Hedge Funds In Talks Over RBS Branches Bid

By Mark Kleinman, City Editor

Two hedge funds which made millions of pounds shorting UK bank shares during the 2008 financial crisis are in talks to back a £1bn bid for more than 300 Royal Bank of Scotland (RBS) branches.

I have learnt that Lansdowne Partners and GLG, which is part of the listed Man Group, are among more than 20 institutions which have indicated their interest in participating in an offer for the branch network.

The prospective involvement of the hedge funds is likely to provoke comment in the City because they were among dozens of investors which profited from bets that banks' share prices would fall during the febrile period leading up to taxpayers' rescue of lenders including Northern Rock and RBS.

Neither GLG nor Lansdowne has formally committed funds yet to the institutions' bid, although GLG's interest is understood to be the more advanced of the two.

Lansdowne made handsome profits from shorting shares in banks such as Barclays and HBOS, whose senior executives were last week criticised by the Parliamentary Commission on Banking Standards for their role in its near-collapse.

The offer would involve an investment worth hundreds of millions of pounds being made into a new company that would have a binding commitment to acquire the RBS branches.

The company would then be floated on the stock exchange.

The institutions' offer is principally made up of major UK pension funds and other investors, such as F&C, Schroders and Threadneedle.

It is being led by Andy Higginson, a former finance director of Tesco and non-executive director of BSkyB, the owner of Sky News.

RBS is expected to decide as soon as this week about the next stage of the process to offload the 316 branches.

People close to the auction said the taxpayer-backed bank could elect to enter exclusive talks with a bidder imminently.

The City institutions are vying with a bid from two private equity groups, Corsair Capital and Centerbridge, who are backed by prominent investors such as Lord Rothschild.

Another private equity consortium is also in the running.

RBS has been forced to sell the branches as part of a package of state aid remedies agreed between the UK Government and the European Commission.

Neither GLG nor Lansdowne would comment on Monday.

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Energy Debts: Amount Families Owe Mounts

The number of families in debt to their energy supplier is rising, with around one in five households owing money, a study suggested.

Collectively, Britons are estimated to owe £637m to energy firms, which is £159m more than last year's projections, comparison website uSwitch said.

Some 20% of bill payers surveyed by the website, equating to more than five million households nationally, are in debt to their energy supplier after falling behind with payments or due to discrepancies between estimated bills and actual amounts.

This figure is up from 14% when similar research was carried out last year.

The latest survey of more than 2,000 bill payers in February found that the typical amount owed is £8 less than it was a year ago, at £123.

But a recent string of price hikes by energy companies combined with the unseasonably chilly weather could see the size of people's energy debts shooting back up again, the study warned.

The average annual household energy bill has risen by almost £100 in the space of a year, adding to the pressure on families as wages remain stagnant.

The website said the typical bill now stands at £1,353 a year, which is around £830 higher than it was in 2004.

This sum is based on a consumer who uses a medium amount of electricity and gas on a standard dual fuel bill, paying quarterly by cash or cheque.

Just over one fifth of those in debt to their supplier said they were turning a "blind eye" to what they owe in the hope that the amount will go down naturally over time.

A similar proportion plan to pay off a big lump sum, while one in 12 people in debt said they would need to try and agree a repayment plan with their supplier.

Ann Robinson, director of consumer policy at uSwitch, said: "The soaring number of households in debt to energy suppliers is a clear indication of the pressure people are coming under just to meet the cost of their basic bills."

She said ways that people could cut down on their costs included paying by direct debit as suppliers tended to offer discounts for paying in this way.

And consumers should also make sure that someone was taking regular meter readings, as relying on estimated bills can be a "shortcut to debt".

A Green Deal scheme has recently been launched by the Government, which allows people to make energy efficiency improvements such as loft insulation or double glazing at no up front cost. Repayments are then to be added to the property's energy bill over a period of time.

Last week, utility giant SSE was handed a record £10.5 million fine by regulator Ofgem for "prolonged and extensive" mis-selling.

SSE provided "misleading and unsubstantiated statements" to potential customers about prices and savings that could be made by switching to SSE, according to Ofgem.

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Cable 'Wants Investigation Into HBOS Life Bans'

An investigation is to be launched into whether the three former HBOS directors blamed for the banking group's collapse can be banned as company directors for life, it has been reported.

The Business Secretary has asked his officials to see if there is enough evidence against Lord Stevenson, the former HBOS chairman, Sir James Crosby, the former chief executive, and Andy Hornby, his successor, to start a formal probe under the Company Directors Disqualification Act.

Vince Cable told The Sunday Times it was the first step in a process which could lead to the three - who have so far not faced formal sanction - being barred from acting as company directors.

The move comes in the wake of a damning report into the collapse of the bank by the Parliamentary Commission on Banking Standards published on Friday.

The group was given a £20.5bn bailout

It found Sir James was the "architect of the strategy that set the course for disaster" and held primary responsibility for the collapse along with former chairman Lord Stevenson and fellow chief executive Andy Hornby.

Their "toxic" misjudgments led to the bank's downfall and a £20.5bn taxpayer bailout at the height of the financial crisis and they should never be allowed to work in the financial sector again, according to the influential commission of MPs and peers.

Mr Cable told The Sunday Times: "It's quite a legalistic process. I can ask (officials) to look at whether the companies investigations branch take action.

"We do have this power which I have begun to initiate."

Sir James stepped down from his role as a member of Bridgepoint's European Advisory Board on Friday but remains chairman of the car credit company Money Barn and a senior independent director for Compass, one of the country's largest catering firms, according to company spokespeople, as well as a trustee for Cancer Research UK.

Mr Hornby's current employer, Gala Coral, has said he has their "complete backing" as chief executive.

Sir James and Lord Stevenson have so far retained their titles, though the Royal Bank of Scotland's disgraced former boss Fred Goodwin was stripped of his knighthood.

Peter Cummings is the only former HBOS director to have been penalised by the Financial Services Authority, after being fined £500,000 and banned for life from working in the City last September.

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State Assets Body Names Russell As New Boss

The body which manages tens of billions of pounds worth of state-owned assets will on Monday name a new boss as it steps up plans for a £4bn privatisation of the Royal Mail.

I have learnt that Mark Russell is to be handed the role of running the Shareholder Executive on a permanent basis.

Mr Russell, a former corporate financier at the accounting firm KPMG, has been acting in the post since his predecessor, Stephen Lovegrove, moved to become permanent secretary at the Department of Energy and Climate Change.

Mr Russell's appointment will be announced by the Department for Business, Innovation and Skills (BIS), which oversees the Shareholder Executive(ShEx).

It has been approved by Vince Cable, the Business Secretary, following an open competition.

The elevation of its new chief executive comes at a critical juncture for the Coalition's plans to offload some of the state's most valuable remaining assets.

Mr Russell has been closely involved with ongoing preparations to sell Royal Mail, which will probably take place through a stock market flotation towards the end of this year.

Michael Fallon, the business and energy minister, is understood to have forged a close working relationship with Mr Russell during his time as acting chief executive of ShEx.

The Royal Mail sell-off will include at least 10 per cent of the company's shares being offered to staff, with ShEx playing an integral role in the creation of an employee share ownership scheme.

A number of other Government-owned assets are also on the block. Britain's one-third stake in Urenco, the nuclear fuel processor, has been put up for sale, potentially generating a £3bn windfall for taxpayers. Mr Lovegrove and Mr Russell are both involved in that sale process.

A substantial student loan portfolio, and the NHS's principal blood plasma supplier are among the other privatisations under consideration as the Treasury pushes Whitehall departments to raise additional money for the Exchequer.

Mr Russell, who led the Business Department's involvement in last year's abortive merger talks between BAE Systems and EADS, is also a non-executive director of London and Continental Railways Limited and Eurostar International Limited.

A BIS spokeswoman declined to comment on Sunday.

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Axminster Rescue To Save 100 Devon Jobs

By Mark Kleinman, City Editor

One of Britain's oldest carpet-makers is to be rescued in a deal that will preserve about 100 jobs in the south-west of England.

I understand that Axminster Carpets, which traces its roots back to 1755, will be bought out of administration by a local consortium. An announcement about the deal is expected.

The consortium is being led by Stephen Boyd, a businessman who chairs Pittards, a major leather supplier, and includes backing from Centric Commercial Finance, an invoice discounting and asset-based lending group.

Axminster fell into administration last month, citing difficult trading conditions, with the loss of about three-quarters of the company's 400-strong workforce.

A supplier to Clarence House, 10 Downing Street and the Royal Albert Hall, the carpet-maker was founded by the Whitty family in the 1750s, and gave rise to what became known as the Axminster method of weaving.

After going out of business in the 1830s, it was subsequently revived a century later.

Joshua Dutfield, grandson of the founder of the current incarnation of Axminster, is expected to remain involved with the company following the rescue deal.

Axminster's collapse sparked an emotional response in Devon, with thousands of people signing a petition aimed at saving the company.

A spokeswoman for Axminster declined to comment ahead of the announcement. Duff & Phelps, which has been handling the administration, could not be reached for comment.

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Cable 'Wants Investigation Into HBOS Life Bans'

An investigation is to be launched into whether the three former HBOS directors blamed for the banking group's collapse can be banned as company directors for life, it has been reported.

The Business Secretary has asked his officials to see if there is enough evidence against Lord Stevenson, the former HBOS chairman, Sir James Crosby, the former chief executive, and Andy Hornby, his successor, to start a formal probe under the Company Directors Disqualification Act.

Vince Cable told The Sunday Times it was the first step in a process which could lead to the three - who have so far not faced formal sanction - being barred from acting as company directors.

The move comes in the wake of a damning report into the collapse of the bank by the Parliamentary Commission on Banking Standards published on Friday.

The group was given a £20.5bn bailout

It found Sir James was the "architect of the strategy that set the course for disaster" and held primary responsibility for the collapse along with former chairman Lord Stevenson and fellow chief executive Andy Hornby.

Their "toxic" misjudgments led to the bank's downfall and a £20.5bn taxpayer bailout at the height of the financial crisis and they should never be allowed to work in the financial sector again, according to the influential commission of MPs and peers.

Mr Cable told The Sunday Times: "It's quite a legalistic process. I can ask (officials) to look at whether the companies investigations branch take action.

"We do have this power which I have begun to initiate."

Sir James stepped down from his role as a member of Bridgepoint's European Advisory Board on Friday but remains chairman of the car credit company Money Barn and a senior independent director for Compass, one of the country's largest catering firms, according to company spokespeople, as well as a trustee for Cancer Research UK.

Mr Hornby's current employers, Gala Coral, has said he has their "complete backing" as chief executive.

Sir James and Lord Stevenson have so far retained their titles, though the Royal Bank of Scotland's disgraced former boss Fred Goodwin was stripped of his knighthood.

Peter Cummings is the only former HBOS director to have been penalised by the Financial Services Authority, after being fined £500,000 and banned for life from working in the City last September.

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US New Jobs At Lowest Level For Nine Months

US Jobs Figures Are Deeply Worrying

Updated: 4:04pm UK, Friday 05 April 2013

By Ed Conway, Economics Editor

Americans are dropping out of the jobs market, and fast. That's the depressing takeaway from today's non-farm payroll report.

The overall participation rate – a measure, essentially, of the proportion of people of working age either in a job or looking for one – has fallen to the lowest level since 1978.

It is, as far as employment experts are concerned, a deeply worrying signal: increasingly, potential workers are giving up on getting work, dropping out of the jobs market instead of attempting to find a new position.

In fact, as you can see from the chart, participation has been falling since the turn of the millennium, though it's only in the wake of the financial crisis that the drop has become more vertiginous.

Why be concerned about this? Well, a high participation rate has typically been seen as evidence of the American economy's strength – a complement to its high productivity rate and consistently-strong GDP growth rate.

A low participation rate, on the other hand, is often evident in economies which are more sclerotic and less efficient – particularly ones with over-generous welfare states which some think discourage people from working.

So, for instance, Japan and Spain both have participation rates below 60%: Germany's has only just tipped fractionally above it.

The reality is that now, for the first time since 1977, America's participation rate, at 63.3%, is lower than Britain's, which is 63.6%, or was in the three months to the end of January.

It would be nice to claim that this was because Britain was in some way becoming leaner and meaner, but the statistics suggest otherwise: Britain's participation rate has remained steady since 2005 while America's has fallen sharply as people leave the workforce.

It might be odd, having said all of the above to say that today's nasty US jobs report (the headline, by the way, was that a mere 88,000 net jobs were added in March – well below the rise in the population) also technically make it more likely that the Federal Reserve will scale back its stimulus.

But in one sense they do. The Fed has committed to more quantitative easing, buying up $85bn (£55.8bn) of debt each month until the unemployment rate drops below 6.5%.

But because unemployment measures the number of working people as a percentage of the total workforce, it can fall as a direct result of the workforce falling – and that's what happened this time, with the rate dropping from 7.7% to 7.6%.

Now, pragmatically speaking the Fed will try to "look through" this optical illusion. But it's an important reminder that when you tie your monetary policy to a very specific number, it doesn't always make it easy to predict future moves from the central bank.

Mark Carney, who is coming in as Bank of England Governor this summer and has nodded approvingly over at what the Fed has been doing, should take note.

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HMV Rescue Saves 141 Stores And 2,500 Jobs

By Mark Kleinman, City Editor

HMV's future as a high street retailer has been salvaged in a £50m deal that secures 2,500 jobs on Britain's beleaguered high streets.

Hilco, a restructuring firm, confirmed on Friday morning that it had struck an agreement with Deloitte, the administrator to HMV, to rescue the retailer.

The deal, which was revealed exclusively by Sky News on Thursday night, will keep 141 shops open, including 25 which had already been earmarked for closure by Deloitte. All nine of the Fopp-branded shops are included in the transaction.

While that represents little more than half of HMV's UK stores that were open before it called in administrators in January, it represents a more optimistic outcome for the chain than many analysts had predicted.

Hilco acquired HMV's Canadian operations two years ago, since when the performance of the business has surpassed expectations.

Paul McGowan, Hilco chief executive, said the deal had the backing of key HMV suppliers and landlords.

He said: "We hope to replicate some of the success we have had in the Canadian market with the HMV Canada business which we acquired almost two years ago and which is now trading strongly.

"The structural differences in the markets and the higher level of competition in the UK will prove additional challenges for the UK business but we believe it has a successful future ahead of it."

Mr McGowan will become chairman of HMV, with two other Hilco executives taking key roles with the retailer.

HMV had been weighed down by a mountain of debt, allied to a combination of waning consumer confidence and intense pressure from supermarkets encroaching on its entertainment retailing turf, as well as the rapid rise of low-cost digital rivals.

Hilco said it would abandon a recently-introduced practice of selling tablets and other digital devices, using the space instead for an expanded music and visual entertainment range.

Ian Topping, one of the Hilco executives who will be involved in running HMV, said: "The reaction of the British public to the administration of HMV shows a strong desire for the business to continue to trade and we hope to play a constructive part in delivering that."

Hilco also confirmed that it would seek to re-establish a presence for HMV in Ireland.

Nick Edwards, joint administrator at Deloitte, said the deal "provides a solid financial footing on which the business can be taken forward".

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Bank Holds QE And Interest Rate Firm

The Bank of England (BoE) has decided to hold its quantitative easing (QE) programme at £375bn as the base interest rate remains at an historic low of 0.5%.

The BoE's decision comes just hours after its Japanese counterpart decided to pump new money into its finance system.

The bank's decision, despite a new remit that gives it clearer leeway to disregard above-target inflation, comes as Britain's economy remains stagnant.

The central bank said it would not add to the £375bn of Government bonds it purchased between March 2009 and October 2012.

The Bank of England decided to hold off on more quantitative easing

"The Bank of England's Monetary Policy Committee (MPC) today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%," the BoE said in a brief statement at the conclusion of its regular monthly meeting.

Melanie Bowler from Moody's Analytics said: "While the asset-purchase programme was not increased as we had expected, quantitative easing is expected to be expanded this year.

"With its remit extended, the BoE is also expected to expand the use of other unconventional monetary policy tools this year."

She added: "Meanwhile, the policy rate will remain at the record low 0.5% for two years more."

HIS Global Insight economist Howard Archer said: "The Bank of England's decision to hold off from quantitative easing was highly likely once again the result of a split 6-3 vote.

"With consumer price inflation set to move above 3% in the near term and sterling still vulnerable despite rising from its lows, several MPC members may want to see evidence that underlying price pressures are broadly contained before approving further stimulative action."

Mr Archer added: "However, we suspect that it is more a matter of when, rather than will, the MPC approve further quantitative easing to try and support the economy."

Japan has made a sweeping shift in its monetary policy, aiming to spur inflation and get the world's third-largest economy out of a long, debilitating slump.

Bowing to demands from Prime Minister Shinzo Abe for more aggressive monetary easing, the Bank of Japan has announced a policy overhaul.

It said the plan was intended to double the money supply and achieve a 2% inflation target at the "earliest possible time, with a time horizon of about two years."

:: The European Central Bank later revealed that it would maintain the eurozone base rate at the current record low of 0.75%.

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HMV Rescue: Hilco Deal To Save Jobs And Shops

By Mark Kleinman, City Editor

HMV, Britain's last remaining independent music retail chain, is on the verge of being rescued tonight in a £50m deal that will preserve 2,500 jobs.

I can reveal that Hilco, the specialist restructuring firm, is poised to sign a binding agreement to secure HMV's future following weeks of speculation that the chain and its historic logo could disappear from high streets.

The deal, which could be announced as early as this morning, will involve HMV emerging from administration, backed by a new company incorporated in the UK. Hilco will acquire roughly 130 HMV-branded stores, and all nine of the outlets which operate under the cut-price music brand Fopp.

People close to the talks said an agreement was likely to be struck today although it could yet be delayed.

Hilco has been the frontrunner to become the new owner of HMV since soon after Deloitte was appointed as administrator at the end of January. Initially brought in to manage the retailer's business alongside Deloitte, the restructuring firm acquired HMV's debts just days later.

The chain is expected to be run by a combination of incumbent HMV and newly-appointed Hilco executives.

Major music companies and film studios, anxious to retain a major distribution channel on Britain's high streets, are understood to have agreed to new supply terms with HMV and have given their blessing to the deal. HMV's landlords, confronted with the prospect of scores more vacant shops, are also understood to be supportive.

Some of the shops being taken on by Hilco had been earmarked for closure by Deloitte, so the final redundancy toll from HMV's restructuring was unclear. Prior to falling into administration, HMV had 230 shops in the UK.

Hilco, which has successfully turned around the performance of HMV's Canadian business since buying it two years ago, also has plans to re-establish the brand in Ireland by reopening a store on Dublin's Henry Street. HMV's 16 Irish outlets, including the famous Grafton Street shop which has hosted gigs by the likes of U2, were closed in January.

Since the turn of the year, thousands of jobs have disappeared from Britain's high streets as prominent chains including Blockbuster UK, Republic and Jessops have been forced to call in administrators. Some have been reborn in truncated form, with Jessops acquired by the Dragons' Den entrepreneur Peter Jones and Republic taken over by Mike Ashley, the Sports Direct tycoon.

Trevor Moore, who had a brief stint running HMV before its collapse into administration, had hoped to put together a bid for the company but was made redundant in February. Among the other suitors which looked at bidding for HMV were Asda, the supermarket chain, and Jon Moulton, the private equity veteran.

HMV had been struggling for several years, pinned down under a debt mountain that vastly outweighed its stock market value. Caught between the dual pressures of fast-growing competition from digital rivals and waning consumer confidence, the company had shed some of its most prized assets, including Waterstone's, the books retailer.

Hilco has had a mixed track record investing in other British retailers, having bought assets from chains including Allied Carpets, Ethel Austin and Woolworths.

Neither Deloitte nor Hilco could be reached for comment.

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