shares jumped C$1.25 to C$17.75 on more than 4.1 million shares, while Agrium lost C$0.35 to hit C$18.55 in heavy dealings. The merger would create one of North America's largest integrated fertilizer firms. Nickel giant Inco Ltd. jumped C$1.05 to C$41.80 in heavy trading, after it announced higher-than-expected third quarter earnings at US$0.19 a share compared to year-earlier US$0.33 a share. Stampeder Exploration Ltd topped Toronto's most active stocks, rising C$0.10 to reach C$6.55.

This year's rally at the Toronto Stock Exchange, Canada's biggest equity market, will stretch through 1997 and may last until the turn of the century, analysts forecast. "I think the Toronto Stock Exchange is in the middle of a bull market," said Michael Metz, chief investment strategist with Oppenheimer & Co Inc in New York. Canadian equities investors have enjoyed spectacular gains this year. Toronto's key 300 Composite Index jumped as much as 28 percent in 1996 and was now up 21 percent after a correction this month. By contrast, the Dow Jones Industrial Average, which Toronto generally tracks, was up 23 percent this year, down from a peak of 26 percent. Analysts said Toronto's market -- the 10th most active worldwide -- would continue to benefit from poor bond yields, which make stocks more attractive. Bond yields have dropped across the board this year, with 50 basis points shaved off the return of Canada's 30-year benchmark bonds. Most of the seven analysts polled by Reuters said Toronto's 300 index next year would break its all-time high of 6018 points, set on November 28. The index was at about 5700 on Friday. Analysts' median estimate for the 300 index was 6600 points by the end of 1997, rising to 7600 by 1998's close. "We're in a general long-term uptrend," said Katherine Beattie, technical analyst for MMS International in Toronto. "The stock market is still going to be the best place to invest given the relatively low interest rates." "We will start inching up, but even if we do get two or three interest rate hikes in the first couple of quarters next year - which I think is going to cause a correction in the markets - it's not going to put bonds or bills at a competitive enough level," Beattie said. Fred Ketchen, senior vice-president at brokerage ScotiaMcLeod Inc, said Canadian equities were being snapped up by the large baby boom population, which was now focusing on generating wealth for retirement amid the uncertain future of government pensions. "I think that basically we're into fairly firm markets right through until the end of the century," Ketchen said. "Demographics are certainly helping here." Josef Schachter, president of Schachter Asset Management Inc, predicted Toronto's heavily weighted resource sectors could push the 300 index to 7000 by the end of 1997 and to at least 8500 a year later. "I see (it) potentially higher than that if we can get precious metals...and base metals joining the party," Schachter said. Montreal-based portfolio consultant Ron Meisels forecast th index would climb to 8000 by the end of 1998 and 10000 by the year 2000. But some analysts were more bearish, with John Ing, president of Toronto-based Maison Placements Canada Inc, predicting the index would sink to 5750 by the end of 1997 and 5400 by the end of 1998. Ing said interest rate hikes would cut short the party. "The inevitable increase in rates has got to happen sometime within the next 12 months and that will test the markets," Ing said.

This year's rally on the Toronto Stock Exchange, Canada's biggest equity market, will stretch through 1997 and may last until the turn of the century, analysts forecast. "I think the Toronto Stock Exchange is in the middle of a bull market," said Michael Metz, chief investment strategist with Oppenheimer & Co. Inc. in New York. Canadian equities investors have enjoyed spectacular gains this year. Toronto's key 300 Composite Index jumped as much as 28 percent in 1996 and was up 21 percent after a correction in December. By contrast, the Dow Jones industrial average, which Toronto generally tracks, was up 23 percent this year, down from a peak of 26 percent. Analysts said Toronto's market -- the 10th most active worldwide -- would continue to benefit from poor bond yields, which make stocks more attractive. Bond yields have dropped across the board this year, with 50 basis points shaved off the return of Canada's 30-year benchmark bonds. Most of the seven analysts polled by Reuters said Toronto's 300 index next year would break its all-time high of 6,018 points, set on Nov. 28. The index was at about 5,700 on Friday. Analysts' median estimate for the 300 index was 6,600 points by the end of 1997, rising to 7,600 by 1998's close. "We're in a general long-term uptrend," said Katherine Beattie, technical analyst for MMS International in Toronto. "The stock market is still going to be the best place to invest given the relatively low interest rates. "We will start inching up, but even if we do get two or three interest rate hikes in the first couple of quarters next year -- which I think is going to cause a correction in the markets -- it's not going to put bonds or bills at a competitive enough level," Beattie said. Fred Ketchen, senior vice-president at brokerage ScotiaMcLeod Inc, said Canadian equities were being snapped up by the large baby boom population focusing on generating wealth for retirement amid the uncertain future of government pensions. "I think that basically we're into fairly firm markets right through until the end of the century," Ketchen said. "Demographics are certainly helping here." Josef Schachter, president of Schachter Asset Management Inc., predicted Toronto's heavily weighted resource sectors could push the 300 index to 7,000 by the end of 1997 and to at least 8,500 a year later. "I see (it) potentially higher than that if we can get precious metals ... and base metals joining the party," Schachter said. Montreal-based portfolio consultant Ron Meisels forecast the index would climb to 8,000 by the end of 1998 and 10,000 by the year 2000. But some analysts were more bearish, with John Ing, president of Toronto-based Maison Placements Canada Inc., predicting the index would sink to 5,750 by the end of 1997 and 5,400 by the end of 1998. Ing said interest rate hikes would cut the party short. "The inevitable increase in rates has got to happen sometime within the next 12 months and that will test the markets," Ing said.

Toronto stocks ended sharply lower on Thursday, pulled down by investor profit-taking and a sell-off in the heavily weighted gold issues. The Toronto Stock Exchange key 300 Composite Index lost 43.9 points to end at 5922.2 points, after nearly touching the 6000-point level yesterday. Ron Meisels, president of P & C Holdings Ltd, said some profit-taking was justified after the 300 Index's bold move upward this month. Investors sold off some holdings to reap profits since the closely-watched 300 Index gained more than five percent since the beginning of November, Meisels said. Trading was heavy, with 124 million shares turned over worth C$1.85 billion (US$1.38 billion). An equities trader agreed. "We could be in for a corrective phase here." Other analysts have said a pull-back was possible. Weak gold bullion prices exacerbated the situation, dragging Toronto's gold stocks down. London gold prices dropped to their lowest level in nearly two years after heavy selling forced it through a technical support level of US$377 an ounce to as low as C$375.70. Banks stocks, which also enjoyed recent gains, suffered from profit-taking, the trader said. Only three of Toronto's 14 sub-indices rose: conglomerates, oils and pipelines. The gold sector lost nearly 2.9 percent today, followed lower by banks, transports and consumer products. Declining stocks raced ahead of declining ones 593 to 395. Another 272 traded flat. Among the hot stocks, gold prospector Bre-X Minerals Ltd. was in the spotlight again after days of turbulent activity. Shares rose C$1.10 to C$23.70 on more than 2.7 million shares as investors eyed a November 22 deadline for the settlement of an ownership dispute over a huge Indonesian gold discovery. Toronto-Dominion Bank lost C$1.15 to C$36.75 in heavy turnover. Barrick Gold Corp., the world's third largest gold producer, lost C$1.15 to hit C$36.75 on Thursday.

The Toronto Stock Exchange closed weaker in heavy trading on Tuesday, hit by plunging gold stocks and a sell-off on Wall Street. The TSE's key 300 Composite Index lost 44.24 points to finish the day at 5940.73. The Dow Jones Industrial Average in New York fell nearly 80 points to 6442, its largest loss in a single day since a 161-point drop in mid-July. Toronto was also dragged down by its heavily weighted gold index, which fell 2.7 percent in the second day of a retreat. "A dominant theme in Canadian markets today is gold," noted RBC Dominion Securities analyst Dunnery Best. Turnover was brisk at 119.7 million shares worth C$2.1 billion (US$1.6 billion), Toronto's fourth highest trading value ever. Analysts said Wall Street was submerged under a wave of profit-taking as investors decided to lock in profits and sell some stocks following recent gains. All of Toronto's 14 sub-indices lost ground except for media and transportation. Golds led the weaker side, followed by conglomerates, base metals and utilities. Gold stocks fell after bullion prices slipped in both London and New York. Declining issues beat out advancing ones 575 to 424. Another 292 traded flat. More losses may be seen ahead because investors will sell poorly-performing stocks to realize tax losses after a spectacular year, said Josef Schachter, fund manager and Schachter Asset Management Inc president. "They usually plan on liquidating during this period of time, so they offset the gains they booked earlier in the year," Schachter said. Shares in Bre-X Minerals Ltd., halted at the end of the day, were active today. Earlier the stock rose C$0.95 to C$18.70 on more than five million shares before the gold prospector announced it increased the resource calculation of its Busang gold discovery in Indonesia by 10.4 million ounces of gold to 57.3 million ounces. Barrick Gold Corp. is still in the midst of negotations with Bre-X over ownership of the deposit. The Indonesian government set a December 4 deadline for a deal between the two. Placer Dome Inc. and other miners said said they would challenge Barrick for control of Bre-X's discovery by pressuring the Indonesian government to allow competing offers. However the Indonesian government said on Tuesday it was expected confirmation tomorrow of a deal between Bre-X and Barrick. It did not mention other potential partners. Barrick fell C$1.70 to C$37.85 and Placer dipped C$0.45 to C$30.60. Potash Corp. of Saskatchewan surged C$5.05 to end at C$108.50. The fertilizer firm told clients it planed to riase domestic potash prices in mid-February.

Toronto stocks ended softer due to a sell-off in financial services on Wednesday, while the value of trading was the third-highest ever. The Toronto Stock Exchange key 300 Composite Index fell 7.96 points to close at 5799.01 points, before setting a new intra-day high of 5816.40 points. Trading volume was 133.2 million shares worth C$2.29 billion (US$1.7 billion). The TSE's highest trading value was C$2.53 billion (US$1.9 billion), set in April 1986. RBC Dominion Securities analyst Dunnery Best noted that bank stocks were retreating from their recent rally. "Weaker bond markets are fueling the shift away from the interest sensitives into the more glorious investing terrain of golds and the cyclicals," Best said in a market report. Ron Meisels, president of P and C Holdings Ltd., added that a pause was warranted since the TSE 300 Index has added about 200 points since November 5. "It would be quite normal and understandable for it to have a correction after such a robust move," Meisels said. Toronto's 14 sub-indices were evenly split between rising and falling groups. Pipelines lost the most ground, followed by banks, utilities, and conglomerates. Golds, base metals and communications led the strong side. Advancing issues edged out declining ones 492 to 473 while 315 traded flat. Among hot stocks, nickel giant Inco Ltd. rose C$1.80 to finish at C$45.95 in heavy trading. Gold firm Euro-Nevada Mining Corp Ltd. topped net gainers, adding C$2.55 to close at C$42.80 in moderate trading. Royal Bank of Canada lost C$0.95 to finish at C$45.05 in brisk trading, while Toronto-Dominion Bank fell C$0.75 to end at C$32.65. Canada's largest publicly traded firm, telecommunications conglomerate BCE Inc., lost C$1.15 to close at C$62.60 on volume of about one million shares.

The Toronto Stock Exchange soared and posted its 53rd record close of 1996 on Wednesday, driven by excitement in interest-sensitive issues and conglomerates. The key TSE 300 Composite Index rocketed 85.45 points to close at 5749.92 points on 118.1 million shares. The value of shares traded on Canada's largest equity exchange was the third-ever highest at C$2.18 billion (US$1.64 billion). Toronto reached its highest value traded in one day in 1986, the exchange said. Toronto is "a market that's generally under-owned in North America," said chief investment strategist Michael Metz of Oppenheimer & Co, Inc. Canadian bank stocks have benefitted from foreign interest, especially after U.S. brokerage Morgan Stanley upgraded Toronto-Dominion Bank and Royal Bank of Canada this week. "The multiple revision that has taken place is not pushing the (banking) group into untenable territory, rather it is a valuation range that the Canadian banks deserve, relative to their peers in the U.S.," Best said. In today's action, all of Toronto's 14 sub-indices surged higher except for gold issues, which fell on slipping bullion prices. The conglomerate group gained the most, adding more than five percent. It was followed by consumer products, banks and transports. Banks and interest-sensitive issues were among today's most heavily traded stocks. Bank of Montreal, Canada's third largest bank, jumped C$0.95 to C$45.00 on more than three million shares while smaller National Bank of Canada rose C$0.35 to C$14.25. Another hot stock was Canada's largest publicly traded firm BCE Inc., which gained C$2.00 to C$64.20.

She once jokingly thought of calling her autobiography "Fascist Bitch," and now Canadian journalists are wondering what epithet to use as she plays an expanding role in the country's largest newspaper empire. British-born Barbara Amiel, the wife of Hollinger Inc. chairman Conrad Black, is an accomplished journalist who counts many fans in Britain, where she writes a rightwing shoot-from-the-hip column for the Daily Telegraph, the centerpiece of the Hollinger empire. Although she honed her craft in Canada, she makes many Canadians bristle by standing out from the mass of generally liberal journalists. She says she has never managed to reap the accolades she desires from Canadians, the ones she routinely receives from the British. A sought-after London party guest, Amiel now is in the Canadian spotlight through her position as vice president of editorial in her husband's newspaper empire. Hollinger added a majority shareholding in Southam Inc., the country's largest daily newspaper chain, to its media stable, substantially boosting its control to more than 40 percent of the industry. The move left some Canadians worried about Hollinger's influence on their media and many Southam journalists fearful for their jobs as Black's well-known road to profits often involves cutting newspaper staff. HUSBAND CAN SPEAK FOR HIMSELF At a recent conference of journalists in Ottawa, Amiel, a former Toronto Sun editor, was repeatedly asked about Black's intentions. She replied that he could speak for himself. But she added, "I think the Southam papers ... have not done their best but have terrific potential." Amiel, who still writes for Maclean's magazine, hesitated when asked if she was treated differently in Canada than abroad. "I think Canada's been very good to me. I became editor of a newspaper, (former editor) Peter Newman gave me a column in Maclean's magazine, how many people have got that? You can't complain." But then she added, "I've never, although one always wants it, had the recognition of my peers that I've had in England, but then maybe I didn't deserve it in Canada." Television personality Alan Edmonds, an admirer of Amiel who disagrees with her views, said Canadians have refrained from praising Amiel's talents because of her rightwing bias. "In the years that she was in Canada ... the prevailing mindset in the media was in the opposite direction." Edmonds said other journalists were jealous of the openings that came her way. "She's used her undoubted feminine attraction to ... create opportunities to use her undoubted superior intellect." In person and in print, Amiel has a knack for sparking debates. For instance, she once wrote that Quebec's moves toward independence, culminating in a narrow 1995 defeat for the separatists, could be blamed on Canada's liberal elite, which promoted multi-culturalism, thereby strengthening French-Canadian nationalism. CASTIGATING LEFTWINGERS Her columns have castigated Ontario's former leftwing government, led by the New Democratic Party, for allegedly being swayed by special interest groups like the disabled. She also wrote that Ontario, which gave homosexual couples the same rights as heterosexual ones, had weakened the family. Canada's most widely read satirical magazine, Frank, noted "a favorite theme in her columns is the insidiousness of self-pity, that the poor should get on with their lives and quit carping about it." And columnist Allan Fotheringham once observed, "Barbara Amiel, otherwise known as Mrs. Conrad Black, can take out any opponent in the world and eat them for breakfast. As she does regularly in print." Amiel has even joked about her reputation, saying she thought about calling her surprisingly frank 1980 autobiography "Fascist Bitch," a name suggested by irate readers. Instead the book was titled "Confessions." Now in her mid-50s, the much-married Amiel began her path at the tender age of eight at a "grotty little newspaper" in her hometown of Hendon, England. Her parents divorced, her mother remarried and her new Canadian stepfather dragged his new family back home. Amiel, used to fine surroundings, ended up in Hamilton, a gritty steel town in southern Ontario about 40 miles (70 km) from Toronto. Before her 1991 marriage to Black, she was married to student Gary Smith, philosopher George Jonas and cable magnate David Graham, with whom she returned to England in 1985. In 1993 well-known Canadian author Margaret Atwood published "The Robber Bride" about a scapel-assisted femme fatale named Zenia. The Canadian rumor mill identified Amiel as the model for Zenia, but she denied it.

A small but growing number of Canadians intend to raid the electronic halls of the Internet for holiday gift-buying instead of strolling through local malls, according to a new survey. Three percent of Canadians with access to the worldwide computer network said they planned to buy a gift using the Internet, a Deloitte & Touche Consulting Group survey said this week. "It's 3 percent. It's much more than zero, one or two," said Augustin Manchon, a retail and consumer business consultant. About 3 million Canadians will have access to the Internet by year-end, according to Michael O'Neil, senior vice-president of marketing research firm International Data Corp. Once they are on the net, Canadians will have access to some 700 electronic malls, Manchon said. Jason Zandberg, Pacific International Securities Inc. analyst, said that online shopping is starting to evolve. However, "it's not going to replace walking to a store and buying something." Many people still like to feel the items they buy. Recently International Business Machines Corp. unveiled partnerships to develop an Internet retailing outlet that would include a Web site for Canada's largest department store chain, Hudson's Bay Co.. Americans are more progressive than Canadians when it comes to online shopping but not by much, Manchon found. "(Interest is) still slightly under the U.S. but it's not bad for the first or second year," Manchon said. Manchon also said that up to half of the people who have access to the Internet, estimated at 40 million worldwide, have already bought something using their computers. And more retailers intend to take advantage of this increasing Internet use, the survey found. Thirty percent of retailers said they're going to invest in the next few months in Internet-related technologies whereas only 16 percent said that last fall. "So that's a dramatic increase," Manchon said. Popular shopping items online tend to be electronic goods, which consumers like to comparison-shop, price-sensitive products and everyday purchases such as toothpaste and cleaning powders, Manchon said. Companies such as Wal-Mart Stores Inc., the United States' largest retailer, have used the Internet to collect research about customers and test new products before installing them on their shelves. Manchon also said Canada's retailers were expecting a better holiday season compared to last year's dismal showing. "The optimism is growing from month to month," Manchon said. "It shows in the numbers of several retailers that we know," Manchon said. "We can confirm that numbers of many of them are going up, slowly."

The Toronto stock market ended weaker in brisk trading on Thursday, hit by a sell off in Canadian bonds and heavily weighted bank stocks. The Toronto Stock Exchange's key 300 Composite Index fell 68.54 points to close at 5842.11, down almost 1.2 percent. Trading totalled 108.3 million shares worth C$1.9 billion (US$1.4 billion.) "It was a bond-led downdraft," one trader said of today's market action. Canadian bonds recorded their biggest one-day drop in more than two years. Investors sold off bonds with Canada/U.S. spreads at near record lows, while a flood of new corporate supply also depressed bonds today, traders said. Weakness in Canada's currency also helped spark the bond sell-off. The 30-year benchmark bond fell C$3.17 to C$110.85 to yield 7.086 percent. "This is a made-in-Canada meltdown," RBC Dominion Securities analyst Dunnery Best said in a stock report. Investors are now likely to buy more natural resource stocks after selling holdings in the financial services, one trader said. "This signals a rotation out of the interest sensitives to some more cyclical names," he said. The shift already started, with stronger golds helping restrain Toronto's fall. Of Toronto's 14 sub-indices, banks fell the most at 3.65 percent, followed by media, utilities and pipelines. Financial services and banks are the most important group on the index. Golds, real estate, and retail rose. Falling issues powered ahead of advancing ones 600 to 407, while 284 traded flat. Among hot stocks, the Canadian Imperial Bank of Commerce fell C$2.50 to C$57.00 on 1.7 million shares. Canada's second largest bank reported net profits rose to almost C$1.4 billion for 1996 from C$1.0 billion last year. The Bank of Montreal, Canada's third largest bank, fell C$2.00 to C$40.40 on 1.8 million shares. Bre-X Minerals Ltd. and Barrick Gold Corp. were heavily traded. Bre-X, which has been advised to do a deal with Barrick over the ownership of its huge Busang gold discovery by the Indonesian government, said it is seeking clarification on what kind of arrangement it should negotiate. Bre-X shares ended flat at C$20.00 while Barrick rose C$0.95 to C$40.25.

Toronto stocks ended weaker in light trading on Thursday, swept lower by a downdraft in the oil and gas sector. Toronto's key 300 Composite Index fell 40.52 points to 6071.89. Trading was lackluster at 107.3 million shares worth C$1.4 billion ($1.04 billion). "Toronto committed suicide," said portfolio manager Josef Schachter. "The oils and golds ... got clipped and took the market lower," he said. Oils took a beating after March Nymex oil lost US$0.81 today to close at US$23.10 a barrel. The TSE's energy group surrendered 172 points, leading 11 of 14 sub-groups lower. The heavyweight gold sector also fell along with softer bullion prices in New York. Comex April gold lost US$1.30 to close at US$345.10 an ounce. The three strong sectors were real estate, transportation and retailing. Declining stocks edged out advances 545 to 402 while 276 issues were unchanged. Schachter said he expected the downdraft to continue for the next few sessions, pulling the Canadian market down by another 100 points. However, oil stocks may bounce back if the rest of the North American winter remains cold and demand for energy improves. Among active stocks, oil producer Canadian Natural Resources Ltd. fell 1.95 to close at 34.25 on 2.6 million shares. Food services firm Cara Operations Ltd. topped Toronto's most-active list. Its class A stock gained 0.35 to close at 4.10 on 6.6 million shares after reporting stronger third quarter earnings. Among active golds, Barrick Gold Corp. fell 0.60 to close at 35.25 on 1.7 million shares.

Several large-capitalization Canadian stocks could benefit, while others may be hurt when the Toronto Stock Exchange changes rules governing control blocks in its key 300 Composite Index on Friday. Stocks such as Barrick Gold Corp, funeral home operator Loewen Group Inc and energy firm Petro-Canada should get snapped up by fund managers when the rules change, analysts said. "Index funds, which try to match the weighting of the index, are going to have to scramble to buy X percent more Barrick shares...by Friday," said an analyst who declined to be identified. The Toronto Stock Exchange, which handles more than 80 percent of Canada's equity trading, will increase the relative weighting of 30 stocks on Friday by raising the level of control blocks to 20 percent from 15 percent. The change will take effect at the start of trading on Friday. Relative weighting describes the impact a stock or sub-group has on the overall TSE 300 Composite Index. A control block is a group of shares owned by a single entity. Control blocks are not considered part of a stock's weighting because these shares cannot freely trade in the market. Under the new rules, the federal government's 18.26 percent holding in Petro-Canada Inc will be included in the company's overall float. Petro-Canada's will therefore see its weighting rise to 1.22 percent from about 1.03 percent. The TSE is changing the definition of a control block to comply with Ontario Securities Commission reporting rules, said Tara O'Donnell, director of derivative markets management. The Ontario Teachers' Pension Plan Board, one of Canada's biggest pension fund managers, will need to make some changes, said Zev Frishman, manager of quantitative products. Teachers' has almost C$45 billion in assets with a third of its money in Canadian equities. "I cannot go into specific numbers or anything like that, but in essence we will have to, to some extent, adjust positions," Frishman said. Barrick will likely be one of the stocks snapped up, analysts said. Barrick, which is 15.7 percent owned by Trizec Hahn Corp, will now be weighted based on 100 percent of its shares from 84.3 percent. As a result, the world's third largest gold producer will see its relative weighting in the TSE 300 increase to 3.28 percent from 2.84 percent. Loewen's weighting will jump to about 1.74 percent from about 0.64 percent, after a control block held by chief executive Raymond Loewen and his wife is included. Ontario Municipal Employees Retirement Services (OMERS) said it expected the control block changes to have little impact on its funds. "You have to remember that the actual changes relative to the market overall are quite small," said Tom Gunn, senior vice-president of OMERS' investment division. The list of 30 affected stocks also includes gold producer Franco-Nevada Mining Corp Ltd, Quebecor Printing Inc, publisher Hollinger Inc, energy firm Gulf Canada Resources Ltd and Shaw Industries Ltd. Others are Astral Communications Inc, BC Sugar Refinery Ltd, CCL Industries Inc and Co-Steel Inc, Corel Corp, Cognos Inc, Cinram Ltd., Edper Group Ltd and First Marathon Inc and Tee-Comm Electronics Inc.

The chief executive of Zellers, a major Canadian retailer, aims to boost sales per square foot by more than a third over three years as the discount chain seeks to regain market leadership from U.S. invader Wal-Mart. Millard Barron, a former executive at Wal-Mart Inc. - which ousted Zellers as Canada's top discount store chain -- told Reuters in a recent interview he planned to increase sales from C$157 ($117) a square foot for fiscal 1997 ending Jan. 31. "We are at least a third below where we should be. We should be (C$)225 ($168) to (C$)250 ($187) a square foot and my goal is (that) over the next three years," said Barron, who took the top job at Zellers last September. Zellers is a unit of Toronto-based Hudson's Bay Co., the owner of Canada's biggest department store chain. Wood Gundy retail analyst David Brodie called Barron's goal ambitious. "Wal-Mart has the momentum. These guys (Zellers) don't," said Brodie, who estimated that Wal-Mart had sales of C$220 ($164) a square foot in Canada, a number Barron called "overstated." Brodie estimated Zellers' market share had fallen to 42 percent since Wal-Mart's arrival in 1994 from about 50 percent. Wal-Mart's Canadian market share was estimated at about 43 percent. Barron landed the chief executive's job at Zellers at a crucial time. The company's operating profit was halved by the arrival in Canada of Bentonville, Ark.-based Wal-Mart, America's biggest retailer. Zellers' fiscal 1996 operating profit plunged to C$106.7 million($79.8 million) from C$215.6 million ($161.2 million) in 1995. Barron said his mission was to improve technology and communications, move more staff to the sales floor, pay more attention to rural stores and renovate the chain's 299 outlets. He did not forecast fiscal 1998 sales, but said Zellers would post fiscal 1997 revenues of about C$3.4 billion ($2.5 billion), versus C$3.5 billion ($2.6 billion) in fiscal 1996. He said that crucial holiday sales in December jumped by double digits for the first time in three years. Barron said that Zellers' capital spending would increase to between two and three percent of fiscal 1998 sales. Retailers usually spend one to two percent. About 20 percent of planned capital spending would be for technological upgrading, with Barron saying Zellers was four years behind other retailers in technology. "By the end of 1997, we will be as technologically proficient and productive as any retailer in North America," Barron said. Zellers said Canada would open up to 12 stores this year, expand 10 and update up to 70.

Toronto stocks ended softer on Thursday but avoided the massive sell-off on Wall Street as heavyweight bank and transport issues restrained losses in the Canadian market, analysts said. The Toronto Stock Exchange's key 300 Composite Index slipped 18.16 points to end at 6040.51, while the Dow Jones Industrial Average dropped 94.28 points to 6755.75. Trading was brisk with 117 million shares changing hands worth C$2.19 billion ($1.63 billion), the fourth highest on record. "This is mostly a Dow-blue chip sell-off," one trader said. Strength in the TSE's financial services and transport sectors restrained Toronto's decline. Computer trading programs drove Wall Street lower after selling was triggered by fears that the Dow was reaching stratospheric levels, traders said. "They were hysterically euphoric in the morning and hysterically nervous in the afternoon," said Oppenheimer & Co. Inc. chief investment strategist Michael Metz. Traders attributed some of the bearish sentiment to news that investment strategist Elaine Garzarelli had turned bullish on U.S. stocks, reversing her call for a 10 to 15 percent correction. Traders said this latest conversion to the bull camp raised concerns among some investors. Of the TSE's 14 sub-indices, 10 lost ground led by media, golds, base metals and utilities. Gaining sectors included transports, real estate and financial services. Declining stocks outpaced advances 525 to 456 with 288 issues unchanged. --- HOT STOCKS --- * Agrium Inc. topped the most-active list, rising 0.60 to 20.50 on 3.9 million shares. Agrium announced plans for a share buyback and US$300 million debt issue on Thursday. * In financial services, Royal Bank of Canada slipped 0.10 to 49.80 on 3.0 million shares. The bank urged shareholders to reject an activist's proposals to limit senior executive pay at its annual meeting in March. Among other banks, Canadian Imperial Bank of Commerce rose 0.60 to 59.10, while Bank of Nova Scotia improved 0.10 to 46.75. * Gold miner Placer Dome Inc. sank 0.70 to 26.90 after announcing a construction delay at its Las Cristinas gold mine in Venezuela.

The Toronto Stock Exchange's key index closed at new highs for the third consecutive session on Thursday, soaring into record territory and ending above the 6,100 point level. The TSE 300 Composite Index climbed 38.32 points to end at 6103.66, after earlier reaching a new intra-day high of 6112.32. Toronto, which set records for the third time this year, was boosted by stronger gold stocks. Portfolio consultant Ron Meisels said investors were looking to snap up cheap gold issues which had recently weakened on plunging bullion prices. Bullion prices have weakened since Monday on news that the Dutch central bank had sold 300 tonnes of gold reserves. "Despite the decline in the price of gold, gold stocks have done reasonably well," Meisels said. "People could have gone bargain-hunting today." Trading was heavy at 121.9 million shares worth C$2.09 billion ($1.56 billion). Almost all of Toronto's 14 sub-indices rose except for four -- conglomerates, pipelines, forestry products and real estate. Golds led the strong side, followed by oils, banks and consumer products. Advancing stocks outpaced declines 591 to 400 with 278 issues unchanged. Among the active issues, Bre-X Minerals Ltd. jumped 0.25 to 24.70 on 2.3 million shares, as some investors laid bets on whether the junior miner would merge with Placer Dome Inc. Placer recently offered to partner with Bre-X to develop the huge Busang gold deposit in Indonesia. Barrick Gold Corp. is also bidding to develop the site with Bre-X. However Bre-X's fate is in the hands of the Indonesian government, which has the final say on any deal. Placer shares soared 0.85 to 28.95 while Barrick jumped 0.75 to 35.80. Wascana Energy Inc. topped Toronto's most actives, gaining 0.40 to 16.10 on 3.4 million shares. Potash Corp of Saskatchewan Inc. fell 2.35 to 113.55 after J.P. Morgan Securities cut its rating on Potash to market perform from buy.

The Toronto Stock Exchange posted another record close on Wednesday on the back of stronger financial service and conglomerate stocks. The TSE's key 300 Composite Index rose 10.85 points to 5986.41 in heavy trading. Trading volume was 108.2 million shares worth C$1.9 billion (US$1.4 billion). Of Toronto's 14 sub-indices, eight rose led by conglomerates, banks, pipelines and media. "This is an interest-sensitive area and where buyers tend to conglomerate," said ScotiaMcLeod senior vice-president Fred Ketchen. Falling sectors included oils, transports and real estate. Barrick Gold Corp. led Toronto's active issues after news on Tuesday of a deal which will give it a majority share in a rich Indonesian gold deposit. One dealer said he had only traded Barrick -- the world's third largest gold producer -- and Bre-X Minerals Ltd. which discovered the Busang gold deposit. "I think both are buys at this point in time," he said. Bank stocks were snapped up by investors as Canada's Big Six banks began reporting year-end earnings this week. Bank of Nova Scotia posted its first C$1 billion ($750 million) annual profit on Wednesday. On the broader market, declining stocks edged out advances 556 to 437, despite gains in the key index. Another 294 shares were unchanged. U.S. markets will be closed on Thursday due to the U.S. Thanksgiving holiday. --- HOT STOCKS --- * Barrick Gold rose 0.75 to 39.65 on more than 7.1 million shares, while Bre-X Minerals gained 0.65 to 21 on 6.5 million shares. * Bank of Nova Scotia climbed 0.20 to 46.05 on 745,000 shares. Toronto-Dominion Bank jumped 0.80 to 36.85 in heavy turnover of 1.3 million shares. T-D Bank is scheduled to report its fourth quarter results on Thursday. * Newbridge Networks Corp. jumped 1 to 38.60 on 1.5 million shares. The stock regained some lost ground since analysts' downgraded Newbridge last week.

The Toronto Stock Exchange's key 300 Composite Index rallied to close at a new all-time high of 6055 points on Tuesday, posting its first such record in 1997. The influential index jumped 53.38 points to end at 6054.86 in brisk turnover of 129.3 million shares worth C$2.1 billion ($1.55 billion). It busted through a previous record of 6018.65 points set on November 28, 1996, partly powered by a Wall Street rally. Wall Street rose 53.11 points to close at 6762.29 on stronger-than-expected fourth quarter earnings from computer chip maker Intel Corp. Earnings per share jumped to $2.13 from a year-earlier $0.98. Today's rally in Toronto was also aided by the start of the 1996 pension season, when Canadians rush into last-minute investing in tax sheltered funds before the traditional end-February deadline. "The RRSP (Registered Retirement Savings Plan) season is beginning," said Midland Walwyn's director of private client investing Dunnery Best. Fund manager Josef Schachter of Schachter Asset Management said that managers have been cautiously eyeing the market and waiting on the sidelines but have been forced to invest since more fund money will soon arrive. "They're sitting on too much cash," Schachter said. All of Toronto's 14 sub-indices spiralled upward, except for golds which tumbled on lower bullion prices. The consumer products sector soared 3.0 percent, followed by conglomerates, transports and base metals. Advancing issues outnumbered decliners 514 to 443 and another 299 traded flat. Takeover targets hogged the spotlight. Gold prospector Bre-X Minerals Ltd. soared 1.90 to $23.35 on today's news that Placer Dome Inc. proposed a rival merger bid to Barrick Gold Corp.'s joint-venture offer. Placer shares slipped 0.90 to $28.10 while Barrick fell 0.95 to 35.45. The Indonesian government originally suggested Barrick and Bre-X team up to develop the deposit but Placer was encouraged to bid for Bre-X by some Indonesian sources. Morrison Petroleums Ltd. rose 0.20 to 10.15 and was Toronto's most active stock. It is expected to fight a hostile bid from smaller oil firm Canadian 88 Energy Corp., announced on Monday.

The Toronto stock market closed softer for a third straight day on Wednesday, depressed by losses on Wall Street. "Canada very often is just following New York," said Montreal-based portfolio consultant Ron Meisels. The Toronto Stock Exchange's key 300 Composite Index fell 17.31 points to close at 6058.67. Trading was brisk on turnover of 123.1 million shares worth C$1.97 billion ($1.47 billion). Wall Street was volatile after analysts were disappointed with fourth quarter earnings from computer giant International Business Machines Corp., they said. Toronto's three-day decline is considered a healthy breather after strong gains earlier this year, Meisels said. "A pause is perfectly natural." Toronto's 14 sub-indices were equally split between gaining and losing ones. The weaker side was led by battered golds, oils, base metals and consumer products. Stronger sectors included media, transports and pipelines. Declining stocks outnumbered advances 559 to 450 while 271 traded unchanged. Shares in the nation's largest airline Air Canada rose 0.75 to 8.00 on ten million shares. Investors were comparing Air Canada's favourable outlook with financially troubled competitor Canadian Airlines Corp. as both waded back into a profit-cutting seat sale, one analyst said. Small prospector Golden Rule Resources Ltd. rose 1.10 to close at 12.00 on speculation about a property in Ghana. Barrick Gold Corp. slipped 0.60 to 35.55 after news that potential partner Bre-X Minerals Ltd. said it acknowledged the 30-day deadline provided by the Indonesian government and will strive to resolve issues with its Indonesian partners. Bre-X shares rose 0.05 to 22.65.

Lower profits from base metals producers are clouding the otherwise improving corporate earnings picture for Canadian companies in the third quarter, analysts said. Richardson Greenshields of Canada analyst Dunnery Best forecast "very substantial declines in earnings" for major base metal firms. "I think almost everywhere else you're going to see improvements year-over-year," Best said. Canada's third-quarter earnings season kicks off when Alcan Aluminium Ltd reports on Thursday. Best said he expected Alcan third-quarter earnings to fall to US$0.35 a share from year earlier US$0.61 a share, which came before an extraordinary loss of US$1.24 a share for an asset writedown. "There's some concerns that the metal group may not exactly report the (expected) numbers," Griffiths McBurney analyst Greg Misztela said. Companies such as Inco Ltd, Noranda Inc and Falconbridge Ltd would likely see earnings declines, Best said. A likely exception was Teck Corp, which Best said "has a lot of coal in its production lineup and coal's been strong, so that will be the one offset." Investors had anticipated disappointments, causing metal stock prices to slide after second-quarter earnings were hit by a drop in copper, nickel and other prices. Markets were rocked in mid-June by the news that Sumitomo Corp fired its head copper trader after he allegedly ran up a US$1.8 billion loss. Analysts forecast that Canada's major banks would lead the pack in earnings gains. The banks are expected to report their results for the fourth quarter ended October 31 in early December. "They'll have a very good year-over-year comparison. I think quarter-over-quarter won't be quite as good," said Royal Bank of Canada vice-president of equities John Kellett. The six big banks, including Royal Bank of Canada and Canadian Imperial Bank of Commerce, have posted a string of record profits in recent years. Best said Richardson Greenshields had increased earnings estimates for Canadian Imperial Bank of Commerce six times so far this year. Consumer products earnings will also rise, analysts said. Another strong area will be Canada's important gold sector, which was buoyed by firmer bullion prices. Earnings at energy firms will be fueled by higher crude oil prices, analysts said. Retail firms will benefit from recent cuts in short-term interest rates by Canada's central bank, spurring consumers to borrow and shop. "Bit by bit the underpinnings are being put in place for a more confident consumer that would eventually lead to better times," Kellett said. Some high-technology firms have said they would report losses in the upcoming quarter, including Gandalf Technologies Inc and Corel Corp, due to problems getting their products to market. Technology heavyweights such as Northern Telecom Ltd and Newbridge Networks Corp will see higher earnings, Best said. -- Reuters Toronto Bureau 416-941-8100

The Toronto market was boosted to another record close on Tuesday by strong buying interest in Barrick Gold Corp. after news broke that it is negotiating to gain control of a huge gold deposit in Indonesia. The Toronto Stock Exchange's key 300 Composite Index gained 23.15 points to end at 5975.56. Turnover was heavy, with 123 million changing hands worth C$2.12 billion (US$1.58 billion). Trading value was the fifth highest ever. Barrick Gold, the world's third largest gold producer, announced that it was in talks with Bre-X Minerals Ltd. over its massive Busang discovery in Indonesia. The market opened stronger, turned mixed at midday but surged again after Barrick and Bre-X announced their negotiations. The Indonesian government had asked Bre-X to form a joint venture with Barrick. "That pulled the gold and precious metals sub-sector higher," said MMS International analyst Katherine Beattie. Barrick, the world's third largest gold producer, has a relative weighting of 3.28 percent on the TSE's list of its top 300 stocks. Relative weighting describes the impact a particular share issue has on the 300 list. Bre-X, which saw its shares tumble, is not included in the TSE 300 index. Ten of Toronto's 14 sub-indices rolled higher, led by golds, transports, consumer products and real estate issues. Sectors which lost a bit of ground were media, base metals, oils and forestry products. On the broader market, declining issues still outpaced advancing ones 553 to 412. Another 305 traded flat. Barrick rose C$2.45 to close at C$39.00 while Bre-X fell C$2.20 to end at C$20.35. Bre-X topped the most actives list, with 8.2 million shares traded, followed by Barrick at 5.9 million shares. Other active stocks included Newbridge Networks Corp., which fell after brokerage Merrill Lynch cut the stock's rating to near-term neutral from near-term accumulate. Shares in the high technology products maker fell by C$2.25 to reach C$37.60. The Bank of Montreal, which is Canada's third largest bank, slipped after it announced record yearly profits as expected. Annual profit soared past C$1 billion (US$745 million) but the stock, which had surged in recent weeks, dipped C$0.45 to C$44.20.

The Toronto stock market posted its sixth record close of the year on Tuesday, led by a rally in Canada's so-called Big Six banks. Toronto's key 300 Composite Index rose 4.48 points to close at 6145.41 in turnover of 115.4 million shares worth C$1.8 billion ($1.3 billion). Investors snapped up banks and other financial service stocks in anticipation that the U.S. Federal Open Market Committee will announce it is keeping short-term interest rates unchanged following a two-day meeting which ends on Wednesday, analysts said. "The most exciting group today was none other than the financial services," said RBC Dominion Securities investment advisor Ira Katzin. "The feeling is that interest rates are not going to rise," he said. Advancing stocks outpaced declines 506 to 464 while another 303 issues were unchanged. The banks led Toronto's six strong groups with a 1.8 percent gain, followed by pipelines and utilities. The TSE's eight weak sectors included media, golds and oils. --- HOT STOCKS --- * The Bank of Montreal, Canada's third largest bank, jumped 1.15 to finish at 48.85 on more than two million shares. Bank of Nova Scotia gained 1.40 to close at 50 on 491,000 shares. * Junior minerals explorer Pure Gold Resources Inc. continued to lead active stocks, rising 0.05 to 0.415 on 7.6 million shares. * Potash Corp. of Saskatchewan Inc. fell 3.50 to 109.50 on turnover of 197,000 shares, depressed by weak potash prices. ScotiaMcLeod analyst Sam Kanes said Russia has been exporting potash at cheaper rates recently. "It's the number one competitor for Potash in Saskatchewan for the moment and they continue to sell their potash at aggressive pricing," Kanes said.

Toronto's stock market extended Friday's rally and closed firmer on Monday, boosted by stronger oil and gold issues to end under its all-time high of 6018 points. Canada's largest equity market closed barely above the watershed 6000 point mark, up 16.55 points at 6001.48. Turnover was brisk at 111.7 million shares worth C$1.58 billion ($1.17 billion). ScotiaMcLeod's senior vice-president Fred Ketchen noted "the stock market didn't do too badly today." Despite a rally in oils, Toronto could not breach its all-time high of 6018 points, set on November 28, 1996. Oils were in focus after Canadian 88 Energy Corp. said it would launch a C$652 million ($476 million) takeover offer for much larger Morrison Petroleums Ltd. "That added a little juice to the oils sector," Ketchen said. On the broader market, only four of Toronto's 14 sub-indices lost ground: consumer products, conglomerates, pipelines and base metals. The gaining sectors were led by oils, golds, transports and industrial products. Advancing stocks outnumbered decliners 544 to 435 and 294 traded flat. Among active stocks, Morrison Petroleums topped Toronto's most actives, gaining C$1.45 to hit C$9.95 on more than 14.7 million shares. Canadian 88 Energy slipped C$0.30 to C$6.45 in light dealings. Canada's largest department store retailer, Hudson's Bay Co., saw shares rise C$0.75 to reach C$24.10 in two large block trades.

Canadian consumers are set to play Scrooge again this holiday season to the despair of long-suffering Canadian retailers, according to a survey of consumers by accounting firm Arthur Andersen. "Overall, the holiday season will not be too much different from last year," said Anderson partner Frank Anderson, who heads the firm's consumer products division. In 1995, Canadian retailers posted one of their worst holiday seasons in recent years, followed by an unseasonably cool spring that hurt sales and forced chains to discount their stock. Many chains have said they are counting on the holidays to boost results in 1996. In the survey released this week, 58 percent of respondents said they would spend the same amount as last year, while 28 percent forecast lower spending and 14 percent said they would spend more. The survey by Arthur Andersen and Quebec firm Le Groupe Mallette Maheu polled 1,220 Canadians in the second week of October. The results were little changed from last year's poll when 58 percent said their spending would equal 1994 levels, while 29 percent said they would spend less and 13 percent more. The findings came despite Canada's lowest interest rates in almost 40 years after a series of rate cuts by the central bank and commercial lenders. Anderson said this year's survey "just shows you there's some underlying problems people have with respect to the level of debt and job security." Canadians have opted for paying down heavy debt loads rather than being spendthrift, he said. Many people still also fear for their jobs after years of layoffs, Anderson added. "It's almost like (you are) looking for an excuse to curtail your spending," he said. "But then again," he added, "historically people have tended to say these things in October and then sort of spend normally when they get involved in the Christmas atmosphere."

The Toronto stock market joined a rally in bonds and finished stronger on Friday, resisting a late session downturn in New York and weakness in heavyweight gold stocks. Toronto's key 300 Composite Index rose 24.48 points to close at 6109.58. About 105 million shares changed hands worth C$1.48 billion ($1.1 billion). "It's the strength in the bond market and the bill market," said MMS International analyst Katherine Beattie. North American bonds rallied after U.S. gross domestic product data released early Friday suggested inflation is not accelerating. The data eased fears of higher U.S. interest rates following next week's rate-setting Federal Open Market Committee meeting. Canada's benchmark 30-year bond jumped C$1.20 to close at C$109.15, yielding 7.215 percent. The Dow Jones Industrial Average closed down 10.77 points at 6813.09, but partly recovered from earlier lows due to profit taking, analysts said. In Toronto, the TSE suffered losses in only four of 14 sub-groups. The key gold sector lost 0.7 percent followed by conglomerates, transportation and base metals. The strong side was led by retail, pipelines, forestry products and consumer products. Advancing issues outpaced declines 539 to 436 with 290 stocks unchanged. Among hot stocks, high technology firm Mitel Corp. fell 0.85 to 9.85 on turnover of 2.4 million shares after reporting relatively flat third quarter profits. Northern Telecom Ltd. rose 2.25 to close at 99.50. Nortel said after the market closed on Thursday that it is bullish on Latin America and will seek further business in Mexico. Takeover target Morrison Petroleum Ltd. fell 0.15 to close at 10.25 on 2.34 million shares as it battles a hostile bid from Canadian 88 Energy Corp. Canadian 88's stock dipped 0.10 to finish at 6.30 on 142,000 shares.

Investors, who last week helped drive the Toronto Stock Exchange to its 50th record close this year, are unlikely to cool on Canadian stocks any time soon, attracted by Canada's improving economic fundamentals. "Canada really has begun to address its deficit problems with rather Calvinistic virtue and I think this is going to help that market and also tend to focus other investors on the opportunities in Canada," said Michael Metz, chief investment strategist at Oppenheimer & Co. Inc. in New York. Toronto's key 300 Composite Index set its 50th record high close last Thursday, the most in a single year since Canada's largest stock exchange began tracking such figures. The previous record was 45 record closes in 1987. The 300 index has risen almost 19 percent this year. After the stock market crash of Oct. 19, 1987, Toronto posted no record closes from 1988 through 1992. But analysts said Toronto's latest bull run will likely extend to mid-1997. "I don't think the run in the Canadian market is over by any means," said Metz. "There's such a rosy view out there on Canada," said HSBC James Capel Canada strategist Bob Boaz. "Inflation is low. The federal deficits are coming down, especially in relation to GDP (gross domestic product). Current account surpluses are happening. The political situation (Quebec separatism) has faded away and that has buoyed the Canadian dollar," Boaz said. Canada's inflation rate is about 1.4 percent, while the federal government has forecast its yearly borrowing requirements will drop to zero in 1998/99 from C$28.6 billion ($21.4 billion) in 1995/96. Booming exports have pushed Canada's current account to a surplus due for the first time since 1984. Political uncertainty has also waned after last year's narrow loss by separatists in a referendum on independence for the French-speaking province of Quebec. On Friday, Canada's dollar reached the 75 U.S. cent mark for the first time in a year. "I think Canada's in a different situation" than in 1987, Metz said. "We're on the early stages of what I would call a boomlet worldwide, which is going to result in I think strengthening industrial and commodity prices, which I think are going to be very bullish for Canada." "I'm still tremendously bullish on stocks," said Boaz, who does not rule out the index hitting 6500 points by mid-1997. The 300 index closed at 5,591.31 on Friday, down 7.51 points.

Investors, who last week helped drive the Toronto Stock Exchange to its 50th record close this year, are unlikely to cool on Canadian stocks any time soon, attracted by Canada's improving economic fundamentals. "Canada really has begun to address its deficit problems with rather Calvinistic virtue and I think this is going to help that market and also tend to focus other investors on the opportunities in Canada," said Michael Metz, chief investment strategist at Oppenheimer & Co Inc in New York. Toronto's key 300 Composite Index set its 50th record high close last Thursday, the most in a single year since Canada's largest stock exchange began tracking such figures. The previous record was 45 record closes for all of 1987. The 300 index has risen almost 19 percent this year. After the stock market crash of October 19, 1987, Toronto posted no record closes from 1988 through 1992. But analysts said Toronto's latest bull run will likely extend to mid-1997. "I don't think the run in the Canadian market is over by any means," said Metz. "There's such a rosy view out there on Canada," said HSBC James Capel Canada strategist Bob Boaz. "Inflation is low. The federal deficits are coming down, especially in relation to GDP (gross domestic product). Current account surpluses are happening. The political situation (Quebec separatism) has faded away and that has buoyed the Canadian dollar," Boaz said. Canada's inflation rate is now about 1.4 percent, while the federal government has forecast its yearly borrowing requirements will drop to zero in 1998/99 from C$28.6 billion in 1995/96. Booming exports have pushed Canada's current account to a surplus for the first time since 1984. Political uncertainty has also waned after last year's narrow loss by separatists in a referendum on independence for the French-speaking province of Quebec. On Friday, Canada's dollar strengthened to the US$0.75 mark for the first time in a year. "I think Canada's in a different situation" than in 1987, Metz said. "We're on the early stages of what I would call a boomlet worldwide, which is going to result in I think strengthening industrial and commodity prices, which I think are going to be very bullish for Canada." "I'm still tremendously bullish on stocks," said Boaz, who does not rule out the index hitting 6500 points by mid-1997. The 300 index closed at 5591.31 on Friday, down 7.51 points.

Eurotunnel Plc, the debt-laden Channel Tunnel operator, pledged on Monday to recover from the public relations disaster which followed last November's tunnel fire and said it expected to restore lost market share in 1997. Speaking from Eurotunnel's Folkestone base in England, Patrick Ponsolle, chairman, outlined the group's review of 1996 with an update on sales and the debt refinancing in the aftermath of the fire which caused a partial shutdown of services in the key Christmas period. Ponsolle assured investors that the financial fallout from last November's fire would not hit its debt rescue plan clinched in October or derail long-term growth. "The board...believes that the November fire should not have any significant effect on the long-term financial performance of the company, nor will there be any need to review the financial restructuring plan," said Eurotunnel in a statement. The shareholder meeting to approve the debt plan has been delayed to June, when all tunnel services resume. Eurotunnel said its banking syndicate had taken the opportunity of the delay to the meeting to ask the remaining syndicate of bankers to extend the debt standstill arrangement to December. Richard Hannah, analyst at UBS, said "The fact that the refinancing will not have to be restructured is the key message for investors." Eurotunnel also provided evidence of its sales surviving last year's fire, with passenger numbers sharply ahead and an "encouraging" outlook for 1997. Ponsolle told the Folkestone press briefing that revenues in the fourth quarter of 1997 were expected to be "substantially higher" than the same 1996 period, making him "cautiously optimistic" for 1998. The embattled Anglo-French group which recently restructured near to nine billion pounds in debt, said its efforts to claw back lost sales coupled with cutbacks in cross-Channel capacity by the ferry companies would fuel the rise in revenues. In the first major trading review since the fire, the group reported that unaudited estimated turnover for 1996 was 450 million pounds ($752.5 million), up from 300 million in 1995. The group said the sales growth was achieved "despite a substantial loss of revenue in the last seven weeks (of 1996)." Thirteen million passengers travelled through the tunnel last year by the Le Shuttle car service or the Eurostar passenger trains, up from eight million the previous year. Eurotunnel said once full services resumed in June it should be able to increase its market share in the second half. "This market share should be comparable to, if not higher than, autumn 1996, and revenues at the end of this year should be higher than at the end of 1996," it said. "As expected, Eurotunnel has provided a morale booster," added UBS' Hannah. Sales growth was in line with expectations. Eurotunnel sought to stress that no damage had been done to consumer confidence by publishing the results of a commissioned Gallup survey which found 77 percent of French questioned and 68 percent of British believed the tunnel was safe. Looking at a breakdown of the latest Eurotunnel traffic data, Eurostar increased passenger numbers by 67 percent to 4.86 million for the full year and by 69 percent for the 11 months up to the November fire which led to a temporary closure. Le Shuttle car tourist traffic rose 70 percent to 2.07 million cars in 1996, with coach traffic up 148 percent to 57,692 coaches. Le Shuttle freight traffic was up 33 percent to 519,003 trucks for the year. Eurotunnel shares edged up two pence to 78 in London and rose 20 centimes to 7.10 francs in Paris.

Anglo-French Eurotunnel SA/Plc on Wednesday sought to reassure the public about the safety of the Channel Tunnel following last week's fire which halted most rail services between France and Britain. "There is no doubt the tunnel is at least as safe as other Channel transport systems," French co-chairman Patrick Ponsolle told a news conference. A fire in a truck on a freight train seriously damaged a section of the tunnel on Monday last week, injuring 34 people and raising doubts over the safety of the cross-Channel service. The Eurostar high-speed passenger train and Le Shuttle car and passenger services have been halted ever since, although a limited freight service has resumed. "Safety is our first consideration, ahead of commercial considerations," British co-chairman Robert Malpas said. "The emergency evacuation procedure which forms the backbone of the safety system worked after two other measures failed." The cause of the fire remains a mystery, although sabotage is seen as one possibility by the French magistrate investigating the fire. "The judge has not ruled out the theory of foul play," said a Eurotunnel spokeswoman. But legal sources said the idea that the fire was started deliberately was regarded as a remote possibility and not the most likely cause. Ponsolle said Eurotunnel's maximum potential loss from the fire was five to seven million pounds ($8.40 million to $11.75 million). "The ultimate maximum loss for the company after receiving insurance indemnities could be of the order of five or six or seven million pounds," he said. Eurotunnel's monthly turnover before the fire was between 350 and 400 million francs ($67.75 million and $77.43 million). Loss of revenues would depend on the re-establishment of a partial service, he said. If passenger and freight services resumed to 50-60 percent of previous capacity this would mean a maximum monthly loss of 200 million francs, Ponsolle said. Eurotunnel's maximum insurance coverage is 1.5 billion francs for equipment and 4.5 billion for earnings losses, Ponsolle said. Eurotunnel hopes to resume partial passenger service early next week, if the safety commission that oversees the tunnel approves a new set of temporary evacuation measures, Ponsolle said. Because a two km (1.243 mile) section of one of the tunnel bores cannot be used for evacuation, the company is laying on special fire-fighting and ambulance crews on 24 hour alert, with two wagons for extricating passengers. The train which was destroyed in the fire was worth nearly 100 million francs and repairs to the tunnel and related equipment would cost between 200 million and 500 million. But Eurotunnel is awaiting the results of insurance investigations into the costs of the fire. Ponsolle said the blaze should not affect a complex plan to restructure the company's 70 billion francs of junior bank debt which took a year to negotiate. "There is no reason for us to put into question the restructuring," he told reporters. "We do not see at this stage there needs to be any delay in the rescheduling of the debt," Malpas told Reuters Financial Television when asked whether the banks had asked for new clauses to be added to its restructuring because of the fire. "The creditor banks have been very understanding; they wish us well...they see it as an incident which we will get over and which will be contained in insurance arrangements and the financial arrangements we have set up," Malpas said. Ponsolle said the company did not face any problems with cashflow. Eurotunnel had 100 million pounds ($167.7 million) in cash holdings and "it is not under financial pressure to reopen services". ($1=.5956 Pound) ($1=5.166 French Franc)

Just as the submarine changed the face of naval warfare in World War Two, Europe's shipbuilders are hoping a new breed of "stealth" warships will do the same in the 21st century. At a trade fair at the business airport of Le Bourget, north of Paris, three shipbuilders were presenting their own version of combat ships with the ability to hide and deceive the enemy. British shipbuilder Vosper Thornycroft was due on Tuesday to unveil its design for the Sea Wraith corvette at the Euronaval exhibition, which gathers the world's navies. BAeSema, a joint venture between British Aerospace Plc and France's Sema Group, launched its Cougar coastal corvette project on Monday. And French state-owned DCN shipyard presented its La Fayette frigate which it boasted was the first operational warship fully to use stealth features in its design. DCN builds the hulls, while it has linked up with French defence company Thomson CSF to provide the ship's communications, detection and weapons control systems. Stealth warships use similar principles to the radar-beating technology developed by the U.S. aircraft industry and used in the 1991 Gulf War against Iraq. The diamond-shaped F117 and batwing B2 bombers were designed to absorb or deflect radar. But traditionalists who admire the sleek greyhound lines of warships would be dismayed to see the flat, angular shapes forced by the stealth technology which makes modern ships mere "platforms" for weapons and detection systems. The La Fayette uses a slab-sided superstructure and non-metallic composite materials to confuse radar and missiles. The second of eight La Fayette-class ships ordered by Taiwan entered service last week, while Saudi Arabia has also ordered the French ship. But the British are in hot pursuit with their own designs for a new generation of stealth vessels, which they say they are ready to build now. They have set their sights firmly on export markets for the first customers. "We believe this is the warship of the future and all warships will need to use these techniques," Brian Spilman, Vosper's manager of future projects shipbuilding, told Reuters. The Sea Wraith design puts the distinctive clutter of mast, radar dishes and aerials inside flat-sided towers and has shaped topsides, rather like diamond facings, to make it hard for radars to lock on. It also uses non-reflective composites. Sea Wraith can alter its "radar signature" by lowering or raising the mast, making it difficult to recognise the craft. Two asymetrically-located masts are meant to confuse radar-guided missiles. To counter new infra-red, or heat-seeking, missiles, the ship sprays a fine mist of water to conceal itself and its "hot spots" such as the exhaust. BAeSema is showcasing the Cougar patrol vessel, which uses low-acoustic waterjet propulsion instead of traditional noisy engines which are easily picked up by sonar. Its low, angular lines are typical of stealth designs for throwing off radar beams. BAe last week announced it was merging its naval systems activities into BAeSema, to boost its prime contractor role. Prime contractors bid for contracts in which their integration of radar, communications and defence systems provide the added value. Both BAeSema and Vosper have declined to give prices for their ships, saying these depend on the systems requested. Thomson-CSF, part of the French state-owned Thomson SA electronics group which is being privatised to the Lagardere conglomerate, is the prime contractor for the La Fayette under Sawari 1 and 2 contracts signed with Saudi Arabia.

Just as the submarine changed the face of naval warfare in World War Two, Europe's shipbuilders are hoping a new breed of "stealth" warships will do the same in the 21st century. At a trade fair at Le Bourget airport, north of Paris, three shipbuilders presented their own version of combat ships with the ability to hide and deceive the enemy. Britain's Vosper Thornycroft on Tuesday unveiled its design for the futuristic Sea Wraith corvette. "We believe it has the potential to make other vessels of its class obsolete," Brian Spilman, Vosper's manager of future projects shipbuilding, told a news conference at the Euronaval exhibition, which gathers the world's navies. BAeSema, a joint venture between British Aerospace and France's Sema Group, presented its Cougar corvette on Monday. And French state-owned DCN shipyard presented its La Fayette frigate which it boasted was the first operational warship fully to use stealth features in its design. Unlike the first two, designed for patrolling regional waters, the French ship is a full-scale deep-water frigate. Stealth warships use similar principles to the radar-beating technology developed by the U.S. aircraft industry and used in the 1991 Gulf War against Iraq. The diamond-shaped F117 and batwing B2 bombers were designed to absorb or deflect radar. Built in flat, angular shapes, stealth warships are "platforms" for weapons and detection systems. The La Fayette uses a slab-sided superstructure and non-metallic materials to confuse radar. The second of eight La Fayette-class ships ordered by Taiwan entered service last week, while Saudi Arabia has also ordered the French ship. The British are in hot pursuit with their own designs for a new generation of stealth vessels. "We believe this is the warship of the future and all warships will need to use these techniques," Vosper's Spilman said. "We have made it difficult to detect, classify and engage with a missile," he told the news conference. The Sea Wraith design puts the distinctive clutter of mast, radar dishes and aerials inside flat-sided towers and has shaped topsides, rather like diamond facets, to make it hard for radar to lock on. It also uses non-reflective composites. Sea Wraith can alter its "radar signature" by lowering or raising the mast, making it difficult to recognise the craft. Two asymetrically-located masts are meant to confuse radar-guided missiles. To counter new infra-red, or heat-seeking, missiles, the ship sprays a fine mist of water to conceal itself. BAeSema is showcasing its low angular Cougar patrol vessel, which uses low-acoustic waterjet propulsion instead of traditional noisy engines which are easily picked up by sonar. The basic Cougar "hull-in-the-water", excluding weapons and other systems, costs around 30 million sterling ($37.56 million), according to Keith Figg, the craft's designer. BAe last week announced it was merging its naval systems activities into BAeSema, to boost its prime contractor role. Prime contractors bid for contracts in which integration of radar, communications and defence provide the added value. BAeSema would act as prime contractor while the ship would typically be built in the customers' own shipyards. "We're going for indigenous building and procurement, which would be a more cost-effective solution and involve ownership at an earlier stage" Figg said. South East Asian delegations have shown interest in both the Cougar and Sea Wraith, company executives said. "We view that part of the world as a very important market," Spilman said. Strong economic growth and regional rivalries particularly over natural resources and territorial waters have fuelled an arms race in South-East Asia. French defence electronics group Thomson-CSF TCFP.PA is the prime contractor for the La Fayette under Sawari 1 and 2 contracts signed with Saudi Arabia. ($1=.7986 Sterling)

The European Airbus consortium said on Tuesday it was confidently pressing ahead with studies on a 555-seat passenger plane despite a decision by archrival Boeing to scale back work on a larger jumbo jet. Boeing on Monday said market conditions did not justify the risk and expense of building a new version of its 747 jumbo jet, the 747-X, and it was diverting half the 1,000 staff on that project to smaller planes. "We are confident the A3XX will meet market needs," an Airbus spokesman said. "The signs from major airlines working with us on shaping the A3XX are definitely encouraging." Airbus, ever quick to seize on any perceived gaps in Boeing's armour, says airlines want an all-new plane rather than Boeing's 747-X, which the Airbus spokesman said was the "end of the line for a product developed in the late 1960s". "Airlines want to fly into the 21st century facing forward, not backwards," the spokesman added. Airbus must attack Boeing's monopoly on the large-capacity segment and is studying designs for an A3XX product family which it hopes to launch in 1998 for service in 2003. It wants to grab at least half of the aircraft market by the end of the decade, up from its estimated historic share of 35 percent. But it lacks large planes to compete with Boeing's 777 giant twinjet and the best-selling 747 jumbo. The four-nation consortium differs with Boeing over the potential market and development costs for a new large plane. Airbus forecasts a market of 1,383 planes seating more than 400 passengers over the next 20 years, while Boeing believes demand would only stretch to 470 planes seating 500 or more, which would not allow it to get a return on its money. A basic A3XX would cost around $200 million, giving potential sales worth more than $275 billion on the Airbus forecast. "A split market would have been a big challenge for two manufacturers but now Boeing is opting out, that enhances our prospects," the Airbus spokesman said. Airbus accepts the view that the market will fragment further as people want to fly more frequently, non-stop, long distance between city pairs. The "fragmentation" effect was one of the factors cited by Boeing for cutting demand for larger planes and reducing the importance of big airport hubs. But Airbus believes it will meet that market change with its A340 long-haul plane and that the A3XX will co-exist. Saturation of air routes and airport landing slots calls for higher capacity planes, it argues. Countering critics who point to the already lengthy waits at airports, it says its A3XX designs would allow a quicker passenger turnaround than the jumbo. Airbus is talking to 14 leading airlines on what the plane should offer and is confident that it can match or better the airlines' operating demands. These include fitting within an 80 metre "box" at the airport terminal. It is officially sticking to its estimated $8 billion development cost for the A3XX, despite scepticism among some experts that it cannot be done for less than $15 billion. Even though, privately, Airbus executives concede that the cost could be nearer $10 billion, they say they will try to contain costs to $8 billion. Airbus is a consortium made up of French state-owned Ste Nationale Industrielle Aerospatiale, British Aerospace Plc, Daimler-Benz Aerospace (a unit of Daimler-Benz AG) and Construcciones Aeronauticas SA (CASA) of Spain.

French aviation executives said on Tuesday they feared renewed turbulence with the United States over airline market access in France, with flagcarrier Air France caught up in a looming "air war". The U.S. government wants France to sign a bilateral treaty which would grant more landing rights to American airlines, while Paris seeks a gradual market liberalisation. A spokeswoman for the U.S. embassy in Paris told Reuters the U.S. authorities had not rejected the new winter schedule for state-owned Air France. "However, Air France has requested increased services over last winter," she said. "The Department of Transportation has extended the deadline to rule on Air France's request until October 27, thereby giving our government time to discuss the schedule with the French authorities." That delay on approving Air France's schedule was seen as a strongarm measure to force Paris into agreeing a new aviation treaty. "It's like placing a dagger at our throat," an aviation executive said. Air France's winter schedule was due to enter service on October 27. Air France has requested an extra flight to San Francisco, two to Los Angeles and one to Chicago this winter, compared to the 1995 winter schedule. It wants to add extra cargo capacity from March to Miami and Chicago. A second French executive said if the United States took unilateral measures, Paris would not hesitate to retaliate against U.S. airlines, as it did in March when U.S. Transportation Secretary Federico Pena rejected Air France's summer schedule. Paris cut landing rights of six U.S. airlines before the junior transport ministers of both countries, meeting in Paris, agreed to open talks aimed at reaching a treaty to replace one which expired in 1992. Without such a treaty, each route and landing rights have to be negotiated on a case-by-case basis, whereas Washington would like a global, market-driven solution. Separately, Washington is withholding approval of a planned alliance between American Airlines and British Airways Plc until Britain agrees an "open skies" treaty with the United States.

State-owned Air France on Wednesday reported dramatically improved earnings of 802 million francs ($158 million) in the first half and placed a bumper order for 20 Boeing and Airbus aircraft, plus options. The profit estimate for the six months to September 30, which emerged in an Air France board statement, compared with a loss of 335 million francs a year ago. The improved results and Air France's aim to break even in 1996/97 was underlined with orders for 10 Boeing 777 twinjets, and options for 10 more. The airline also ordered five Airbus A340s, confirmed five orders made in June and options for a further five. Air France chairman Christian Blanc won vital support from Prime Minister Alain Juppe to buy from Seattle-based Boeing instead of ordering solely from its archrival Airbus Industrie , the European consortium based in southwest France. At catalogue prices, which are rarely paid, the orders and options for the Boeing 777-200 version ordered could be worth around $2.7 billion. Airbus would stand to gain $1.75 billion. List prices for the B777-200 range between $128 and $146 million, while the Airbus A340-300 costs $110 to $120 million. "In the reorganisation of its fleet, Air France is obliged to buy Boeing," Transport Minister Bernard Pons told parliament. "It is obliged to meet commitments made in 1989, unless it accepts losing deposits and taking legal action which risks being much more expensive than taking this decision." The French airline had orders outstanding with Boeing worth $994 million and $2 billion of options, Pons said, adding that the airline had skillfully negotiated the latest order to respect the initial undertaking. The three state representatives on the Air France board approved the Boeing 777 purchase "not because they are the best or the most profitable but because they best meet the company's needs," Pons said. Air France had also accepted to be a launch customer for the planned A340-600, a "stretched" version of the A340, he said. Airbus hopes to build the 375-seater to smash Boeing's monopoly at the large capacity aircraft segment. Air France said that due to financial problems, it froze at the end of 1994 all aircraft orders, including the 1989 Boeing order, and opened talks with the two plane-makers. Air France has since rationalised its fleet, restructured its network around a centralised "hub" at Paris Charles De Gaulle airport and optimised aircraft use. It has over the past two years increased the number of flying hours by 14 percent. Pons welcomed Air France's financial results, saying: "The results are very encouraging." The company said it made its profit despite a rise in spending on fuel of nearly 500 million francs for the period. Turnover was up nearly five percent to 21.3 billion francs due to a 14.8 percent increase in passenger traffic and a 6.7 percent rise in freight. Operating profit rose nearly 30 percent to 1.1 billion francs, compared with 849 million in the year-earlier period. The pretax, pre-exceptional result tripled to 660 million francs. Air France was ahead by "a little more than 250 million francs of its budget" at the six months stage, the company said. The first half is traditionally better for seasonal reasons and should not be used to extrapolate for the full year, it added. Debt stood at 12.9 billion francs at September 30, versus 19.2 billion at March 31, 1996. The repayment of 6.3 billion francs significantly exceeded the last tranche of its state recapitalisation paid in September. The Boeing order consists of the heavier "Increased Gross Weight" version of the basic 777-200, equipped with GE90 engines built by General Electric and France's Snecma. The B777-200 will seat 288 passengers in three-classes. The Airbus order is for the A340-200E version equipped with CFM56-5C4 engines. ($1=5.075 French Franc)

Air France is linking up with two major U.S. carriers, Delta Air Lines and Continental, in a transatlantic alliance crucial to its ability to keep up with its major European rivals. The French state airline said on Wednesday it had signed separate letters of intent for cooperation with Delta and Continental after a lengthy search for a U.S. partner. The long-awaited agreements mark a strategic step in Air France's development and tap the huge U.S. travel market to feed its global network while the U.S. companies will carry the French airline's passengers on their domestic routes. "These agreements crystallise the company's wish to forge a network of global alliances," Air France said in a statement. The alliances allow so-called code-sharing arrangements between Air France and the U.S. companies, which is a low-cost way of gaining more customers without direct investment. It means passengers can be issued with a through-ticket by one carrier to be used on its partner airline -- making it possible for airlines to feed passengers to each other without setting up their own routes. The companies will also harmonise their flight schedules, share a common frequent flyer programme, and provide ground facilities. Delta operates from its hub at Atlanta, Georgia, while Continental works from Houston, Texas and Air France uses Paris Roissy-Charles De Gaulle airport. Air France gave no financial details of the link-ups but a spokeswoman said they were expected to bring the loss-making airline savings of $100 million a year. The airline racked up a net loss of more than two billion francs last year after heavy provisions for restructuring, but has said it hopes to be in profit this financial year. Air France chairman Christian Blanc has for months been looking for a heavyweight partner to give the airline a global reach and counter the spread of alliances between its rivals. Air France has previously said it was talking to Continental and Delta, as well as American Airlines of AMR Corp, United Airlines of UAL Corp and USAir Group. German airline Deutsche Lufthansa AG started code-sharing flights with United Airlines in 1994, paving the way for several other high-profile cooperation deals. American Airlines this year agreed a controversial alliance with British Airways Plc but regulatory approval has been held up by a row between the British and U.S. governments over an "open skies" agreement. The planned BA-American alliance has been attacked by rivals as anti-competitive. French newspapers have said Washington is squaring up for another struggle with France over a bilateral "open skies" pact and would use any alliance by Air France as a lever to push the French to further open up the domestic market. Air France cautioned the through-ticketing accords with Continental and Delta were subject to government approvals. Washington and Paris clashed earlier this year when the United States wanted to open bilateral talks on market access and held up U.S. approval of Air France's summer schedule until the French agreed to start negotiations. Air France and Continental signed a commercial accord back in 1993 but it has never been implemented due to changes in top management at both companies. Continental, among the U.S. majors, does not have a European partner.

French subscriber television company Canal Plus said on Friday that it was merging with Nethold, a Dutch satellite television company, to create one of the world's largest pay-TV groups. Nethold is jointly held by Richemont SA, which is quoted on the Zurich and Johannesburg stock exchanges and MIH Holdings Ltd, a listed holding company. "This merger is a major strategic move, resulting in the creation of one of the largest television groups in the world...particularly in the field of pay-TV with over 8.5 million subscribers," Canal Plus said in a statement. The new group will have significant positions in France, Italy, Spain, Scandinavia, the Benelux countries and Germany, as well as a presence in several growing markets in central Europe. The Paris stockmarket authorities had suspended trading in Canal Plus shares on Friday morning, sparking speculation of a link up between the French firm and Nethold. Its stock closed at 1,169 francs on Thursday. Utilities group Cie Generale des Eaux, a key shareholder in Canal Plus, said in a separate statement that it was delighted with the merger plan, which marked big step in Canal Plus's international development. The pact would give the French company access to the fast growing Italian market, Generale des Eaux said. It would also give the new group greater weight in negotiating purchases of copyrights and open opportunities for the launch of European theme channels. Generale des Eaux said it was comfortable with its investment in Canal Plus. It said that, in agreement with other Canal Plus shareholders, it would seek to maintain the same scale of investment in the new company. Under the terms of the deal, Canal Plus will buy 100 percent of Nethold from Richemont and MIH, paying with 6.1 million new Canal Plus shares and $45 million in cash. Following the issue of new Canal Plus shares, Richemont and MIH will respectively own 15 and five percent of Canal Plus. Cie Financiere Richemont has interests in luxury goods and tobacco and owns such famous brandnames as Cartier, Mont Blanc, Rothmans and Dunhill. Canal Plus said the deal had the backing of its main shareholders, media group Havas, Generale des Eaux, bank Ste Generale and state bank Caisse des Depots et Consignations. It is subject to regulatory and shareholder approval.

Partners in European aircraft consortium Airbus must speed up plans to convert the partnership into a single company after news of a merger between its two U.S. competitors, an aerospace executive said on Sunday. Boeing Co and McDonnell Douglas announced a $13.3 billion merger plan which would create the world's largest aerospace firm, with 1997 sales of about $48 billion and employing 200,000 people, dwarfing rival Airbus. The merger meant Airbus shareholders had "to get their act together quickly", the executive said. Airbus is a consortium made up of France's Ste Nationale Industrielle Aerospatiale, British Aerospace Plc (BAe), Daimler-Benz Aerospace, a unit of Germany's Daimler-Benz AG, and Construcciones Aeronauticas SA (CASA) of Spain. The European company has historically held around a 30 percent share of the market, with Boeing holding around 60 percent and McDonnell 10 percent. Airbus expects to notch up firm orders for more than 300 aircraft in 1996, worth around $20 billion, compared to 106 sales last year, worth $7 billion. Boeing said it has received orders for 621 planes at the end of November. The Airbus partners, who are also Airbus subcontractors, are in talks on how to change the grouping into a joint stock company from the present "groupement d'interet economique" (economic interest group) partnership. The aim is to create a more competitive and responsive organisation. "The need for the Europeans to integrate becomes more urgent," said the executive, who asked not to be identified. The merger move showed "the arguments (between partners) are trivial". BAe's group managing director John Weston has said the future Airbus should be a large, integrated company with design offices and manufacturing and sales functions, and have a solid balance sheet to finance aircraft sales, to better rival Boeing. But Aerospatiale's chairman Yves Michot has said he sees the new Airbus as essentially a large prime contractor, directing its suppliers' work but retaining its design offices. Some executives see the design office as the heart of the business, with the ability to create new aircraft. Aerospatiale's design offices are in the southwestern French city of Toulouse, next to Airbus headquarters. Eventually, BAe wants Airbus to be the civilian arm of a huge pan-European aerospace grouping, with a military wing to build future generations of combat planes, built from the national companies. But for the time being, the partners also need to resolve differences over the valuation and transfer of assets. Airbus officials in France declined comment. "We can't comment on things happening in North America," a spokeswoman said. Officials at Aerospatiale were not available for comment. The Airbus negotiations slowed over the summer, when the French government moved the then chairman, Louis Gallois, to the helm of troubled state railway operator SNCF and promoted his number two, Yves Michot. A memorandum of understanding was due to be signed by the end of this year setting out the main lines of the new company but the industry executive said the talks are due to last up to March 31. U.S. broker Lehman Brothers has estimated Airbus could be worth between $15-18 billion after its conversion, based on historical and prospective financial data. Previous major consolidation moves in the United States between fierce rivals such as Lockheed and Martin Marietta, and now Boeing and McDonnell Douglas, showed all that was needed was the ability to look ahead and for the political will to exist. The internal debate over the shape and scope of the future Airbus has run on for years, with managing director Jean Pierson a fervent enthusiast for an integrated company. The new Airbus company is supposed to be formed by the end of 1999. The irony is that Airbus held merger talks with McDonnell Douglas in 1988 but the U.S. firm was stronger in those days and Airbus had not consolidated its position in the world market.

Partners in European aircraft consortium Airbus must speed up plans to convert the partnership into a single company after news of a merger between its two U.S. competitors, an aerospace executive said on Sunday. Boeing Co and McDonnell Douglas earlier announced a $13.3 billion merger plan which would create the world's largest aerospace firm, with 1997 sales of about $48 billion and employing 200,000 people, dwarfing rival Airbus. The merger meant Airbus's shareholders had "to get their act together quickly," the executive said. Airbus is a consortium made up of Ste Nationale Industrielle Aerospatiale, British Aerospace Plc (BAe), Daimler-Benz Aerospace, a unit of Daimler-Benz AG and Construcciones Aeronauticas SA (CASA) of Spain. The partners, who are also Airbus subcontractors, are in talks on how to change the grouping into a joint stock company from the present "groupement d'interet economique" (GIE) partnership. The aim is to create a more competitive and responsive organisation. "The need for the Europeans to integrate becomes more urgent," the executive said. The merger move showed "the arguments (between partners) are trivial." BAe's group managing director John Weston has said the future Airbus should be a large, integrated company with design offices, manufacturing and sales functions, and have a solid balance sheet to finance aircraft sales, to better rival Boeing. But Aerospatiale's chairman Yves Michot has said he sees the new Airbus as essentially a large prime contractor, directing its suppliers' work, but retaining its design offices. Some executives see the design office as the heart of the business, with the ability to create new aircraft. Aerospatiale's design office are in the southwestern city of Toulouse, next to Airbus headquarters. Eventually, BAe wants Airbus to be the civilian arm of a huge pan-European aerospace grouping, with a military wing to build future generations of combat planes, built from the national companies. But for the time being, the partners also need to resolve differences over the valuation and transfer of assets. Airbus declined comment. "We can't comment on things happening in North America," an Airbus spokeswoman said. Officials at Aerospatiale were not available for comment. The Airbus negotiations slowed over the summer, when the government moved then-chairman Louis Gallois to the helm of troubled state railway operator SNCF and promoted his number two, Yves Michot. A memorandum of understanding was due to be signed by the end of this year setting out the main lines of the new company, but the industry executive said the talks are due to last through the winter, up to March 31. U.S. broker Lehman Brothers has estimated Airbus could be worth between $15-18 billion after its conversion, based on historical and prospective financial data. Previous major consolidation moves in the United States between fierce rivals such as Lockheed and Martin Marietta, and now Boeing and McDonnell Douglas, showed all that was needed was the ability to look ahead and for the political will to exist. The internal debate over the shape and scope of the future Airbus has run on for years, with managing director Jean Pierson a fervent enthusiast of an integrated company. The new Airbus company is supposed to be formed by the end of 1999. Airbus expects to notch up firm orders for more than 300 aircraft in 1996, worth around $20 billion, compared to 106 sales last year, worth $7 billion. Boeing said it has received orders for 621 planes at the end of November. The irony is that Airbus held merger talks with McDonnell Douglas in 1988, but the U.S. firm was stronger in those days and Airbus had not consolidated its position in the world market. The European company has historically held around a 30 percent share of the market, with Boeing around 60 percent and McDonnell 10 percent.

Air France is linking up with two major U.S. carriers, Delta Air Lines and Continental, in a transatlantic alliance crucial to its ability to keep up with its major European rivals. The French state airline said on Wednesday it had signed separate letters of intent for cooperation with Delta and Continental after a lengthy search for a U.S. partner. The long-awaited agreements mark a strategic step in Air France's development and tap the huge U.S. travel market to feed its global network while the U.S. companies will carry the French airline's passengers on their domestic routes. "These agreements crystallise the company's wish to forge a network of global alliances," Air France said in a statement. The alliances allow so-called code-sharing arrangements between Air France and the U.S. companies, which is a low-cost way of gaining more customers without direct investment. It means passengers can be issued with a through-ticket by one carrier to be used on its partner airline -- making it possible for airlines to feed passengers to each other without setting up their own routes. The companies will also harmonise their flight schedules, share a common frequent flyer scheme, and provide ground facilities. Delta operates from its hub at Atlanta, Georgia, while Continental works from Houston, Texas and Air France uses Paris Roissy-Charles De Gaulle airport. Air France gave no financial details of the link-ups but a spokeswoman said they were expected to bring the loss-making airline an extra $100 million a year in gross revenues. The French airline racked up a net loss of more than two billion francs last year after heavy provisions for restructuring, but has said it hopes to be in profit this financial year. Air France chairman Christian Blanc search for U.S. partners only became possible this year as Air France showed signs of financial recovery and reorganised its global network around a central "hub" operation at Roissy Charles De Gaulle airport, giving it a key asset. This year marks the end of a three-year productivity drive by Blanc to return Air France to break even by 1997 and match the competiveness of its European rivals. German airline Deutsche Lufthansa AG started code-sharing flights with United Airlines in 1994, paving the way for several other high-profile cooperation deals. French executives fear Washington could hold up any alliance by Air France as a lever to push Paris into opening up the domestic market as part of a bilateral aviation pact. American Airlines this year agreed a controversial alliance with British Airways Plc but regulatory approval has been held up by a row between the British and U.S. governments over an "open skies" agreement. The planned BA-American alliance has been attacked by rivals as anti-competitive. Air France cautioned the through-ticketing accords with Continental and Delta were subject to government approvals. Washington and Paris clashed earlier this year when the United States wanted to open bilateral talks on market access and held up U.S. approval of Air France's summer schedule until the French agreed to start negotiations. Air France and Continental signed a commercial accord back in 1993 but it has never been implemented due to changes in top management at both companies. Continental, among the U.S. majors, does not have a European partner.

Partners in European aircraft consortium Airbus must speed up plans to convert the partnership into a single company after news of a merger between its two U.S. competitors, an aerospace executive said on Sunday. Boeing Co and McDonnell Douglas announced a $13.3 billion merger plan which would create the world's largest aerospace firm, with 1997 sales of about $48 billion and employing 200,000 people, dwarfing rival Airbus. The merger meant Airbus shareholders had "to get their act together quickly", said the executive, who asked not to be identified. Airbus is a consortium made up of France's Ste Nationale Industrielle Aerospatiale, British Aerospace Plc (BAe), Daimler-Benz Aerospace, a unit of Germany's Daimler-Benz AG, and Construcciones Aeronauticas SA (CASA) of Spain. An Airbus spokesman said the U.S. merger would not alter the competitive threat to Airbus: "(McDonnell) Douglas hasn't been a competitor in the civilian aircraft business for a number of years," the spokesman said. "So it hasn't altered the equation in the commercial field at all for Airbus." Boeing is effectively swallowing up McDonnell Douglas, he said. "It was expected Douglas would have to look in the civil field for its fortunes elsewhere, or merge, or opt out of the business altogether," he said. Boeing was the obvious merger candidate. MD decided in October to drop plans to build the MD-XX wide body passenger jet, which would have doomed it to niche player status with its two current products, the MD-11 and MD-80/90. Airbus, which has historically held around a 30 percent market share, with Boeing some 60 percent and McDonnell 10 percent, wants at least half the market by the end of the decade. Airbus expects to notch up firm orders for more than 300 aircraft in 1996, worth around $20 billion, compared to 106 sales last year, worth $7 billion. Boeing said it has received orders for 621 planes at the end of November. The Airbus partners, who are also Airbus subcontractors, are in talks on how to change the grouping into a joint stock company from the present "groupement d'interet economique" (economic interest group) partnership. The aim is to create a more competitive and responsive organisation. "The need for the Europeans to integrate becomes more urgent," said the executive who spoke on condityion of anonymity. The merger move showed "the arguments (between partners) are trivial". BAe's group managing director John Weston has said the future Airbus should be a large, integrated company with design offices and manufacturing and sales functions, and have a solid balance sheet to finance aircraft sales, to better rival Boeing. But Aerospatiale's chairman Yves Michot has said he sees the new Airbus as essentially a large prime contractor, directing its suppliers' work but retaining its design offices. Some executives see the design office as the heart of the business, with the ability to create new aircraft. Aerospatiale's design offices are in the southwestern French city of Toulouse, next to Airbus headquarters. Eventually, BAe wants Airbus to be the civilian arm of a huge pan-European aerospace grouping, with a military wing to build future generations of combat planes, built from the national companies. But for the time being, the partners also need to resolve differences over the valuation and transfer of assets. The Airbus negotiations slowed over the summer, when the French government moved the then chairman, Louis Gallois, to the helm of troubled state railway operator SNCF and promoted his number two, Yves Michot. An agreement was due to be signed by the end of 1996 setting out the main lines of the new Airbus but the industry executive said the talks are due to last up to March 31. U.S. broker Lehman Brothers has estimated Airbus could be worth between $15-18 billion after its conversion, based on historical and prospective financial data. The internal debate over the shape and scope of the future Airbus has run on for years, with managing director Jean Pierson a fervent enthusiast for an integrated company. The new Airbus company is supposed to be formed by the end of 1999.

A longstanding row over market share between rival plane makers Boeing of the U.S. and Europe's Airbus consortium resurfaced on Tuesday, when Airbus claimed to have overtaken the U.S. giant. Airbus senior vice president for strategy John Leahy told reporters at the Farnborough air show that if 117 cancellations of previous orders at Boeing were taken into account, the U.S firm had added 216 net new orders this year rather than the gross orders of 333 planes announced. "You have to be very careful when people are running around at air shows talking about gross order books because gross orders aren't what you can bill," he said. "Essentially a third of the Boeing order book has been cancelled this year." Airbus, with 13 cancellations, has so far had 221 net orders this year, putting it ahead of the Seattle-based firm, he said. Based on planes seating between 125-350 passengers in which Airbus fields a competitor product to Boeing -- Airbus does not have a 100- or 400-seater -- the European grouping claims a 52 percent share, crediting Boeing with 43 percent and McDonnell Douglas with five percent. Leahy said since 1976, Boeing's share had shown a slow but noticeable decline while Airbus showed a strong increase. McDonnell Douglas had seen a steep loss. But Boeing vice-president for marketing Bruce Dennis told Reuters, even with cancellations, the company was exceeding targets for this year of around 63-64 percent market share. "Orders are exceeding our targets and are doing very well," he said. "We just don't agree with their numbers." Although Airbus has increased its share over the years, this had not been at Boeing's expense but came out of McDonnell Douglas's sales. "It's not coming out of Boeing's hide." Production figures gave a clearer view of the company's advance, he said. Boeing had recently increased production of its 777 giant twinjet to seven per month from five and would be turning out the 737 narrow-body at a rate of 17.5 planes per month late next year. He gave no figure for present output. Airbus' Leahy reaffirmed the group's aim to develop the 3XX, a plane seating over 500, for $8 billion, or perhaps less, thanks to industry restructuring efforts. The four-nation partnership aims to deliver the first 3XX in 2003, he said. He also defended the company's market forecast for the plane, which showed there was demand for the aircraft. Airbus executive Volker Von Tein said of the 3XX, which is seen as key to attacking Boeing's lucrative monoploy at the top end of the market, "We are not in a race with Boeing on this programme. If Boeing were to launch a stretched derivative of their veteran, 34-year-old 747, it will come as no surprise to us." That would allow Airbus to "fine tune" the 3XX, he said. He added that Boeing had said that there was not enough room in the market for two makers of large planes. "In that case I would suggest that they opt out of the competition because once the A3XX is on the market maybe they will be proven right -- there will be no room for old derivatives." Boeing's Dennis said he could not see how Airbus could build the 3XX for the estimated $8 billion, "unless they see something that we can't." Boeing Commercial Airplane Group president Ron Woodward said on Monday its studies showed it would cost over $5 billion to build large planes seating 460 and 560 derived from the existing 747 jumbo jet, which would be cheaper than creating a new plane like the 3XX. The Airbus consortium comprises French Aerospatiale, British Aerospace Plc, Germany's Daimler-Benz Aerospace AG and CASA of Spain.

Shares in debt-mired Channel Tunnel operator Eurotunnel SA fell on Tuesday after they were requoted following a week's suspension amid disappointment over terms of its restructuring with creditor banks. The troubled Anglo-French company unveiled on Monday details of the refinancing its 69.6 billion francs ($13.50 billion) of junior-ranked bank debt after a year of complex negotiations with bank lenders. The shares closed down 8.74 percent at 8.35 francs on heavy volume of 20 million shares. They were at 9.15 francs when they were suspended on September 30 in the runup to the debt deal. Analyst Jean Borgeix at broker Pinatton said the stock market was disappointed with the 10.40 franc price that banks will be getting new Eurotunnel shares at as part of an eight billion franc equity-for-debt deal. The market had been looking for a conversion price of between 12-15 francs per share, he said. Current shareholders also stand to effectively "lose" 30 percent of Eurotunnel's future cashflow, as this is the percentage earmarked for paying the "stabilisation notes" it would issue to banks in return for an interest-free credit line. The company negotiated the right to issue the stabilisation notes in case it fell short of cash to meet interest payments. It can issue up to 14.8 billion francs of the notes. Factoring in that loss of future cashflow gave the shares a present value of around 8.5 francs a share. Another French analyst said: "The restructuring assures the industrial viability of the project, even though the shares remain a risky investment." The debt deal looked good on paper and the zero-interest stabilisation notes provided Eurotunnel with a last line of defence if its cash failed to meet interest payments, he said. A trader at a major U.S. brokerage in Paris said the share price suffered from the dilution of equity due to the debt pact. The restructuring will dilute the holdings of current shareholders to 54.5 percent of the capital after the debt swap. The complex agreement also includes issuing eight billion francs of bonds redeemable in shares, which could further dilute the equity holders to 39.4 percent if the banks exercised their conversion rights at 12.40 francs per share. But shareholders will also get share warrants at the same price to bring them back to owning 51.3 percent of the capital. ($1=5.156 French Franc)

A two-stage privatisation France's Thomson SA electronics group would allow an early sale of its defence arm and make better economic sense than packaging defence with the loss-making consumer goods unit, stock market analysts said on Monday. Conservative Prime Minister Alain Juppe said in an interview in the London Financial Times on Monday that the military electronics subsidiary Thomson-CSFcould be separated from Thomson Multimedia to allow for a speedy privatisation. The government was forced last week to drop its preferred choice of selling the whole Thomson group to the Lagardere Groupeconglomerate for a symbolic one franc after the independent Privatisation Commission rejected that option. A break-up of Thomson runs directly against President Jacques Chirac's initial policy announced on February 22 on restructuring the French defence industry and selling Thomson as one unit. But analysts said the two-part sale made good sense. "We should have started with that...get on immediately with restructuring the defence industry," said an analyst at a French brokerage. "We can leave Thomson Multimedia (TMM) until 1998." A second analyst said, "It's the privatisation of the Multimedia unit which poses the problem. The industrial logic of the merger between Thomson-CSF and Lagardere has not been criticised by anyone." It was Lagardere's plan to sell TMM to South Korea's Daewoo Electronics, while keeping Thomson-CSF, which led the Privatisation Commission to rule out its bid. The Commission objected to planned technology transfers to Daewoo and the lack of binding commitments by Daewoo to retain jobs in France. Privatising Thomson-CSF separately would meet the state's main aim of creating a defence electronics national champion, and shelve the problems of Thomson Multimedia. CSF is profitable, virtually clean of debt and 42 percent of the capital is quoted on the Paris bourse. A source close to Thomson-CSF said the firm has not lost any contracts due to the privatisation uncertainty but it has had to run a corporate advertising campaing in countries where it feels its image has suffered. Lagardere's Matra missile company still looks the favoured candidate for taking over Thomson's defence unit ahead of a rival offer from engineering group Alcatel Alsthom. "We get the impression that the government wants Lagardere to get Thomson-CSF," said one analyst at a brokerage. An analyst at a French bank said, "Insofar as the government has made its preference known and is sticking by it, Lagardere seems to be well placed." Lagardere has the means to buy Thomson-CSF, without recourse to significant borrowing, one analyst said. Taking a range of Thomson-CSF share price of between 156 and 200 francs per share, the company has a market capitalisation of between 18 and 24 billion francs ($3.4-4.6 billion), he said. At the end of 1995 Lagardere had 10 billion francs in tradeable securities, 1.3 billion in free cash and is due to receive three billion in the first half of 1997 when share warrants are due to be exercised. Financial debt was around 8.4 billion. Lagardere would bring some eight billion francs of Matra's assets in merging with Thomson-CSF, which would reduce the cash it would have to pay. It would however be expected to pay large amounts for goodwill. Speculation that a vertical integration of missiles, electronics and airframe makers could now be tackled by merging Thomson, Matra, Dassault Aviationand Aerospatiale did not stand up to scrutiny, analysts said. Combat plane maker Dassault is expected to be absorbed by the larger, civilian-aircraft manufacturer Aerospatiale as part of the defence industry consolidation. But as Aerospatiale is state-owned and the government still wants to privatise Thomson, that course seemed to be excluded, an industry executive said. Economy ministry officials were not immediately available for comment. ($1=5.244 French Franc)

Construction group Bouygues has emerged as the latest contender in the French telecommunications arena with its joint bid with Italy's STET to run the telephone network of rail operator SNCF Bouygues follows the larger Cie Generale des Eaux, which last month announced blue chip partners for its Cegetel telecoms unit, and the state-owned RATP Paris Metro operator which set up a unit to exploit its 300 kilometres of track. The stock market cheered Bouygues' alliance with STET and marked its shares up 4.62 percent to 510 francs on Friday. The new entrants are seizing on the opportunity presented by the breakup of France Telecom's domestic monopoly from the start of 1998, under European Union competition rules. Although both Bouygues and Generale des Eaux currently run mobile telephone businesses, their ambitions run higher. They want a major slice of the profitable long-distance call market and the high-value business networks. Generale des Eaux chairman Jean-Marie Messier wooed analysts recently with bullish growth forecasts for the telecoms sector and said he expected Cegetel to contribute 15 percent of group sales and 25 percent of cashflow by 2003. Which leaves Lyonnaise des Eaux of the three French major utilities and services company firmly wedded to pursuing communications rather than telecommunications. "Our strategy is communications, not telecommunications," said a Lyonnaise executive. Analyst Annick Santer at broker Ferri said, "Communications is not at all in the same league as telecommunications. It does not have the same scope but it can be profitable." Communications, if it offers less spectacular potential, also holds less scope for risk, she added. The group's communications interests, grouped around its Lyonnaise Communications unit and M6 television stake, had 1995 sales of 1.4 billion francs and contributed 69 million in net profit. The profit came from its 34 percent stake in the Metropole Television M6 unit, which reported a first half net profit of 215 million francs, up 2.3 percent from a year ago. But Lyonnaise Communications, which runs its cable television operations, made a 1995 loss of 45 million francs. The cable business, with 400,000 subscribers, is close to breaking even this year and depends on getting a few thousand more customers, a source close to the company said. Lyonnaise owns 70 percent of Lyonnaise Communications, with France Telecom holding 17 and US West with six percent. Lyonnaise executives declined to give sales or cashflow forecasts for its communications business but said most of the investment had already been made and it was adding services to the existing infrastructure. -- Paris newsroom +33 1 4221 5452 pnt/cct

A planned sale of French television maker Thomson Multimedia to South Korea's Daewoo Electronics for a symbolic one franc has sparked a political backlash against the government's privatisation plans. The government wants to sell electronics group Thomson SA to the Lagardere conglomerate, which would sell the loss-making Thomson Multimedia to Daewoo while keeping Thomson-CSF, the defence electronics subsidiary. The leader of the French Socialist Party, Lionel Jospin, told France 3 state-owned television on Sunday he was "shocked" by the Thomson privatisation. "This was a public sector firm and concerned the national interest. It has been privatised for ideological reasons", he said. "I was shocked by the method, which was despicable and perhaps even illegal as the 1986 (privatisation) law specifically called for the parliamentary privatisation committee to give a supporting opinion," he said. Jacques Delors, former president of the European Commission, told a conference in Paris on Sunday, "I would have preferred to maintain a European pole in consumer electronics." On Monday, French business newspaper La Tribune Desfosses added to the controversy by reporting that a French businessman, whom it did not identify, was preparing a bid for Thomson Multimedia to keep the company French. The report said it was only after the government declared its preference last Wednesday for Lagardere's bid over a rival offer from Alcatel Alsthom that authorities realised "the value of the gift it (the state) was making to Daewoo." A Thomson-CSF spokesman declined to comment on the report of a "white knight" bidder. A Lagardere spokesman said bids had closed in September and if investors were interested in Multimedia, they would have to negotiate with Daewoo after it had bought the firm. Jospin said French President Jacques Chirac and Prime Minister Alain Juppe were allowing the sale of Thomson Multimedia to Daewoo, which would reap the benefits of French state financing for the group's digital technology. "Thanks to state finances, it will be able to take up a strong position in the digital (television) market and be profitable from 1999," Jospin said. Thomson Multimedia is set to make big profits in 1999, when revenues from technology licences will contribute at least one billion francs ($192.3 million) a year. The licences were acquired when Thomson bought RCA of the United States from General Electric in 1987 but only revert to Thomson after 1998. "We are not hostile to a foreign company taking control of Thomson Multimedia as it follows an industrial and economic logic," a spokesman for the Thomson-CSF association of employee shareholders said. But, he added, it was a pity the state had not played its part as a shareholder to recapitalise the group earlier. A source close to Thomson said the group's financial situation was untenable as its share capital was insufficient to sustain its debt and that it was in dire need of fresh funds. But the government is tightening its belt as it cuts public spending to meet tough requirements to join the single European currency by 1999. The Thomson privatisation was also launched as part of the government's consolidation of the defence industry. The Thomson Multimedia unit, the world's fourth-largest TV maker, reported a loss of three billion francs in the first half of 1996. It has invested heavily in digitial television technology and is a leader in television decoders, as well as a being a member of the Digital Video Disc consortium. The chairman of the South Korean company, Bae Soon-Hoon, has said he is ready to invest $1.5 billion in France and create 5,000 new jobs if he wins Multimedia. ($1=5.199 French Franc)

France's national audit office on Monday criticised a lack of clarity and insufficient competition in the water supply market, dominated by two giant companies Cie Generale des Eaux and Lyonnaise des Eaux. "There is a high degree of concentration. That is not to say competition is absent, but it is organised competition," said Francois Logerot, author of the Cour des Comptes (court of auditors) report. "It may be that concentration in this sector is accentuated by agreements between these companies...sometimes by creating joint subsidiaries at the request of local councils." Logerot cited as an example the Saint-Etienne city council, where the water company Societe Stephanoise des Eaux is jointly owned by Lyonnaise des Eaux Dumez and Generale des Eaux (CGE). The report, presented at a news conference, said the private sector held 75 percent of the supply of drinking water in France in 1991, up from 60 percent in 1980 and 31 percent in 1954. The price of water rose by a national average 47.7 percent from 1990 to 1994, it said. Significant price rises occurred where contracts were awarded to the private sector, Logerot said. "Sometimes there was a catch-up effect but there were also excesses and abnormal situations." Lyonnaise officials were not available for comment. But CGE noted in a statement that the report said the main reason for rising water prices was higher quality and increasing investment needs. It said the official audit pointed to a near doubling of the cost of water treatment between 1990 and 1995, while the price to the consumer rose by 30 percent. Logerot said local authorities often awarded contracts to the water companies in exchange for payments which the companies then recovered in the price charged to customers. The study followed a 1995 law which banned "right of entry" payments that water companies paid to win an operating licence. The report cited the Alpine city of Grenoble, where a contract with Lyonnaise des Eaux resulted in the conviction for bribery of the mayor, former Gaullist minister Alain Carignon. Grenoble used the proceeds of the water contract to finance its general expenditure, while accounting principles call for water expenses to be kept separate from the general budget. The CGE statement said much of the criticism in the report related to the past, when payment for contracts was legal. It added that the company was pleased such payments were banned and the duration of those contracts was limited. CGE said the water market was highly competitive and 1996 had shown that when contracts expired, there was competition to win new licences. The sector was also subject to strict controls by a number of public bodies, including competition and quality experts. The audit office called for tighter water management and said higher water quality standards contained in a 1992 law would require annual investment of around 14 billion francs.

The four partners of the Airbus consortium on Monday signed an agreement aimed at making the European plane maker a unified company better able to compete with Boeing Co. In a statement, Airbus Industrie said its four European partners had signed a memorandum of understanding to restructure Airbus into a limited liability company by 1999. "The establishment of Airbus Industrie as a single corporate entity (SCE) is an important initial step in the consolidation of the aerospace industry within Europe," Airbus said. Toulouse-based Airbus is currently a partnership between French state-owned Ste Nationale Industrielle Aerospatiale, British Aerospace Plc, Daimler-Benz Aerospace(DASA), and Construcciones Aeronauticas SA(CASA) of Spain. The French and Germans both have 37.9 percent, the British 20 percent and Spanish company 4.2 percent. The new entity will have a single management structure which should add control of engineering, testing, production, procurement and customer service to Airbus's current responsibilities for marketing, sales and product support, it said in a statement. "Transfer of assets associated with these functions... will depend on how far the assets are essential for the described functions and their detailed valuation, to be completed by the end of 1997," it said. "The ultimate objective is the restructring of the entire European (aerospace) industry, of which Airbus in one element and not the integrating entity," Aerospatiale chairman Yves Michot told the Le Monde newspaper. "Airbus will be made a single company before the end of 1999 with a shareholding strictly the same as now," he added Currently Airbus is mainly a sales and marketing organisation with the four partners manufacturing the planes. Airbus first announced a preliminary agreement in early January. The four partners decided last July to turn Airbus into a corporation to streamline decision-making and production. These restructuring plans took on a more urgent tone after Boeing and McDonnell Douglas said in December they would merge and form a civil and military giant with nearly $50 billion in annual sales. Airbus said in its statement that the restructured company would facilitate continuing improvement in overall operational efficiency, the introduction of new international strategic partnerships and the longer term opportunity for "external participation" in Airbus. Airbus spokesman Robert Alizart said that these options included a future stock market listing of Airbus. Airbus said that the restructured company "presented a great opportunity for business growth both for its existing shareholders and its future partners." It said Airbus was studying expansion of its product range with an aircraft in the 100 seat category, with Alenia ALEI.RO of Itlay in co-operartion with AVIC of China and Singapore Aerospace. It is also mulling derivatives of the four-engined A340, the A340-500 with a range of 8,300 nautical miles and the A340-600 with seating capacity of close to 400 seats. In the high-capacity long haul market it is planning to launch the A3XX, which would break the stranglehold on the lucrative top-end of the market now held by Boeing's 747 jumbo jet. Airbus is also pondering work on the Future Large Aircraft (FLA), a military transport aircraft to match the future needs of Europe, next to its civil work. British Aerospace said it expected its wing development and production operations, employing more than 4,000 people, to be transferred to Airbus.

The French government said on Friday it would reveal early in the New Year how it plans to sell the Thomson-CSF state defence electronics firm and that the sale would be covered by a 1986 privatisation law. The decision, announced by the finance ministry, makes the sale process slower than if it had been carried out under another 1991 privatisation decree. The independent Privatisation Commission earlier this month forced the state to rethink its plan to sell the Thomson SA electronics group in a private deal to the Lagardere Groupe conglomerate, when it objected to a key element in the disposal. Following that setback, the state decided to privatise Thomson SA in two parts, with a sale of Thomson-CSF first, followed by Thomson Multimedia, the loss-making consumer electronics unit, to speed up the process. But the complex sale details mean any decision will only be made in the beginning of 1997, government officials said. The Council of State, France's highest administrative court, ruled that the Thomson-CSF sale is covered under the 1986 act, after the government asked it to rule on the legal framework. The court said that as Thomson-CSF constitutes an essential part of the assets of Thomson SA, the sale should be seen as a means of privatising the parent company, the finance ministry said in a statement. "The privatisation of Thomson-CSF is covered, just as that of Thomson SA, by chapter II of the law of 6 August 1986 on privatisations," it said. A number of possibilities have emerged for Thomson-CSF since the Privatisation Commission derailed the sale process. Thomson-CSF's chairman Marcel Roulet and its executive committee have lobbied the Prime Minister Alain Juppe for a stock market flotation instead of selling it to an industrial company such as Lagardere. A flotation would preserve Thomson-CSF's independence and would be faster than a "trade sale", a source close to the firm said. The company has all the financial details to hand and 42 percent of its capital is already traded on the stock market. Floating Thomson-CSF would allow a faster restructuring of the defence industry, which was the aim of the privatisation move. It could still form alliances with other groups, such as the planned merger between aircraft companies Dassault Aviation and Aerospatiale. Thomson-CSF wants a "clean" flotation, without the traditional cross-shareholding pact which protects companies from hostile takeovers. A flotation would also ensure clarity in the sale terms, a senior source close to Thomson said. But Lagardere chairman Noel Forgeard argues a flotation could lead to a break up of Thomson-CSF as members of any shareholders pact would want to buy up parts of the business.

The French government sold a nine percent stake in oil major Elf-Aquitaine on Wednesday, raising around 10 billion francs ($2 billion) and allowing the energy group to buy back a big chunk of its own shares. The disposal follows a sharp rise in the Paris bourse in recent weeks and, specifically of oil stocks which have benefited from high world oil prices. "Finance minister Jean Arthuis has decided to sell 24.9 million shares in Elf-Aquitaine held by the ERAP company, which will reduce the stake held by this public sector firm in Elf-Aquitaine to 0.75 percent," the ministry said in a statement. The sale involved the placement of 12.5 million Elf shares, or 4.6 percent of the capital, at 417.50 francs per share to French and international institutions. Elf said in a separate statement it had bought a 4.5 percent stake through its indirectly-owned financial Fingestval company as a long-term investment, accounting for the remainder of the shares sold by the state. Elf shares slipped 2.5 francs to 423 by 1300 GMT. The 10 billion francs will go into a government special account held for share sale proceeds, which is reserved for injecting into other state-owned companies, the ministry said. Government spokesman Alain Lamassoure said the money would be used to recapitalise state-owned companies which needed it, particularly those being privatised. It will not be used to help reduce the government's budget deficit. France plans to recapitalise Thomson SA to the tune of 11 billion francs before selling the state-owned electronics group to Lagardere Groupe and Daewoo Electronics Corp. The Elf share sale leaves a rump 0.75 percent of Elf stock in government hands, which covers free shares due to Elf employees and non-voting petroleum certificates held by the state. Elf was among the early privatisations in the previous conservative government of Edouard Balladur in February 1994 (Corrects timing of Elf privatisation), when it was floated at 385 francs per share to private investors. The group has wide-ranging interests in oil exploration, production and refining, as well as health and beauty products through its Sanofi unit. It is a major constitutuent in the Paris CAC-40 share index. The group's stock purchase would boost earnings per share, chairman Philippe Jaffre said: "This removes the uncertainty surrounding the French state's interest in the company which has weighed on the share price." "The acquisition will automatically improve earnings per share," he said in a company statement. The sale to institutions was handled by Paribas and SBC Warburg, after a tender with various banks. ABN Amro Rothschild acted as adviser to the government. Fingestval is a wholly-owned subsidiary of Socap, which itself is wholly-owned by Sofaxbanque. Sofaxbanque is 100-percent owned by Elf. Socap manages assets and financial interests and has substantial cash holdings, Fingestval said. ($1=5.088 French Franc)

French utilities giant Compagnie Generale des Eaux posted on Monday higher first half profits and unveiled plans to reorganise its loss-making construction business, hammered by a depressed French market. Chairman Jean-Marie Messier told a news conference the company made first half net profit of 808 million francs, after payment to minorities, up from 224 million a year ago. He also forecast net profit for the full year 1996 would be about 1.8 billion francs, compared with a net loss of 3.69 billion francs a year ago. The results would be "strongly marked by exceptional items, notably capital gains from asset sales," he added. For 1997, Messier expected profits to be "much higher" than those of 1996 and should be "without doubt higher than the best profits the company has had in its history." The company made 3.4 billion francs net profit in 1994. Messier also announced Generale des Eaux had made a formal bid on Monday with its German partner Mannesmann AG to run the telecommunications operations of French state railways SNCF. The two companies want to bring British Telecom to join the bid. Messier, who came from an investment bank, was brought in last year to clear out the group's balance sheet which had put on more than 50 billion francs of debt and been savaged by a crisis in the property market and construction business. His first step last year was to reorganise the property arm, which he said on Monday had cost the group a total 15 billion francs since 1994. The group expects to lose 4.6 billion francs this year due to poor property assets but that includes three billion francs of exceptional charges which should wipe out any uncertainty for the next three years, he said. "At the end of 1996, Generale des Eaux will not face any questions, even in pessimistic scenarios for the next three years, on any exceptional charges which may arise from its property activities," he said. The group's George V property development arm aims to be profitable from 1997, he said. The group's average level of property provisioning was around 55-56 percent, of which assets in the south of France were provisioned at 65-70 percent and 85 percent at Cannes. This time round, Messier attacked the group's building and public works businesses which have suffered from the downturn in France and Germany. He has made its SGE subsidiary the centre of its construction activity. The GTIE and Santerne electrical installations units and roadbuilders Cochery, Viafrance and SGE-VBU will be brought into SGE. And there will be a consolidation of building activity with SGE buying 40 percent of Compagnie Generale de Batiment et de Construction (CBC), currently wholly owned by CGE. The new SGE, which will be "radically different and attractive," will have annual sales of 52 billion francs and will return to a "significant level" of profit in 1997, Messier said. Generale des Eaux also expects to cut its debt by about 10 to 15 billion francs in 1997. It said it expected its net financial debt to stand at 53 billion francs at the end of 1996, down from 54 billion in 1995. Messier said the company's operating profit would be close to the 3.7 billion franc profit recorded in 1994. Turnover in 1996 should be up three percent to 164 billion francs, he added. France is deregulating the telecommunications regime in 1998, breaking the domestic monopoly of state-owned France Telecom to comply with European Union rules.

France's national audit office criticised on Monday a lack of clarity and insufficient competition in the water supply market, dominated by two giant companies Cie Generale des Eaux and Lyonnaise des Eaux. "There is a high degree of concentration. That is not to say competition is absent, but it is organised competition," said Francois Logerot, author of the Cour des Comptes (court of auditors') report. "It may be that concentration in this sector is accentuated by agreements between these companies...sometimes by creating joint subsidiaries at the request of local councils." Logerot cited as an example the Saint-Etienne city council, where the water company Societe Stephanoise des Eaux is jointly owned by Lyonnaise des Eaux Dumez and Generale des Eaux (CGE). The report, presented at a news conference, said the private sector held 75 percent of the supply of drinking water in France in 1991, up from 60 percent in 1980 and 31 percent in 1954. The price of water rose by a national average 47.7 percent from 1990 to 1994, it said. Significant price rises occurred where contracts were awarded to the private sector, Logerot said. "Sometimes there was a catch-up effect but there were also excesses and abnormal situations." But CGE noted in a statement that the report said the main reason for rising water prices was higher quality and increasing investment needs. It said the official audit pointed to a near doubling of the cost of water treatment between 1990 and 1995, while the price to the consumer rose by 30 percent. Logerot said local authorities often awarded contracts to the water companies in exchange for payments which the companies then recovered in the price charged to customers. The study followed a 1995 law which banned "right of entry" payments that water companies paid to win an operating licence. The report cited the Alpine city of Grenoble, where a contract with Lyonnaise des Eaux resulted in the conviction for bribery of the mayor, former Gaullist minister Alain Carignon. Grenoble used the proceeds of the water contract to finance its general expenditure, while accounting principles call for water expenses to be kept separate from the general budget. Lyonnaise said in a statement that each water company had given details of its contracts to the audit office and, of the 12,000 in France, only about 20 had drawn explicit comment. And these had been agreed under conditions prevailing before the 1995 law. The CGE statement said much of the criticism in the report related to the past, when payment for contracts was legal. It added that the company was pleased such payments had been banned and the duration of those contracts was limited. CGE said the water market was highly competitive and 1996 had shown that, when contracts expired, there was competition to win new licences. The sector was also subject to strict controls by a number of public bodies, including competition and quality experts.

Just as the submarine changed the face of naval warfare in World War Two, Europe's shipbuilders are hoping a new breed of "stealth" warships will do the same in the 21st century. At a trade fair at Le Bourget airport, north of Paris, three shipbuilders presented their own version of combat ships with the ability to hide and deceive the enemy. Britain's Vosper Thornycroft on Tuesday unveiled its design for the futuristic Sea Wraith corvette. "We believe it has the potential to make other vessels of its class obsolete," Brian Spilman, Vosper's manager of future projects shipbuilding, told a news conference at the Euronaval exhibition, which gathers the world's navies. BAeSema, a joint venture between British Aerospace and France's Sema Group, presented its Cougar corvette on Monday. And French state-owned DCN shipyard presented its La Fayette frigate which it boasted was the first operational warship fully to use stealth features in its design. Unlike the first two, designed for patrolling regional waters, the French ship is a full-scale deep-water frigate. Stealth warships use similar principles to the radar-beating technology developed by the U.S. aircraft industry and used in the 1991 Gulf War against Iraq. The diamond-shaped F117 and batwing B2 bombers were designed to absorb or deflect radar. Built in flat, angular shapes, stealth warships are "platforms" for weapons and detection systems. The La Fayette uses a slab-sided superstructure and non-metallic materials to confuse radar. The second of eight La Fayette-class ships ordered by Taiwan entered service last week, while Saudi Arabia has also ordered the French ship. The British are in hot pursuit with their own designs for a new generation of stealth vessels. "We believe this is the warship of the future and all warships will need to use these techniques," Vosper's Spilman said. "We have made it difficult to detect, classify and engage with a missile," he told the news conference. The Sea Wraith design puts the distinctive clutter of mast, radar dishes and aerials inside flat-sided towers and has shaped topsides, rather like diamond facets, to make it hard for radar to lock on. It also uses non-reflective composites. Sea Wraith can alter its "radar signature" by lowering or raising the mast, making it difficult to recognise the craft. Two asymetrically-located masts are meant to confuse radar-guided missiles. To counter new infra-red, or heat-seeking, missiles, the ship sprays a fine mist of water to conceal itself. BAeSema is showcasing its low angular Cougar patrol vessel, which uses low-acoustic waterjet propulsion instead of traditional noisy engines which are easily picked up by sonar. The basic Cougar "hull-in-the-water", excluding weapons and other systems, costs around 30 million sterling ($37.56 million), according to Keith Figg, the craft's designer. BAe last week announced it was merging its naval systems activities into BAeSema, to boost its prime contractor role. Prime contractors bid for contracts in which integration of radar, communications and defence provide the added value. BAeSema would act as prime contractor while the ship would typically be built in the customers' own shipyards. "We're going for indigenous building and procurement, which would be a more cost-effective solution and involve ownership at an earlier stage" Figg said. South East Asian delegations have shown interest in both the Cougar and Sea Wraith, company executives said. "We view that part of the world as a very important market," Spilman said. Strong economic growth and regional rivalries particularly over natural resources and territorial waters have fuelled an arms race in South-East Asia. French defence electronics group Thomson-CSF is the prime contractor for the La Fayette under Sawari 1 and 2 contracts signed with Saudi Arabia. ($1=.7986 Sterling)

Air France said Wednesday it was linking up with two major U.S. carriers, Delta Air Lines and Continental Airlines, in a trans-Atlantic alliance crucial to its ability to keep up with its major European rivals. The French state airline said it signed separate letters of intent to coordinate ticket booking and feed passengers back and forth with Delta and Continental after a lengthy search for an American partner. The long-awaited agreements mark a strategic step in Air France's development and tap the huge U.S. travel market to feed its global network while the U.S. companies will carry the French airline's passengers on their domestic routes. Air France and Continental signed a commercial accord back in 1993 but it has never been implemented due to changes in top management at both companies. Continental, among the U.S. majors, does not have a European partner. "These agreements crystallise the company's wish to forge a network of global alliances," Air France said in a statement. The alliances allow so-called code-sharing arrangements between Air France and the U.S. companies, which is a low-cost way of gaining more customers without direct investment. It means passengers can be issued a ticket by one carrier to be used on its partner airline -- making it possible for airlines to feed passengers to each other without setting up their own routes. The companies will also harmonise flight schedules, share a common frequent flyer scheme, and provide ground facilities. Delta operates from its hub at Atlanta while Continental works from Houston. Air France uses Paris Roissy-Charles De Gaulle airport. Air France gave no financial details of the alliances but a spokeswoman said they were expected to bring the loss-making airline an extra $100 million a year in gross revenues. The French airline racked up a net loss of more than 2 billion francs ($385 million) last year after heavy charges for restructuring, but has said it hopes to earn a profit this fiscal year. Air France Chairman Christian Blanc said a search for U.S. partners only became possible this year as Air France showed signs of financial recovery and reorganized its global network around a central hub at De Gaulle airport. German carrier Deutsche Lufthansa AG started code-sharing flights with United Airlines in 1994, paving the way for several other high-profile cooperation deals. French executives fear Washington could hold up any alliance by Air France as a lever to push Paris into opening up the domestic market as part of a bilateral aviation pact. American Airlines this year set a controversial alliance with British Airways Plc but regulatory approval has been held up because of a dispute between London and Washington over an "open skies" agreement. The planned alliance has been attacked by rivals as anti-competitive. Air France noted that the ticketing accords with Continental and Delta were subject to government approvals. Washington and Paris clashed earlier this year when the United States wanted to open bilateral talks on market access and held up U.S. approval of Air France's summer schedule until the French agreed to start negotiations.

Shareholder democracy will grab the spotlight when investors in the troubled Channel Tunnel operator Eurotunnel SA/Plc vote on a complex debt deal aimed at keeping the company afloat. The restructuring agreement with its bank lenders requires a two-thirds majority at an extraordinary meeting of shareholders expected to be held by March. Potentially, two French shareholder groups could muster a blocking minority but the associations hold distinct positions and styles. Of Eurotunnel's estimated 750,000 small investors, around 600,000 are French. Albert Jauffret heads the newer and smaller Association de Defence des Actionnaires d'Eurotunnel (Adacte), considered by some as the more "extremist" -- but possessing clear and strongly-held views on the restructuring and what he wants. "Whether one agrees with his views or not he represents a group of shareholders and shareholder democracy requires each shareholder has a voice," said lawyer Sophie L'Helias, who acted as proxy agent for more than 20,000 Eurotunnel shareholders. Jauffret, a retired headmaster, believes the restructuring gives too much to the banks. "We are very unhappy the debt is being treated at face value," he said. In London's secondary debt market, Eurotunnel's 70 billion francs ($13.40 billion) of junior-ranked loans have been marked down to about 40 percent of face value, on a view they are distressed assets. CALL FOR SOME DEBT CANCELLATION The 225 lending banks should cancel at least a third of the debt, taking their lead from the market's valuation, instead of keeping most of the debt intact, Jauffret argues. The restructuring takes out eight billion francs of loans to be swapped for shares at 10.40 francs per share. The loans outstanding should be converted into Eurotunnel shares at 24 francs per share, the average level of the last three rights issues by Eurotunnel, Jauffret believes. Adacte is highly critical of Eurotunnel's managers, whom Jauffret believes are cowed by its bankers. At the annual general meeting in June, he moved a resolution, which was easily defeated, to sack co-chairman Patrick Ponsolle along with six other executives, considered too close to the banks. Adacte, which held proxies for about four percent of the votes at the AGM, was founded in September 1995 as a breakaway from the Eurotunnel shareholders association. Christian Cambier, who runs the Prigest portfolio management company, heads the Eurotunnel shareholders association which was set up in 1992 and has around 3,000 members, most of whom are professional workers rather than the retired folk who make up Adacte. DIFFERENT APPROACHES The difference in constituencies partly explains the divergent approaches. Adacte members are angered by the loss of life savings, while Cambier's have limited losses to spare investment income, said one observer. The contrasting styles was shown clearly after Eurotunnel announced the restructuring agreement with its bankers. Adacte denounced it as a "declaration of war", because it did not cancel any debt. In contrast, the Eurotunnel shareholders association said it would seek a meeting with management to get more details. "We support the management," Cambier says, adding that he does not want to change the board. He spends perhaps five percent of his time on Eurotunnel and the rest managing client funds. Cambier does not fundamentally object to the restructuring but says the operating licence needs to be extended to 99 years from 65, to allow the company extra time to make money. His clients hold around 1.5 million Eurotunnel shares and lend them in stock-lending operations, which he says poses no conflict of interest. They gain a running yield each month, even though the shares have fallen sharply in value. However, both Cambier and Jauffret share common ground when they accuse some of Eurotunnel's banks and brokers of conflicts of interest. They accuse some of the underwriters for the 1994 rights issue of short selling the shares in the months before the May capital increase. Cambier garnered a near blocking minority of around 32 percent of the votes at the AGM, after a ground-breaking proxy solicitation, and wants to improve on that for the crucial EGM. He says he will base his voting on the share price. If Eurotunnel trades below five francs, he will take that as the market's no-confidence in the restructuring, but if it is between 10 and 15 francs, he will approve the deal. ($1=5.225 French Franc)

European aircraft maker Airbus looks set to soar higher in 1996 following a bumper order from airline USAir on Wednesday, but tough decisions still need to be made on its products and ownership to secure the long-term future. Airbus Industrie announced on Wednesday one of the biggest orders in aviation history with the Pittsburgh-based airline's command for 120 planes in the A320 narrow-body family of passenger jets and options for a further 280. List price for the orders was estimated at $5.3 billion. The USAir victory follows Monday's order by Emirates, a Gulf-based airline, for 16 Airbus A330-200s worth $2 billion, which beat out a rival offer of Boeing Co's 767. "The order backlog is really healthy," Emmanuel Dubois Pelerin, analyst at ratings agency S&P Adef said. The order book would sustain or even increase production rates for 1997 and 1998, he added. An Airbus spokesman confidently forecast the consortium would rack up firm orders this year exceeding 300 planes, compared to 106 last year. While there are no worries on products and profitability for the next two or three years there are uncertainties further ahead stemming from Airbus' change in legal status and implications for projects, particularly the A3XX large plane and stretched A340 long-range jet. Airbus is a partnership made up of French state-owned Ste Nationale Industrielle Aerospatiale, British Aerospace Plc, Daimler-Benz Aerospace, a unit of Daimler-Benz AG and Construcciones Aeronauticas SA (CASA) of Spain. In the interests of increasing market responsiveness and competitiveness, Airbus wants to change into a joint stock company by 1999. Discussions are being held among the partners to decide the shape of the future company. It also has to find external financing for the 3XX plane. Airbus has said it wants to find between 30-40 percent of external risk sharing for the 3XX, which it estimates will cost $8 billion to develop. Dubois Pelerin said he believed Airbus would have to choose to build either the stretched A340-600 or the 3XX, as running both at the same time would overload its finances, But the Airbus spokesman said the consortium would be able to finance development of both the 340-600 and the 3XX, with the stretched 340 a top priority in the near term. Airbus is under severe time pressure to come up with a rival to Boeing's monopoly at the large-capacity segment with its 777 and 747 combination which hit Airbus hard in 1995. Boeing is studying the 747-500X and 747-600X derivatives of its Jumbo jet, which has been a cashcow since it entered service in the 1970s, but which nearly broke the company in development. The new jumbos are expected to cost around $200 million a piece, which industry sources said prompted Airbus' senior vice-president commercial John Leahy to announce earlier this week that the 3XX would cost $198 million. The Airbus supervisory board last month asked for the business case for the 340-600 to be presented in mid-December to allow an early decision on whether to launch the product. If it were launched, the 376-seater could be in service in late 2000 and head off competition from the early versions of the 747. If the 555-seater 3XX goes ahead, it would fly in 2003 and tackle the 747 derivatives. A signature earlier this week with Rolls-Royce Plc on using its Trent engine for the 3XX will allow Airbus to supply important performance data such as fuel burn, range and take-off and landing weight to the airlines it is talking to for its marketing studies.

The French government has cleared the way for state-owned Air France to buy Boeing long-haul passenger jets from the United states, as well as similar planes from French-based Airbus, an official source said on Tuesday. The source told Reuters the clearance would come when the airline's board members meet on Wednesday to decide on its fleet acquisition after reports that the government would insist that the French flag carrier should get all its long-haul needs from French-based Airbus. "We are inclined to a balanced solution between Airbus and Boeing," said the source on Tuesday, speaking on condition of anonymity. "There should an agreement tomorrow." The business newspaper Les Echos reported earlier on Tuesday that a committee of the Air France board was expected on Wednesday to recommend purchase of 10 Airbus A340-300 and 10 Boeing 777-200 jets for its long-range fleet, Two other sources close to the talks said the split purchase was expected to be approved. Transport minister Bernard Pons had so far been pushing airline chairman Christian Blanc into buying exclusively from French-based Airbus Industrie, rather than mixing the purchase with archrival Boeing, industry and union sources have said. Apart from the symbolic value of the French flag carrier, which has received 20 billion francs ($4 billion) in state funds, buying a French-made product, the Boeing 777 and Airbus 340 are considered by some in the aerospace industry to be competing products. But a crucial factor in Blanc's decision to press ahead with the Boeing buy was a previous order for seven 767-300 and eight 737-500 aircraft due for delivery between 1999 and 2001. Les Echos said a clause in the sale contract allowed conversion of these planes to other types. That order was worth around $874 million and Air France would now like to use the option to convert to Boeing 777s. Otherwise it stood to lose its deposit if it reneged on the deal to buy the smaller planes, a second source familiar with the talks said. A Transport Ministry spokeswoman said Blanc had met Pons on Monday to explain the company's position. Air France and Airbus declined to comment. An aerospace executive said the cost of introducing to the fleet a new plane such as the giant 777 twinjet would be an estimated $40 million and mean a broader range of aircraft to maintain, and therefore increasing costs. The industry will look carefully to see whether Air France will place orders or options on its aircraft, as the airline could use a conversion option for a planned "stretched" version of the Airbus A340, termed the A340-600, and thus become a launch customer for the programme. Airbus has made studies of the A340-600 a top priority, as it would boost capacity to 375 passengers in three classes from 295 in the current A340-300 version. The new plane would rival the Boeing 777-300, which seats between 368 amd 394, and older models of Boeing's cashcow, the 747 jumbo. Boeing currently enjoys a monopoly in the large capacity segment, which Airbus is determined to rival with its own products. Air France already flies the A340, which is a long-range, wide-body aircraft. ($1=5.086 French Franc)

French electrical equipment company Schneider aims to almost double its return on equity capital to 15 percent in the next three years, executive vice president Michel Staib told Reuters. "Our objective is to have a net return on capital, before amortisation of goodwill, of 15 percent...in three years," he said in an interview. "It's a reasonable plan." That compared to just over eight percent in 1995, he said. The improvement will come from pruning down Schneider to core electrical activities and an internal re-engineering programme. Schneider shares have risen strongly in the past few weeks as analysts considered the stock undervalued and welcomed the pending sale of the Spie Batignolles unit, which has dragged on the group's results. The stock has risen around 10 percent since mid-December when news of its Spie sale hit the market. The shares closed on Wednesday at 255.70 francs. About a third of the capital is in non-domestic hands. All the group companies are profitable and with the sale of construction company Spie Batignolles, Schneider is at a "diamond point," Staib said. Staib did not rule out further disposals depending on market and technology changes but Schneider is now well-focused. Schneider will seek growth in emerging markets, in South America and Asia, including India. It wants Asia to contribute at least 20 percent of group turnover before the end of the decade compared to 11 percent in 1995. Schneider has expanded its operations in China, increasing the number of employees to 2,500 from 200 five years ago. The company also wants to increase its share in Germany from a tiny three to four percent of a market which Staib says is the world's third largest. Germany accounted for 2.5 percent of turnover in 1995, or three billion francs. It will seek alliances with other industrial companies rather than acquire firms, as the Germany market is tightly held. Expansion in emerging markets will also be done through local alliances and joint ventures. Schneider last year bought out Daimler-Benz AG's 50 percent share in AEG Schneider Automation unit. Schneider posted 1995 sales of 59.42 billion francs and net attributable profit of 817 million. It reported 1996 first half net profit of 503 million francs, at the low end of market expectations. Schneider is selling Spie to Amec Plc and to Spie employees for one billion francs, subject to regulatory approvals. Amec will gain between 40-48.6 percent of Spie for an injection of 40 million stg. -- Pierre Tran, Paris newsroom +33 1 4221 5452

The French government, belatedly attempting to consolidate a fragmented aerospace industry, on Wednesday gave the green light for aero-engine maker Snecma to buy up rocket engine manufacturer SEP. State-owned Snecma already owns 51 percent of Societe Europeene de Propulsion (SEP) and wants to buy out minority shareholders to make it a wholly-owned subsidiary. The enlarged group would have annual sales of around 15 billion francs ($2.9 billion). "The government has been advised of Snecma's wish to raise its holding in the capital of SEP from 51 percent to 100 percent and has given its approval so Snecma's board can make a public offer for SEP shares, followed by, if the 95 percent threshold is reached, a mandatory buy-in," the Finance Ministry said in a statement. The deal has a strong industrial logic and would ensure Snecma's future in space programmes and its position as France's centre for engine manufacture, it said. SEP makes engines and boosters for Ariane rockets, used by the European Arianespace consortium. Snecma makes civilian and military aero engines including those for passenger jets of the Airbus Industrie consortium and Dassault Aviation combat planes. The buy-in, for which no financial details were available, reverses a policy drawn up by Snecma's previous chairman, Bernard Dufour, who wanted to dispose of SEP and Messier Bugatti, Snecma's aircraft brakes unit, to raise cash. "Previously envisaged, the sale of SEP is no longer on the agenda", said a Snecma staff note made available to Reuters. Although the SEP sale would have brought in fresh cash, it also risked weakening the Snecma group by losing know-how essential for future transports such as a second generation supersonic plane and hypersonic aircraft, the note said. It would also have meant the loss for SEP of Snecma's technical support, which has helped it in the past. Snecma's new chairman, Jean Paul Bechat, has said asset sales should not be used to make up operating losses and that the company's deficits would only be tackled by meeting a targeted 1.5 billion francs in cost cuts in a restructuring plan. In addition, the government has adopted an industrial policy for the defence sector which relies on consolidating each sector on a business basis. Snecma was thus the natural centre for SEP, to build a propulsion group in aeronautics and space, it said. The move would also consolidate Snecma's brakes activities by bringing together SEP's Carbone-Industrie subsidiary with Snecma's Messier Bugatti to create a bigger entity. Brakes make up around eight percent of Snecma's sales, with potential to grow into areas such as cars and trains. The buyout will help SEP through a difficult period in the next few years as its order book falls when the Arianespace space consortium transfers launches to the new Ariane 5 rocket from the existing Ariane 4. SEP makes the rocket motors for the Ariane 5, which has one huge Vulcain engine instead of the up to 10 Viking and HM 7 motors in Ariane 4. Competition from the United States, Russia, Ukraine, China and Japan is also expected to put severe price pressure on rocket launchers. SEP also makes ballistic missiles and its proposed M5 replacement for the M45 was only adopted in the six-year defence budget on condition that there would be big cost reductions and reorganisations among the industrial partners. The takeover will create a group with synergies in aeronautical and space engines, making it virtually unique in Europe, a Snecma spokesman said. Snecma made a 1995 net loss of 1.24 billion francs and expects to make a loss in 1996 and next year before returning to profit in 1998. Turnover for 1996 is expected to total 9.2 billion francs, up from 8.6 billion in 1995 but still lower than 1994's 10.39 billion. SEP had 1995 turnover of 5.4 billion francs, up 10 percent from 1994, and made a net attributable profit of 133 million. ($1=5.157 French Franc)

European aircraft consortium Airbus said on Friday it had no evidence that archrival Boeing was putting pressure on U.S. suppliers to prevent them from working on Airbus' planned A3XX large plane. Daimler-Benz Aerospace (Dasa) chairman, Manfred Bischoff, said on Thursday he was concerned Boeing and merger partner McDonnell Douglas were signalling to a big U.S. subcontractor, understood to be Northrop Grumman, not to work on the Airbus project, newspapers reported. "We have no evidence of any kind of pressure," an Airbus spokesman said. But an industry source close to Airbus said Boeing had put pressure on Northrop to stay out of the A3XX project, which threatens Boeing's lucrative monopoly of the high-capacity segment with its 747 jumbo. "It is a fact," he said. Dasa is a partner in Airbus Industrie, alongside France's Aerospatiale, British Aerospace Plc, and Casa of Spain. Boeing was not immediately available for comment. Airbus had been in exploratory talks with Northrop over supplying engine housing sections for the A3XX but those negotiations had ended, the industry source said. Airbus has been looking for risk-sharing partners to supply up to 40 percent of the targeted $8 billion in the A3XX development costs. The plane would seat 550 passengers in the basic version, which it wants to enter service in 2003. Airbus managing director Jean Pierson told journalists on Thursday at the Toulouse headquarters that he would lay out Airbus' competition concerns on the Boeing merger when he gives evidence to the U.S. Federal Trade Commission and the European Commission, as expected. In the long term, the Boeing merger "will pose a problem for Europe's civil aviation industry," he said, adding there would effects in military markets, particularly helicopters. The industry source said the merged Boeing/McDonnell company would have bigger clout on suppliers, have a wider technology base though its portfolio of patents and gain larger access to indirect state funds for research and development through military programmes. But Pierson said the merger was inevitable. "The Boeing-McDonnell merger will go ahead," he said. Airbus is determined to fight back and is holding to its aim of securing a half share of the world passenger plane market by the early part of the next decade. A niche player strategy was doomed to failure, as McDonnell Douglas and Fokker found out, he said. The consortium needs to field products at the top and bottom end of the range, with respectively the A3XX and a 100-seater plane to be built with China and Singapore, as well as extend the A340 family of long-range jets to compete against Boeing.

French holding company CGIP said on Tuesday it was buying 20 percent of car parts manufacturer Valeo, solving a problem which has occupied the government, France's car makers and Italian businessman Carlo de Benedetti. Cerus, a French investment firm controlled by de Benedetti, sold the 20 percent stake to Compagnie Generale d'Industrie et de Participations (CGIP), for a sum which could total 6.7 billion francs, if Valeo hits 1997 profit targets. The Valeo stake has been on the market for a year, as Cerus sought to raise cash to reduce debts, and sparked U.S. interest which set off alarms among European car makers. French industry minister, Franck Borotra, said he wanted a "French solution" for the Valeo holding. But the Valeo purchase was made because "it is good for our group, our shareholders and for Valeo," CGIP chairman Ernest-Antoine Seilliere told a news conference, explaining why his company chose to become the lead shareholder in Valeo. The Valeo purchase was driven by CGIP's desire to rebalance its portfolio away from the packaging business, in which CGIP had 49 percent of assets following the acquisition of U.S. Crown Cork & Seal shares last year in exchange for its interest in CarnaudMetalbox. CGIP halved its stake in Crown Cork to 9.9 percent last month and with the 3.2 billion franc proceeds, helped pay for the holding in Valeo, which has significant growth potential, Seilliere said. These were "parallel operations" he said. The question of keeping Valeo in French hands did not figure in its calculations. "It's not our problem," he said. CGIP wants Valeo to adopt a more generous dividend policy, pursue acquisitions more aggresively and use debt financing to leverage its financial results. "We will ask for a payout of a third of the net," Seilliere said. Valeo has historically paid out 15 to 18 percent of net profit, while the average on the Paris stock exchange is 35 to 40 percent. The CGIP move seemed to have borne fruit as Valeo said as part of the acquisition announcement it will make an exceptional 10 franc dividend later this month, for which Cerus would still be the beneficiary. But Valeo's chairman Noel Goutard emphasised "There is no change in direction," he told a separate news conference. The priority will be a "strong and healthy balance sheet," and the company will pay particular attention to pursuing "controlled and profitable growth," he said. He added that Valeo had relied on its own resources in the past as Cerus did not want to see its 28 percent stake diluted in any capital raising in the markets. With the new ownership structure, Valeo would be free to tap the markets for funds when it saw acquisition opportunities. French car industry analysts said the deal was good news for all involved. Valeo had a solid partner in CGIP to develop on its own, even if this would not rule out a merger with another car parts firm in several years as the industry changed. In the deal, Valeo, Europe's second largest car parts maker and a leading supplier of French and German carmakers, said it would make a 1996 dividend downpayment of 10 francs. Another payout of 10 francs per share would be made to Cerus if Valeo's 1997 net attributable profit hits 1.45 billion francs. Shares in CGIP closed 3.93 percent higher at 1,190 francs while Valeo ended 2.64 percent. Cerus was down 7.29 percent at 127.10 francs.

Some 120 Eurotunnel SA /Plc employees are working round the clock to clear wreckage from the Channel Tunnel, devastated by a fire two weeks ago which has halted passenger services on the undersea link between Britain and France . Reporters visiting the tunnel on Tuesday viewed a nightmarish scene of flame-scarred concrete where intense heat had blown apart the surface cladding to expose steel reinforcing cables embedded in slabs. A blaze on a truck-carrying wagon on December 18 forced Eurotunnel to close the tunnel to Eurostar high-speed passenger trains and tourist vehicle Shuttle services just before the Christmas season. Partial freight traffic has been resumed. Eurotunnel hopes to run two thirds of normal passenger and freight traffic in the estimated three to six months necessary for repairs to be completed, Eurotunnel spokesman Francois Borel said. "We are going to make a new tunnel," he said. But before repairs can begin, the wreckage must be cleared. With scorched rubble underfoot and ghostly streams of melted grey fibre glass filaments overhead, maintenance workers in four shifts of six hours are shovelling out ashes and debris, all that is left of 28 trucks caught in the fire. The Eurotunnel official coordinating the clearance, Dominique Dorso, said three wagons remained where the fire started, in section five of the tunnel. One was being removed Tuesday evening and the other two should be taken out next week. The fire was so intense in one 30-metre stretch that no visible traces of the trucks themselves remained in the Shuttle wagons, which were themselves reduced to blackened and twisted steel lattice frames. Chunks exploded off the first 40-cm thick concrete layer which makes up the the Tunnel wall but the fire did not penetrate to the underlying 20-30 cm of injected concrete which lines the link. Behind that second layer is chalk. Two weeks on, the smell of burnt plastic and metal still permeates the air and protective masks are obligatory. Once the debris is cleared , the Anglo-French consortium which built the Tunnel, Transmanche Link (TML), can start repairs to the five or six affected kilometres of the link, putting in new cladding, cabling and conductor rails. Eurotunnel hopes to use intersections linking the two tunnel bores to bypass the damaged section and allow trains to run between Britain and France during repairs, he said. Tight security surrounds the entry points to the tunnel bores. There are three separate checkpoints before workers can even enter the narrow central service tunnel, which was used for the evacuation on the night of the fire, and is routinely used by maintenance crews. Specially-built Mercedes vehicles, high and narrow, are used to transport personnel along the service tunnel. It is not a trip for claustrophobics. Once the overhead lights are out, the grey strip of tunnel extends into the darkness ahead, with only the headlights for illumination. Overhead are tonnes of rock and the Channel waters.

State-owned Air France is under pressure from the French government to drop any thought of buying Boeing long-haul jets from the U.S. and stick with the French-based Airbus equivalent, industry sources said on Friday. They said that Air France chairman Christian Blanc flew into a political storm after saying on Thursday that the French flag carrier might use a mix of Boeing and Airbus planes in its planned new long-haul fleet, expected to cost some $1 billion. One industry source said the pressure on Blanc had come from Transport Minister Bernard Pons. "It's clear there is extremely strong political pressure," head of the SNPL pilots union Geoffrey Bouvet said on Friday. Blanc on Thursday told the business newspaper Les Echos there was no conflict in flying both the Airbus 340 and Boeing 777 aircraft. "They are complementary...Today like yesterday, we need both Airbus and Boeing." He added that he did not expect government opposition if the company bought from both European Airbus Industrie consortium and arch-rival Boeing. "The minister, having talked to Airbus, has been told that there will be an equivalent Airbus product. It is perfectly natural that he ask the national company to invest in Airbus," a transport ministry spokeswoman said. Any decision will go to Prime Minister Alain Juppe for ratification, the transport ministry spokeswoman said. France's state-owned Aerospatiale is a senior partner in Airbus. The others are British Aerospace Plc, Daimler-Benz Aerospace, a unit of Daimler-Benz AG and Construcciones Aeronauticas SA (CASA) of Spain. At the heart of the debate, apart from technical merits of the fleet, is Blanc's desire to run the airline as a "normal" company along commercial lines, free of political intervention. Blanc's mandate is to turn round the airline, prepare it for privatisation and deregulation of European air travel from 1997. He has forecast the group was on track to break even this year. Because of the political sensitivity, a committee of Air France board members was formed to evaluate the products and will submit its conclusion on December 20. The union's Bouvet said Air France should be left to choose the right planes for particular routes rather than have a fleet imposed by the government. A mixed fleet could make economic sense, if a world class airline such as Singapore Airlines could fly both Airbus and Boeing, he said. Air France is expected to order between five and 10 planes. The official list price for the A340-300 is around $120 million. The plane seats 295 passengers in a typical three-class layout and can fly up to 7,300 nautical miles or 13,500 km. The Boeing 777 flies in two basic versions. The 777-200 seats between 305 to 328 in three classes and has a catalogue price of $128-146 million, and has a range of 3,780 nautical miles, or 7,000 km. The 777-300, officially priced at $151 million-170 million, seats between 368 and 394, flies 5,380 miles or 9,970 km. A Boeing spokesman said the company has made a number of offers to Air France using different product mixes. Airbus itself declined to comment. The Air France operating company in June reported a first-half operating profit of 413 million francs compared with a loss of 902 million in the first half of 1995.

A restructuring agreed between Channel Tunnel operator Eurotunnel SA /Plc and bank negotiators on its 69.6 billion francs of debt was a "robust" deal, French co-chairman Patrick Ponsolle said on Monday. He told a news conference the restructuring was robust as it would eliminate a total 16 billion francs of debt by swapping eight billion of loans into equity and a further eight billion for equity notes. The plan secured the company's future until 2003, when the London-Folkestone high-speed rail link would be built, he said. "After 2003 we will see an explosion of revenues from the railways," Ponsolle said. The restructuring meant the interest bill would be fixed at 5.2 percent or 3.21 billion francs for the seven-year period. That rate was much lower than market rates, the company said. If there is a cashflow shortage to repay interest, it will be able to draw down on stabilisation notes, which are effectively a credit line, free of interest until January 2006. The plan also pushed back the debt repayment periods by a significant period, Ponsolle said. The resettable bonds mature in 2050, the participating loan notes in 2040, the remaining junior debt in 2025 and stabilisation notes in 2026. Eurotunnel has also negotiated the right to refinance all its debt after 2004, free of penalties, to benefit from any improvement in market conditions. Previously, that refinancing incurred heavy financial penalties. The deal had been worked out using a wide range of scenarios and sought to preserve the company's future and independence, Ponsolle said. "It is the best compromise under the circumstances. The sacrifices for shareholders and banks are equal and equitable." The two chief aims of the deal were "to preserve a clear majority for the shareholders and to ensure long-term financial stability," he said. Although the company planned to pay a first dividend in around 10 years, if it performed very well it could make a payment at the date envisaged in the 1994 rights issue -- 2004. Asked what would happen if shareholders rejected the deal, Ponsolle said, "I think we would go back to the choices at the starting point. The starting point was either we come to a friendly agreement or insolvency." "I think, contrary to some, an insolvency could only be a catastrophe for the small shareholders." Prices should rise "to a reasonable level" following the merger announcement last week of P&O and Stena of their cross-Channel operations, Ponsolle said. The merger news had come as a surprise to Eurotunnel, which had not expected such a move until later, perhaps in 1997, he said. The earliest Eurotunnel could hold a shareholders' meeting to vote on the deal would be late March or early April, he said. -- Paris newsroom +33 1 4221 5452 pnt

The European Airbus consortium must resolve deep differences over the future shape of the aircraft-maker to meet the challenge posed by the merger of its U.S. rivals, industry executives said on Monday. Boeing and McDonnell Douglas shook the aerospace world on Sunday by announcing they were joining to create a company with annual sales of $48 billion. The strengthening of Boeing, which already outpaces Airbus in sales of civilian aircraft, puts further pressure on the four-nation Airbus Industrie consortium to agree a status change that might sharpen its commercial muscle. But the four member companies from France, Germany, Britain and Spain are stuck over differing ambitions for changing their present partnership into an integrated company that could rival the new U.S. titan. Historically Boeing has held around 60 percent of the world civilian aircraft market, Airbus 30 percent and McDonnell Douglas 10 percent. Airbus, which had set a target of 50 percent by the end of decade, is a partnership made up of French state-owned Ste Nationale Industrielle Aerospatiale, British Aerospace Plc, Daimler-Benz Aerospace, a unit of Daimler-Benz AG and Construcciones Aeronauticas SA (CASA) of Spain. The partners said on July 8 they aimed to reach an agreement by the end of 1996 on the timetable for setting up a new Airbus company, which could be formed by 1999. But an industry source in London said a pact looked likely to slip into the new year. "The discussions go on. The partners are still working on negotiations for the Airbus Industrie restructuring," said an Airbus spokesman, speaking from its headquarters in Toulouse, southwestern France. "I think this will clearly introduce a massive sense of urgency," aerospace analyst Sash Tusa, at broker UBS told Reuters Financial Television (RFTV). A senior executive said the partners have three different positions on the future Airbus. Aerospatiale wants a "minimal" Airbus, Dasa seeks a "maximum", while BAe wants a transfer of "core assets" from the partners to the new company, he said. Aerospatiale's chairman Yves Michot said in September he wanted Airbus to act as a prime contractor with enlarged powers to direct subcontractors. Aerospatiale does not think Airbus can take on more than its current marketing operations. "You cannot go from one thing to the next overnight. Marketing is a business in its own right. Managing factories, manufacturing, people is something else," a French industry executive said. That pits the French firm against Dasa which wants to deepen Airbus' integration to include the design and engineering of sub-assemblies as well as making the major systems such as wings and fuselages. The "maximum Airbus" would also handle procurement, final assembly and product support. BAe would like to transfer design and manufacturing facilities and provide Airbus with a strong balance sheet to finance aircraft sales. But Aerospatiale would stand to lose its industrial and intellectual crown jewels if it transferred its design office and manufacturing plant in Toulouse to Airbus. Aerospatiale gains some 70 percent of annual sales from the civilian sector, more than BAe and Dasa which have military and motor vehicle sales respectively to boost their revenue streams. Although Aerospatiale would receive Airbus dividends, it would lose key operations -- galling for a company which set up Airbus jointly with the Germans. It is joint senior partner with Dasa with 38 percent ownership. Stripping out Airbus would leave Aerospatiale with missiles and satellites, both of which are being eyed by the acquisitive Lagardere Groupe, and helicopters -- a business under severe pressure. Apart from the status change, Airbus also needs to develop a fuller product range. "We have to enlarge the product line at the upper and lower end," a Dasa spokesman told RFTV. Airbus is studying a large plane seating between 500-600, dubbed the A3XX, and is planning a 100-seater with China and Singapore. BAe chairman Richard Evans told the Wall Street Journal on Monday that while the A3XX large aircraft was important, it needed to be a sound business decision. "I recognise that to be successful and compete with Boeing, we in Airbus need as wide a product mix as possible but not at any price, not at the cost of busting the business," he said. BAe owns 20 percent of Airbus, while Casa owns four percent.

Channel Tunnel operator Eurotunnel SA/Plc sought to reassure the public Wednesday about the safety of the rail link between France and Britain following last week's fire that halted most services. But its public relations effort was marred by a minor fire that broke out near the site of last week's blaze. "There is no doubt the tunnel is at least as safe as other Channel transport systems," French Co-Chairman Patrick Ponsolle of the Anglo-French company told a news conference. A fire in a truck on a freight train seriously damaged a section of the tunnel on Monday last week, injuring 34 people and raising doubts over the safety of the cross-Channel service. The Eurostar high-speed passenger train and Le Shuttle car and passenger services have been halted, although a limited freight service has resumed. Wednesday's fire was apparently sparked by welding work during repairs, but it was quickly extinguished, British police said. "Safety is our first consideration, ahead of commercial considerations," British Co-Chairman Robert Malpas said. "The emergency evacuation procedure which forms the backbone of the safety system worked after two other measures failed." The cause of the fire remains a mystery, although sabotage is seen as one possibility by the French magistrate investigating the fire. "The judge has not ruled out the theory of foul play," said a Eurotunnel spokeswoman. But legal sources said the idea that the fire was started deliberately was regarded as a remote possibility and not the most likely cause. Ponsolle said Eurotunnel's maximum potential loss from the fire was five to seven million pounds ($8.40 million to $11.75 million). "The ultimate maximum loss for the company after receiving insurance indemnities could be of the order of five or six or seven million pounds," he said. Eurotunnel's monthly revenue before the fire was between 350 million and 400 million francs ($67.75 million and $77.43 million). Loss of revenues would depend on the re-establishment of a partial service, he said. If passenger and freight services resumed to 50-60 percent of previous capacity, this would mean a maximum monthly loss of 200 million francs ($38.7 million), Ponsolle said. Eurotunnel's maximum insurance coverage is 1.5 billion francs ($290.4 million) for equipment and 4.5 billion ($871.1 million) for earnings losses, Ponsolle said. Eurotunnel hopes to resume partial passenger service early next week, if the safety commission that oversees the tunnel approves a new set of temporary evacuation measures, Ponsolle said. Because a 1.243 mile section of one of the tunnel bores cannot be used for evacuation, the company is laying on special fire-fighting and ambulance crews on 24-hour alert, with two cars for extricating passengers. The train that was destroyed in the fire was worth nearly 100 million francs ($19.4 million) and repairs to the tunnel and related equipment would cost between 200 million and 500 million ($38.7 million to $96.8 million). But Eurotunnel is awaiting the results of insurance investigations into the costs of the fire. Ponsolle said the blaze should not affect a complex plan to restructure the company's 70 billion francs ($13.6 billion) of junior bank debt, which took a year to negotiate. "There is no reason for us to put into question the restructuring," he told reporters. "We do not see at this stage there needs to be any delay in the rescheduling of the debt," Malpas told Reuters Financial Television when asked whether the banks had asked for new clauses to be added to its restructuring because of the fire. "The creditor banks have been very understanding; they wish us well ... they see it as an incident which we will get over and which will be contained in insurance arrangements and the financial arrangements we have set up," Malpas said. Ponsolle said the company did not face any problems with cash flow. Eurotunnel had 100 million pounds ($167.7 million) in cash holdings and "it is not under financial pressure to reopen services."

French state-owned aerospace group Aerospatiale, in the throes of merger talks, faces key questions on its strategic operations as Europe's aircraft industry gears up for competition with a new U.S. giant. Aerospatiale is due to merge with combat plane maker Dassault Aviation as part of France's consolidation of its fragmented defence industry. It is also fighting what executives see as a rearguard action to preserve its hold on building passenger jets for Airbus Industrie, in which it is a senior partner. "France and Europe have no choice but to restructure," Jean-Marc Baron, aerospace specialist at consultancy KPMG Peat Marwick, said. "The Boeing-McDonnell Douglas merger is excellent because it confronts the Europeans with reality." Sunday's surprise merger announcement by U.S. giant Boeing and McDonnell Douglas put the spotlight on speeding up European consolidation and a shakeup of the Airbus structure, in which Aerospatiale is expected to play a key role. Airbus partners British Aerospace Plc (BAe) and Daimler-Benz Aerospace AG (Dasa) are pushing for a version of a future Airbus which could effectively take commercial aircraft production out of Aerospatiale's hands. The Airbus shareholders, which also include Construcciones Aeronauticas SA of Spain (Casa), are negotiating the future shape of the Airbus group as part of a move to convert it to a joint stock company from a cumbersome partnership structure. If, as the British and Germans want, the partners transfer key design and manufacturing assets to Airbus, Aerospatiale would be left with an uncertain future in missiles, satellites, helicopters and combat aircraft after taking over Dassault, a senior industry executive said. "Aerospatiale wants to accelerate the merger with Dassault to give it more weight vis-a-vis Dasa in Airbus," Baron said. Aerospatiale derives 70 percent of annual sales from the civilian sector, of which half comes from Airbus products, an Aerospatiale spokeswoman said. Airbus contributed a 1995 operating profit of 1.06 billion francs ($203 million) to Aerospatiale and that figure is sure to rise for this year with Airbus deliveries at 111 at the end of November. Airbus delivered 102 planes in 1995. Although Aerospatiale, which had 1995 turnover of 49.23 billion francs, would absorb Dassault in the merger, chairman Serge Dassault has said he wants to keep its identity distinct. Dassault, smaller than Aerospatiale with 1995 sales of 11.6 billion francs, has consistently made profits and cultivates its own strong corporate culture as maker of the Mirage combat plane and Falcon small business jet. The merged company would have annual turnover of around 60 billion francs and is expected to have a common purchasing centre. Purchasing makes up around 60 percent of turnover so if it made annual savings of around five percent, it could benefit to the tune of one to two billion francs a year. The Aerospatiale spokeswoman said merger terms had not yet been agreed. Aerospatiale wants Airbus eventually to have a military wing, similar to U.S. giants such as Lockheed Martin and Boeing and McDonnell Douglas, a source close to the company said. The U.S. giants have defence businesses to balance out the business cycles and receive state research contracts for military projects which are viewed as indirect industry aid. After merging with Dassault and breaking even, Aerospatiale can be privatised. This is expected to be a sale of capital to industrial partners rather than a stock market flotation, because of the strategic nature of Aerospatiale's business. But so far, no timetable or partners have emerged. On missiles and satellites, Aerospatiale executives are frustrated that they have been unable to close a deal to merge these activities with Dasa, despite years of negotiations. The two activities, grouped under a space and defence heading, contributed 412 million francs operating profit in 1995, after a loss of 32 million in 1994. Meanwhile, it feels the French conglomerate Lagardere Groupe breathing down its neck. Lagardere recently completed a merger of its Matra missiles unit with BAe to create the Matra BAe Dynamics joint venture, with annual sales of $1.5 billion. Lagardere argues that by virtue of its British merger it should be the focus for the next consolidation between France and Germany in missiles, while its Matra Marconi Space satellites joint venture with Britain's GEC Plc should be the centre of a European space business. Aerospatiale also has a Eurocopter joint venture with Dasa, which makes military and civilian helicopters. Eurocopter made an operating loss of 817 million francs last year, after a 45 million loss in the previous year. Eurocopter faces a difficult medium-term outlook with an orders gap after the next two years until first deliveries in 2002 of the Tiger combat helicopter to the French army. Aerospatiale made its first surplus since 1991 with a first-half 1996 net profit of 273 million francs and expects to break even in 1997 if the dollar stays at five francs. It made a 1995 net attributable loss of 981 million, due to a 1.5 billion restructuring charge to cover 3,000 job losses. ($1=5.224 French Franc)

The four partners of the Airbus consortium Monday signed an agreement aimed at making the European planemaker a unified company better able to compete with U.S. rival Boeing Co. Airbus Industrie said in a statement its four European partners had signed a memorandum of understanding to restructure Airbus into a limited liability company by 1999. "The establishment of Airbus Industrie as a single corporate entity (SCE) is an important initial step in the consolidation of the aerospace industry within Europe," Airbus said. Toulouse, France-based Airbus is currently a partnership between French state-owned Ste Nationale Industrielle Aerospatiale, British Aerospace Plc, Daimler-Benz Aerospace (DASA) and Construcciones Aeronauticas SA (Casa) of Spain. The new Airbus will have a single management structure which would add engineering, testing, production, procurement and customer service to Airbus's current marketing, sales and product support activities, the statement said. DASA Chairman Manfred Bischoff told reporters in Munich that differences remained among the partners in the consortium despite the signing of the deal on Monday. He said there were still different views over the amount of productive assets that should be brought in to the limited liability company which is to replace the existing partnership. An industry executive said what follows now would be "horse-trading" as the partners discuss what assets are deemed necessary now that the functions for the new Airbus have been decided. "Is this plant an essential part of the function of the future Airbus," will be the question to be asked, he said. The Airbus statement said "Transfer of assets associated with these functions... will depend on how far the assets are essential for the described functions and their detailed valuation, to be completed by the end of 1997." The British and Germans had argued for a high degree of integration in the new Airbus, while Aerospatiale wanted a more cautious approach, based on a largely static view of Airbus. Airbus is mainly a sales and marketing organisation with the four partners making the planes. But the task of reorganizing Airbus took on an urgent note after Boeing and McDonnell Douglas said in December they would merge and form a civil and military giant with $50 billion in annual sales. Airbus said the restructured company would help improvement in overall operational efficiency, the introduction of new international strategic partnerships and the longer term opportunity for "external participation" in Airbus. Airbus spokesman Robert Alizart said that these options included a future stock market listing of Airbus. In London, a British Aerospace spokesman said a share flotation for Airbus was a "long-term possibility." Airbus said it was studying a launch of the A3XX, which would break the stranglehold on the lucrative high-capacity end of the market now held by Boeing's 747 jumbo jet. Aerospatiale Chairman Yves Michot told journalists that he had met the chairman of U.S. giant Lockheed Martin, Norman Augustine, for cooperation talks and did not exclude a role in the A3XX project for the U.S. company. "You cannot get enough of the right kind of partners in this sort of project..." Michot said, citing Lockheed Martin as a potential partner. But Dasa's Bischoff told the Stern magazine that no decision was expected this year on the A3XX project as talks with airlines had shown detailed consultations were still needed, in view of the huge financial effort needed. The goal of the new Airbus company must be to achieve a return on equity of at least 12 percent for its shareholders, Bischoff said. That meant that Aerospatiale must match cost cuts of 30 percent already made by DASA and BAe, he said. Bischoff told reporters in Munich that Lockheed and Russian plane companies could become Airbus partners, as well as Saab of Sweden and Italy's Alenia.

Air France on Wednesday ordered 10 Boeing jetliners and 10 Airbus jets, and the government-owned airline reported dramatically improved profits of 802 million francs ($158 million) in the first half. The profit estimate for the six months ending Sept. 30, disclosed in an Air France board statement, compared with a loss of 335 million francs ($66 million) a year ago. The improved results and Air France's aim to break even in 1996/97 was underlined by the orders for 10 Boeing 777 twinjets and options for 10 more. The airline also ordered five Airbus A340s, confirmed five orders made in June and took options for an additional five. Air France Chairman Christian Blanc won vital support from French Prime Minister Alain Juppe to buy from Seattle-based Boeing instead of ordering solely from its archrival Airbus Industrie, the European consortium based in southwest France. At list prices, which are rarely paid, the orders and options for the Boeing 777-200 version ordered could be worth around $2.7 billion. Airbus would stand to gain $1.75 billion. List prices for the B777-200 range between $128 million and $146 million, while the Airbus A340-300 costs $110 million to $120 million. "In the reorganization of its fleet, Air France is obliged to buy Boeing," Transport Minister Bernard Pons told parliament. "It is obliged to meet commitments made in 1989 unless it accepts losing deposits and taking legal action, which risks being much more expensive than making this decision." The French airline had outstanding Boeing orders worth $994 million and $2 billion in options, Pons said, adding that the airline had skilfully negotiated the latest order to respect the initial commitment. The three government representatives on the Air France board approved the Boeing 777 purchase "not because they are the best or the most profitable but because they best meet the company's needs," Pons said. Air France had also accepted to be a launch customer for the planned A340-600, a "stretched" version of the A340, he said. Airbus hopes to build the 375-seater to smash Boeing's monopoly in the large-capacity aircraft segment. Air France said that, due to financial problems, it froze at the end of 1994 all aircraft orders, including the 1989 Boeing order, and opened talks with the two plane makers. Air France has since reorganized its fleet, restructured its network around a centralized "hub" at Paris Charles De Gaulle airport and optimised aircraft use. It has over the past two years increased the number of flying hours by 14 percent. Pons welcomed Air France's financial results, saying: "The results are very encouraging."

State-owned Air France on Wednesday reported dramatically improved earnings of 802 million francs ($158 million) in the first half and placed a bumper order for 20 Boeing and Airbus aircraft, plus options. The profit estimate for the six months to September 30, which emerged in an Air France board statement, compared with a loss of 335 million francs a year ago. The improved results and Air France's aim to break even in 1996/97 was underlined with orders for 10 Boeing 777 twinjets, and options for 10 more. The airline also ordered five Airbus A340s, confirmed five orders made in June and options for a further five. Air France chairman Christian Blanc won vital support from Prime Minister Alain Juppe to buy from Seattle-based Boeing instead of ordering solely from its archrival Airbus Industrie, the European consortium based in southwest France. At catalogue prices, which are rarely paid, the orders and options for the Boeing 777-200 version ordered could be worth around $2.7 billion. Airbus would stand to gain $1.75 billion. List prices for the B777-200 range between $128 and $146 million, while the Airbus A340-300 costs $110 to $120 million. "In the reorganisation of its fleet, Air France is obliged to buy Boeing," Transport Minister Bernard Pons told parliament. "It is obliged to meet commitments made in 1989, unless it accepts losing deposits and taking legal action which risks being much more expensive than taking this decision." The French airline had orders outstanding with Boeing worth $994 million and $2 billion of options, Pons said, adding that the airline had skillfully negotiated the latest order to respect the initial undertaking. The three state representatives on the Air France board approved the Boeing 777 purchase "not because they are the best or the most profitable but because they best meet the company's needs," Pons said. Air France had also accepted to be a launch customer for the planned A340-600, a "stretched" version of the A340, he said. Airbus hopes to build the 375-seater to smash Boeing's monopoly at the large capacity aircraft segment. Air France said that due to financial problems, it froze at the end of 1994 all aircraft orders, including the 1989 Boeing order, and opened talks with the two plane-makers. Air France has since rationalised its fleet, restructured its network around a centralised "hub" at Paris Charles De Gaulle airport and optimised aircraft use. It has over the past two years increased the number of flying hours by 14 percent. Pons welcomed Air France's financial results, saying: "The results are very encouraging." The company said it made its profit despite a rise in spending on fuel of nearly 500 million francs for the period. Turnover was up nearly five percent to 21.3 billion francs due to a 14.8 percent increase in passenger traffic and a 6.7 percent rise in freight. Operating profit rose nearly 30 percent to 1.1 billion francs, compared with 849 million in the year-earlier period. The pretax, pre-exceptional result tripled to 660 million francs. Air France was ahead by "a little more than 250 million francs of its budget" at the six months stage, the company said. The first half is traditionally better for seasonal reasons and should not be used to extrapolate for the full year, it added. Debt stood at 12.9 billion francs at September 30, versus 19.2 billion at March 31, 1996. The repayment of 6.3 billion francs significantly exceeded the last tranche of its state recapitalisation paid in September. The Boeing order consists of the heavier "Increased Gross Weight" version of the basic 777-200, equipped with GE90 engines built by General Electric and France's Snecma. The B777-200 will seat 288 passengers in three-classes. The Airbus order is for the A340-200E version equipped with CFM56-5C4 engines. ($1=5.075 French Franc)

French utilities giant Compagnie Generale des Eaux on Monday posted higher first half profits and unveiled plans to reorganise its loss-making construction business, hammered by a depressed French market. Chairman Jean-Marie Messier told a news conference the company made a first half net profit of 808 million French francs ($155.9 million), after payment to minorities, up from 224 million a year ago. He also forecast net profit for the full year 1996 would be about 1.8 billion francs after a net loss the year before of 3.69 billion francs. The results would be "strongly marked by exceptional items, notably capital gains from asset sales." For 1997, Messier expected profits to be "much higher" than those of 1996 and should be "without doubt higher than the best profits the company has had in its history." The company made 3.4 billion francs net profit in 1994. Messier also announced Generale des Eaux said it had made a formal bid on Monday with its German partner Mannesmann to run the telecommunications operations of French state railways SNCF. The two companies want to bring British Telecom to join the bid. Messier, who came from an investment bank, was brought in last year to clear out the group's balance sheet which had put on more than 50 billion francs of debt and been savaged by a crisis in the property market and construction business. His first step last year was to reorganise the property arm, which he said on Monday had cost the group a total 15 billion francs since 1994. The group expects to lose 4.6 billion francs this year due to poor property assets but that includes three billion francs of exceptional charges which should wipe out any uncertainty for the next three years, he said. "At the end of 1996, Generale des Eaux will not face any questions, even in pessimistic scenarios for the next three years, on any exceptional charges which may arise from its property activities," he said. The group's George V property development arm aims to be profitable from 1997, he said. The group's average level of property provisioning was around 55-56 percent, of which assets in the South of France were provisioned at 65-70 percent and 85 percent at Cannes. This time round, Messier attacked the group's building and public works businesses which have suffered from the downturn in France and Germany. He has made its SGE subsidiary the centre of its construction activity. Into SGE will go the GTIE and Santerne electrical installations units and roadbuilders Cochery, Viafrance and SGE-VBU. And there will be a consolidation of building activity with SGE buying 40 percent of Compagnie Generale de Batiment et de Construction (CBC), currently wholly owned by CGE. The new SGE, which will be "radically different and attractive," have annual sales of 52 billion francs and will return to a significant level of profit in 1997, Messier said. Generale des Eaux also expects to cut its debt by about 10 to 15 billion francs in 1997. It said it expected its net financial debt to stand at 53 billion francs at the end of 1996, down from 54 billion in 1995. He said the company's operating profit would be close to the 3.7 billion franc profit recorded in 1994. Turnover in 1996 should be up three percent to 164 billion francs, he added. France is deregulating its telecommunications in 1998, breaking the domestic monopoly of state-owned France Telecom to comply with European Union rules. ($1=5.182 French Franc)

French President Jacques Chirac looked set on Wednesday to achieve his ambition of creating a national defence giant to rival huge U.S. conglomerates through the planned merger of Lagardere's Matra with Thomson- CSF. The government announced on Wednesday it preferred a bid by missile-maker Lagardere Groupe for electronics firm Thomson SA over a rival one by civilian engineering group Alcatel Alsthom. Both offers have been referred to the independent Privatisation Commission. The preference for Lagardere seems to vindicates the integration sought by Noel Forgeard, chairman of Lagardere's Matra unit, who has fought a highly-public campaign for Thomson, in order to win its Thomson-CSF defence arm. The deal will "indisputably strengthen the missiles activity in France and particularly Europe," said Jean-Marc Baron, a partner specialising in defence at consultants KPMG Peat Marwick. "The merger wil create a critical mass," he added. Matra specialises in air-to-air missiles with the Magic and Mica weapons, while Thomson-CSF has ground-to-air missiles including the Crotale NG (New Generation) and Starstreak very- short-range missile built with Shorts Brothers Plc, a unit of Canada's Bombardier. The addition of Thomson-CSF reinforces a vital joint venture between Matra and British Aerospace Plc to create Matra BAe Dynamics, which Lagardere wants to be the pole for future European industrial concentration. Besides the missile synergy, Baron pointed to the benefits of marrying Thomson-CSF's radar and communications expertise with Matra's space satellites, which will give Thomson access to a new market. Lagardere has major space interests with its Matra Marconi Space (MMS) joint venture with GEC Plc of Britain and also wants to use this a platform for building a single European satellite giant, to make the most of scarce funds. This vertical integration of detection, communications and weapons makes the future Thomson Matra a powerful "systems" player rather than a seller of separate products. Each of these segments has annual turnover of about $1-$2 billion, Baron said. In the United States, the defence industry has quickly consolidated through $40 billion of mergers and acquisitions to create giants such as Lockheed Martin. Integration is seen as key, with firms such as Hughes, a unit of General Motors, not only building missiles and satellites but also operating the satellites. European and U.S. defence firms have had to adapt to shrinking military spending since the end of the Cold War and soaring research and development costs. But Europe has lagged in that restructuring due to differing national interests. With the aid of Matra's links with BAe and GEC and through overtures to Daimler-Benz Aerospace (Dasa), Forgeard wants to forge a European grouping which would have world class status in terms of turnover and product range. Chirac launched the privatisation of Thomson SA in February as part of a restructuring of France's fragmented defence industry, widely seen by analysts as a vital step toward a badly needed consolidation of European capacity.

The European Airbus consortium said on Tuesday it was confidently pressing ahead with studies on a 555-seat passenger plane despite a decision by archrival Boeing to scale back work on a larger jumbo jet. Boeing on Monday said market conditions did not justify the risk and expense of building a new version of its 747 jumbo jet, the 747-X, and it was diverting half the 1,000 staff on that project to smaller planes. "We are confident the A3XX will meet market needs," an Airbus spokesman said. "The signs from major airlines working with us on shaping the A3XX are definitely encouraging." Airbus, ever quick to seize on any perceived gaps in Boeing's armour, says airlines want an all-new plane rather than Boeing's 747-X, which the Airbus spokesman said was the "end of the line for a product developed in the late 1960s". "Airlines want to fly into the 21st century facing forward, not backwards," the spokesman added. Airbus must attack Boeing's monopoly on the large-capacity segment and is studying designs for an A3XX product family which it hopes to launch in 1998 for service in 2003. It wants to grab at least half of the aircraft market by the end of the decade, up from its estimated historic share of 35 percent. But it lacks large planes to compete with Boeing's 777 giant twinjet and the best-selling 747 jumbo. The four-nation consortium differs with Boeing over the potential market and development costs for a new large plane. Airbus forecasts a market of 1,383 planes seating more than 400 passengers over the next 20 years, while Boeing believes demand would only stretch to 470 planes seating 500 or more, which would not allow it to get a return on its money. A basic A3XX would cost around $200 million, giving potential sales worth more than $275 billion on the Airbus forecast. "A split market would have been a big challenge for two manufacturers but now Boeing is opting out, that enhances our prospects," the Airbus spokesman said. Airbus accepts the view that the market will fragment further as people want to fly more frequently, non-stop, long distance between city pairs. The "fragmentation" effect was one of the factors cited by Boeing for cutting demand for larger planes and reducing the importance of big airport hubs. But Airbus believes it will meet that market change with its A340 long-haul plane and that the A3XX will co-exist. Saturation of air routes and airport landing slots calls for higher capacity planes, it argues. Countering critics who point to already lengthy waits at airports, it says its A3XX designs would allow a quicker passenger turnaround than the jumbo. Airbus is talking to 14 leading airlines on what the plane should offer and is confident that it can match or better the airlines' operating demands. These include fitting within an 80 metre "box" at the airport terminal. It is officially sticking to its estimated $8 billion development cost for the A3XX, despite scepticism among some experts that it cannot be done for less than $15 billion. Airbus is a consortium made up of French state-owned Ste Nationale Industrielle Aerospatiale, British Aerospace, Daimler-Benz Aerospace (part of Daimler-Benz) and Construcciones Aeronauticas SA of Spain.

A two-stage privatisation France's Thomson SA electronics group would allow an early sale of its defence arm and make better economic sense than packaging defence with the loss-making consumer goods unit, stock market analysts said on Monday. Conservative Prime Minister Alain Juppe said in an interview in the London Financial Times on Monday that the military electronics subsidiary Thomson-CSF could be separated from Thomson Multimedia to allow for a speedy privatisation. The government was forced last week to drop its preferred choice of selling the whole Thomson group to the Lagardere Groupe conglomerate for a symbolic one franc after the independent Privatisation Commission rejected that option. A break-up of Thomson runs directly against President Jacques Chirac's initial policy announced on February 22 on restructuring the French defence industry and selling Thomson as one unit. But analysts said the two-part sale made good sense. "We should have started with that...get on immediately with restructuring the defence industry," said an analyst at a French brokerage. "We can leave Thomson Multimedia (TMM) until 1998." A second analyst said, "It's the privatisation of the Multimedia unit which poses the problem. The industrial logic of the merger between Thomson-CSF and Lagardere has not been criticised by anyone." It was Lagardere's plan to sell TMM to South Korea's Daewoo Electronics, while keeping Thomson-CSF, which led the Privatisation Commission to rule out its bid. The Commission objected to planned technology transfers to Daewoo and the lack of binding commitments by Daewoo to retain jobs in France. Privatising Thomson-CSF separately would meet the state's main aim of creating a defence electronics national champion, and shelve the problems of Thomson Multimedia. CSF is profitable, virtually clean of debt and 42 percent of the capital is quoted on the Paris bourse. A source close to Thomson-CSF said the firm has not lost any contracts due to the privatisation uncertainty but it has had to run a corporate advertising campaing in countries where it feels its image has suffered. Lagardere's Matra missile company still looks the favoured candidate for taking over Thomson's defence unit ahead of a rival offer from engineering group Alcatel Alsthom. "We get the impression that the government wants Lagardere to get Thomson-CSF," said one analyst at a brokerage. An analyst at a French bank said, "Insofar as the government has made its preference known and is sticking by it, Lagardere seems to be well placed." Lagardere has the means to buy Thomson-CSF, without recourse to significant borrowing, one analyst said. Taking a range of Thomson-CSF share price of between 156 and 200 francs per share, the company has a market capitalisation of between 18 and 24 billion francs ($3.4-4.6 billion), he said. At the end of 1995 Lagardere had 10 billion francs in tradeable securities, 1.3 billion in free cash and is due to receive three billion in the first half of 1997 when share warrants are due to be exercised. Financial debt was around 8.4 billion. Lagardere would bring some eight billion francs of Matra's assets in merging with Thomson-CSF, which would reduce the cash it would have to pay. It would however be expected to pay large amounts for goodwill. Speculation that a vertical integration of missiles, electronics and airframe makers could now be tackled by merging Thomson, Matra, Dassault Aviation and Aerospatiale did not stand up to scrutiny, analysts said. Combat plane maker Dassault is expected to be absorbed by the larger, civilian-aircraft manufacturer Aerospatiale as part of the defence industry consolidation. But as Aerospatiale is state-owned and the government still wants to privatise Thomson, that course seemed to be excluded, an industry executive said. Economy ministry officials were not immediately available for comment. ($1=5.244 French Franc)

Troubled Channel Tunnel operator Eurotunnel SA/Plc is due to release first-half results on Monday but analysts said any attempt to forecast the figures was futile, given the uncertainties over its debt restructuring. "Everything depends on resolving the financial situation. If they announce a good figure...that might help, but it's really a face-off between the company and the bankers," Olivier Machou, analyst at brokerage Leven said. Eurotunnel needs to agree a refinancing of its $12.3 billion bank debt by the end of September, having asked in July for two court-appointed mediators to stay on to negotiate a deal with its some 220-strong bank syndicate. Machou said it was hard to forecast results due to "dumping" in the price war between Eurotunnel and ferry companies as they battle for a share of cross-Channel traffic between Britain and France. "It's not a stock that you can take a view based on half-year figures, especially as the first half comes before the summer season," one analyst said. However, one analyst at a large French brokerage said he had a rough forecast of a 2.5 billion franc ($492 million) net loss and an operating loss of around 100 million. The Channel Tunnel operator posted first-half sales of 1.79 billion francs, up from 806 million a year ago. It made a net loss for the full year last year of 7.196 billion francs on turnover of 2.266 billion. The headline figures will likely be flattered by the fact that Eurotunnel did not have all its services running a year ago, said Jeff Summers, head of research at debt specialist Klesch and Co in London. Stripping out the minimum usage fee that the railway operators pay, he expected a 25-30 percent improvement in the underlying results from a year ago. In sterling terms, Summers has pencilled in a 22 million pound ($34.45 million) pretax, pre-interest loss versus 121 million a year ago. With benign currency movements, it may break even. Operating cashflow should at least double to 56 million sterling before interest and capital expenditure, compared with 29 million. "Everything is going in its favour," Summers said. He cited the British government's recent decision to allow cooperation between ferry companies to pool their capacity and the European Commission's decision not to extend the duty-free sales regime beyond 1999. Pooling by rivals such as P&O and Stena would lead to "a reduction in direct competition" for Eurotunnel, while the loss of duty-free sales, representing 250 million sterling of soft subsidies for the ferries, would push ferry firms to raise ticket prices. Eurotunnel could then raise its prices and boost turnover. The cross-Channel market has also grown much faster even than Eurotunnel forecast, with traffic up 20 percent last year and estimated growth of 13-15 percent this year, Summers said. Richard Branson, head of the London & Continental Railways (LCR) group which runs the Eurostar high-speed train concession, has forecast it will hit six million passengers in the financial year 1996/97 and 10 million in 18 months. If that happens, Eurotunnel could receive revenues above the minimum usage fee as higher service levels trigger extra payments. ($1=5.077 French Franc) ($1=.6385 Pound)

French subscriber television company Canal Plus said on Friday it was merging with Nethold, a Dutch satellite television company, to create one of the world's largest pay-TV groups. Nethold is jointly held by Richemont SA, which is quoted on the Zurich and Johannesburg stock exchanges, and MIH Holdings Ltd, a listed holding company. "This merger is a major strategic move, resulting in the creation of one of the largest television groups in the world...particularly in the field of pay-TV with over 8.5 million subscribers," Canal Plus said in a statement. The new group will have significant positions in France, Italy, Spain, Scandinavia, the Benelux countries and Germany as well as a presence in several growing markets in central Europe. The Paris stockmarket authorities had suspended trading in Canal Plus shares on Friday morning, sparking speculation of a link up between the French firm and Nethold. Its stock closed at 1,169 francs on Thursday. Utilities group Cie Generale des Eaux, a key shareholder in Canal Plus, said in a separate statement it was delighted with the merger plan, which marked big step in Canal Plus's international development. The pact would give the French company access to the fast-growing Italian market, Generale des Eaux said. It would also give the new group greater weight in negotiating purchases of copyrights and open opportunities for the launch of European theme channels. Generale des Eaux said it was comfortable with its investment in Canal Plus. It said that in agreement with other Canal Plus shareholders, it would seek to maintain the same scale of investment in the new company. Under the terms of the deal, Canal Plus will buy 100 percent of Nethold from Richemont and MIH, paying with 6.1 million new Canal Plus shares and $45 million in cash. Following the issue of new Canal Plus shares, Richemont and MIH will respectively own 15 and five percent of Canal Plus. Cie Financiere Richemont has interests in luxury goods and tobacco and owns such famous brandnames as Cartier, Mont Blanc, Rothmans and Dunhill. Canal Plus said the deal had the backing of its main shareholders, media group Havas, Generale des Eaux, bank Societe Generale, and state bank Caisse des Depots et Consignations. It is subject to regulatory and shareholder approval.

Shares in debt-mired Channel Tunnel operator Eurotunnel SA fell on Tuesday after they were requoted following a week's suspension, amid disappointment over terms of its restructuring with creditor banks. The troubled Anglo-French company unveiled on Monday details of the refinancing its 69.6 billion francs ($13.50 billion) of junior-ranked bank debt after a year of complex negotiations with bank lenders. The shares were trading at 8.50 francs at 1052 GMT, on heavy volume of 16 million. They were 9.15 francs when they were suspended on September 30. Analyst Jean Borgeix at broker Pinatton said the stock market was disappointed with the 10.40 francs for which the banks will getting new Eurotunnel shares in an eight billion franc equity for debt deal. The market had been looking for a conversion price of between 12-15 francs per share, he said. The current shareholders also stand to effectively "lose" 30 percent of Eurotunnel's future cashflow, as this is the percentage earmarked for paying the "stabilisation notes" it would issue to banks in return for an interest-free credit line. The company negotiated the right to issue the stabilisation notes in case it fell short of cash to meet interest payments. It can issue up to 14.8 billion francs of the notes. Factoring in that loss of future cashflow gave the shares a present value of around 8.5 francs per share. Another French analyst said, "The restructuring assures the industrial viability of the project, even though the shares remain a risky investment." The debt deal looked good on paper and the zero-interest stabilisation notes provided Eurotunnel with a last line of defence if its cash failed to meet interest payments, he said. A trader at a major U.S. brokerage in Paris said the share price suffered from the dilution of equity due to the debt pact. The restructuring will dilute the holdings of current shareholders to 54.5 percent of the capital after the debt swap. The complex agreement also includes issuing eight billion francs of bonds redeemable in shares, which could further dilute the equity holders to 39.4 percent if the banks exercised their conversion rights at 12.40 francs per share. But shareholders will also get share warrants at the same price to bring them back to owning 51.3 percent of the capital. ($1=5.156 French Franc)

Europe's aircraft industry flew closer to strengthening its industrial base with announcements on Friday that a 100-seater jet to be built with China will form part of the Airbus family and Italy's Alenia will enter new Airbus programmes. The news follows statements earlier this week from archrival Boeing and the smaller McDonnell Douglas that the two U.S. firms are cooperating on future wide-body jets, particularly two "stretched" versions of the Boeing 747 jumbo. "A specific agreement has been reached on the new 100 seat jet family in which all the European partners involved have agreed that it will be part of the Airbus product range," a statement from British Aerospace Plc (BAe) said. BAe is a partner in the European Airbus Industrie consortium, as well as the separate AIA joint venture which is partnering China to build the Asian Express 100 passenger plane. Airbus, together with Alenia, a unit of the Finmeccanica holding company, will set up a new company to lead the European participation with China and Singapore, the joint statement said. Singapore's Singapore Technologies Aerospace is also a partner in the project. "This completes the bottom end of the Airbus range with a brand new offering and consolidates Airbus' position in the growing Asian market," an Airbus spokesman said. The Airbus partners are also bringing Alenia closer to the consortium by involving it in derivatives of current products, such as the A340-600, a stretched version of the four-engine, long-range A340, as well as a likely role in the A3XX large aircraft under study. "Alenia will probably be a risk-sharing partner in the A3XX," the spokesman added. "It means a broadening in equity and funds for both programmes." Airbus has marked out the A340-600 as its top priority as it needs to increase capacity to rival the Boeing 777 twinjet and older 747 models. It also wants to be able to launch the A3XX, expected to cost $8 billion, by 1998 for service in 2003. But while Alenia is moving in at the programme level, it is not entering the consortium as an equity partner. Alenia is already present in a special Airbus subsidiary, Airbus Military Company, set up to manage the Future Large Aircraft (FLA), a tactical transporter planned for eight European forces. The other Airbus partners are French state-owned Ste Nationale Industrielle Aerospatiale, Daimler-Benz Aerospace, a unit of Daimler-Benz AG and Construcciones Aeronauticas SA (CASA) of Spain. The 100-seater plane for China will share common features with the Airbus A320 family, which includes the A321 and A319, seating between 124 and 186 passengers. It will bring Airbus into a new segment fought over by Boeing and McDonnell Douglas. News that McDonnell Douglas will act as a subcontractor for Boeing, announced on December 3, "didn't take us by surprise," said the Airbus spokesman. "It doesn't alter our agenda." The aerospace industry had been expecting some of realignment by McDonnell Douglas after it announced at the end of October it was dropping studies of its MDXX wide-body plane. It also lost its place for a vital U.S. competition for the Joint Strike Fighter (JSF) last month.