PRESS DIGEST – Financial Times – June 10

Financial Times

EUROPEAN BANKS UNDER PRESSURE AS CORPORATE BOND MARKETS DRY
UP

European banks have been resorting to alternative funding
sources after suffering a virtual closure from primary capital
markets. Research by analytics firm Dealogic found banks raised
less from mainstream capital markets in the past six weeks than
in any year since 1995. Banks sold 11.7 billion dollars of
corporate bonds in the six weeks to last Friday, which is far
short of the 145 billion dollars they raised at this time in
2009. Some banks have been tapping the bond market but many have
been using the type of short-term money that regulators have
been discouraging. Suki Mann, head of credit strategy at Societe
Generale, said the markets are “running scared because of the
potential for a government restructuring in Europe”.

IoD WARNS OVER RULES BURDEN

Company director representative, the Institute of Directors,
has blamed burdensome red tape introduced since the financial
downturn for hampering board members in their duties, as it
unveils its latest Director’s Handbook. New guidelines published
in the updated manual for directors have been released by the
IoD to help board members better understand their duties,
responsibilities and liabilities in areas such as remuneration
and corporate manslaughter. Roger Barker, head of corporate
governance at the IoD, cautioned that directors are at their
limits of managing regulatory requirements and “we need to be
very careful about imposing too much further regulation and hard
law on directors”.

PROBE INTO BANK FEES ON SHARE ISSUES

The Office of Fair Trading is to launch a probe into the
fees charged by investment banks on corporate share issues. The
news comes amid increasing investor disquiet and is likely to
embroil a number of the world’s biggest banks. It is understood
that the competition regulator’s probe will be narrowly focused
and will not look at wider competition concerns in the
investment banking market. UK banks such as RBS (RBS.L: ),
Barclays (BARC.L: ) and HSBC (HSBA.L: ) are already subject to an
inquiry as to whether their investment banking activities should
be hived off from their retail banking operations.

EQUITY RAISING BY ENERGY GROUPS HITS 15-YEAR HIGH

Independent energy companies have secured more equity
capital than any other sector in 2010, driven by investors
support for companies delivering returns less correlated to
broader market turbulence. Analytics firm Dealogic found that
oil and gas companies raised 3.3 billion pounds to date in 2010,
with a 26 percent market share issuance being on the London
market. Tullow Oil (TLW.L: ) is among the successful equity
raising energy companies completing a one billion pound placing
in January to finance capital expenditure in Uganda, while Soco
International (SIA.L: ) was among the firms making a smaller cash
call. Joshua Critchely, head of European equity capital markets
and corporate broking at Royal Bank of Canada, said as long as
the fundamentals of energy firms remain strong they are
“relatively insulated against market turbulence”.

RIVAL SIDES CHALLENGE OFCOM PAY TV RULING

Cable network owner Virgin Media [VMEDL.UL] has mounted a
legal challenge against broadcasting regulator Ofcom, over its
leniency with rival British Sky Broadcasting (BSY.L: ) on price
setting for the market in Premier League football coverage.
Among the challenges outlined in a document submitted to the
Competition Appeals Tribunal on Wednesday, Virgin Media
criticised Ofcom for failing to set limits on the price BSkyB
can charge for bundles of the main sports channels with Sky
Sports 3 and 4. Ofcom decided the pricing of sports channels
after a three-year investigation, which prompted BSkyB to also
lodge an appeal on the principle of how it is being regulated.
BT (BT.L: ) and Top Up TV as well as Virgin Media have been
wanting the price set lower with a broader definition of what
channels BSkyB had to put up for sale on a wholesale basis.

MINIMUM PRICING ON ALCOHOL BACKED BY MORRISON

Plans to introduce minimum pricing for alcohol have been
backed by supermarket group Wm Morrison (MRW.L: ). The retailer
becomes the second supermarket chain to back the proposals,
following market leader Tesco’s (TSCO.L: ) earlier pledge of
support. Writing to Home Secretary Teresa May, Morrison, which
is the fourth largest supermarket in the country, cautioned that
a ban on below-price-selling, where shops sell alcohol at a loss
to entice customers, would be hard to implement as retailers pay
varying amounts for drinks, depending on the deals they strike
with suppliers. As a result the retailer has called for minimum
pricing to be achieved by increasing duty, rather than setting
unit prices on drinks.

BIFFA’S OWNERS OPT TO EXPAND NOT SELL

Private equity owners of waste management firm Biffa
[WSAQTB.UL] have abandoned plans to shed the landfill gas energy
business in favour of acquiring rival recycling business
Greenstar UK for 135 million pounds. Biffa, which suffered
following a 20 percent drop in commercial waste volumes in 2009,
had been in danger of breaching the terms of its loan agreements
later in 2010. A Montagu Private Equity and Global
Infrastructure Partners deal to merge Biffa with Greenstar is
expected to facilitate negotiations with Biffa’s banks to agree
a new set of financial terms on the one billion pound debt
package for the newly expanded firm.

UPBEAT IG GROUP FORECAST REFLECTS TURMOIL IN FOREX AND
EQUITY

The volatility seen in both equity and foreign exchange
markets in May led to a surge in the number of clients opening
accounts with spread betting firm IG Group (IGG.L: ) in the final
weeks of its financial year. As a result, the London-listed firm
is forecasting better-than-expected annual profits. In a
pre-close trading update for the year to May 31, the group said
that its adjusted pre-tax profit is likely to rise 25 percent to
157 million pounds. Shares closed Wednesday’s trading up 10.1
percent at 431.8 pence.

F&C EYES OPTIONS IN 1.6 BILLION POUND PROPERTY INVESTMENT
MERGER

F&C Asset Management (FCAM.L: ) is seeking to develop an
alternative proposal to the merger between F&C Commercial
Property Trust, which is managed by its majority-owned
subsidiary F&C Reit and UK Commercial Property Trust, which is
managed by Ignis. The trusts’ boards have already recommended
the plan put forward by Ignis, which would see UKCPT acquire the
assets of FCPT and remain under Ignis’ management. F&C Asset
Management, which received notice from the board of FCPT of the
termination of its contract on Wednesday, has said it will look
to work with the board to develop an alternative.

BARCLAYS AND BOVIS IN MORTGAGES PACT

Barclays (BARC.L: ) has partnered with the housebuilder Bovis
(BVS.L: ) to provide high loan-to-value mortgages without the
relatively steep costs associated with riskier lending. The bank
will offer 90 percent mortgages to borrowers who buy a property
from Bovis Homes and the loans will carry an element of
insurance, provided by the housebuilder, in order to mitigate
Barclays’ risk. While Moneyfacts data shows the average 90
percent two-year fixed rate is 6.3 percent, Barclays will offer
a two-year fix at a rate of 4.99 percent, reverting to a tracker
rate of 2.49 percent above base rate.

Stock Analysis

Prepared for Reuters by Durrants

PRESS DIGEST – Financial Times – June 10