PRESS DIGEST - Financial Times - Feb 18

Financial Times

DARLING OVERRODE RBS TOXIC LOAN FEARS

Chancellor of the Exchequer Alistair Darling overrode advice from Sir Nicholas Macpherson, permanent secretary to the Treasury, warning that a state-backed plan to ensure the survival of the Royal Bank of Scotland (RBS.L) by underwriting toxic loans could cover assets of uncertain legality. Macpherson expressed concerns over the government's 282 billion pound Asset Protection Scheme in a letter to the chancellor in November. However, in his response, Darling said the "wider public interest" in restoring confidence in the banking sector justified taking on the "residual risks" highlighted by the Treasury. The Treasury declined to comment on the value of the potentially tainted assets.

TAX EXILES SET FOR MORE SCRUTINY

Wealthy individuals leaving Britain to avoid the 50 pence tax rate can expect closer scrutiny from the Inland Revenue following a Court of Appeal decision this week. The court rejected Seychelles-based businessman Robert Gaines-Cooper's application for a judicial review of the Revenue's insistence that he was a UK resident since 1976, finding that Gaines-Cooper had not "severed his social and family ties with the UK". Louise Somerset of RBC Wealth Management said that claiming a total severance of UK ties was "now very difficult".

SFO SEEKS MORE TRANSATLANTIC PROBES

Serious Fraud Office director Richard Alderman has indicated that UK companies suspected of corruption will face more coordinated transatlantic investigations similar to the one that resulted in a near-record fine for weapons maker BAE Systems (BAES.L). The settlement involving BAE was the first example of a British deal on suspected corporate corruption being coordinated with the United States. Defending the deal, Alderman said collaboration with the United States enabled authorities to impose a bigger fine. He said UK authorities "would not have achieved what we achieved" without American help.

FSA VOWS TOUGHER FINES FOR TAKEOVER BREACHES

The Financial Services Authority said on Wednesday that companies breaching rules on reporting takeovers will face unlimited fines, following the imposition of a penalty of just 1,000 pounds on a billion-pound property fund. Semperian PPP Investment Partners, which pleaded guilty and faced a maximum fine of 5,000 pounds, had failed to wait for regulatory approval before acquiring an FSA-regulated subsidiary of investment company Telereal during January 2009. The FSA said the case laid down a "marker" and was likely to be followed by other similar charges, adding that future cases would "face a very different set of sanctions".

ICELAND FACES SOFTER REPAYMENT TERMS

Chancellor of the Exchequer Alistair Darling has signalled he is open to considering options to scale back interest rate charges which Iceland is required to make on the 3.4 billion pound losses from failed online bank Icesave. After talks between the governments in London, the chancellor said although British taxpayers "must get their money back" the Treasury could negotiate terms. The Treasury is considering two options to scale back interest rate charges and insists both options will still see debts being fully recouped. The Icelandic government is eager to forge a compromise as opinion polls in the country suggest the initial deal would be rejected.

L&G PREPARES TO OFFER "LONGEVITY INSURANCE" TO FUNDS

Legal & General (LGEN.L) has revealed plans to supply "longevity insurance" to pension funds, in a move which will see the insurer compete against the likes of Credit Suisse (CSGN.VX) and Deutsche Bank (DBKGn.DE). The launch of the new insurance product by L&G will precede similar plans by others in the insurance sector including Prudential (PRU.L). Chief executive Tim Breedon emphasised that the provision of longevity swaps will "develop alongside and not necessarily compete with" L&G's bulk annuity business. Babcock International and RSA were the first companies to take out longevity protection in 2009.

HGCAPITAL SHARE ISSUE TO BOOST FUNDING FOR INVESTMENT SURGE

Private equity group HgCapital Trust is seeking to raise more capital from investors by preparing a share issue to shore up its finances, amid expectation of a rise in new investments. Industry sources suggest the London-listed group could raise as much as 50 million pounds. As one of the best-performing listed private equity groups with a market capitalisation of 210 million pounds, HgCapital is hoping to appeal to investors from its position of strength by making a placing of ordinary shares with subscription shares attached. Chairman Ian Armitage anticipated the company will invest more than it sells, as the market conditions present bargains. During 2009 rival 3i also sought capital from investors to repair damage to its balance sheets.

WILLS & CO CLIENTS JOIN SHARE CENTRE

The Share Centre, a retail stockbroker, has secured around 11,000 clients from its rival after private client broker Wills & Co was censured by the Financial Services Authority for mis-selling penny shares to investors. The action by the financial watchdog is the second of its type taken against Wills & Co and follows a 49,000 pound fine issued in 2007 for failure by the firm to alert its clients to the risks of purchasing small company shares. It is expected that Wills & Co client accounts will be transferred to the Share Centre over the next couple of weeks.

PENSION WOES HIT READER'S DIGEST UK

General interest magazine Reader's Digest UK has filed for administration after failing to gain support from the UK pensions regulator over an agreement for funding its 125 million pound pension deficit. The UK subsidiary of U.S. Reader's Digest Association had brokered a deal with trustees of its pension plan and the Pension Protection Fund, which would have seen a capital payment alongside the transfer of a one-third interest in the equity of the UK business to the UK pension scheme trustees. While Reader's Digest Association has multiple national subsidiaries, the UK is the only branch with a large pension shortfall. The parent company said the UK insolvency would not have a material impact on its other global operations.

BABCOCK READY TO RAISE OFFER FOR VT

Support services provider Babcock International (BAB.L) may raise its offer for rival VT Group VTG.L to over 1.2 billion pounds in an attempt to bring VT's chief executive Paul Lester to the negotiating table. VT had attacked a previous 1.14 billion pound approach from Babcock on Monday, calling it "totally inadequate" and "strategically unsound". Babcock's new offer is likely to be set between 685 pence and 715 pence a share, with a 700 pence offer valuing VT at 1.26 billion pounds. Shares in VT have risen over 25 percent since Babcock's Monday approach.

Prepared for Reuters by Durrants