23 November, 2009
PRESS DIGEST - Financial Times - Nov 24
Tuesday, 24 November 2009
Financial Times
LEADERS CLASH OVER DEFICIT
Prime Minister Gordon Brown and his main rival David Cameron clashed at the annual conference of the Confederation of British Industry on Monday as both party leaders sought political advantage by claiming that their rival's strategy on tackling Britain's budget deficit would jeopardise the economic recovery. Mr Cameron said his plans for an "emergency growth budget" within 50 days of taking office were interlinked with his call for urgent measures to tackle the 175 billion pound ($290.7 billion) deficit; but Dominique Strauss-Kahn, managing director of the IMF, lauded Mr Brown's global leadership, backing his warning that fiscal stimulus should not be withdrawn too quickly.
LLOYDS SETS ISSUE AT DISCOUNT OF NEARLY 40 PERCENT
Lloyds Banking Group(LLOY.L) will launch Britain's largest rights issue on Tuesday to raise 13.5 billion pounds in new capital at a discount of nearly 40 percent. The new shares are expected to be priced at just over 37 pence each, with about four shares allocated for every three that investors currently own. The issue comes on the back of strong investor appetite for the first stage of Lloyds' 22.5 billion pound capital raising, with the bank saying that its offer to exchange existing debt for other bonds and equity was more than a third over-subscribed.
BANKS EAGER TO SUPPORT CLIENTS, RBS SAYS
Stephen Hester, the chief executive of Royal Bank of Scotland(RBS.L), has told members of the CBI that bank lending to businesses will continue to be available to "supportable propositions" on fair terms. Despite signs that the recession is bottoming out, small companies are still complaining about the availability and cost of bank credit, and the Bank of England says that the average interest rate on loans is 3.5 percentage points above the current central bank's base rate, with some companies being charged as much as 5.5 percent. Mr Hester said that banks were eager to support customers and were able to lend to exactly the same proportion of people asking for money as before the recession.
GOVERNMENT URGED TO FILL FUNDS GAP FOR SMALL BUSINESSES
The business secretary, Lord Mandelson, has welcomed a government commissioned independent review which says that small companies seeking venture capital are facing a structural lack of investment made worse by the impact of the recession. Chris Rowlands, who conducted the review, said: "The easy availability of bank lending in recent years served to obscure an underlying lack of capital provision. An intervention from government is required." The report calls for the government to provide funding in the range of 2-10 million pounds. The government is proposing a growth capital fund to enable private capital to invest in established and growing small and medium-sized enterprises, and detailed proposals are expected to be unveiled in the pre-Budget report.
FIRST "CLEAN COAL" POWER PLANT GETS GREEN LIGHT
The European Commission has pledged 180 million euros ($269.5 million) towards a proposed carbon capture and storage plant at Hatfield colliery in South Yorkshire. The site is owned by mining entrepreneur Richard Budge's Powerfuel company. Mr Budge plans to build the 900 MW plant next to the colliery and pump the carbon captured into depleted gas fields under the North Sea. The plant will produce 10 percent of the emissions of a conventional coal-fired power station and could cut CO2 emissions by up to 60 million tonnes. The plant is a centrepiece of Yorkshire's aim to become a leader in low-carbon technology.
COSMENS RAISE STAKE AT NATIONAL EXPRESS
The Cosmen family, the biggest shareholder in National Express(NEX.L), has increased its stake in the transport group to 19.46 percent ahead of a Friday vote to decide whether it will proceed with a 360 million pound rights issue. Deputy chairman Jorge Cosmen is opposed to the move, which he believes should only go ahead alongside a refinancing of the company. The family, which have been lobbying shareholders for support, said they increased their stake to show they were "committed and long-term shareholders in National Express". A source close to the family said 10 percent of shareholders also opposed a rights issue.
CADBURY SOARS AS BIDDING WAR LOOMS
Cadbury(CBRY.L) shares hit a record high of 819.5 pence amid rising expectations of a bidding war. U.S. confectioner Hershey gave further indications over the weekend that it was considering a counter-offer to Kraft's hostile bid as several analysts raised their price targets on Cadbury. Investec raised its target from 785 pence to 810 pence, citing a 30 percent chance of a competitive auction resulting in Cadbury being acquired for 850 pence; a 30 percent chance of the company remaining independent and trading at around 750 pence; and a 40 percent chance of Kraft buying it for 820 pence. Analysts remained cautious about Hershey's ability to finance an offer due to its limited capacity to take on debt.
BLACKS TO REVAMP STORES AFTER AVOIDING COLLAPSE
Blacks Leisure is to concentrate on strengthening its core outdoor goods business and updating its stores. The group's landlords voted to accept a company voluntary arrangement that will allow Blacks to offload 101 lossmaking outlets and meet the terms of a restructuring agreement with Lloyds Banking Group(LLOY.L). Over 97 percent of the group's creditors backed the proposal, which allowed Blacks to avoid falling into administration and axing up to 4,000 jobs. Chief executive Neil Gills said he would now roll out a new store format in an effort to boost sales. Gills said he would not leave the group until it returned to profitability.
MITIE REAPS REWARD FROM OUTSOURCING DEMAND
Mitie(MTO.L) said its first half underlying profits climbed 12.5 percent to 39.6 million pounds. The landscaping and pest control group found that companies and public bodies have not been demanding significantly cheaper outsourcing deals even though they are restrained by tighter budgets. Chief executive Ruby McGregor-Smith explained that the government is keen to maintain standards of public service and would not simply hand contracts to the lowest bidder. Mitie, which also manages security of the Thames Barrier, said its pipeline for potential contracts was at "unprecedented levels". However, Investec cuts its profit forecast for 2010 and 2011 to five percent due to the impact of the recession.
NORTHUMBRIAN AWAITS OFWAT RULING
Northumbrian Water(NWG.L) reported a 13 percent rise in interim pretax profits to 87 million pounds as it awaited the outcome of Ofwat's ruling on a five-yearly price determination that is fundamental to its investment plans. The water utility's positive results were achieved despite the number of industrial customers who cut their water usage or failed to pay their bills in the six months to September 30. The regulator's ruling is due on Thursday and will outline price rise and rate-of-return limits for water companies until 2015. A draft released by Ofwat in July recommended a one percent per year price rise cap for the company, which had applied for a cap of three percent.
Prepared for Reuters by Durrants ($1=.6020 Pound) ($1=.6679 Euro)
Source: http://www.reuters.com
PRESS DIGEST - Financial Times - Nov 24 Added: (23.11.2009)
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