I do hope that Morris Chang, the recently-returned chief executive of Taiwan Semiconductor Manufacturing, knows more about making chips than he does about the theatre. He’s quoted in Friday’s FT as likening the economic downturn to a Greek tragedy.
The first act was the financial crisis, the second the global economic slowdown. “In the end” he says, “there must be a third act, recovery.”
I can’t decide whether this is an elegant spoof or a serious piece of academic research. At first sight, the answer’s obvious, since it starts thus:
“Should the income tax system include a tax credit for short taxpayers and a tax surcharge for tall ones?”
Do you feel that the supermarkets are neglecting you? That your local Sainsburys is too far away or looking a little scruffy? Justin King is here to help. Other companies may be scratching around for capital to fix their balance sheets, but J Sainsbury is raising it to expand; more space, bigger stores and a little light property speculation on the side.
Chief executive King has a good story to tell, with a trading update which trumps Tesco’s and makes the analysts’ forecasts look slightly conservative (which is how they like it). It’s confirmation that the food retailers are having a good war in the current recession.
You may not have heard of Adam Posen, but you hadn’t heard of David “Danny” Blanchflower before the banking crisis. Posen is Blanchflower’s replacement on the Bank of England’s Monetary Policy Committee and, boy, does he have some strong views. Here he is before the US Congress three months ago, with some modest proposals.
The rest of us may struggle to come up with remedies for the current malaise, but Posen has no doubts. He calls his address “a proven framework to end the US banking crisis”. His framework looks more like a cross to nail up bankers, owners and regulators, since he suggests firing the lot of them, wiping out the shareholders, and wholesale nationalisation. He is wonderfully free of self-doubt:
The shareholders in Northern Rock have been wiped out, but all the various classes of bondholder have – so far – been paid out on time. That may be about to change. The European Commission is about to rule on the sensitive issue of the state aid poured into the failed bank nearly two years ago, and the UK government may offer to bite the bondholders as a quid pro quo for Commission approval.
Last week Fitch downgraded Northern Rock’s vast range of debts, arguing that the treatment meted out to Bradford & Bingley would be extended to the Rock. It seems likely that the Rock will be split into a legacy bank containing the 67 billion pounds of old mortgages, while the 20 billion pounds of deposits would go into a new bank.
Running a pubco is harder than running a bath, as Giles Thorley proved this afternoon. The dash for trash that has characterised this stock market rally had swept shares in his Punch Taverns up from 32 pence in March to 148 pence on Friday night. The chance to gulp a little air for this drowning business was too much to resist, but Wall Street’s finest struggled all day to raise the 375 million pounds Punch needs to stay solvent next year. In the end, they needed to create 140 per cent of the existing share capital at 100 pence a share, a 32.7 per cent discount.
The sum is far too small to rebalance the Punch-drunk balance sheet, with its 4.2 billion pounds of notes, but it does prevent the holders of the convertible bond forcing the company into bankruptcy when they demand their money back next year.
Here is Giles Thorley’s record of maximising long-term value for his shareholders, the aspiration when he floated Punch Taverns in 2002. As you can see, it hasn’t quite worked out, and in order to have any long term at all, the shareholders are being asked to put up roughly last Friday’s entire market capitalisation in new capital.
Punch is in a hole of its own making, with 4.2 billion pounds of notes secured on 7,900 pubs, and another 275 million of convertible bonds not secured on anything. When these bonds were issued, the expectation was that the soaraway Punch price, then 8.60 pounds, would rise enough to make it worth converting at 11.72 pounds a share.
(Refiles on October 19, 2010 to add disclaimer for author’s personal investment. Neil Collins is a Rio Tinto shareholder.)
“The directors of Rio Tinto believe that attracting, developing and retaining a skilled and engaged workforce is critical to business performance”. Thus Jan du Plessis in his long, rambling chairman’s statement to Rio shareholders today asking them for a spare $15 billion to dig them out of the hole their directors have dug for them.
Bill Zastrow owns $240,000 of General Motors bonds. He’s not happy, but, as he told Reuters’ Kevin Krolicki, “We were getting the Marie Antoinette haircut and now it looks like it’s a few inches higher.”
The best guess is that his holding is now worth about $22,000, not far away from the sum he used to get in annual interest, but that’s better than the zero-to-$12,000 which the earlier offer to bondholders implied.
It is a quarter of a century since the ground-breaking privatisation of BT. Unfortunately, it may not be many more years before a reluctant government is forced to take the company back into state ownership.
The new BT annual report, 169 pages of it, gives only a few hints of the scale of the problem facing what John Ralfe recently described as “a badly run hedge fund that happens to own a phone network.”