Lloyds to spin off billions in property assets
Simon Evans - The Independent
Lloyds Banking Group is believed to be considering plans to hive off a portion of its giant commercial property portfolio into a separate, tax-efficient company.
Senior figures within the bank are thought to have put forward the idea, which would see some of the £50bn to £75bn worth of assets and loans inherited by Lloyds following its merger with HBOS spun off into a real estate investment trust (Reit).
Any move would happen after the general election, and with the taxpayer owning 41.3 per cent of the bank, any deal would require the Government to retain a stake in the new property vehicle.
Sources said that the plan to move some of Lloyds' commercial property interests into a separate structure were at an early stage and other options to tackle the bank's troubled commercial property portfolio remain on the table.
"It's a sensible idea but the key will be who they get to manage it and what they put in there," said a source. "It will be much cleaner and will make it easier for Lloyds to sell off assets too."
Last September, Lloyds parachuted in Mark Collins, the former chief operating officer at Land Securities and a one-time adviser to a property fund backed by the Prince of Wales, to help restructure the bank's commercial property book. Mr Collins, who declined to comment on plans to create a Reit, has been working to clear up the property mess left by Peter Cummings, the discredited former head of property lending at HBOS.
Estimates suggest that around 20 per cent of Mr Cummings's deals by value, have turned sour and will not be recovered.
Mr Collins has been managing assets now under the control of the bank as part of the ending of loans that cannot be saved.
Lloyds' chief executive, Eric Daniels, was forced to admit last month that write-downs on assets at the bank rocketed to £24bn in 2009. Mr Daniels said the increase in impairments, which forced Lloyds to post an overall loss of more than £6bn for the year, was "principally due to the HBOS portfolios and their high level of exposure to commercial property".
Mr Daniels and the chairman, Sir Win Bischoff, aim to shrink Lloyds' huge loan book by as much as £200bn in the coming years.
The group raised £22.5bn from its investors in 2009 in the biggest rights issue of the year. However, some city analysts believe that the bank could be forced to raise additional capital if the dreaded "double dip" in markets becomes a reality.
A spokesman for Lloyds said: "We do not comment on speculation."
KKR and Warner eye break-up bid for ailing EMI
James Ashton - Sunday Times
KKR, the private equity firm, is in talks with Warner Music to launch a break-up bid for Warner’s rival, EMI.
The two have met in recent weeks to discuss how they would structure a deal for EMI, which is expected to be put up for sale this summer.
The revelation ups the ante for EMI, home to artists such as Robbie Williams and Coldplay. It must devise a rescue plan in the next three weeks that will convince investors to stump up another £120m or face being taken over in June by its lender, Citigroup. Last week, EMI was rocked by the abrupt departure of music boss Elio Leoni-Sceti.
KKR, which filed for a New York stock market listing on Friday, is keen to acquire EMI’s music publishing arm, which owns the rights to songs such as Over the Rainbow and Santa Claus is Coming to Town. It already has a publishing joint venture with Germany’s Bertelsmann.
Warner wants EMI’s recorded music division — a prize it has pursued for nearly a decade. The tie-up has previously been blocked by competition authorities, but Warner chief Edgar Bronfman Jnr is sure it will go through this time.
Bankers value EMI Music Publishing at £1.2 billion. Putting a price on its recorded music arm is much harder. Although it generated 55% of EMI’s £293m group earnings before restructuring costs last year, buyers wonder whether it has a future. Big-name acts such as the Rolling Stones and Radiohead have already deserted, with more expected to follow.
Sources say there has yet to be any contact with EMI and that a bid is unlikely to happen until the company has resolved its stand-off with Citi. It must find £120m to cure a covenant breach on its £3.2 billion of loans by June 14. At the same time, EMI’s owner, Terra Firma, has soured relations with Citi by suing it for allegedly misleading it over the sale of EMI in 2007.
Both divisions of EMI are preparing five-year business plans that will include profit projections but are not thought to earmark assets for disposal. Charles Allen, the former ITV boss who has stepped up to replace Leoni-Sceti as executive chairman of EMI Music, will aim to demonstrate how EMI has developed reliable earnings streams in areas such as digital. He will point out EMI can still produce hits, such as Plastic Beach, the new release from Gorillaz.
The business plan will be submitted through Maltby Investments, one of EMI’s parent companies, which will mediate between Terra Firma and Citi. To give it another 12 months of breathing space, Terra Firma needs to win the backing of 150 out of 200 investors, who have already seen their initial £1.8 billion EMI investment all but wiped out.
However, Maltby is also expected to recommend how much debt EMI can feasibly carry. If Terra Firma and Citi agree, that will pave the way for a debt-for-equity swap that is likely to hand control of EMI to Citi, which will auction off the business.
Hands, who has relocated to Guernsey, will find out in the next two weeks whether he must return to London for his Citi court battle.
KKR said: “Our policy is not to comment on deal speculation.”
Online revenue growth offset CD and DVD decline for the first time last year for Britain’s composers and songwriters. PRS for Music, the collecting agency, reported annual income up 2.6% at £623m, helped by a 19% increase in overseas income
British Seafood faces SFO scrutiny
Simon Evans - The Independent
The Serious Fraud Office is set to examine the circumstances behind the collapse of British Seafood Group, a frozen-fish company with sales of more than £300m, which failed last month.
Accountants Deloitte was appointed to administer the company after it folded following the banks' withdrawal of trade credit in February. But a source close to the SFO said: "We are looking at the issues around the company going into administration and will be meeting with the administrators soon."
British Seafood Group owner Mark Holyoake was listed as the 1,077th richest person in Britain the Sunday Times Rich List last year. He was estimated to enjoy a fortune of around £50m.
The collapse of British Seafood Group is believed to have cost 3i, the listed private equity company which owned a 28.5 per cent stake in the frozen food chain, around £80m in losses.
Spokesmen for Deloitte and Mr Holyoake declined to comment.
Second bidder eyeing Manchester United
Manchester United is being eyed up by a second potential acquirer,
competing with the Red Knights consortium.
Lawrie Holmes - Sunday Telegraph
The rival party was thought to have been preparing a bid worth about £1.2bn, including debt, before the Red Knights consortium revealed its interest in approaching the Glazer family which owns the club.
Sources close to the situation said the emergence of a second party, thought to be a single entity rather than a consortium, has raised the Glazers' valuation of the club to at least £1.6bn.
A person close to the interested party said: "I spoke to the Glazers - they will not sell." The Glazers are still thought to be keen to hire a bank to monitor interest in the club, although they have said they are not interested in selling. A spokesman for the Glazers said: "We are not in play. The Glazer family are very much in it for the long term."
The Red Knights, which confirmed it was being advised by Nomura last week, is not thought to be aware of the rival party.
A spokesman for the Red Knights said Jim O'Neill, its ringleader and chief economist of Goldman Sachs, had been given permission by the investment bank to work on the approach – even though Goldmans recently advised on a £500m bond issue. The spokesman said: "We are not trying to buy the club to change the way it is run. We don't like the way it has £750m of debt, as well as paying £81m of interest a year."
Recovery yields Alistair Darling a £12bn budget windfall
Chancellor will cite state investment in jobs as key to lower-than-expected unemployment
Toby Helm and Heather Stewart - The Observer
Alistair Darling will claim next week that government action to protect jobs has saved around £12bn, as Labour uses the pre-election budget to spell out key economic dividing lines with the Tories.
In what is expected to be the most political budget in decades, the chancellor will cite government investment in jobs programmes as a major reason why unemployment has turned out to be dramatically lower than economists predicted. Last year's budget anticipated that the level of unemployment, based on National Audit Office assessments of independent forecasts, would be 2.09 million people in the fourth quarter of 2009 and 2.44 million in the fourth quarter of 2010. By December's pre-budget report (PBR), however, the government had revised the forecasts to 1.72 million for 2009 and 1.91 million for 2010, saying that this would save up to £10bn over five years from lower unemployment benefits alone.
Since then, the Observer has established that Darling's officials have cut the forecasts still further. The latest projections for unemployment are for it to hit 1.72 million in the final quarter of this year and 1.75 million in the fourth quarter of 2011 – a further 200,000 lower than in the PBR plans, potentially freeing up an extra £1bn-£2bn.
The work and pensions secretary, Yvette Cooper, said: "In the 80s and 90s unemployment continued to rise even after the recession ended, because the government failed to put the necessary support and training in place and keep it there as the economy returned to growth." She claimed that the Conservatives would cut back investment in jobs programmes and "put the economy at risk, even though the clear evidence shows helping people back to work saves money for the future too".
This week Cooper is expected to announce that the government will subsidise another 7,000 jobs for young people, bringing the total created under the Future Jobs Fund to 117,000. The funding will pay for work at the national minimum wage, targeted at under-25s and people living in unemployment hotspots.
Last night Treasury sources insisted that most of the windfall savings from lower-than-expected unemployment would be used to cut the deficit, rather than for pre-election giveaways.
Darling believes the budget could spark a sell-off in government markets unless he stands by his pledge to halve the deficit within four years. Ministers believe that they have a credible plan to put the public finances back in order, through targeted investment in the economy, which they say will speed progress towards sustained growth; the introduction of tax rises such as the 50p rate for top earners (from this April) and national insurance rises from next April; and efficiency savings across government. But Darling is not expected to spell out any more details of specific departmental spending cuts so close to polling day.
Sainsbury beats 50% tax rate
Kate Walsh - Sunday Times
J Sainsbury will accelerate bonus payments for all staff in a move that means staff taking home more than £150,000 will avoid paying the 50% tax rate that comes in on April 6.
This will dramatically improve the pay packets of the supermarket’s 1,200 top earners, including Justin King, the chief executive, who was paid more than £2m in pay, pension and bonuses last year. Now staff will pay the current rate of 40%.
Changing the timing of payments breaks no rules but is likely to infuriate those in the banking sector who were warned against trying to avoid paying the windfall tax levied on their bonuses for last year.
A spokesman insisted the change was not linked to the new tax rate but was a trial to cut the time staff waited for bonuses after the chain’s year-end, which falls on Saturday.
“It is fairer for the proportion of bonus awards based on Sainsbury’s performance to be paid, and taxed, in accordance with rates that applied across the year they were earned,” the spokesman said.
Government reveals change to credit card interest repayments that could save customers £500m a year
Mail on Sunday
The Government has persuaded credit card providers to change the way they charge interest on uncleared bills - a move that could save nine million cardholders £500million a year in interest.
Gordon Brown and Business Minister Kevin Brennan will announce the deal with card issuers tomorrow as part of a series of measures to ensure indebted cardholders are treated more fairly.
At present, most card companies treat a cardholder's monthly repayments as paying off their cheapest outstanding debt, leaving the most expensive part of their debt accruing often sky-high charges. An exception is Nationwide Building Society.
For example, a borrower may use a card to withdraw cash. This attracts higher charges than uncleared debt resulting from spending. But when monthly repayments go to pay off a borrower's debt, these cash amounts are the last to be cleared.
A poll among consumers conducted as part of the Government's investigation into credit cards launched last year indicated that most users were unaware of this industry practice.
Now the Government has secured a voluntary agreement from card companies that repayments will be applied to the most expensive debt. It hopes to follow this with legislation as 'soon as possible'.
Other measures to be confirmed tomorrow include a requirement for card issuers to set a higher minimum monthly repayment amount for all new customers, encouraging cardholders to repay rather than accumulate debt.
Minimum repayments are typically set at two per cent of the outstanding debt, but card issuers have agreed to three per cent.
There will also be measures to stop struggling cardholders being hit by further interest rate rises or being given higher credit limits as an encouragement to spend more.
Card debt stands at £54billion with 32million people holding more than 73million cards.
Although the Bank of England base rate is 0.5 per cent, credit card interest rates are still close to 20 per cent.
The Prime Minister has said that he wants 'to make banks and credit companies behave responsibly and act fairly' and put an end to the 'sharp practices that sting so many credit card holders'.
Celeb punters to lose $15m in Ponzi scam
Sue Hewitt - Sunday Herald Sun
A-LIST
investors are reportedly set to lose $15 million in a Ponzi
scheme that involves betting on Australia's biggest horse races.Celebrities, sporting figures, businessmen and football identities are about to be caught in the alleged sting.
The man behind the scheme, who cannot be named, has used the money to finance a lavish lifestyle and his gambling addiction, according to racing sources.
The businessman courted big-name identities with promises of ridiculously large returns. In return, he asked for their guarantee to keep the scheme a secret.
But in recent weeks, so-called investors have hit brick walls when asking for their money to be returned.
The businessman allegedly claimed he was laying bets of up to $200,000 for investors and getting odds of eight to one in horse races, which bookmaking sources say is impossible.
A Ponzi scheme is one of the simplest yet most effective scams.
It operates by using funds from new investors to pay interest to other investors or to the same investor.
Racing sources said the money coming into the scam was drying up and the fraud would be revealed when dividends were due at the end of the March quarter.
One investor tried to get his $60,000 out recently and had to fight to even get half of it returned, they said.
Another man fears he will never see his life savings of $250,000 again.
The scammer is a big-noter at the track and places large bets on his own behalf, according to bookmakers.
"Part of the money deposited by early investors is then used to pay their first dividend cheques or interest," ASIC said of Ponzi schemes.
"The swindler continues paying them dividends for a couple of months until they are more comfortable and decide to invest more.
"Such schemes usually fall over because the promoter starts to spend the money too quickly, or the pool of investors starts to dry up."
China must be cautious in exiting economic stimulus: Wen
Sify
China's exit strategy on the economic stimulus should be 'very cautious and flexible' in order to shore up the hard-earned economic recovery, Premier Wen Jiabao said Sunday.
'We must maintain the continuity and stability of macro economic policy, which means we will continue implementing proactive fiscal policy and moderately loose monetary policy to consolidate the trend of economic recovery,' Wen told reporters after the annual parliamentary session closed.
Wen said the government will make more efforts to keep its policies flexible while keeping close watch on domestic and international economic changes, Xinhua news agency reported.
He noted it is a very difficult job to properly handle the relations between maintaining economic growth, adjusting economic model and managing inflation expectation this year.
'Although it is a tough job, it should be addressed,' he said.
Wen said agriculture is the life-line of the national economy, and it plays a decisive role in ensuring economic growth and managing inflation expectation, he said.
He stressed that China will make institutional arrangements to turn the country into a 'fair playing ground' for foreign investors and grant foreign enterprises 'national treatment'.
Wen said that China welcomed foreign investors to do their business in line with the Chinese laws and he encouraged them to bring more research and development centres into the country so as to improve the efficiency in the use of foreign capital.
He said that China would stick to the policies of opening up and economic reform.
He pledged to create more opportunities to exchange ideas with foreign investors in the remaining three years of his tenure.
Israel eyeing big defense contracts in India
Yaakov Katz - Jerusalem Post
Defense industries hopeful after New Delhi increases defense budget to $32 billion; Rafael and Aeronautics send UAV systems to Chile to assist surveying the quake damage, prevent looting.
Israeli defense industries are hoping for multi-million dollar contracts in India after New Delhi recently increased its defense budget for the coming year by 4 percent to a whopping $32 billion.
Rafael Advanced Defense Systems is preparing to increase its staff in New Delhi to four full-time employees in place of the single worker currently stationed there. It is also waiting for expected approval from the Israeli and Indian governments to establish a joint venture with India’s Bharat Electronic Ltd., which will provide it with a foothold in the country.
Israel is today one of India’s top defense suppliers alongside Russia, with sales since the beginning of the 1990s amounting to around $9b. Recent deals include a $1.4b. contract signed last March for the development and procurement of the Barak 8 medium-range surface-to-air missile.
“This is a growing market with tremendous potential now for all Israeli companies,” a defense official said last week.
Rafael is currently competing for a number of tenders in India, including a multi-million contract to supply the Indian Army with anti-tank missiles, as well as another contract to supply the army with active protection systems.
Israel Aerospace Industries, which has sold India unmanned aerial vehicles and other platforms over the years, is also hoping to score major contracts in India and is in discussions with the Indian Air Force about the possible sale of another three Phalcon airborne early-warning and control aircraft in addition to the three already under order.
In related news, another Israeli firm, Rafael and Aeronautics, sent several UAV systems to Chile last week to assist security forces there in surveying the damage to the country caused by the recent earthquake. The UAVs will also be used by police to prevent looting.
Last week, the Chilean government announced that despite the earthquake, it was going ahead with plans to hold the FIDAE defense trade show in Santiago. The show will open later this month, and Israel will erect a large pavilion for a number of defense companies. It will display its wares, including Rafael, IAI, Plasan Sasa, Elbit Systems and Rada.
As an act of solidarity with Chile, Rafael has decided to donate close to $50,000 to two charities set up to assist people affected by the quake.
“We are proud to return to Chile after the earthquake,” said Rafael Executive Vice President for Marketing Lova Drori.
“Chile is a close friend of Israel, and we will be at FIDAE in full force to show our support.”
Israel pushing for free trade agreement with India
India- Weapons of Mass destruction
Readers
please email comments to: editorial AT
martinfrost.ws including full name