PRESS DIGEST - Financial Times - June 10

Financial Times

EUROPEAN BANKS UNDER PRESSURE AS CORPORATE BOND MARKETS DRY UP

European banks have been resorting to alternative funding sources after suffering a virtual closure from primary capital markets. Research by analytics firm Dealogic found banks raised less from mainstream capital markets in the past six weeks than in any year since 1995. Banks sold 11.7 billion dollars of corporate bonds in the six weeks to last Friday, which is far short of the 145 billion dollars they raised at this time in 2009. Some banks have been tapping the bond market but many have been using the type of short-term money that regulators have been discouraging. Suki Mann, head of credit strategy at Societe Generale, said the markets are "running scared because of the potential for a government restructuring in Europe".

IoD WARNS OVER RULES BURDEN

Company director representative, the Institute of Directors, has blamed burdensome red tape introduced since the financial downturn for hampering board members in their duties, as it unveils its latest Director's Handbook. New guidelines published in the updated manual for directors have been released by the IoD to help board members better understand their duties, responsibilities and liabilities in areas such as remuneration and corporate manslaughter. Roger Barker, head of corporate governance at the IoD, cautioned that directors are at their limits of managing regulatory requirements and "we need to be very careful about imposing too much further regulation and hard law on directors".

PROBE INTO BANK FEES ON SHARE ISSUES

The Office of Fair Trading is to launch a probe into the fees charged by investment banks on corporate share issues. The news comes amid increasing investor disquiet and is likely to embroil a number of the world's biggest banks. It is understood that the competition regulator's probe will be narrowly focused and will not look at wider competition concerns in the investment banking market. UK banks such as RBS (RBS.L), Barclays (BARC.L) and HSBC (HSBA.L) are already subject to an inquiry as to whether their investment banking activities should be hived off from their retail banking operations.

EQUITY RAISING BY ENERGY GROUPS HITS 15-YEAR HIGH

Independent energy companies have secured more equity capital than any other sector in 2010, driven by investors support for companies delivering returns less correlated to broader market turbulence. Analytics firm Dealogic found that oil and gas companies raised 3.3 billion pounds to date in 2010, with a 26 percent market share issuance being on the London market. Tullow Oil (TLW.L) is among the successful equity raising energy companies completing a one billion pound placing in January to finance capital expenditure in Uganda, while Soco International (SIA.L) was among the firms making a smaller cash call. Joshua Critchely, head of European equity capital markets and corporate broking at Royal Bank of Canada, said as long as the fundamentals of energy firms remain strong they are "relatively insulated against market turbulence".

RIVAL SIDES CHALLENGE OFCOM PAY TV RULING

Cable network owner Virgin Media [VMEDL.UL] has mounted a legal challenge against broadcasting regulator Ofcom, over its leniency with rival British Sky Broadcasting (BSY.L) on price setting for the market in Premier League football coverage. Among the challenges outlined in a document submitted to the Competition Appeals Tribunal on Wednesday, Virgin Media criticised Ofcom for failing to set limits on the price BSkyB can charge for bundles of the main sports channels with Sky Sports 3 and 4. Ofcom decided the pricing of sports channels after a three-year investigation, which prompted BSkyB to also lodge an appeal on the principle of how it is being regulated. BT (BT.L) and Top Up TV as well as Virgin Media have been wanting the price set lower with a broader definition of what channels BSkyB had to put up for sale on a wholesale basis.

MINIMUM PRICING ON ALCOHOL BACKED BY MORRISON

Plans to introduce minimum pricing for alcohol have been backed by supermarket group Wm Morrison (MRW.L). The retailer becomes the second supermarket chain to back the proposals, following market leader Tesco's (TSCO.L) earlier pledge of support. Writing to Home Secretary Teresa May, Morrison, which is the fourth largest supermarket in the country, cautioned that a ban on below-price-selling, where shops sell alcohol at a loss to entice customers, would be hard to implement as retailers pay varying amounts for drinks, depending on the deals they strike with suppliers. As a result the retailer has called for minimum pricing to be achieved by increasing duty, rather than setting unit prices on drinks.

BIFFA'S OWNERS OPT TO EXPAND NOT SELL

Private equity owners of waste management firm Biffa [WSAQTB.UL] have abandoned plans to shed the landfill gas energy business in favour of acquiring rival recycling business Greenstar UK for 135 million pounds. Biffa, which suffered following a 20 percent drop in commercial waste volumes in 2009, had been in danger of breaching the terms of its loan agreements later in 2010. A Montagu Private Equity and Global Infrastructure Partners deal to merge Biffa with Greenstar is expected to facilitate negotiations with Biffa's banks to agree a new set of financial terms on the one billion pound debt package for the newly expanded firm.

UPBEAT IG GROUP FORECAST REFLECTS TURMOIL IN FOREX AND EQUITY

The volatility seen in both equity and foreign exchange markets in May led to a surge in the number of clients opening accounts with spread betting firm IG Group (IGG.L) in the final weeks of its financial year. As a result, the London-listed firm is forecasting better-than-expected annual profits. In a pre-close trading update for the year to May 31, the group said that its adjusted pre-tax profit is likely to rise 25 percent to 157 million pounds. Shares closed Wednesday's trading up 10.1 percent at 431.8 pence.

F&C EYES OPTIONS IN 1.6 BILLION POUND PROPERTY INVESTMENT MERGER

F&C Asset Management (FCAM.L) is seeking to develop an alternative proposal to the merger between F&C Commercial Property Trust, which is managed by its majority-owned subsidiary F&C Reit and UK Commercial Property Trust, which is managed by Ignis. The trusts' boards have already recommended the plan put forward by Ignis, which would see UKCPT acquire the assets of FCPT and remain under Ignis' management. F&C Asset Management, which received notice from the board of FCPT of the termination of its contract on Wednesday, has said it will look to work with the board to develop an alternative.

BARCLAYS AND BOVIS IN MORTGAGES PACT

Barclays (BARC.L) has partnered with the housebuilder Bovis (BVS.L) to provide high loan-to-value mortgages without the relatively steep costs associated with riskier lending. The bank will offer 90 percent mortgages to borrowers who buy a property from Bovis Homes and the loans will carry an element of insurance, provided by the housebuilder, in order to mitigate Barclays' risk. While Moneyfacts data shows the average 90 percent two-year fixed rate is 6.3 percent, Barclays will offer a two-year fix at a rate of 4.99 percent, reverting to a tracker rate of 2.49 percent above base rate.

Prepared for Reuters by Durrants