PRESS DIGEST - Financial Times - Nov 25

Wednesday, 25 November 2009

Financial Times

KING WARNS OF RISK TO CREDIT RATING

The governor of the Bank of England warned on Tuesday that Britain's credit rating could be at risk unless the government comes up with a credible plan to tackle the deficit. Mervyn King called on the next government to adopt a more rapid path to fiscal consolidation than that envisaged by the chancellor, and said there was nothing to stop the Treasury adopting such a plan. Mr King also told the Commons Treasury committee that there needed to be a "significant reduction" in borrowing over the lifetime of the next parliament to eliminate "a large part of the structural deficit". This goes much further than the Treasury's plan to halve the headline deficit over four years.

BUSINESS INVESTMENT HITS 40-YEAR LOW

Figures released by the Office for National Statistics reveal that business investment has fallen during the recession by the most since records began over 40 years ago. Investment also continued to fall rapidly in the third quarter. Spending by companies on goods ranging from IT systems to machinery fell by three percent in the three months to September, compared with a drop of 10.2 percent in the second quarter. Investment has now fallen by 21.4 percent in the six quarters since the recession began. In manufacturing, investment fell by 9.5 percent in the third quarter, and the services sector saw a fall of 2.3 percent. The record weakness in investment across the economy may mean weaker growth in future years.

FLOOD OF OLDER WORKERS SET TO DELAY THEIR RETIREMENT

A survey of 2,000 working people conducted by the Chartered Institute of Personnel and Development has found that the proportion of older employees intending to continue working past the state pension age has shot up in the past two years. 71 percent of those aged 55 and above now plan to continue working past state pension age, compared to only 40 percent in a similar survey conducted two years ago. Although financial reasons were given as a driver for continuing to work, there were other motivations cited in the survey. 65 percent said they would like to continue using their experience and skills, 58 percent said they wanted the social interaction, and 44 percent said work was good for their self-esteem.

COSMENS PUMP UP THE PRESSURE

The Cosmen family has stepped up attempts to block National Express's(NEX.L) 360 million pounds ($595.5 million) rescue rights issue by lifting its stake for the third time in a week. The bus and rail company's biggest shareholder has spent around 5.84 million pounds in three share deals in the past three trading days, raising its holding to 19.72 percent from 18.5 percent. Shareholders meet on Friday to decide whether the rights issue will go ahead. Mr Cosmen is lobbying investors to vote against the cash raising as he wants the company to refinance its debt of 1.1 billion pounds and reconsider its strategy.

KIRSCH COUNTS UP MINERVA PROCEEDS

Nathan Kirsch, who launched a bid for Minerva last week, has so far made a profit of over 16 million pounds from his stake in the company. Mr Kirsch's investment vehicle, KiFin, has made an offer of 50 pence a share in cash, and its offer document, published on Tuesday, shows that the financing behind the acquisition of shares has come from a Norwegian krone interest-free loan facility from parent company Ki Corporation.

ALLIANCE TRUST WARMS TO RALLY

Alliance Trust(ATST.L) has stated in a quarterly trading update that recent improvements in economic and earnings data had brought about "a better fundamental backdrop" for asset markets. The investment trust added that most companies had beat market expectations this quarter and that improved guidance and clarity for 2010 and beyond should support current market valuations. The remarks represent a softening of the bearish stance Alliance Trust adopted in September. However, the trust also warned that consumption would remain subdued "for some time" and expressed concern about what would happen once quantitative easing is removed.

PARAGON TARGETS LOAN RESTART

Buy-to-let mortgage specialist Paragon has indicated it is ready to resume lending to new customers following its withdrawal from the market in 2007. The Solihull lender was forced to launch a 287 million pounds rights issue in January last year after a collapse in the wholesale mortgage market left it without the funds necessary to offer mortgages at competitive rates. The group has since restricted itself to only offering funds to existing mortgage holders and its consumer finance business has also reigned in lending. Chief executive Nigel Terrington said the past six months had seen "significant improvements" in wholesale funding markets and that this would encourage Paragon to reinstate its funding programme for new lending.

SSL GETS BOOST FROM RUSSIAN ACQUISITION

SSL InternationalSSL.L raised its dividends as it benefited from its Durex and Scholl brands, the acquisition of Russian condom maker BBLV and growth in emerging markets. Durex saw a 5.3 percent increase in sales, driven by strong growth in Germany, Poland, Hungary and China, while its Play range of sex toys proved popular in Spain. In the six months to the end of September, pretax profits soared 60 percent to 51.9 million pounds on revenue boosted 21 percent to 390.8 million pounds, aided by four months of contributions from BBLV. Sales of the Scholl brand saw rose 4.7 percent higher in footwear and 1.9 percent in footcare products.

TOPPS RAISES 15.4 MILLION POUNDS AS DOWNTURN CUSHION

Topps Tiles (TPT.L) has raised 15.4 million pounds through a share issue in an effort to protect its balance sheet from the prospect of a further downturn in consumer spending. The move comes despite the group's return to growth in the first weeks of its fiscal year.

BORDERS UK ON BRINK OF COLLAPSE

Borders UK risks falling into the hands of administrators unless a last minute buyer comes forward. The group appointed Clearwater Corporate Finance to advise on a potential sale, but the stores have failed to attract much interest. A source close to Borders said its management was likely to appoint administrators before the end of the week. The business has failed to compete with online retailers such as Amazon and the discounts offered by supermarkets. The group's management was in talks with HMV(HMV.L) on Tuesday, but sources claim the owner Waterstone's is only interested in a small number of stores. The company has been hit by the withdrawal of some of its credit insurance, which has led to some publishers cutting off its stock on fears it is set to collapse.

Prepared for Reuters by Durrants

($1=.6045 Pound)