Archive
Reuters blog archive
from Breakingviews:
FirstGroup cash call shows deleveraging imperative
By Dominic Elliott
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
It’s shaping up to be the year of the rights issue in Europe. FirstGroup’s 615 million pound ($1 billion) cash call suggests companies are biting the bullet and exploiting the rise in equity markets to repair their balance sheets. The jumbo issue from the UK rail and bus operator comes after similar fundraisings from the likes of Commerzbank, Dutch cable company KPN and travel operator Thomas Cook. Other distressed companies should look to delever while they can.
FirstGroup’s woes were caused by a lack of investment, spluttering business performance and, above all, too much debt. The rights issue tackles the latter head-on and gives the owner of the U.S. Greyhound bus brand financial headroom to address a capital expenditure shortfall accumulated over the last few years. FirstGroup’s ratio of debt to EBITDA should fall from a precarious three times at the end of March to two times by the end of next year. That should prevent a ratings cut below investment grade, which would have added 50 million pounds in funding costs per year, according to Espirito Santo. A suspension of the dividend will also preserve needed cash.
The high level of indebtedness meant that FirstGroup had few options. A hybrid issue - as used by KPN - wouldn’t have reduced the debt pile. Yet like other companies’ recent rights issues, FirstGroup had to price at a steep discount - 39.5 percent to the theoretical ex-rights price (TERP). That’s in line with those offered by Commerzbank and KPN. Somewhere between a 35 percent and 40 percent discount to TERP appears to be the new price for a distressed company hoping to sell a sizable chunk of shares.
from Hugo Dixon:
UK should get on front foot with City
It is perhaps too much to expect Britain’s Conservative-led government to lead any initiatives on Europe, such is the orgy of self-destruction in the party over whether the UK should stay in the European Union. But, insofar as David Cameron manages to get some respite from the madness, he should launch a strategy to enhance the City of London as Europe’s financial centre.
Britain has in recent years been playing a defensive game in response to the barrage of misguided financial rules from Brussels. It now needs to get on the front foot and sell the City as part of the solution to Europe’s problems. The opportunity is huge both for Britain and the rest of Europe.
from Hugo Dixon:
Brexit would be bad for Britain
Quitting the European Union would be bad for Britain. Membership of even an unreformed EU is better than “Brexit”. Quitting would mean either not having access to the single market - at a huge cost to the economy - or second-tier membership.
The debate over Brexit has moved into high gear in the past 10 days, after the UK Independence Party – which wants Britain to pull out of the EU - performed well in English local elections. The Conservative party, which rules in coalition with the pro-European Liberal Democrats, has been thrown into turmoil because UKIP has been winning votes largely from the Tories.
from Breakingviews:
BT’s free sports gambit tries to out-Sky Sky
By George Hay and Quentin Webb
The authors are Reuters Breakingviews columnists. The opinions expressed are their own
BT's free sports gambit is an attempt to out-Sky Sky. The UK telco on May 9 surprised investors by offering new broadband users the chance to watch live Premier League soccer for no extra charge. The 2 percent, 6 percent and 12 percent drops in the share prices of BT, BSkyB and smaller competitor TalkTalk may look like an extreme response to the move, but they reflect rational fears of a price war.
from Breakingviews:
ENRC board needs to summon its poker skills
By Kevin Allison
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
ENRC’s independent directors need to practice their poker skills. They face the task of recommending or rejecting a possible bid for the hapless miner from a consortium of its biggest shareholders. The directors’ hand is weak, but they shouldn’t just fold.
from Breakingviews:
Man Utd about to discover Fergie’s true worth
By Peter Thal Larsen
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Alex Ferguson’s retirement should worry Manchester United’s fans and investors as much as it delights long-suffering rivals. His triumphant 26-year reign has gone hand-in-hand with the soccer club’s equally impressive financial rise. Ferguson’s departure will reveal how much of that value depends on the manager.
from Breakingviews:
UK minus EU is another loser from Lawson
By Ian Campbell
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Nigel Lawson is back in the ring and as sharp as ever. The UK chancellor who dismissed his critics as “teenage scribblers” in the 1980s - as he fomented a housing bubble that weighed on the economy for half a decade - is now throwing his weight behind a UK exit from the EU. It will make Britain stronger, he jabs. Someone should throw in his towel.
from Hugo Dixon:
Hugo Dixon: How to respond to UKIP’s surge
By Hugo Dixon
(Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.)
The UK Independence Party will not come close to winning Britain’s next general election. The populist anti-Europe, anti-immigration party may not even win a single seat, despite last week’s surge in English local elections where it won nearly a quarter of the vote - running a close third to Labour and the Conservatives. That’s how the maths of Britain’s first-past-the-post voting system works.
from Breakingviews:
RBS needs to make the case for freedom
By George Hay The author is a Reuters Breakingviews columnist. The opinions expressed are his own
Royal Bank of Scotland needs to make the case for its freedom. The UK bank’s management is now publicly stating that the process to sell down the UK government’s 81 percent stake will begin in under a year. But a quick sale looks as double-edged as RBS’s own current performance.
from Breakingviews:
Barclays in capital fog after Deutsche U-turn
By George Hay
The author is a Reuters Breakingviews columnist. The opinions expressed are his own
Barclays is under the spotlight after Deutsche Bank's capital U-turn. Having trumpeted an organic capital strategy since being appointed co-chief executives of the German bank last year, Juergen Fitschen and Anshu Jain finally opted for a 3 billion pound equity placing to bolster capital. Barclays new boss Antony Jenkins doesn't look immune to a similar volte face.
