STOCKS NEWS EUROPE-Alstom hits 9-yr low on cap hike fears

Shares in French engineering firm Alstom (Paris: FR0010220475 - news) drop 4.2 percent to a nine-year low on mounting worries of a capital hike, traders say.

According to a report on Les Echos website, Alstom's woes have sparked concern within the French government, which hired consultants to study the group's position in its different markets, as well as strategic options including the state taking a stake in the firm via a capital increase.

A spokeswoman for Alstom declines to comment on the report, but says a capital increase is not on the table.

A spokeswoman for France's industry minister also declines to comment.

The report comes on the back of French conglomerate Bouygues (Other OTC: BOUYF - news) ' decision to write down the value of its stake in Alstom by 1.4 billion euros to reflect its weaker cash flow forecasts and depressed market value.

"This is not good news for Alstom since it sends the markets a negative signal on the group's health," a Paris-based trader says.

"Also, the market might speculate that Bouygues might at some stage sell its stake, which it partly bought from the French state."

Bouygues pumped 2 billion euros into Alstom in 2006 when it took over a 21 percent stake that the French government had acquired to rescue Alstom from near-bankruptcy a decade ago.

Bouygues then gradually raised its stake to the 29.4 percent stake it now holds.

Reuters Messaging: blaise.robinson.thomsonreuters.com@reuters.net