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Transdev to Sell European Assets, Cut Debt as Part of Overhaul

March 26 (Bloomberg) -- Transdev, the mass transit operator partly owned by Veolia Environnement SA, plans to lower debt, sell assets and reduce global reach in a bid to raise profitability.

The operator of city buses and tramways’ debt of 1.9 billion euros ($2.5 billion) “is not sustainable for much longer,” Chief Executive Officer Jean-Marc Janaillac said at a press conference today. After a period of rapid expansion and rising revenue, “we’re going through withdrawal.”

Transdev, renamed from Veolia Transdev because the water utility’s stake is set to fall through a capital increase, is in the throes of a reorganization that will see the reach of its bus, rail and tramway activities reduced to about 17 countries from as many as 27. The company was created in 2010 when French state-owned bank Caisse des Depots et Consignations and Veolia Environnement SA agreed to merge their transport units to create the world’s biggest private operator. They had planned an initial public offering.

Transdev reported a loss of 380 million euros for 2012 on sales of 7.6 billion euros, the company said today.

Transdev is preparing to sell assets with revenues of about 1.5 billion euros in coming months that include rail and bus businesses in Germany, Sweden, Finland, Belgium and the Netherlands, according to a statement released today. Debt may be cut to less than half by the end of 2015, he said.

‘Good Margins’

The businesses to be sold either require a lot of spending on equipment or are slow growing, Janaillac said. French loss-making contracts will be reviewed while orders in the U.S. and Australia are providing “good margins,” he said.

CDC will bring 520 million euros to Transdev as part of the capital increase while Veolia will provide 280 million euros, bringing their stakes to 60 percent and 40 percent, Janaillac said.

Veolia Chief Executive Officer Antoine Frerot has said the water utility wants to lower its stake to 20 percent within about two years and eventually pull out.

Transdev’s reorganization mirrors efforts by Frerot to sell assets to lower debt at Veolia while also reducing its geographic reach.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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