PRESS DIGEST - Financial Times - July 27

UK FACES CREDIT CARD CRISIS ON US SCALE

As consumers in the US have been hit by sharply rising unemployment and the severe economic downturn, credit card defaults have risen. Billions of dollars of losses have been suffered in the credit card portfolios of banks such as Citigroup, Bank of America, JPMorgan Chase and Wells Fargo, as well as credit card issuers like American Express. UK charity National Debtline has reported the number of calls from consumers concerned about loans, credit cards and mortgage arrears had risen from 20,000 in May 2008 to 41,000 in May this year. The International Monetary Fund has predicted that of the 2,467 billion dollars of consumer debt in Europe, much of which comes from the UK, seven per cent will be lost.

TRADERS TO FACE 'FIT AND PROPER' FSA TESTS

The Financial Services Authority may impose extra checks and possibly interviews on up to 2,000 influential traders and managers in the UK to ensure they are suitable and competent in their roles. The individuals likely to be tested by the FSA would be at the largest fifty banks, insurers and other institutions, doing jobs that could expose their institutions to significant risk. Their record and experience will be examined to ensure they are fit for the role, with the potential for criminal prosecution if they are suspected of wrongdoing.

DARLING WORRIED BY BANKS' CHARGES ON LOANS

The charges being imposed by high street banks on loans to small businesses have caused Alistair Darling to express his "extreme concern". He has noted that whilst banks need to raise margins to cope with the recession, they are potentially jeopardising economic recovery by reducing affordable finance for businesses, particularly considering that low interest rates are reducing the cost of borrowing. British Bankers' Association chief executive Angela Knight responded by observing that the level of loans to small businesses has risen by 366 million pounds in June, compared to 133 million pounds in May.

OUTLOOK BRIGHTENS FOR COMMERCIAL PROPERTY

Reports from surveyors that the fall in tenant demand for shops and offices has started to slow is bringing some confidence back to the commercial property market. A report from the Royal Institution of Chartered Surveyors reveals that while demand still fell in the second quarter of 2009, the pace of decline slowed markedly. The slower decline points towards a mild improvement in the lettings market, particularly in the office sector where the net balance actually turned positive for the first time since the third quarter of 2007.

MANAGERS SAY POLITICAL SPATS DELAY RECOVERY

In its latest survey of opinion across the manufacturing sector, the Financial Times has found that political infighting is preventing ministers from grappling with key business issues and is therefore limiting the chance of a revival in the UK economy this year. Forty-six of the 59 managers surveyed said that the government's difficulties were distracting ministers from dealing with policies linked to industry and the wider economy. Thirty-eight managers said they thought the government had performed badly, almost four times as many as those who said ministers a done a good job.

AVIVA TO SET UP ONE BILLION POUND FUND FOR MASS-PRODUCED RENTAL HOMES

A consortium headed by insurance giant Aviva (AV.L) has proposed the launch of a new investment fund with up to one billion pounds to buy and rent out new-build residential property in partnership with property consultancy CB Richard Ellis. This property would be large purpose-build residential blocks in the south-east, using a US model of large-scale multi-family rented housing to try to cater for the mid to lower-level private rental market.

NATIONAL EXPRESS TO REJECT BID

National Express (NEX.L) is set to reject a takeover bid from Spain's Cosmen family and CVC. The company will argue at its interim results on Thursday that its plans for an independent future offer better value than either of the preliminary approaches it has received. The Cosmen family is National Express's largest single shareholder and the consortium had been expected to bid 500 million pounds, around 325 pence a share, however, the board has signalled that it is unwilling to consider bids below 400 pence.

OCADO CLOSES IN ON 40 MILLION POUNDS REFINANCING

Ocado is in the final stages of raising 40 million pounds in a move which would help prepare the company for a possible flotation. The privately owned online grocer is raising 20 million pounds from existing shareholders, and 20 million pounds in debt in order to recapitalise its balance sheet and continue to invest in the business. Ocado is also talking to foreign groups about helping them build an online home delivery food business in international markets. Jason Gissing, one of the founders of the company, said that if Ocado continues to invest heavily, he expects it to break even at the pre-tax level in the next two years.

M STANLEY TO INVEST 45 MILLION POUNDS IN ALDERMORE

Morgan Stanley's (MS.N) private equity fund of funds will on Monday announce a 45 million pound investment in Aldermore Bank alongside Anacap Financial. Anacap, which specialises in financial services investments, bought Aldermore in May. The deal makes the 40-year-old leisure and property lender one of the UK's best capitalised lenders with a tier one capital ratio of around 40 per cent, and will allow it to rapidly expand its balance sheet by lending to many more small businesses. The investment from Morgan Stanley's fund of funds will take the total new capital invested in Aldermore to 80 million pounds.

REXAM WEIGHS CASH CALL

Rexam (REX.L) is considering raising several hundred million pounds of equity from existing shareholders so that it can avoid the risk of having its credit rating cut to 'junk' status. The world's biggest drinks can maker, whose clients include Coca-Cola and Pepsi, said that continued tough trading conditions meant cash flows had not improved and the risk of a downgrade has become 'unacceptably high'. Despite downgrades, Rexam says it is not in danger of breaching debt covenants and that its half-year results will meet expectations. Analysts predict underlying pre-tax profits to fall from 158 million pounds last year to 130 million pounds.

Prepared for Reuters by Durrants