Financial News

Barclays PLC hopes to raise $8.85 billion through a share issue that will draw in new investment from Qatar and Japan, the company said Wednesday.

The company said the cash would bolster its financial position after losses from the U.S. subprime crisis and give it the opportunity to capitalize on the current disruption in financial markets.

Barclays is the third big British bank to go to its shareholders to shore up its financial position. Royal Bank of Scotland (RBS-PL) recently raised $23.6 billion in Europe’s biggest-ever rights issue, and HBOS PLC (HBOFF.PK) has announced a $7.9 billion rights issue.

Barclays (BCS), Britain’s third-largest bank, said its plan would bring in new investment from Sumitomo Mitsui Banking Corp., the Qatar Investment Authority and Challenger, a company representing Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, the chairman of Qatar Holding, and his family.

The share offer is in two parts: $983 million to be raised through a placing of 169 million new ordinary shares at 296 pence, and $7.9 billion to be raised through an open offer of 1.4 billion shares at $5.55 each on the basis of 3 shares for every 14 shares now held.

Qatar Investment Authority and Challenger have agreed to invest up to $3.46 billion and $1.05 billion respectively, Barclays said.

Sumitomo Mitsui has agreed to invest $983 million; China Development Bank up to $267 million; and Temasek Holdings, based in Singapore, up to $393 million.

"We feel that the valuation is undemanding, the dividend outlook is good news, as is the lack of any earnings guidance downgrade," said Alex Potter, analyst at Collins Stewart.

"Following this, we have a strongly capitalized bank which was the key bear point," Potter said.

Barclays shares were up 5.2% at $6.43 in early trading on the London Stock Exchange.

The bank has reported writedowns of $5.1 billion through the first quarter of this year related to the subprime lending crisis in the United States, a smaller hit than reported by some of its peers, including RBS cash advances. The company said the share issue would boost its capital and equity ratios above its long-term target, and it intends to keep them at that level "particularly while current market turbulence persists."

Current strains in the financial system have created opportunities, including pricing changes in many asset classes and reduced competition, Barclays said in a statement.

"Significant opportunities therefore exist to attract flows of new business at expanded margins consistent with Barclays’ strategy to seek higher growth over time by diversifying its profits base."

The company said it intends to expand its presence in Asia, the Middle East, Africa and Europe, and step up growth in Russia, Pakistan and other new markets. It also intends to expand its investment banking activity, particularly in Asia and the United States. 

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Anheuser-Busch Cos Inc plans to reject InBev NV’s unsolicited $46.3 billion takeover offer, saying it undervalues the company, a source familiar with the situation said on Wednesday.

Anheuser-Busch, the brewer of Budweiser beer, and InBev, the maker of Stella Artois and Beck’s, could not be immediately reached for comment.

In rebuffing InBev’s offer, Anheuser-Busch plans to map out its own restructuring plan soon that would include the sale of the company’s theme park operations, The Wall Street Journal reported.

The plan also would include layoffs, more than $500 million in cost-cutting efforts and the sale of Anheuser-Busch’s packaging unit, the New York Times added.

“It sounds dead-on. It’s what we were expecting. The interesting thing is what happens next.” said Tom Pirko, president of Bevmark, a Santa Barbara, California-based beverage industry consulting firm.

The timing of Anheuser-Busch’s restructuring announcement was not clear, but the source said the company’s board viewed InBev’s $65-per-share offer as too low quick payday loans. The source declined to be identified by name because the source was not authorized to speak to the media.

Pirko said a rejection from Anheuser sets the stage for InBev to either raise its bid or take its bid directly to shareholders — options he said InBev is likely to pursue.

Analysts had speculated InBev may have to raise its offer by more than $3 billion, to around $70 a share, to woo its shareholders into a deal to create the world’s largest brewer, making a quarter of the world’s beer. 

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The state of Qatar has agreed to sell 25 percent of the Doha Securities Market to NYSE Euronext (NYX.N: Quote, Profile, Research, Stock Buzz) for $250 million in a bid to become the booming region’s financial hub and extend global links.

Transatlantic bourse NYSE Euronext — which comprises the New York Stock Exchange and several leading European bourses — said on Tuesday the deal was its largest-ever investment in a foreign exchange.

Qatar will retain a 75 percent majority ownership of the Doha Securities Market (DSM) and plans to sell a minority stake in the DSM in a domestic initial public offering within the next three years.

“This partnership lays the foundations for us to build Doha into a world class financial centre,” Qatar Prime Minister Sheikh Hamad bin Jassim bin Jabr Al-Thani said in a statement.

“Our country’s financial markets will be an integral part of a group which links together the world’s major trading centers across the U.S creditreport. and Europe and now the Middle East,” he added.

Western exchanges are looking to boost their presence in booming emerging markets amid a slowdown in European and American economies.

The Doha deal comes as the oil-rich region plays an increasingly active role in exchange consolidation among global stock market operators.

Qatar, with a population of one million and the world’s biggest exporter of liquefied natural gas, last September bid for shares in Nordic bourse operator OMX AB and the London Stock Exchange (LSE.L: Quote, Profile, Research, Stock Buzz), as Dubai looked to close a $4.9 billion three-way merger with Nasdaq Stock Market (NDAQ.O: Quote, Profile, Research, Stock Buzz) and OMX. 

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Investors have become increasingly concerned about stagflation over the past month, cutting back on equities and snubbing bonds in the face of slowing growth and rising prices, a survey showed on Wednesday.

Investment bank Merrill Lynch said its monthly poll of 204 fund managers across the world showed some of the most negative stances on equities it has seen in 10 years.

The main shift, the bank said, was in a view that global growth and profit expectations were falling just as expectations of higher interest rates were rising because of inflation.

“About 87 percent (of respondents) believe we are in a world of above-trend inflation and below-trend growth,” said David Bowers, Merrill’s poll consultant.

“People now believe we are in a world that is not only slowing but where short rates are rising,” he said.

The poll was taken during a period in which both the U.S free credit report.com. Federal Reserve and European Central Bank warned about inflation and hinted that interest rates were likely to stay unchanged or be raised despite slowing economies.

Specifically, 75 percent of fund managers in Merrill’s June poll said they believed the world economy would slow over the next 12 months, compared with 61 percent in May.

The same percentage said corporate profits would deteriorate, a small increase from May, while 59 percent said global inflation would be higher compared with 53 percent in May and just 44 percent in June. 

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WASHINGTON–Retail sales in the United States jumped by the largest amount in six months in May as 57 million federal economic-stimulus payments helped offset the headwinds buffeting consumers.

Retail sales soared 1 per cent last month, the biggest increase since November, the commerce department reported yesterday. A wide variety of retailers enjoyed a good month, including the biggest increase at department stores and other general merchandise stores in a year.

The May increase was double what economists had been expecting and indicated the economy is getting a major boost from the government’s $50 billion (U.S.) in economic stimulus payments.

Also, April sales data were revised to show a respectable gain of 0.4 per cent, instead of the original estimate that sales had fallen by 0.2 per cent.

The administration of George W. Bush is hoping the stimulus payments will help offset the gloom from a prolonged slump in housing, a severe credit crisis, soaring energy bills and rising layoff notices to help the country avert a deep recession.

Highlighting the pressures on the job market, new applicants for jobless benefits rose by a larger than expected 25,000 last week to 384,000, the highest level since late March, the labour department said yesterday in a separate report.

In a third report, the commerce department said business inventories grew by 0.5 per cent in April, more than double the 0.2 per cent rise in March and the best showing since inventories rose by 1 per cent in January.

"Recession? What recession?" asked Joel Naroff, chief economist at Naroff Economic Advisors pay day loans. "Spending in April and May was solid in just about every category.”

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said rebate cheques were giving a temporary boost to spending that would not last, resulting in weaker economic performance in coming months.

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Muhammad Yunus doesn’t talk like a typical banker. He believes that access to credit is a fundamental human right.

Nicknamed Bangladesh’s "banker to the poor" for motivating a global microfinance movement, the Nobel Prize-winning economist told a Toronto business audience yesterday the financial system shuts out nearly two-thirds of the world’s population, denying the poor both opportunity and dignity.

Poverty is often perceived as a dilemma of the developing world, Yunus said, but the problem is alive and well in North America.

"You’ll be surprised how many people in Toronto do not qualify to do business with the banks," he said in a keynote address at the 2008 Top Employer Summit. "In the United States, a neighbouring country, there are millions of people who cannot open a bank account."

He told conference delegates "poverty is not created by poor people. It is created by the system." He challenged his audience to inspire "institutional change."

A bank for the poor is a hard sell in Canada’s financial capital, especially at a time when big banks are bracing for more credit losses. Still, Yunus makes a strong business case for allowing people to borrow with dignity

He established the Grameen Bank, or village bank, about 25 years ago in Bangladesh with a mission to eradicate poverty through microlending to destitute craftspeople.

Grameen Bank now has 7.5 million borrowers, about 97 per cent of them impoverished women. The bank lends out about $1 billion each year in small loans to help stimulate the most basic entrepreneurial activities, such as processing rice, raising chickens or selling eggs. And even with no required collateral or default penalties, Grameen Bank boasts a repayment rate of more than 98 per cent.

"Conventional banks’ principle is, the more you have, the more you can get," Yunus said payday advance low fees.

"We reversed it. We said, the less you have, the more attractive you become. If you have absolutely nothing, you get the highest attention."

The Grameen Bank model has been successfully replicated in more than 100 countries.

In late April, Yunus officiated at the opening of the first branch of Grameen America in New York City.

Grameen America, which already has 225 borrowers, makes loans ranging between $500 (U.S.) and $3,500.

"We follow exactly the same thing we do in the village in Bangladesh," Yunus said. "In all these months, not a single weekly instalment has been missed."

He is now receiving inquiries from around the country, including from cities such as New Orleans, Baltimore, Los Angeles and Newark. He believes this proves the need for microcredit is great, even in the world’s largest capitalist economy.

Nevertheless, Yunus continues to encounter skeptics.

"People said that maybe microcredit is good for Bangladesh, but in a rich country, another context, it will be difficult. We always say, ‘It is not difficult. People are people. People need money.’ "

Grameen’s U.S. expansion comes at a time when the subprime mortgage crisis and ensuing credit crunch continue to rock banks around the world. The International Monetary Fund estimates that total losses could eventually reach a whopping $1 trillion. Yunus suggests the subprime market’s implosion underscores the inadequacies of the conventional banking system.

"With all your lawyers, with all your collateral, you have to write off $1 trillion of your money," he said. "It is not just a $1 trillion writedown; the whole economy has suffered because of that."

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Liquidation World Inc. is on sale.

The money-losing operator of 106 "asset recovery" stores said Wednesday its board has formed a special committee "to investigate and evaluate strategic alternatives available to the company to increase shareholder value."

The committee of independent directors has retained outside financial and legal advice but "has not established a list of strategic alternatives, nor has it endorsed any particular course of action," the company stated.

"Furthermore, there is no guarantee that the work of the special committee will lead to any transaction."

Liquidation World also disclosed Wednesday that Darryl Chenoweth, senior vice-president of operations, is leaving the company bad credit payday advance. This follows the late-May departure of Maurice Chelli, SVP merchandising.

The company, Canada's largest liquidator with 1,600 employees, lost $5 million in its latest quarter, compared with a $3-million loss a year earlier. Revenue was flat at $42.2 million as same-store sales slid 4.2 per cent.

Liquidation World shares, trading at the $5 level a year ago, closed Tuesday at $1.56, representing a stock-market value of $12.9 million.

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BRUSSELS–Food prices increased at about double the rate of inflation in the European Union, with dairy products outstripping other food classes for the largest annual rise in April, the bloc’s statistics agency said yesterday.

"Since the end of 2006, but particularly since July 2007, food prices in the EU have increased more rapidly than overall inflation," the Eurostat agency said in a report.

In April, the most recent month for which figures are available, Eurostat said food prices in the 27-country EU increased 7.1 per cent annually, compared with 3.6 per cent for overall inflation – nearly double the rate.

But when taken over a longer period, the rate of food price increases was far more in line with inflation, even though March and April saw the highest annual increases in food prices since Eurostat began collecting data in 1996, the report said, adding that the recent rises in farm prices followed three decades of decline in real terms.

"Between 1996 and April 2008, food prices have risen in total at a similar rate to overall inflation: 31 per cent and 27 per cent respectively in the EU, and 30 per cent and 27 per cent respectively in the euro area," it said.

In April, the highest yearly rises were in Bulgaria and Latvia at 25.4 and 21.7 per cent respectively, while Estonia and Lithuania were close with increases of about 18 per cent.

Portugal saw the smallest rise at just 3.2 per cent, followed by the Netherlands and France with about 5.5 per cent each.

By sector, milk, cheese and eggs prices saw the largest year-on-year price increase in April, jumping by about 15 per cent payday loans. Bread and cereals prices rose by 10.7 per cent and meat prices went up by 4.1 per cent.

Other food that Eurostat studied included fish and seafood, oils and fats, fruit, vegetables, sugar, jam and chocolate. Vegetables were the only item with a small price fall, down by 1.2 per cent in April, 2008 compared with April, 2007.

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