RBS slides despite lifeline Royal Bank of Scotland on Monday night faced the prospect of full nationalisation after the state-controlled lender suffered a 67% plunge in its share price after revealing the biggest loss in Britain's corporate history. Despite the government's move to lift its shareholding in RBS to 70% on Monday, UK chancellor Alistair Darling was left battling to avoid nationalising another bank. But UK bank shares plunged on concerns the government is poised to increase its grip on the largest lenders as part of its efforts to kick-start bank lending and curb recession. Stephen Hester, chief executive of RBS, said that full nationalisation had been discussed with the government at the weekend but it was "something we all wished to avoid." See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51376/rbs-slides-despite-l
| Lex on UK bail-out Part II Posted at 05:52 by Gwen Robinson Much of Monday's UK bail-out package for banks "simply unstitches bits of the October bail-out that went wrong", in Lex's view. Government guarantees against extreme losses on dud assets may persuade lenders to stop hoarding capital, as should the Financial Services Authority's belated clarification of capital requirements. But this will not reverse the recession's course. With the state now insuring lending to companies big and small, Godon Brown is giving the dogs in the country's dwindling pack of banks a last chance at a life in the private sector. Investors should brace for nationalisation. See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51377/lex-on-uk-bail-out-p
| Brown accuses RBS of 'irresponsible risks' Gordon Brown on Monday unveiled a second bank rescue package including powers for the Bank of England to lend up to £50bn directly to businesses, as he accused Royal Bank of Scotland of taking "irresponsible risks" as the bank's shares collapsed. His comments came as RBS on Monday warned it could report an annual loss of up to £28bn, following the mis-timed acquisition of ABN Amro, which it acquired as part of a €71bn (£63bn) hostile break-up bid in 2007. Brown said the decision to buy ABN "was wrong". Earlier, the UK Treasury had agreed to replace the £5bn in RBS preference shares held by the government since the October bailout with ordinary stock, increasing government ownership to almost 70%. See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51375/brown-accuses-rbs-of
| Fiat poised to take Chrysler stake Chrysler and Fiat are in talks about creating a joint venture that would give the Italian carmaker a significant stake in Chrysler. Insiders said the companies had signed an MoU on a deal to give Fiat a 35% stake in Chrysler and an option to buy a majority, which could be announced within days. But others said that terms were still being negotiated. Under the proposal, which would be similar to the venture between Japan's Nissan and France's Renault, Fiat would help finance the retooling of some Chrysler factories so they could manufacture Fiat cars and components. But Fiat would not inject any cash into Chrysler. In Lex's view, the deal is hardly surprising, and makes good sense. "Fiat, so strong in Europe and the developing world, seems a perfect fit for US-focused Chrysler." See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51374/fiat-poised-to-take-
| UK Treasury gives go-ahead to 'print money' The UK Treasury on Monday gave the Bank of England the power to print money and buy assets direct from companies and banks. In a sweeping set of banking announcements, the Treasury said the Bank would set up a new facility allowing it to buy up to £50bn of high-quality corporate assets that could also be used to boost money supply, if the monetary policy committee felt it would help to meet the Bank's inflation target. The MPC, which recently cut rates to a historic low of 1.5%, has been cautious about the policy of "printing money", which evokes hyperinflation in Weimar Germany and Zimbabwe. At least, says Lex, sterling's "saving grace is that no other currency, even the euro, is in a much better situation". More analysis here. See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51373/uk-treasury-gives-go
| S&P trims Spain's rating as euro slides Spain on Monday became the first country to lose its triple A credit rating from S&P since Japan in 2001, spurring a slide in the euro as the economic outlook for Europe worsened. S&P said it had downgraded Spain's long-term sovereign debt because of its deteriorating public finances. The decision, which is likely to increase borrowing costs for the Madrid government and for Spanish companies, highlighted strains within the eurozone between its relatively robust northern economies and those in the south – Spain, Portugal, Italy and Greece – that would benefit more from a devaluation of the single currency. The euro fell against the dollar and the yen, while the spread in bond yields between Spain and Germany, Europe's biggest economy, widened to record levels See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51372/sp-trims-spains-rati
| Irish banks plunge on nationalisation fears Shares in Allied Irish Banks and Bank of Ireland halved on Monday amid investor fears that the Irish government may be forced to nationalise the two largest domestic lenders. Bank of Ireland shares fell 54% to 34 cents while AIB fell 58% to 60 cents and Irish Life & Permanent, the country's biggest bancassurer, fell 45%. The sell-off follows last week's decision to nationalise Anglo Irish Bank, the country's third-largest bank. One analyst said investors were "spooked" by the government's handling of the Anglo Irish crisis, while others noted that the share collapse increased the likelihood of a full-blown nationalisation, as banks would now struggle to raise sufficient capital via rights issues. See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51371/irish-banks-plunge-o
| Norilsk eyes metal mega-merger An ambitious plan to create one of the world's biggest mining groups through the merger of up to five Russian companies has been proposed by two billionaire tycoons. Oleg Deripaska and Vladimir Potanin, the two biggest shareholders in Norilsk Nickel, have proposed the merger as the groups seek to restructure tens of billions of dollars in debts. The other companies include Metalloinvest, the iron ore and steel group owned by Arsenal Football Club shareholder Alisher Usmanov; Evraz Group, the steel group part owned by Chelsea Football Club owner Roman Abramovich; Mechel, another steel group; and Uralkali, the potash producer. See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51370/norilsk-eyes-metal-m
| Permira issues capital call letters Permira, the private equity group, has issued capital call letters to raise $917.8m from its investors for its acquisition of NDS, the set-top box company, in the first test of its revised fundraising structure. The letters come less than a month after Permira agreed to allow 18 of its investors to reduce their commitments to its €11.1bn (£9.9bn) fund, shrinking it to €9.6bn. By pushing ahead with the NDS deal - which will see Permira acquire 51% of the company, alongside News Corp with 49% - Permira is signalling renewed confidence in its access to capital. The letters, sent Jan 7, also indicate Permira intends to press ahead with the $3.6bn take-private acquisition of NDS, due to complete next month, even after the company reported a 56% drop in profits in October. See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51369/permira-issues-capit
| Barclays struggles to avoid state capital Shares in Barclays, the UK's third largest bank, dropped a further 10% to 88p on Monday despite the bank's decision to rush out a trading statement late Friday in efforts to stem the slide in its share price. Barclays said in the statement that its profits for 2008 were "well ahead" of the £5.3bn forecast by analysts. Though it suffered less of a drop than did semi-nationalised lenders RBS and Lloyds Banking Group, the market reaction suggested continued scepticism about Barclays' efforts to steer clear of government ownership. The government's proposed insurance scheme to cap losses on bad assets represents another challenge for Barclays, as it will require payment in the form of cash or equity for participation. Barclays is expected to resist demands it issue equity to the government. See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51368/barclays-struggles-t
| Eurozone economy to shrink 1.9% this year Europe's economy will start to emerge from recession in the second half of this year, provided that financial markets stabilise and governments rapidly implement their fiscal stimulus plans, the European Commission predicted Monday. In its latest economic forecasts, the Commission said GDP in the 16-nation eurozone would shrink by 1.9% this year before recording modest growth of 0.4% in 2010. Many private sector economists, however, were more pessimistic on 2009 forecasts, with Deutsche Bank predicting a 2.5% fall in eurozone GDP this year before a return to 1% growth in 2010. Eurozone finance ministers are due to meet later on Monday to discuss economic policy issues. See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51378/eurozone-economy-to-
| Denmark unveils bank loan package Denmark will offer up to Dkr100bn (€13.4bn) in loans to recapitalise its struggling banks and encourage them to restart lending as the country's economy continues its slide into recession. The political agreement, announced Sunday night, means that Denmark has joined the European mainstream after initially resisting giving banks further help. After weeks of negotiations, the centre-right government announced that all political parties – with the exception of the Left-Green Alliance – had agreed on a second credit package, which should be in place early next month. See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51367/denmark-unveils-bank
| UBS buys AIG's commodity index business UBS on Monday announced it would buy the commodity index business of AIG, the struggling US insurer, after it spent the past two months divesting non-core commodities activities. The Swiss banking group said it would pay $15m to AIG Financial Products for the business, including rights to the popular DJ-AIG commodity index. The index is one of the two leading commodity indices of its kind, after the S&P GSCI, and is popular among passive investors, such as pension funds, who bet on rising commodity prices. Although the initial sum is modest, UBS said it could make additional payments of up to $135m on the purchase over the following 18 months, based on future profits of the activities being acquired. See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51366/ubs-buys-aigs-commod
| Abu Dhabi SWF exits Gatwick race Six consortiums have submitted bids of up to £2bn for Gatwick Airport, but the Abu Dhabi Investment Authority (ADIA), the world's largest sovereign wealth fund, is understood to have dropped out, reports The Times. ADIA, which has assets of about $700bn, formally registered its interest in Gatwick last year, but did not submit an initial bid by Monday's deadline of 3pm. The fund has spoken to other interested parties and is thought to be considering joining one of the consortiums in the coming months. Half a dozen consortiums submitted initial bids to RBS and HSBC, which are arranging the sale for BAA, the airports operator. However, the FT adds, bids are expected to be depressed both by the problems of finding sufficient debt finance - and the cost and terms of the debt - as well as by falling passenger traffic. See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51365/abu-dhabi-swf-exits-
| Richemont sees austere times for luxury goods Richemont on Monday issued a grim warning about the outlook for expensive jewellery, watches and accessories, as the world's second largest luxury goods company said sales had fallen 12% in the crucial third quarter, which covers the Christmas period. The Geneva-based group, which owns brands such as Cartier, Vacheron and Montblanc, said it saw no easing in the toughest market conditions since its formation 20 years ago. The statement coincided with the opening in Geneva of a top trade fair for prestige watches, and suggested Richemont had already had strong indications from its own boutiques and independent retailers about the steep downturn in consumer confidence and spending. See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51364/richemont-sees-auste
| Pearson gives market upbeat outlook Pearson met or exceeded its previous guidance for 2008 in all its businesses, the publisher said Monday, bucking a run of bearish announcements from rival educational, book and newspaper companies. The owner of the FT said in a trading update it expected full-year headline earnings growth of about 20%, indicating that adjusted earnings per share could advance from 46.7p to about 56p, ahead of consensus forecasts of 51p. The shares closed up 27p at 625p. The statement, the second time in three months that Pearson has indicated its earnings would exceed consensus levels, noted that earnings had benefited from the strength of the dollar and a tax rate at the lower end of a previous 27-29% guidance range. See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51363/pearson-gives-market
| GLG hires Pendragon founders UK hedge fund GLG Partners is hiring the founders of smaller firm Pendragon Capital in a move that signals how the tricky markets are making it increasingly tough for small managers to go it alone, reports the WSJ. Emmanuel Roman, GLG's co-chief executive, said the firm will hire Pendragon founders Kaveh Sheibani and Julian Harvey Wood, who specialise in making bets on merger deals and other corporate events. Much of the few hundred million dollars in assets Pendragon manages is likely to follow Sheibani and Harvey Wood to GLG, pending the approval of Pendragon investors. The move marks a reversal for the Pendragon founders, who held discussions with GLG about a year and a half ago but were not interested in joining a larger firm. See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51362/glg-hires-pendragon-
| Cerberus takes its own medicine Cerberus Capital Management, the private equity group specialising in stripping costs out of struggling companies, is taking some of its own medicine with plans to cut 10% of its 275 members of staff. While Cerberus is the latest in a string of big buy-out groups to announce cost-cutting measures, its move underlines the massive problems it faces in some of its most recent investments. The group has been forced to ask the US government for a bail-out of two of its biggest portfolio companies: Chrysler, the ailing carmaker, and GMAC, the auto finance company. See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51361/cerberus-takes-its-o
| Overnight markets: Bail-out gloom Asian stocks slumped on Tuesday, led by commodity producers and banks, after RBS's forecast of the biggest loss in UK corporate history heightened concern about deepening global recession and financial stocks were driven down in key markets. The US was closed for a holiday but futures on the S&P500 Index fell 1.6% Tuesday, pointing to declines when US markets reopen. Barack Obama's inauguration later Tuesday is likely to be a focus for US traders. Asian markets (Tues)
05:23am GMT
Nikkei down 245.87 (-2.98%) to 8,010.98
Topix down 17.24 (- 2.11%) 800.49
Hang Seng down 443.97 (-3.33%) at 12,896.02 US markets (Fri, closed Mon)
DJIA up (Fri) 68.73 (0.84%) at 8,281.22
Nasdaq (Fri) up 17.49 (1.16%) at 1,529.33
S&P500 (Fri) up 6.38 (0.76%) at 850.12 European markets (Mon)
FTSE100 down 38.59 (-0.93%) at 4,108.47
Eurofirst 300 down 12.67 (-1.58%) at 791.23 Currencies
05:25 GMT
€/$ 1.2993 (1.3343)
$/¥ 90.19 (90.82)
£/$ 1.4177 (1.4845) Commodities
05:27 GMT
Brent Crude (Mar09) down $0.58 at $43.92
Light Crude (Feb09) down $2.31 at $34.20
100 Oz Gold (Feb09) down $12.30 at $827.60
Copper (Mar09) down 55.50 at $3,389.50 10-year government bond yields (%)
US 2.36 (2.34)
UK 3.43 (3.30)
Germany 2.99 (2.92)
Japan 1.23 (1.24) Sources: FT, Reuters See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51360/overnight-markets-ba
| Overnight markets: Bail-out gloom Asian stocks slumped on Tuesday, led by commodity producers and banks, after RBS's forecast of the biggest loss in UK corporate history heightened concern about deepening global recession and financial stocks were driven down in key markets. The US was closed for a holiday but futures on the S&P500 Index fell 1.6% Tuesday, pointing to declines when US markets reopen. Barack Obama's inauguration later Tuesday is likely to be a focus for US traders. Asian markets (Tues)
05:23am GMT
Nikkei down 245.87 (-2.98%) to 8,010.98
Topix down 17.24 (- 2.11%) 800.49
Hang Seng down 443.97 (-3.33%) at 12,896.02 US markets (Fri, closed Mon)
DJIA up (Fri) 68.73 (0.84%) at 8,281.22
Nasdaq (Fri) up 17.49 (1.16%) at 1,529.33
S&P500 (Fri) up 6.38 (0.76%) at 850.12 European markets (Mon)
FTSE100 down 38.59 (-0.93%) at 4,108.47
Eurofirst 300 down 12.67 (-1.58%) at 791.23 Currencies
05:25 GMT
€/$ 1.2993 (1.3343)
$/¥ 90.19 (90.82)
£/$ 1.4177 (1.4845) Commodities
05:27 GMT
Brent Crude (Mar09) down $0.58 at $43.92
Light Crude (Feb09) down $2.31 at $34.20
100 Oz Gold (Feb09) down $12.30 at $827.60
Copper (Mar09) down 55.50 at $3,389.50 10-year government bond yields (%)
US 2.36 (2.34)
UK 3.43 (3.30)
Germany 2.99 (2.92)
Japan 1.23 (1.24) Sources: FT, Reuters See this article online.
http://ftalphaville.ft.com/blog/2009/01/20/51357/overnight-markets-ba
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