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Jul 13, 2009
via Commentaries

Centrica draws a bow at a Venture


(Refiles on October 19, 2010 to add disclaimer for author’s personal investment. Neil Collins owned shares in Centrica when he wrote this article.)
– Neil Collins is a Reuters columnist. The opinions expressed are his own. –

Venture Production sounds like one of those ephemeral companies employing a bunch of enthusiastic, well-bred young things who are trying to break into television. In fact, it’s run by a bunch of enthusiastic, well-qualified not-so-young things breaking into the business of picking over old North Sea oil and gas finds that others have discarded.

Jul 9, 2009
via Commentaries

Fun for bondholders, misery for Punch-drunk shareholders


Some share issues look like money for old rope. Others look decidedly high-risk for anyone who underwrites them. Despite being issued at a 33 percent discount to the market price, plus the added inducement of 7p a share in fees, those who stumped up a pound a share to help keep Punch Taverns off the rocks last month are out of the money with the shares at 88p.Full marks to Punch’s beleaguered management for proving that they know more about financial engineering than they do about running pubs; they timed their emergency cash call perfectly, as the “dash for trash” share market rally was peaking, and then just scraped the 75 percent majority needed from the shareholders.Cazenove’s analysts are not impressed. Despite the injection of 350 million pounds of new capital, the brokers can’t recommend a purchase. The parts, they say, may add up to 96p a share, but the debt is still 7.8 times their estimate of EBITDA for next year, and there’s the issue of, ahem, quality.”We only see a credible long term investment case if the decline in EBITDA in the tenanted estate can be arrested. There is no evidence of this at this stage” is the gloomy conclusion.Punch needed the cash because its 275 million 5 percent convertible bond must be redeemed next year, and it can’t find the money any other way. The price of the convertible shrank to 43 percent of par in January when default seemed likely. Now Punch has offered to use the proceeds to buy stock in at 97.A month ago, sellers would have stampeded for the cash, but so far less than 4 million pounds has been tendered. Suddenly, the prospect of an 8 percent return over a year, with money in the bank to cover it, has made the bond look worth holding to maturity. Funny things, markets, although I doubt whether the Punch shareholders see the joke.

Jul 7, 2009
via Commentaries

A Timmid measure reinforces UK pensions apartheid

At the lower end of the income scale, Britain’s pensions apartheid is well established. Public sector workers are guaranteed an index-linked pension based on their final salary, while private sector workers must just hope their contributions are enough to buy a decent income. Now it is to be applied at the top end as well.Stephen Timms is the poor sap with the task of cleaning up the trail of ordure left by his boss, Alastair Darling, at the UK Treasury. Two months after the shambles that was the UK Budget, he’s still hard at it, trying to nail down the tax rules for a year that’s a quarter gone.In April, the Chancellor introduced the concept of “anti-forestalling”, a term coined to prevent people using the existing rules on pension contributions (introduced by Labour) before new ones designed to achieve the opposite effect can be imposed. Darling had no time to think about the details, so he left it to Timms to sort them out.Timms consulted, and has now administered a brisk kick in the teeth to the highest earners. Those earning over 150,000 pounds will be allowed full tax relief on up to 30,000 pounds of contributions, rather than the 20,000 pound ceiling proposed in the Budget. Even this derisory concession is only available to those who have contributed at least that much annually over the last three years.Well, serves the fat cats right, you may say. They’ve had it too good recently. Perhaps, but the Treasury’s attack is highly selective.  Anyone who used to make “regular” contributions can carry on as before, allowing those in schemes to escape penalties. “Regular” is defined as at least quarterly, neatly trapping those who may have little idea of how much they will earn until towards the end of the tax year.Just as neatly, it allows those at the top of schemes to escape scot-free, including the Permanent Secretary at the Treasury, whose department has designed these vindictive rules. Now there’s a stroke of luck.

Jul 6, 2009
via The Great Debate UK

Mandelson spares Byers’ blushes over Rover


— Neil Collins is a Reuters columnist. The views expressed are his own –At the very least, it’s frightfully convenient for the British government to call in the Serious Fraud Office to look into MG Rover, a former carmaker. Whether there’s a shocking crime or not, it suits Peter Mandelson, the Business Secretary, to organise a further delay before this gory case is finally closed.It took BDO Stoy Hayward’s partner Gervase MacGregor 16 million pounds and four years to report on a case which looked open and shut at the time. Whatever exciting new detail he has unearthed, this attempt to smear the so-called Phoenix Four is little more than political treachery.The Four, as John Towers and his three cronies were immediately dubbed, saw an opportunity. They might have genuinely believed they could make a go of a business where even BMW had failed, but few others did. BMW gifted them the company, added 427 million pounds and the (uncomfortably large) stock of unsold cars, and gratefully walked away.The cash allowed Towers & Co to pretend that a sub-scale business, producing unattractive, high-cost models in an industry with chronic overcapacity could be made viable. When the money ran out, five years later, the plant had to close.On what we know so far Towers & Co, who helped themselves to over 40 million pounds during their tenure, are guilty of little more than greed. In 2000, the Trade Secretary was Stephen Byers, a man with an impressive record of errors. The Rover unions were obsessed with preserving jobs in the face of the facts, and between them and Towers, Byers was bamboozled into awarding it to the incompetents. Since little public money was involved, it looked like an easy decision.The only alternative (barring complete closure) was put forward by Jon Moulton, who proposed selling off most of the site and continuing to make MG sports cars, the only niche of MG Rover with any value. He was swiftly tarred by the unions as an asset-stripper, and the Phoenix Four took the wheel.The real tragedy here is not that Labour made such an obviously stupid decision, but that it blighted the lives of thousands of Rover workers. BMW’s 427 million pounds was there to fund generous redundancy terms for them. By the time the money was needed, it was gone, and the workers were five years older, less able to find a career elsewhere. A study nearly two years on found that almost a quarter of them were not in regular employment, despite a two million pound support package from the government.There is a common theme running through this dispiriting affair. At every turn, the government has acted so as to minimise its own embarrassment, so perhaps we should not be surprised to see Mandelson’s spoiling tactics continuing this baleful process.(Edited by David Evans)

Jul 1, 2009
via The Great Debate UK

East Coast rail franchise crashes: Bowker unhurt

Richard Bowker is a man who appears entirely untroubled by self-doubt. Even as he was scrambling clear of the financial train-wreck that is today’s National Express, he smoothly explained that he’s been in talks for weeks lining up his next destination, running trains for the United Arab Emirates.

His CV looks like a parody of the dynamic young executive, never in the same place for long enough for the results of his decisions to become apparent.  He was not even 30 when he became head of London Underground’s Private Finance Initiative unit, and we can see since what a fiasco that’s since become.

Jun 29, 2009
via The Great Debate UK

Goldman shows a preference for Lloyds Banking

Too late to save Sir Victor Blank, Goldman Sachs has decided that the prospects for Lloyds banking Group are little short of glittering. Once the current crisis is past, says Goldman, the British banks will clean up.

Anyone trying to borrow right now would say they are cleaning up already. Loans carrying a small margin over Libor are a distant memory for most commercial borrowers, and woe betide any company that breaches a covenant, no matter how technical.

Jun 25, 2009
via The Great Debate UK

Gilts buyers forced to pay protection money

It’s expensive, this risk-free investment business. You can lend to the UK government for 28 years and be guaranteed a real return, after inflation, of  a magnificent 0.816 per cent on your money.

Put another way, if there was no inflation over the period, 100 pounds would have turned into about 125 pounds by 2037, to add to the 81.6 pence a year (before tax) you’d have had in annual interest.

Jun 25, 2009
via The Great Debate UK

Mick to Cyn: that letter in full

An early draft of the letter from Mick Davis of Xstrata to Cynthia Carroll of Anglo American has fallen into my hands. The public interest demands that I publish it.


Strictly private and confidential


Dear Cyn


I’ve been told by my advisers that I ought to write to you, so here goes. I assume you read the papers. Even if none of your shareholders has actually phoned to tell you the game’s up, you’ll have read that they don’t think you’re equipped to run a big mining company.

Jun 24, 2009
via The Great Debate UK

It takes two to tangle at Artilium

Here’s part of a sad, unintentionally funny statement issued by an AIM-listed company called Artilium today, following “disagreements over the appropriate financing strategy.”

“Due to the current size of the Board (being the Chairman and the CEO) and the differences in opinion between the Board members, the Company has requested that trading in its shares be suspended pending the resolution of these issues.”

Jun 23, 2009
via The Great Debate UK

Executive rewards: give the shareholders a veto

Do we really want to do something about executive pay? Here’s a simple, elegant and transparent way to stop the gravy train: insist that no contract with any director can be binding on a company until it has been approved by its shareholders in general meeting.

The egregious example of Stephen Hester , the man who said that some rewards in banking were “way too high”  reveals the hypocrisy and runaway inflation in the boardroom. This is hardly surprising. The remuneration committee appoints remuneration consultants who dream up ever more exotic rewards, while encouraging candidates to demand them.

    • About Neil

      "City Editor, The Daily Telegraph 1986-2005 City Editor, The Sunday Times, 1984-1986 City Editor, Evening Standard, 1979-1984 Director Templeton Emerging Markets Investment Trust plc, Finsbury Growth and Income Trust plc Passion: fly fishing (and wife Julia and seven-year-old twins)"
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