...the main business headlines..........
Ministers mull mortgage bailout
Government ministers are considering a number of options to “help fund mortgage lending”, reported The Independent. These schemes would run parallel to the successor to the Bank Of England’s Special Liquidity Scheme, which some in government and the housing industry would like to see guarantee lending. The original SLS '6 month window' will close in mid October and bank share prices have already “come under pressure” as a result of uncertainty over what form its successor will take.
BP set to resolve Russia dispute
BP is expected later today to sign an agreement to maintain its 50 per cent stake in TNK-BP, Russia’s third biggest oil company, said the Financial Times. It has been involved in a “power struggle” with its partners over the venture, which supplies 25 per cent of the company’s oil and gas production. Under the deal, the 50-50 equity split would “remain unchanged” but the BP chief executive would leave by the end of the year, and there would be a provision a shared portion of an initial public offering for the venture.
Plug pulled on MyHome
Lloyds Bank has pulled its financing for MyHome International, the nationwide provider of residential cleaning services. The bank demanded repayment of an £8m loan to the company which couldn’t be paid, and MyHome shares have been suspended on the AIM market. Signs of trouble had already been evident in June, when the new management team warned of pressure on its results as a result of the credit crunch. Then it said it was in negotiation with Lloyds over its debts. The company has 900 franchisees.
Whitbread bucks downturn
Whitbread announced a buoyant set of results, helping it outpace its rivals in the leisure sector. Like for like sales were up 7 per cent in the 24 weeks to August 14th, with revenues at its budget hotel group Premier Inns up 10.2 per cent. In its pub restaurants business sales rose 4.4 per cent and its Costa Coffee chain saw sales increase 4.4 per cent. The company has sold off its pub portfolio in recent years to focus on the budget hotel business, a move which is paying dividends in the current credit crisis.
GMAC takes axe to business
GMAC, the American financial services group part-owned by car manufacturer General Motors, has announced it is cutting 5000 jobs and closing all its retail mortgage offices. GMAC lost $4.3 billion on its Residential Capital mortgage business last year and is currently restructuring the group. ResCap was one of the biggest sub-prime lenders in the US and has suffered writedowns as customers have defaulted in the wake of the credit crunch. GMAC is 51 per cent owned by private equity group Cerberus.
IATA says airlines to lose £5.2bn
Airlines watchdog the International Air Transport Association forecasts that airlines will post losses of £5.2 billion over the next two years, according to The Guardian. The organisation blames a “toxic combination” of high fuel costs and receding demand for flights. Soaring fuel costs have already forced 25 airlines to the wall this year and further bankruptcies are expected this winter, traditionally a quiet time of year. IATA said that global passenger growth numbers in July were the lowest for five years.
...in brief..................
US services to fall and Norwich Union cuts bonus
The US Institute for Supply Management service sector index is expected to decline for the third month in a row in August. Economists expect the index, which comprises 90 per cent of the economy, to come in at 49.5, again below the contraction mark of 50…………
JPMorgan Chase is to stop selling interest rate swaps in the US municipal bond market, according to Bloomberg.com. It is currently under investigation in relation to overcharging for swaps and other derivatives, which have led Alabama's Jefferson County to the brink of bankruptcy…………
RAB Capital’s founder Philip Richards is stepping down as chief executive. RAB, which lost on its investment in Northern Rock, said that Stephen Couttie, the current chief operating officer, will replace Richards, who will focus on running the company’s Special Situations fund…………
Two former Credit Suisse bankers have been charged with fraud and conspiracy, for selling $1 billion of bonds to clients which they claimed were safe, but were in fact backed by sub-prime mortgages. The two face up to 20 years in prison if found guilty…………
Europe's second-largest telephone company, Telefonica, is to pay up to 1.1 billion euros to increase its stake in China Netcom. Telefonica has invested heavily in Latin America over the past two decades and is now focusing on Chinese mobile phone growth............
Norwich Union is cutting its final bonus rates on with-profits policies by an average of £2000. 2.4 million policyholders will suffer as a result of the move by Norwich’s parent Aviva. The cut amounts to 10 per cent of current levels and comes after poor fund performance…………
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