Markets live chat transcript for the chat ending at 12:07 on 19 Feb 2009. Participants in this chat were: Neil Hume, FT (NH) Paul Murphy, FT (PM)
NH:
Good morning and welcome to Markets Live
PM:
hi there
NH:
Alphaville’s daily markets chat
PM:
Neil jumped in before me
NH:
another busy morning
NH:
lots of stories, results, rights issue and another scandal in the making
PM:
Nerves are shredded
PM:
Should mention that we are bit light staffed on AV today
PM:
Sam’s away — and now Tracy has gone on full time Stanford duty
PM:
With SMI
NH:
preparing a big feature piece for the weekend
NH:
Stanford overload
PM:
Izzy will come to the rescue a bit later, but in the meantime, got me all over the shop — and Neil –producing little stories like BGI
PM:
yes, we know the sale of BGI has been spculated upon repeatedly
NH:
it has
NH:
and there has been lots of chat about Barclays selling other divisions
PM:
But…
NH:
such as Absa in South Africa
PM:
We think there is quite possibly something in this
PM:
NH:
we do, some very educated and grown up punters think there is definately something to this stock market rumour
NH:
and it amazing to think that BGI could be worth say, £4bn
PM:
or 5
NH:
and barclays has a market cap of £8bn
PM:
Hmm
PM:
think this hugely bullish news for barclays
NH:
if true
PM:
sure
NH:
but of course, banks are being valued on asset prices at the moment
PM:
book multiple
NH:
more a question of whether they are solvent and will need more govt cash
PM:
or partial multiples
NH:
anyway an interesting bit of chatter to start the morning
PM:
but — we should alert people to the fact that Barclays source denies that it is in BGI sale talks
PM:
Just coming out on Reuters
PM:
that goes against what unidentified people familiar with the situation have said to us
PM:
bear with us — we are having to take a number of calls
PM:
not much we can say here, other than printing the wire flashes
PM:
Neil can you get them?
NH:
not on newsedge yet
NH:
which is terribly slow
NH:
but what we have is Barclays declining to comment
NH:
and a source saying it is not true
NH:
Now source on Retuers is code for PR man
NH:
NH:
could be internal PR or agency PR
NH:
but that is the shorthand
PM:
Swiped our story down
PM:
NH:
and sometimes the source can unofficially officially deny a rumour
NH:
if he has been briefed by the right person
NH:
other times he is mushroom kept in the dark
NH:
and is not told what is going on and can therefore deny it and not lie
NH:
if you see what I mean
PM:
Just to be clear to those below saying Barc has not denied this….
Reuters are saying that a source has indeed denied that talks are underway — off the record — ie the felt
NH:
we are working to try and establish the idenity of the consortium members. Fair to say some of them could be based in the middle east
NH:
and one more thing on barclays before we move on
NH:
rumours that Crispin Odey is buying back his bear position
NH:
which I am not sure I have seen
PM:
Just rumours
NH:
in terms of an official regulatory announcement
NH:
but he could be under the disclosure threshold
11:16AM
NH:
actually all of the banks are up this morning
PM:
They are
PM:
Look at these prices moves
Lloyds Banking Group (LLOY:LSE): Last: 54.90, up 4.1 (+8.07%), High: 57.40, Low: 51.80, Volume: 19.37m
Royal Bank of Scotland Group (RBS:LSE): Last: 19.60, up 1.5 (+8.29%), High: 20.50, Low: 18.00, Volume: 58.09m
PM:
that’s in celebration of these banks becoming state entities for UK statistical purposes
NH:
er, not quite
NH:
but that is interesting
PM:
Thanks for that — to the commenter below who supplied
PM:
here’s a news snippet on it
NH:
look the reason for the rally this morning
NH:
is the reverse of yesterday really
NH:
concerns about the cost of the government’s asset protection scheme are fading
PM:
MarketWatch) — Britain’s Office for National Statistics on Thursday reclassified Royal Bank of Scotland ) as public corporations from Oct. 13, when the government announced it would recapitalize the companies. The agency said data from the two banking groups will be incorporated into data on public sector finances “as soon as is practicable, but it should be noted that they are large, complex organizations, and this may take some time.” The U.K. government has pumped 17 billion pounds into Lloyds Banking Group and holds a roughly 43% stake in the company. The government has also pumped around 20 billion pounds into RBS and will hold a roughly 70% stake once preference shares are converted
PM:
Really?
NH:
yep
NH:
remember yesterday’s report in the Telegraph
NH:
that RBS would have to pay a £8bn premium to insure around £200bn of assets
PM:
Hmm
PM:
Do remember
PM:
that figure sounded very high
NH:
well, it seems the Govt are not that dumb
NH:
and are not going to shoot themselves in the foot by asking RBS, which remember is the test case for this scheme, for cash it does not have
NH:
oh no
NH:
instead it will allow the company to spread the cost over say 10 years
NH:
and RBS might be able to pay with debt
NH:
actually there is a good piece in the Wall Street Journal on this
NH:
which you can find here
NH:
http://online.wsj.com/article/SB123499778873616959.html?mod=testMod
NH:
and for those of you without a subscription
NH:
here’s some highlights from the piece
NH:
The concern is that the overall cost of participating in the scheme, which is estimated to be several billion pounds, will damage the capital reserves that banks are required to maintain. To avoid that, people familiar with the matter say, the government is considering allowing RBS to spread the fee for the program over as many as 10 years. It is also considering allowing payment in instruments other than cash, such as bonds or deferred tax assets.
A spokesman for the U.K. Treasury declined to comment.
A spokesman for the U.K. Treasury declined to comment.
NH:
Paying with noncash instruments would help the bank because it wouldn’t dent the capital ratio it is required to maintain against losses. The structure being worked out by RBS is thought to be a blueprint for other participants, such as Lloyds Banking Group PLC.
The U.K. asset-protection scheme was announced last month and is widely seen as perhaps the best weapon left in the government’s arsenal to fight further bank losses. The bank and the government are rushing to get the details decided by Feb. 26, when RBS announces its 2008 results.
The U.K. asset-protection scheme was announced last month and is widely seen as perhaps the best weapon left in the government’s arsenal to fight further bank losses. The bank and the government are rushing to get the details decided by Feb. 26, when RBS announces its 2008 results.
PM:
interesting
PM:
using deferred tax assets
NH:
but don’t forgot
NH:
Lloyds and RBS are basically options
NH:
and therefore they will bounce around like this
NH:
actually, the Guardian is saying today that the govt’s asset plan could run into difficulties
PM:
why??
NH:
apparently Brussels are not happy
PM:
so much for European unity
NH:
indeed
NH:
here’s the Guardian piece
NH:
http://www.guardian.co.uk/business/2009/feb/19/banking-ring-fence-uk-europe
NH:
and for those with a phobia of the Guardian
NH:
here’s the highlights
NH:
EU fights plan to ring-fence British banks’ toxic assets
Brussels cites competition issues to thwart state-backed insurance scheme
The government’s multi-billion pound insurance scheme to ring-fence British banks’ toxic assets and reboot lending to the recession-hit economy has run into a wall of opposition in the EU, the Guardian has learned.
Brussels cites competition issues to thwart state-backed insurance scheme
The government’s multi-billion pound insurance scheme to ring-fence British banks’ toxic assets and reboot lending to the recession-hit economy has run into a wall of opposition in the EU, the Guardian has learned.
The European commission and several leading EU countries are understood to have objected that the UK proposals are a serious threat to competition and to the much-prized single market.
The commission is due to publish final guidance on how to treat their toxic or impaired assets next Wednesday. It is understood to be insisting that the UK Treasury impose a hefty premium on the banks benefiting from the insurance.
Royal Bank of Scotland, soon to be 70% owned by the British taxpayer, is the guinea pig for the scheme which is regarded as vital in ring-fencing an estimated £150bn of toxic assets on its balance sheet. Details of the scheme are yet to be finalised, but there are expectations of a government announcement when RBS publishes its 2008 figures – expected to show a £28bn loss – next Thursday
PM:
— actually i think the G has been rather good recently, business coverage wise
— actually i think the G has been rather good recently, business coverage wiseNH:
it has
NH:
and here is a bit comment on that story
NH:
from Bruce Packard at Evolution Securities
NH:
Govt insurance scheme
NH:
Govt asset insurance scheme hits a snag
EVO TAKE – The Guardian reports that the government’s multi-billion pound insurance scheme to ring-fence British banks’ toxic assets and maintain lending to the economy has run into a wall of opposition in the EU. We believe the real reason the Europeans could be objecting is that they worry that sterling could be devalued putting European companies at a competitive disadvantage.
EVO TAKE – The Guardian reports that the government’s multi-billion pound insurance scheme to ring-fence British banks’ toxic assets and maintain lending to the economy has run into a wall of opposition in the EU. We believe the real reason the Europeans could be objecting is that they worry that sterling could be devalued putting European companies at a competitive disadvantage.
DETAILS – The point of this insurance scheme, announced in January this year, is to try to make sure credit is available to UK households and SMEs, but if UK Govt forces the banks to throw money at over-indebted UK households on non commercial terms, eventually it will distort markets and create all sorts of unforeseen negative consequences. Nevertheless we believe that the BoE is extremely sensitive to any accusations that UK is deliberately trying to devalue the pound.
NH:
VALUATION AND RECOMMENDATION – Timetable, RBS to report a £28bn loss next Thursday, £10bn loss from Lloyds next Friday. Before that the EU Commission is to publish their guidance on the treatment of impaired and potentially impaired assets. We rate all UK banks except HSBC (BUY TP 950p) as Reduce.
PM:
ta for that
11:26AM
NH:
now, if you are all bored with banks
NH:
what about insurers
PM:
NH:
Legal & General is down AGAIN
PM:
PM:
Price is off another 4p at 38.4p
PM:
So much for reassuring the market
NH:
actually Deutsche Bank, who have been on top of this story, have published a short and sweet note this morning that gets straight to the heart of the matter
NH:
A binary outlook. The market gave a thumbs down to L&G’s capital announcement, despite
management attempts to reassure. Although we suspect neither the regulator nor S&P will
force the issue near term, L&G’s default assumptions are still relatively unconservative, and the
weaker capital base is now more susceptible to negative market moves. Though a lot of bad
news is in the price, experience from the banks sector suggests the shares will not recover
quickly. We cut our price target to 55p, with a Hold recommendation.
management attempts to reassure. Although we suspect neither the regulator nor S&P will
force the issue near term, L&G’s default assumptions are still relatively unconservative, and the
weaker capital base is now more susceptible to negative market moves. Though a lot of bad
news is in the price, experience from the banks sector suggests the shares will not recover
quickly. We cut our price target to 55p, with a Hold recommendation.
PM:
Hmm — short and sweet
NH:
indeed
NH:
and a quick update on another company we have been following
NH:
our favourite support services company
PM:
Sugar?
NH:
nope Spice
NH:
and is this one is not looking nice
PM:
it’s down again!
PM:
Off 5p at 47.5
NH:
started the week at 74p
NH:
but that was before results
NH:
now
NH:
aside from the fact that Spice has been nominated for lots of awards – which is usually the coporate kiss of death
NH:
I had not realised that Simon Cawkwell
NH:
aka Evil Knievil
NH:
does not like this company
NH:
on the basis that it has been and still is an acquisition machine
NH:
I have not seen the latest comment from Evil
NH:
but if anyone has
NH:
pls let us know
11:31AM
NH:
back to Barc for a sec
NH:
a bit of broker comment on this moring’s BGI tale
NH:
whoops source says she would prefer it did not go up
NH:
but it says Barc IR not seen the report
PM:
NH:
but BGI is a cracking business
NH:
and they would be loathe to sell it
NH:
unless they were concerned about capital
NH:
which the FD told this bank’s salesforce on Monday it wasn’t
NH:
in fact he was telling the bank about its £12bn buffer
NH:
they are inclined to disregard the talk
PM:
okay okay
PM:
Let’s leave BGI
PM:
We’ve said that we think sales talks are underway — that has been greeted with scepticism — adn so we will live with that
NH:
yeah, but just wanted to put the other side across
NH:
wider market?
11:35AM
PM:
yep
PM:
the footsie has been deteriorating has wehave been on air, no?
NH:
yep, back below 4,000
NH:
off 10 points at 3,996.97
PM:
So pretty flat
11:36AM
PM:
Sibir Energy — what a wacky story
NH:
yeah, amazing story
NH:
the company thought they had lent this Russian billionaire $115m
PM:
In fact it was 325m
NH:
now, were not sure how that has happened
PM:
How on earth could something like this happen??????
NH:
but we are sure of is that the outlook for Sibir looks very bleak
PM:
ex-billionaire
NH:
it seems difficult to believe the company will ever return from suspension
PM:
Another day, another fall-out-of-bad-laughing scandal
PM:
warren Buffett’s fabulous words
PM:
When the tide goes out….
PM:
Londonbus — hotel and shopping mall, we think
NH:
oh, I have got a note
NH:
from one of those analysts who had a buy recommendation
PM:
OH NO NEIL
PM:
BRUTAL
NH:
that’s right a buy recommendation
PM:
Go on share
NH:
Deutshce Bank
PM:
NH:
Tatiana Kapustina
NH:
Pavel Kushnir
PM:
Ouch
PM:
Dated?
NH:
today
NH:
it’s reaction
NH:
great opening par
NH:
Trading in Sibir’s shares on AIM has been suspended today on a very worrying
statement.
statement.
PM:
I’ll say
NH:
The company requested to suspend trading after its nominated adviser
Strand Partners Ltd. was informed that Tchigirinsky’s businesses’ debt to
Sibir is currently USD325m and not USD115m as Sibir was previously saying.
Strand Partners Ltd. was informed that Tchigirinsky’s businesses’ debt to
Sibir is currently USD325m and not USD115m as Sibir was previously saying.
NH:
Sibir’s board will now conduct an enquiry as to how this has happened and
will also assess the effect of the increase in debt on Sibir’s ability to recover
the indebtedness and the company’s financial position.
Sibir’s EGM scheduled for 27 February 2009 has been postponed until further
notice.
will also assess the effect of the increase in debt on Sibir’s ability to recover
the indebtedness and the company’s financial position.
Sibir’s EGM scheduled for 27 February 2009 has been postponed until further
notice.
NH:
It is not Sibir’s ability to survive with the increase in debt that we are worried
about (Sibir’s free cash flow after capex and debt is forecast at USD550m
in 2009E) but rather corporate governance issue, which has sharpened dramatically
over the last few months.
about (Sibir’s free cash flow after capex and debt is forecast at USD550m
in 2009E) but rather corporate governance issue, which has sharpened dramatically
over the last few months.
NH:
Our valuation of Sibir is based on the fundamental value of its asset base
(which we believe is of exceptional quality) but it also incorporates our universe’
highest required ROE of 23.1%, which is to reflect our corporate
governance concerns. That said, we are not suggesting any changes to our
forecasts/valuation at this stage but we will be following the situation closely
and may consider amendments on the actual outcome.
(which we believe is of exceptional quality) but it also incorporates our universe’
highest required ROE of 23.1%, which is to reflect our corporate
governance concerns. That said, we are not suggesting any changes to our
forecasts/valuation at this stage but we will be following the situation closely
and may consider amendments on the actual outcome.
NH:
so they are not backing down
PM:
may consider amendments?
PM:
that’s a radical response
NH:
Price Target(GBP) 450.00 – BUy
11:43AM
PM:
Must return to L&G for a mo
PM:
Given their painful reassessment of the corporate bond default assumptions
PM:
earlier in the week
PM:
Would seem curlish not to share this
PM:
Legal & General Investment Management discuss the risks and rewards of investing in corporate bonds
NH:
NH:
how funny
PM:
At today’s Fundamentals briefing, Legal & General Investment Management’s credit strategist, Ben Bennett examined the corporate bond market, explained the key risks and identified the stellar opportunities which they may hold for investors.
“The investment grade corporate bond index currently yields 5% more than government bonds,” Ben explained. “History suggests that this is an extraordinary level of compensation for the level of potential annual losses from companies defaulting.”
Ben also acknowledged that investors face risks in the near-term. According to Ben, in an environment where economic growth is slowing and corporate profits shrinking, credit deterioration appears inevitable. However, he explained that there is considerable dispersion within the marketplace, with companies less tied to the economic cycle significantly outperforming ‘cyclical’ corporate bonds. “Cheap bonds are cheap for a reason, with the coming months set to witness a high number of downgrades and associated volatile price action.”
Ben concluded that despite significant ‘fallen angel’ (bonds which are downgraded from investment grade to speculative grade) risk remaining, the corporate bond market as a whole is currently providing a long-term investment opportunity not seen since the 1930s. Furthermore, Ben pointed out that by avoiding fallen angels while benefiting from the high yield which is associated with this risk, an active approach may offer even greater opportunity. “A managed corporate bond portfolio which successfully buys riskier bonds while maintaining a strict approach to risk management, could produce significant excess returns in 2009”, he said.
“The investment grade corporate bond index currently yields 5% more than government bonds,” Ben explained. “History suggests that this is an extraordinary level of compensation for the level of potential annual losses from companies defaulting.”
Ben also acknowledged that investors face risks in the near-term. According to Ben, in an environment where economic growth is slowing and corporate profits shrinking, credit deterioration appears inevitable. However, he explained that there is considerable dispersion within the marketplace, with companies less tied to the economic cycle significantly outperforming ‘cyclical’ corporate bonds. “Cheap bonds are cheap for a reason, with the coming months set to witness a high number of downgrades and associated volatile price action.”
Ben concluded that despite significant ‘fallen angel’ (bonds which are downgraded from investment grade to speculative grade) risk remaining, the corporate bond market as a whole is currently providing a long-term investment opportunity not seen since the 1930s. Furthermore, Ben pointed out that by avoiding fallen angels while benefiting from the high yield which is associated with this risk, an active approach may offer even greater opportunity. “A managed corporate bond portfolio which successfully buys riskier bonds while maintaining a strict approach to risk management, could produce significant excess returns in 2009”, he said.
PM:
very timely
11:44AM
NH:
right for those of you interested in tin cans
NH:
and that’s a surprising number
NH:
we move on to Rexam
NH:
which is the world’s biggest maker of tin cans
NH:
stock is biggest faller in FTSE 100 at the moment
NH:
off 29.75p at 279p
NH:
now the results have reignited fears that Rexam needs a cash call
NH:
while the numbers themselves are OK
NH:
in line in fact
NH:
net debt came in well above forecasts
NH:
primarily inflated by currency translation effects
NH:
all of which implies according to Cazenove
PM:
do share
NH:
a FY08 net debt/EBITDA ratio of 4.0x and interest cover of c. 3.5x
NH:
in fact here is the full Cazenove note
NH:
Rexam reported an operationally inline set of results this morning, however, net debt came in well above our
expectations primarily inflated by currency translation effects. This implies an underlying interest cover of
3.5x and a proforma net debt/EBITDA ratio of 4.0x. Underlying operating profit came in at £466m relative to
CAZE at £467m, with no surprises at the segmental level. Outlook statement was cautious, with management
focus resting on cash generation and costs.
Overall a solid operational performance from the company during the reporting period, but investors may find
the sharp rise in debt and thin interest cover at the start of what will be a challenging year, disconcerting. We
have an UNDERPERFORM recommendation on Rexam. There is a breakfast meeting at 9am today, which will
also be webcast on the company’s website.
expectations primarily inflated by currency translation effects. This implies an underlying interest cover of
3.5x and a proforma net debt/EBITDA ratio of 4.0x. Underlying operating profit came in at £466m relative to
CAZE at £467m, with no surprises at the segmental level. Outlook statement was cautious, with management
focus resting on cash generation and costs.
Overall a solid operational performance from the company during the reporting period, but investors may find
the sharp rise in debt and thin interest cover at the start of what will be a challenging year, disconcerting. We
have an UNDERPERFORM recommendation on Rexam. There is a breakfast meeting at 9am today, which will
also be webcast on the company’s website.
NH:
Results: key points
Group: Operational figures and the dividend came in inline with our expectations, while there were no major surprises at
the segmental level.
Financing: Net debt increased sharply on currency translation effects to c. £2.6bn, which was 31% ahead of our
expectations. This implies a FY08 net debt/EBITDA ratio of 4.0x and interest cover of c. 3.5x. While the company
highlights that debt is adjusted for average currencies (and its subordinated debt) before covenant calculations are made,
this inflated level still remains the starting point for 2009.
The company reported headroom of £0.7bn on its facilities as of the end of FY2008.
Corporate activity/strategy: Capex increased to £383m for the year as the company expanded operations in Russia,
Denmark, Spain, Egypt and Austria. Investment levels are past the peak, and capex expected to fall to 1.11.2x
depreciation going forward. The company is committed to positive free cash flow generation post dividends in 2009.
Synergies of £8m were delivered from the integration of OI.
Outlook – cautious:
“We recognise that times are uncertain and that it is difficult to predict how the economic downturn will affect
our trading in 2009 but we remain focused on generating cash and managing costs to underpin the progress we
made in 2008.”
Group: Operational figures and the dividend came in inline with our expectations, while there were no major surprises at
the segmental level.
Financing: Net debt increased sharply on currency translation effects to c. £2.6bn, which was 31% ahead of our
expectations. This implies a FY08 net debt/EBITDA ratio of 4.0x and interest cover of c. 3.5x. While the company
highlights that debt is adjusted for average currencies (and its subordinated debt) before covenant calculations are made,
this inflated level still remains the starting point for 2009.
The company reported headroom of £0.7bn on its facilities as of the end of FY2008.
Corporate activity/strategy: Capex increased to £383m for the year as the company expanded operations in Russia,
Denmark, Spain, Egypt and Austria. Investment levels are past the peak, and capex expected to fall to 1.11.2x
depreciation going forward. The company is committed to positive free cash flow generation post dividends in 2009.
Synergies of £8m were delivered from the integration of OI.
Outlook – cautious:
“We recognise that times are uncertain and that it is difficult to predict how the economic downturn will affect
our trading in 2009 but we remain focused on generating cash and managing costs to underpin the progress we
made in 2008.”
NH:
Recommendation and valuation
Rexam delivered a strong operational performance during FY08, meeting our and market expectations. However, 2009 is
expected to be a challenging year, and concerns on Rexam’s debt level may persist as interest cover remains thin, currency
Rexam delivered a strong operational performance during FY08, meeting our and market expectations. However, 2009 is
expected to be a challenging year, and concerns on Rexam’s debt level may persist as interest cover remains thin, currency
NH:
fluctuations are difficult to predict and the performance of its plastics businesses during recessionary periods is uncertain.
We have an UNDERPPERFORM recommendation on Rexam.
We have an UNDERPPERFORM recommendation on Rexam.
PM:
thanks for that
11:49AM
PM:
Now — off at a tangent for a mo
PM:
Mike Hunter was telling me about tht UBS doc — adn all the 007 stuff in it
NH:
yep, it is amazing. just been flicking through
PM:
This is the settle with with the US authorities on tax evasion charges
PM:
Allegations that they helped US citizens dodge tax — now settled
NH:
I will put this up in the Long Room later
NH:
but here a couple of highlights
PM:
Nah — cant past from that doc
NH:
page 32
NH:
point 42
NH:
reveals that UBS bankers travelling to the US
NH:
were shown how to use encrypted laptops
NH:
and using mail that would not show UBS’s name and address
PM:
interesting read — we will post in the LR later
NH:
actually talk about Switzerland
NH:
this just in from our currency reporter Peter Garnham
NH:
EUR-CHF rallied sharply to 1.4945 highs as fears picked up over the end of Swiss bank secrecy laws after UBS gave up the names of clients involved in U.S. tax fraud, although Finance Minister Merz said that banking laws would be maintained
11:54AM
PM:
Can i just stop proceedings for a mo
PM:
I want to have a word about commenting below
PM:
Please don’t make it abusive
PM:
its not smart
PM:
Especially when being abusive about individuals — even politicians
PM:
Keep it relevant, please
PM:
PM:
Otherwise I will let Sam play with the zapper again
PM:
Okay — lecture over
11:56AM
PM:
So what else is moving this morning??
NH:
3i
NH:
heading south
NH:
down 7.75p at 225p
NH:
company announced earlier this morning plans to sell some of their holding in the 3i infrastructure fund
NH:
3i Group plc (’3i Group’) announces its intention to sell at least 55 million existing shares (‘Placing Shares’) in 3i Infrastructure plc (’3i Infrastructure’) representing approximately 6.8 per cent of 3i Infrastructure’s issued share capital (the ‘Placing’). 3i Group currently holds 347.3 million shares in 3i Infrastructure, or 42.8 per cent of 3i Infrastructure’s issued share capital, down from 46.4 per cent immediately after 3i Infrastructure’s IPO in March 2007.
NH:
While the Placing reduces 3i Group’s holding in 3i Infrastructure, it remains 3i Group’s overall strategy to retain a significant long-term shareholding in 3i Infrastructure. 3i Group’s strategy continues to be to invest in infrastructure assets principally via its holding in 3i Infrastructure.
3i Group has agreed to a lock-up of 180 days with respect to its residual holding in 3i Infrastructure.
Citigroup Global Markets U.K. Equity Limited (‘Citi’) and JPMorgan Cazenove Limited (‘JPMorgan Cazenove’) are acting as joint bookrunners and lead managers to the Placing.
The Placing is expected to close at or before the close of business on 19 February 2009. The price per Placing Share and exact number of Placing Shares to be sold in the Placing will be announced thereafter. Citi and JPMorgan Cazenove reserve the right to close the book at any earlier time. Settlement is expected to be on 24 February 2009.
PM:
hmmm
PM:
why the negative reaction??
NH:
well it all looks desperate
NH:
we know 3i needs cash
NH:
and if this is what they have had to resort to – selling 55m shares in an infrastructure fund
NH:
well, that just looks desperate
NH:
and in any case
NH:
is hardly enough to put a dent in its debt position
PM:
which is??
NH:
OK, so here’s the financial position at 3i
NH:
2.1bn of net debt and £839m of cash deposits and undrawn banking facilities.
NH:
but
NH:
500m of debt and £1bn of capital calls that could fall due in the next three years, against £620m of cash left on its balance sheet in September.
PM:
right
PM:
and market cap is currently £974m
PM:
that all looks pretty grim
NH:
it does
NH:
and 3i Infrastructure shares are 82.5p each at the moment
NH:
so this share sale is not going to get them much
NH:
that said, 3i does have investments in other listed companies it could sell
NH:
it owns a large chunk of 3i quoted private equity
NH:
in which an activist shareholder took a position last week
NH:
and Venture Production
NH:
which has recently been the subject of takeover rumours
12:00PM
NH:
I think we are done
NH:
except to mention another bit of RAW
RAW is market chatter – information that has not been formally tested through traditional journalistic channels (PRs etc). The story might be complete rubbish, but if we believe there is some substance to it we will say so. Either way, Reader Beware.
NH:
rumours that Lafrage could announce a rights issue with its figures tomorrow
NH:
and we almost forgot about Numis
PM:
Oh yes — CORRECTION
PM:
THERE HAS BEEN NO ROW — we are told
NH:
of course, how silly of me
PM:
No row at all — completely amicable — Michael Spencer sold his shares — adn that’s it
PM:
Just had to spend too much time on his other interests — so chopped his relationship with Numis
PM:
Simple as that – we re told
NH:
OK, row might have been a litle over the top, but Numis shareholders are telling me that the reason for this corporate divorce is simple
NH:
Spencer is going into competition with Numis
PM:
That’s true — ICAP equities already sending out reserach
NH:
they are, like this
NH:
London, 10 February 2009 – ICAP Equity Research, part of the new cash equities business of ICAP plc (IAP.L), the world’s premier interdealer broker, has launched its first equity research report, initiating coverage of European Consumer Staples.
Among the large cap consumer staples stocks our key ‘Buys’ are Cadbury, Compass, Sodexho, ABInBev, Heineken, Reckitt Benckiser, BAT and Imperial Tobacco whilst our key ‘Sells’ are Danone, Nestle, Unilever, Pernod Ricard, Carlsberg, SAB Miller, L’Oreal and Henkel.
Among the large cap consumer staples stocks our key ‘Buys’ are Cadbury, Compass, Sodexho, ABInBev, Heineken, Reckitt Benckiser, BAT and Imperial Tobacco whilst our key ‘Sells’ are Danone, Nestle, Unilever, Pernod Ricard, Carlsberg, SAB Miller, L’Oreal and Henkel.
NH:
this I believe is the real reason he went. Spencer is going to build a big equities biz
NH:
lord knows why
NH:
but there you have it
PM:
okay
12:04PM
PM:
Are we done?
PM:
Was sent some very funny Lloyds BSE pics which I will put in the LR later also
NH:
Lloyds BSE – how amusing
NH:
A mad cow leaping in the air seems to be the new corporate symbol
PM:
But right now — got to run
PM:
Thanks for all the comments
PM:
Well, most
PM:
We will be back tomorrow at 11am
NH:
see you then
PM:
seeya