Alliance & Leicester and Paragon rose against a falling bank
sector as short sellers closed positions on talk that the two buy-to-let
lenders could be the next target for a private equity led rescue after TPG
bought its discount stake in Bradford & Bingley.
Such deals, whereby a private equity firm injects cash into a listed company
by taking a stake in new shares, are regarded as a growing trend in a market
where private equity players are unable to raise bank debt for leveraged
buyouts.
Mitchells & Butlers is holding an effective auction to allow a
private equity firm to take a stake in new shares to help remove its debt
and fund growth.
A&L rose 5 per cent to 420.25p while Paragon rose 5.25 per cent to 89.25p.
The FTSE 100 lost 96.9 to 5960.8 as major stocks took a dive on going ex
dividend and as miners and oil stocks fell on worries over falling commodity
prices.
Those trading ex dividend include Vodafone, down 5 per cent to 155p, National
Grid off 4 per cent to 719.5p and Enterprise Inns, down 3.2 per
cent.
Vodafone is also being hit by worries that it will overpay for Tiscali, the
broadband operator in Italy and the UK that is for sale. Vodafone's debts
have been mounting of late as growth in Western Europe stalls. Goldman Sachs
warned that Vodafone's rumoured offer price, reported in Italian press, of
E2.80 a share, or E1.6 billion (£1.27 billion) looked steep, nearly E1,000
per broadband customer, far higher than amounts paid in recent deals.
In the mid caps, Findel, the catalogue and online retailer, lost 12 per
cent to 193.25p after going ex dividend.
BP lost 3 per cent and Shell 2.6 per cent.
Eurasian Natural Resources fell 4 per cent as worries over ferrochrome
prices, combined with fears over the 14.5 per cent stake held by Kazakhmys,
which it is considering selling when its lock-in expires on Friday.
UBS issued a bearish note on housebuilders, driving Redrow and BarrattDevelopments down 7 per cent. Taylor Wimpey lost 6 per cent
and Bovis Homes 5 per cent.
Morgan Stanley helped Royal Bank of Scotland rise against the falling
sector as the broker raised its view to "overweight" from "underweight",
on valuation grounds.
It said: "Capital has been raised, there is potential for future disposals,
and we think risks are higher at HSBC and Lloyds TSB. Our Underweight rating
on RBS was built on concerns in the US, capital, dividends and the UK macro
picture. Many of these are now resolved by the rights issue, alongside
prudent marks in RBS’s structured credit book and extra US bad debt
reserves, leaving only a UK recession and ABN Amro integration as major
concerns."
Motor dealers such as Lookers, down 4 per cent to 75.5p and Pendragon,
down 1.6 per cent, fell after Nationwide data showed consumer confidence in
the UK plumbed new depths in May with 65 per cent saying it was a bad time
to buy a car or house.
Land of Leather was on the slide again, down 0.25p to 14.25p after The
Times revealed that Euler Hermes had withdrawn credit insurance from its
suppliers. It has done the same to several UK retailers including MFI.
