PRESS DIGEST - Financial Times - Nov 3

Financial Times

PRESSURE MOUNTS IN UK AND EU FOR RATE CUTS

Amid a clamour for rate cuts unprecedented in their brief histories, the Bank of England's monetary policy committee and the European Central Bank's governing council meet this week. In a coordinated move with the U.S. Federal Reserve, the Bank of Canada and the Swedish Riksbank, the Bank of England and the ECB reduced rates in October by a half point. Surveys suggest cuts of at least a half a point in the Bank of England rate to four percent and the ECB rate to 3.25 percent when they announce their decisions on Thursday are expected by economists.

DARLING TO UNVEIL 37 BILLION POUND BANK AGENCY

Details of the arm's length agency that will manage the 37 billion pounds in stakes the government agreed with banks to help them in the credit crisis will be unveiled on Monday by the Chancellor of the Exchequer Alistair Darling. According to the Treasury, the agency's staff will be tasked with monitoring the lending activities of the banks to ensure they fulfil the pledge to ensure funding of small businesses and that mortgage borrowers get a fair deal without the banks ramping profit margins at their expense. Ministers have been in talks with high street lenders with a view to rewriting their voluntary code on lending to small businesses to make certain that customers are given reasonable notice before loans and overdrafts are axed or made more expensive.

BRUSSELS RULES HIT PUBLIC TV REFORM

Plans by the BBC [BBC.UL], ITV (ITV.L) and Channel 4 to launch an Internet-TV archive service, currently code named Kangaroo, could fall foul of a draft of new rules proposed by the European Commission. The proposals attempt to clarify when government subsidy of PSB constitutes illegal "state aid". Also included in the paper are sections that could force Channel 4 to make organisational and accounting changes to distinguish between those programmes that it makes as part of its PSB remit, and commercial programmes.

BUILDERS BRACE FOR FRESH WRITEDOWNS

As developers revalue their assets to reflect the lower value of the land on their balance sheets, the slump in property prices could eliminate the equivalent of more than a decade of profits in the housebuilding sector. The big six nationwide housebuilders have already written off around two billion pounds. More writedowns are expected by analysts as a result of a further decline in the property market, with Panmure Gordon estimating the final writedown figure of five billion pounds by 2011. "You have to question whether housebuilders delivered any added value by building houses as opposed to just reaping profits by sitting on their land banks. Until the whole writedown exercise is over, we won't know," said one analyst.

BROKER POISED TO SEEK NEW PRIVATE CAPITAL

The insurance broker Towergate is expected to seek fresh private equity capital in 2009, with people close to the situation insisting the move is separate from negotiations by the broker to reset its banking the covenants. Led by Lloyds TSB (LLOY.L) and HBOS HBOS.L, Towergate's banks have agreed a covenant waiver. The highly acquisitive broker is studying options to reduce its 580 million pounds of debt in 2009. According to those familiar with the situation, the expected additional investment would be aimed at smoothing the path to an initial public offering in about three years' time.

BA SHARE FALL THREATENS IBERIA TALKS

Merger negotiations between Iberia (IBLA.MC) and British Airways (BAY.L) are threatened by the sharp fall in the BA share price in the past three months. The British carrier's shares have fallen much more rapidly than Iberia's since merger talks commenced at the end of July when a ratio of about 67 percent for BA shareholders and 33 percent for Iberia investors was indicated. Closing prices on Friday, however, showed this ratio to have fallen to only 53.3 percent for BA and as much as 46.7 percent for Iberia. In a research note last week, aviation analyst at Citigroup, Andrew Light, said the current share exchange ratios may be "unpalatable" for shareholders in BA. "We therefore see a risk that the merger could be put on hold until a full actuarial valuation is performed next year and until equity markets recover," he said.

VIRGIN CLOSE TO DEAL ON DEBT

Virgin Media (VMED.O) is putting the finishing touches on a deal that will complete the cable television group's bid to persuade creditors to rearrange its 4.3 billion pound debt package. Last week, creditors voted on proposals that would see major chunks of its outstanding repayments that were due in 2010 and 2011 delayed until June 2012.

BSKYB AHEAD IN BATTLE FOR TISCALI