Personal guarantees come back to haunt cities businesses

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Personal guarantees come back to haunt cities businesses

A recent worrying trend that has begun to raise it head no doubt as result of the ongoing financial downturn is company directors pledging their share equity in companies as loan security, not necessarily for loans pertaining to their business. In December 2008 , a co-founder of Carphone Warehouse, David Ross, , resigned his post as deputy chairman of the company when he was obliged to admit that he had used his equity to guarantee personal loans on commercial property without his partner's knowledge.

Yesterday, the city brokerage Icap also revealed that their chief executive Michael Spencer had pledged more than 90 per cent of his company shareholding in the company as security for a loan. Spencer who founded and acts as managing partner for Icap made his announcement as an FSA imposed deadline draws nearer.

It was also announced that towards the end of 2008, that Spencer, had also pledged shares in stockbroker Numis,, where he acts as non-executive chairman and is a major shareholder, as collateral for a loan with HSBC.

The FSA recently announced an amnesty on such undeclared loans giving executives, till the 23rd January 2003 to come clean on any similar arrangements.

On the FTSE, equipment hire group Speedy Hire saw their shares plummet by almost fifty percent to 48.25 pence after issuing a profit warning, based on predictions that revenues for the fourth quarter would be much lower than a year earlier. Forecasts are that Speedy Hire's pre-tax profits for the year will run around 36 million pounds, a fall of 25% from 2007. . The company said uncertainty in the credit markets had affected confidence in the construction market

Leisure group JD Wetherspoon has announced that it will be cancelling its dividend as well as halting short term expansion plans. These measures are being taken in an attempt to conserve capital holdings, largely due to difficulties in raising funds. A company representative admitted that, as a result of the continuing turmoil in the banking system, refinancing "cannot be taken for granted".

Britain's largest real estate investment trust, Land Securities (LAND.L), has announced their intention sell off certain assets as part of a cash-raising initiative. Rental revenues are considerably down as more and more clients are closing down their businesses. Retail clients who have gone into liquidation currently make up around five percent of the company's annual turnover, a rise from three percent in September.

In banking circles, newly formed Lloyds Banking Group was seen to attempt to strengthen their efforts to fight off government ownership. Their efforts not to follow the Royal Bank of Scotland into government ownership, was strengthened by bond holders injecting capital.

Lloyds, currently 43.4 per cent owned by the taxpayer, will pay state owned banking group GBP 480 million ponds this year

Financial analysts said the deal was good for both Lloyds and its bond holders, while the markets showed their disagreements. Shares in the bank closed 34 per cent down at 65p. Small potatoes when compared to RBOS but still a cause for worry

In the United States, trade was slack with most of the interest focused on the Presidential inauguration. One interesting development was the announcement that Mexican tycoon e Carlos Slim Helu is to invest about £170 ($250m) in the New York Times Company.

Rumours have it that the telecommunications tycoon is poised to shore up the publisher's ailing finances, with the company's board expected to meet Wednesday to approve the deal. The terms of the deal would see Slim issued with preferred shares in the company in return for his investment.

Slim, the third richest man on the planet with a wealth of $49bn from telecommunications, retail, construction, banking, insurance, among others, bought a 6.4% stake in the New York Times Company in September 2008 for (£73m) $128m. The New York Times Company publishes the New York Times, the Boston Globe and a string of local newspapers,

As European markets opened, Britain's FTSE 250 Index fell -64.96 (-1.06%) to 6,077.10o while the FTSE 100 FTSE 100 Index fell -31.06 (-0.76%) to 4,060.34
whilst, Germany's DAX rose 1.12percent and France's CAC-40 was up 1.1 percent.

U.S. stock futures suggested a weaker open on Wall Street. Dow futures were down 38 points, or 0.5 percent, at 8,205 and S&P500 futures fell 3.8, or 0.5 percent, to 844.80.

In Asia, financial issues sank. Sumitomo Mitsui Financial Group Inc. fell 3.8 percent, and Mizuho Financial Group Inc. dived 6.2 percent.

Shares of Toyota Motor Corp. bucked the trend, rising 2.3 percent as investors waited for the automaker to name a new leader, which it did after market close.

Akio Toyoda, the 52-year-old grandson of Toyota's founder, was named to lead the company through its biggest crisis in history, which led to a 4-percent fall in global vehicles sales last year.

Sterling was stable against other major currencies early Tuesday with rates as follows

Pound/US dollar 1.37617

Pound/Euro 1.06785

Pound/Japanese Yen 123.466

Oil prices fell to near $34 a barrel Tuesday in Asia as traders sold the expiring front-month Nymex contract due to a lack of space at a key U.S. storage facility.

On the Asian front Japan's Nikkei 225 stock average lost 2.3 percent to 8,065.79, paring losses in the afternoon after dipping under the key 8,000-level during the morning session.

Natural resource companies were among the hardest-hit after overnight declines in commodity prices. Australia's BHP Billiton Ltd. plunged 4.7 percent, and Nippon Oil Corp., Japan's biggest oil distributor, retreated 4.1 percent