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Daily News Roundup: Tuesday, 29th September 2020

Posted: 29th September 2020

BANKING

SMEs struggle to get bounce back loans

Concerns that a number of small firms missed out on government-backed coronavirus loans have led to calls for banks to ensure that no SMEs eligible for funding are “locked out”, with MPs saying lenders accredited under the scheme , which is overseen by the British Business Bank, should re-open applications for bounce back loans. Mel Stride, chair of the Treasury Select Committee, said: “Accessing these loans may be a question of life or death for some of these businesses.” With it shown that of 28 lenders that have received accreditation to issue bounce back loans, just six are currently open to applications from new customers, Kevin Hollinrake, leader of the all-party parliamentary group for fair business banking, said all accredited lenders should “do the right thing”. He added that banks must “open their doors to new customers”. Shadow Business Secretary Ed Miliband has urged the Government to “work with lenders to ensure they reopen applications and assess them fairly”. City AM says Barclays has been accused of “inventing” rules for the scheme, having rejected multiple applications “based on a regulation that does not appear to exist”, while SME bosses have described HSBC’s handling of the scheme as a “complete shambles”.

Barclays hit by online issue

Barclays has apologised after a number of customers were left unable to make payments or check their balances after issues logging into online banking services yesterday. The bank advised customers who received an error message not to remake any payments for four hours.

PRIVATE EQUITY

PE firms hold £1.2trn in dry powder

Figures from assets market data specialists Preqin show the amount of so-called "dry powder" amassed by private equity firms globally reached a record high this month, hitting $1.582trn. Details of the cash held that could be used to launch takeover deals comes as Partners Group snapped up restaurant chain Cote; Asda could be part sold to TDR Capital; Warburg Pincus and Towerbrook Capital Partners are considering a joint bid for roadside assistance business AA; and Apollo Management International has launched a swoop on William Hill.

Blank-cheque firm looks to raise $450m

HIG Acquisition Corp, a blank-cheque company backed by private equity firm HIG Capital, is looking to raise $450m in a US IPO. The firm will list 45 million units at an offering price of $10 apiece. Credit Suisse, Morgan Stanley and BofA Securities are the bookrunners for the initial public offering.

INTERNATIONAL

Ping An investment sends HSBC shares up

China’s Ping An Asset Management has increased its stake in HSBC. Ping An, one of the largest insurers in the world, had been holding a 7.95% stake in HSBC but has added 10.8m shares at an average of HK$28.29 each. A spokesman for Ping An said the move “is a long-term financial investment.” HSBC’s shares yesterday rose by 8.9%, or 25.2p, to 308.55p, the biggest daily rise since 2009. The rising share price boosted investors who saw the bank's shares fall to a 25-year low last week after allegations of money laundering following the FinCen files leak.

Goldman Sachs to replace chief of consumer banking unit

Goldman Sachs is set to unveil a new chief of its consumer banking business, with Harit Talwar expected to hand control of the unit to Omer Ismail.

Credit Agricole sells Banque Saudi Fransi stake

Credit Agricole has sold its 4% stake in Banque Saudi Fransi to two Saudi government-related institutional investors in a deal worth $387m. Credit Agricole started the sale of its 31% stake in Banque Saudi Fransi in 2017.

FINANCIAL SERVICES

Derivatives clearing deal agreed

A temporary agreement on information-sharing arrangements between the UK and EU for eurozone lenders to continue using London’s clearing houses after the end of the Brexit transition period has been reached, with the European Securities and Markets Authority (ESMA) advising that temporary access arrangement would apply to the London Stock Exchange’s LCH, ICE Clear Europe, and LME Clear. ICE Clearing and LCH are to face close scrutiny from the EU after being designated “systemically important.” The announcement comes as governments across the bloc seek to address the risk that after the end of the transition period, shares in European firms may be unable to trade in London.

Jupiter to close Buxton’s UK Growth trust

The independent board of the Jupiter UK Growth Investment Trust has said it intends to liquidate the portfolio, despite the appointment of Richard Buxton to revive its fortunes earlier this year. It comes after the vehicle’s market value shrank to just £26m. The trust had a £30m market capitalisation when Mr Buxton took it on in May.

LEISURE AND HOSPITALITY

Pizza Hut agrees CVA

Pizza Hut’s creditors have agreed a CVA that will see 29 of its 244 restaurants close, putting 450 jobs at risk. The deal, which will see a reduction on rents, will protect about 5,000 jobs across the sites that will stay open. Announcing the CVA process earlier in September, Pizza Hut had said it did not expect sales to fully bounce back from the blow dealt by the coronavirus lockdown until well into 2021.

Côte saved after pre-pack deal

Côte Restaurants has been acquired by new investors via a pre-pack administration, with private markets investment manager Partners Group snapping up the casual dining chain in a deal that secures the future of 94 restaurants and 3,148 jobs.

Caesars in William Hill takeover offer

Caesars Entertainment is believed to be in “advanced discussions” regarding a £2.9bn takeover deal of William Hill, after the US casino firm offered 272p per share for the British company. Tom Reeg, chief executive of Caesars, remarked: “The opportunity to combine our land based-casinos, sports betting and online gaming in the US is a truly exciting prospect.”

MEDIA AND ENTERTAINMENT

Reach in bonus issue offer to shareholders

Reach shareholders have been offered a bonus issue in lieu of a cash dividend after the group reported adjusted pre-tax profit in the six months to the end of June of £53.5m. Chief executive Jim Mullen commented: “Unusual times require other ways to reward shareholders,” while Citi analyst Natasha Brilliant said “consumers are willing to offer their data in exchange for a better experience”. Net revenues in the first six months were down 18% to £290.8m compared with the year earlier period.

PROFESSIONAL SERVICES

ICAEW: A quarter of audits are substandard

A review of audit quality by the ICAEW has found that around a quarter required improvement. Of 960 audit files reviewed in 2019, 18% required improvements and 8% needed significant improvement. The report says audits typically needed to improve because they lacked sufficient evidence, reached inappropriate decisions in key areas, failed to challenge management, or lacked adequate documentation. Michael Caplan, chair of ICAEW’s regulatory board, said: “Trust in the quality of audit underpins confidence in UK business. In the current economic climate this has never been more important."

REAL ESTATE

KKR takes stake in Great Portland Estates

Private equity firm KKR has purchased a 5.4% stake in West End property firm Great Portland Estates. This comes as UBS analysts noted that investors prepared to overlook coronavirus-related disruption in the sector could reap rewards in future, adding that 40% discounts on the net asset values of Great Portland and rival Derwent London represent a chance to invest in “quality names in the sector.”

RETAIL

Walmart selects preferred Asda bidder

Walmart has chosen a consortium led by Mohsin and Zuber Issa, the owners of petrol station chain EG Group, and private equity firm TDR Capital as the preferred bidder to buy Asda. The deal, which would value the UK supermarket chain at more than £6.5bn, would return Asda to British ownership for the first time in more than 20 years. Walmart had been tipped to select buyout firm Apollo Global Management.

Aldi sees profit climb

Aldi has announced plans to invest £1.3bn in the UK over the next two years as it reported a near-50% increase in profit. A trading update covering the year to December 2019 showed sales rising 8% to £12.3bn, with pre-tax profits increasing 49% to £271m. The company said it would invest £1.3bn over the coming two years on new and upgraded stores, distribution centres and “further innovations across its business.”

ECONOMY

IFS: Taxes or austerity needed to cover coronavirus cost

The Institute for Fiscal Studies (IFS) has warned that the Government will need to roll out tax increases or a fresh round of austerity due to the increase in public spending in the wake of the coronavirus outbreak. Ben Zaranko, economist at the IFS, said extra spending “could swallow up huge amounts of money, and leave some public services facing another round of budget cuts for their core services.” He added: “Avoiding that scenario would require the Chancellor to find billions of extra funding, paid for at some point through higher taxes." Paul Johnson, director at the institute, said: "It is entirely inappropriate for the Chancellor to consider raising taxes this year or next, or possibly even the year after," adding: “The longer-term answer is clearly that if we have a bigger state we will need more tax.” The think-tank said Government spending as a share of overall economic output could rise from its current level of 40% of GDP to possibly 45% by the middle of the 2020s. The IFS also pointed to the economic uncertainty brought about by the pandemic and urged the Chancellor to abandon any plans for setting out a multi-year spending review, suggesting a one year plan would be a better option.

BoE deputy governor warns on negative rates

Sir Dave Ramsden, a Bank of England (BoE) deputy governor, has spoken out against setting negative interest rates. He told the Society of Professional Economists that negative rates “would be less effective as a tool to stimulate the economy.” While the Bank has cut rates to a record low of 0.1%, some policymakers have called for rates to be taken into negative territory, taking the cost of borrowing below zero. Sir Dave, a member of the BoE's Monetary Policy Committee and deputy governor for markets and banking, said: “We're continuing with a quantitative easing programme - no one is voting at present for negative rates.” He added: “I see the effective lower bound still at 0.1%, which is where Bank rate is at present.”

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