Executives at Fannie Mae and Freddie Mac, the American financial giants which sit at the core of the country’s mortgage market, were desperately fighting yesterday to preserve their independence as a federal government takeover appeared closer than ever.

Shares in the companies collapsed to lows not seen for two decades amid fears that any government-led refinancing would wipe out shareholders. Freddie Mac bosses met US Treasury officials to complain that the uncertainty was crippling their ability to find a private market solution to their problems.

The companies own or guarantee almost half of all outstanding US mortgages and have become even more important props to the mortgage market since the appetite for exotic mortgage derivatives waned last year.

Last month, the Treasury Secretary, Hank Paulson, promised to do whatever it took to shore up the companies. Their failure could plunge the US housing market into a depression, and, because Fannie and Freddie debt is so widely held by foreign governments, it could also lead to a flight of capital from the US.

Mr Paulson has insisted that the promise to backstop the companies with emergency lending or the injection of equity capital ought to shore up confidence enough to ensure that the money is never needed. However, the companies’ shares have been in freefall since reports on the weekend that the Treasury was drawing up a nationalisation plan, which it could put into effect within weeks.

On Tuesday, Freddie Mac had to pay its highest-ever interest rate relative to Treasuries, to obtain $3bn (£1.6bn) of short-term debt.

Yesterday, Fannie Mae shares lost 27 per cent of their remaining value. Freddie Mac shares shed 22 per cent.

Freddie Mac has promised to raise $5.5bn of new capital to strengthen its balance sheet, battered by billions of dollars of losses on US mortgage investments and by the falling value of its ultimate collateral, namely American houses.

In private, executives have expressed their fury that uncertainty over the Treasury’s intentions has persisted, making it impossible to reassure potential investors they won’t quickly be wiped out in a subsequent government takeover.

Fannie Mae’s chief executive, Daniel Mudd, insisted yesterday that the company had more capital than ever before and did not foresee a government takeover. “They haven’t offered anything and we haven’t asked for anything.I don’t anticipate that they will do that.”

The Treasury has consistently said it has no plans to take action and said the meeting with Freddie Mac executives was routine.

News reported by The Independent

Adecco, the Swiss recruitment company, has refused to rule out a hostile bid for Michael Page, despite last week’s rejection of a 400p-per-share indicative offer – sending the smaller UK group’s stock price up almost 8 per cent yesterday.

After three months of talks, Michael Page management rejected the bid as “materially undervaluing the company”, an argument bolstered by yesterday’s half-year results showing revenue up 26 per cent and profits up 22 per cent. But Adecco is undeterred. “At the request of the UK Takeover Panel, Adecco is clarifying its position,” the company said yesterday. “While it is focused on negotiating a recommended offer for Michael Page, Adecco is keeping all its options open at this stage.” Shares in Michael Page closed up 25p at 342.5p.

Recruitment companies have been having a hard time in the last year’s economic slowdown. With contractions in the housing market turning to redundancies, and massive headcount reductions in the financial services industry, headhunters’ shares have tumbled. Despite recent rises, Michael Page is still nowhere near prices touching 595p in mid-2007, and rival Hays has seen a similar fall.

The faltering UK economy is having an impact. Michael Page’s half-year figures to June this year show strong revenue growth to £500m and operating profits up to £84.9m. But in the UK, which represents a third of gross profits, operating profits were down by 0.7 per cent to £28.4m. Not only is recruitment activity slowing in banking and related sectors but companies are increasingly cautious across the board – resulting in a “conversion rate”, calculated using operating profit as a proportion of gross profit, down from 31.1 per cent in 2007 to 29.7 per cent this year.

Unsurprisingly, the company remains bullish, emphasising that 67 per cent of gross profits of £292.7m are now from outside the UK and half are from non-finance disciplines. “Our organic growth strategy of diversifying by both specialist discipline and geography has enabled us to achieve record results and be more robust and resilient, with an increasingly difficult economic environment in some markets being balanced by others that remain strong,” Steve Ingham, the chief executive of Michael Page, said.

The company will feel the pinch if the economy continues to decline, but so far the strategy is paying off, say analysts. “It is a late-cycle business so if unemployment levels pick up then the company will suffer further down the line,” Jonathan Jackson, at Killick Capital, said. “But at the moment, the fact that it is diversified by both sector and geography means Michael Page is a lot more defensive in respect of the UK economy than it was at the last downturn.”

When Michael Page first revealed Adecco’s unsolicited £1.3bn approach this month, its shares soared by nearly a third to 369.75p, despite the lukewarm management response.

The revised proposal, ultimately rejected as “unattractive to shareholders” last week, was for the Swiss group to take 50.1 per cent through a new share issue at 400p per share, with a 200p payout to compensate for the dilution.

News reported by The Independent

A £400m rights issue at Bradford & Bingley (B&B) has closed, with analysts expecting that some of the deal’s underwriters will end up with shares.

Shares in B&B were trading at 55.25p when the deadline for the cash call finished on Friday – just above the 55p offer price for existing investors.

The take-up is forecast to be modest – though higher than the 8% seen last month in a rights issue by HBOS.

B&B, a buy-to-let loans specialist, has been hit hard by the credit crunch.

It is not expected to reveal how many shareholders took up the offer to buy extra shares until Monday.

The rights issue was underwritten by banks including Citi and UBS, along with HSBC, Lloyds TSB, HBOS, Barclays, Abbey and the Royal Bank of Scotland.

WHAT IS A RIGHTS ISSUE?
Companies issue extra shares to raise money
They are offered to existing shareholders, usually at a discount to the current share price
Shares are offered in proportion to existing holdings, so if you own 10% of the old shares you are offered 10% of the new ones

Rival cash calls

B&B’s rights issue has been restructured twice. The bank first announced an attempt to sell shares at 82p in May. Then, as trading took a turn for the worse, B&B announced it had decided to sell a 23% stake in the firm to Texas Pacific, but the private equity firm later backed out.

Earlier this year the Royal Bank of Scotland raised £12bn from its shareholders with a strong take-up in its rights issue.

Meanwhile Barclays has secured £4.5bn in new funding from a range of foreign investors.

Barclays announced last month that 19% of its new shares had been taken up by existing investors.

News reported by The BBC

Broadcaster ITV says profits fell 28% in the first half of the year, and that its advertising revenues will be flat across the first eight months of 2008.

It also says advertising revenues will fall 20% in September against 2007, when it broadcast the Rugby World Cup.

Adjusted pre-tax profit was £91m for the six-month period, but allowing for one-off charges it made a £1.54bn loss.

ITV boss Michael Grade said that the firm may give up its public service broadcaster status to help cut costs.

“I think we have a future as a public service broadcaster provided that we can get Ofcom and the government to realise very, very quickly that we cannot afford to pay more than the licence and the public service broadcaster (PSB) status is worth,” he said.

He added that the regulator Ofcom estimated the cost to be about £45m a year.

“It’s presently costing us over £220m a year,” Mr Grade said.

“If we can’t get quick resolution to that then, obviously, as Ofcom itself outlined in its recent consultation paper, there is an option for ITV to give up its public service status,” he continued.

“We don’t want to do that.”

ITV’s shares fell 5.8% to close at 43.6 pence in London.

Ad revenue ‘holding up’

The broadcaster is facing severe advertising budget cuts in the UK, and is having to deal with significant shifts in market conditions.

It said that the 28% drop in profit was largely due to a charge of £1.6bn made as it wrote down the value of assets bought in 2000 and 2004.

“Multi-channel competition against ITV has been a nightmare for this founder of commercial broadcasting for years” Robert Peston, BBC business editor

As a result the company has targeted an extra £35m of cost savings by the end of 2010.

ITV executive chairman Mr Grade said ITV was “not immune to wider economic pressures”.

He added: “Despite some dire predictions UK television advertising held up relatively well over the first half of the year and through the summer.”

ITV estimates that total net advertising revenue for the eight months to August will be down 1% year-on-year, with ITV plc net advertising revenue flat.

“However, on current estimates the television advertising market has weakened significantly in September, where trading is impacted by tough comparisons with the successful Rugby World Cup in 2007,” Mr Grade said.

ITV’s sports costs were up £29m compared with last year, primarily due to the cost of broadcasting Euro 2008 football matches.

However, sport was one of the areas where ITV continued to perform well, with the UEFA Champions League final between Manchester United and Chelsea achieving an audience of 10 million viewers.

ITV’s net advertising was actually up 1% over the first six months of the year, and its viewing share up 2.5%.

Tough competition

BBC business editor Robert Peston said cost-cutting was now the order of the day at ITV, as it finds the bill for living up to its obligations as the leading licensed commercial broadcaster financially onerous.

“Multi-channel competition against ITV has been a nightmare for this founder of commercial broadcasting for years,” he said.

“What makes this nightmare almost unbearable is the economic slowdown we’re all experiencing – manifest in ITV’s expectation that its net TV advertising revenue will be 20% lower in September.”

And our correspondent said that the impairment charge of £1.6bn was “simply the unavoidable recognition that the businesses brought together to create ITV in 2000 and 2004 are worth a great deal less now than they were”.

News reported by The BBC

Vodafone shocked the City yesterday by becoming the the first telecoms company to warn that revenues would suffer from the deteriorating economic conditions, increasing fears of recession in the UK.

The market reacted badly to Arun Sarin’s last quarterly results as Vodafone chief executive, sending the telecoms’ group shares plunging 16 per cent at one point. The world’s largest mobile phone group hinted at a “recessionary impact” in the UK and a slowdown on the Continent, dragging on its full-year returns in a sector that had been considered “immune” to the credit crunch.

Mr Sarin said yesterday: “We are beginning to see an impact from the current economic environment which is greater than we expected.”

Dean Reynolds, an analyst at Execution, said yesterday’s announcement was the “first time we have seen a telecoms company” acknowledging the weakening economic situation.

The group revealed its revenues for the year would be at the bottom of its previous predictions – at about £39.8bn – which reflected its “first-quarter performance, recent economic weakness and lower than expected equipment revenue”.

While the UK slowed, Vodafone’s business in Spain was worst hit “by economic and competitive effects” as consumer spending fell and the credit crunch bit. In particular, Mr Sarin said, Vodafone had been hit by a fall in the number of ecnomic migrants working in Spain, in particular in its construction industry, and to a lesser extent in the UK and Ireland.

Simon Weeden at Goldman Sachs said: “We expect the market to take a fairly dim view of the miss to revenue and revision of guidance, evidence of economic sensitivity in Spain and reference to early signs of ‘recessionary impact’ in the UK.”

The market duly complied and the shares, which have performed relatively well compared with the FTSE All Share index in the past month, closed 13.6 per cent lower at 129p.

Mark James, at Collins Stewart, said: “Vodafone is probably the first telecoms group in the world to say it is not immune to the wider market decline. It has slowed in Spain and the UK, and failed to grow as hoped elsewhere in Europe. This is clearly an issue for telecoms groups in the developed markets.” Shares in rivals including Telefonica and Ericsson fell on the back of the news.

“Up until Tuesday, telecoms companies have been relatively immune from the economic slowdown, and as a result investors have been camped out in the sector,” Mr James said. He added that what had traditionally been seen as a defensive investment “has now experienced a sentiment shift”. Vodafone’s statement yesterday kicked off the telecoms sector reporting season in Europe, with TeliaSonera and Belgacom due to report later this week.

The group’s first-quarter results showed that revenues had risen 19.1 per cent to £9.8bn, driven by returns in its data business and strong growth in India, but were still lower than analysts had predicted. Goldman added that the announcement brought “to an abrupt end the growth story that was Vodafone Spain…. As guidance was set at the end of May, trading may, in our view, have deteriorated in Spain only late in the quarter”.

Exactly a week before he is to step down, Arun Sarin remained upbeat. He said that despite the challenging environment, the group had benefited from the diversity of its operations. “While we expect revenue around the bottom of the outlook range, our continued focus on cost reduction enables us to reiterate our operating profit and cash flow guidance for the year,” he added.

Mr Sarin announced his decision to leave the group, after five years, in May. His position will be taken by Vittorio Colao, his deputy. Mr Sarin pioneered Vodafone’s drive into the emerging markets, culminating in the $11bn (£5.5bn) takeover of the Indian group Hutchison Essar last year.

Mr James of Collins Stewart remains unconvinced that the strategy will remain viable in the short term. “Today’s emerging markets are tomorrow’s developed markets – the prospects for a slowdown in the medium term are there,” he said.

>News reported by The Independent

Informa has received a tentative 506p-per-share approach from a private equity consortium which would value the trade fairs and scientific journals business at £3.4bn including debt, the company said on Tuesday night.

If successfully completed, the approach from Providence Equity Partners, Carlyle Group and Hellman & Friedman would rank as the world’s largest private equity bid since leveraged finance markets seized up late last summer.

The proposal would value Informa’s equity at £2.15bn, on top of which its net debt stood at £1.25bn at the end of 2007. The consortium has yet to begin formal due diligence.

Investor doubts about the consortium’s ability to finance a deal of this scale have weighed on Informa’s share price, which has fallen from 435p on June 19 when the consortium confirmed it had made an approach. On Tuesday, shares in Informa closed down 8.4 per cent at 378¼p. The company issued its statement after the market closed.

The consortium lined up financing last month from a group of banks including ING and Goldman Sachs, which have offered to provide £1.39bn of senior debt priced at 375 basis points over Libor, and an additional £463m in high-yield debt costing 11.75 per cent.

Providence and its partners made their approach shortly before the collapse of an earlier merger-of-equals proposal from United Business Media, a smaller rival to Informa. UBM has reserved the right to return should the private equity approach come to nothing.

The consortium’s continued interest underlines the private equity community’s appetite for business-to-business media assets, which offer a higher share of annually renewed subscription revenues than most consumer-facing media stocks.

Providence bid unsuccessfully for Emap’s business publishing assets, which were sold in December to Apax Partners. Apax and Candover are expected to show interest should the consortium sell off any of Informa’s assets.

News reported by Financial Times Ltd

Royal Bank of Scotland shareholders have agreed to buy more than 95% of the shares offered in a £12bn rights issue.

The rights issue is the biggest in UK corporate history, and the firm said investors would take up 5.8bn new shares at a value of 200 pence each.

But shares in RBS ended 5% lower in London at 234 pence.

The bank is not alone in having to ask investors for extra cash after problems in the world credit and US housing markets cut the value of its assets.

Banking sector blues

HBOS and Bradford & Bingley have also asked their investors for extra cash.

Analysts are particularly concerned that HBOS, which was formed by the merger of Bank of Scotland and Halifax, will struggle to raise the £4bn it requires to help restore the bank’s finances.

This is because private investors, rather than institutional investors, dominate its share base and are generally less supportive of rights issues.

HBOS’s shares ended 7.2% lower, while Barclays shares fell almost 6% on speculation that it would be the next bank to try and sell new shares.

“It’s a good level of takeup for one of the biggest ever rights issues, done in not easy circumstances” Alan Beaney, Principal Investment Management

Check RBS’s share price

Royal Bank of Scotland (RBS) shares have more than halved in value over the past year – including a 25% slump since the rights issue was announced in April.

Despite a brief rally last week, analysts warned that the bank and its shares may remain under pressure in the coming weeks.

Fundraising

RBS and other banks have suffered from a drop in the value of risky assets, particularly those focused on US sub-prime mortgages.

Sub-prime borrowers are those with poor or non-existent credit histories, and in recent months the number of defaults has jumped.

As a result, many lenders have had to find ways of boosting their cash reserves.

RBS’s circumstances have been exacerbated after it headed a group that bought Dutch lender ABN Amro for 71bn euros last year.

There are about 200,000 RBS shareholders; 93% of the shares are held by major investors, such as pension funds, with the other 7% owned by private individuals.

Shareholders are generally not keen on new share issues because it means that their investments are diluted, the firms’ earnings are spread more thinly and each share takes a smaller slice of the company’s earnings.

To compensate for these downsides, they are offered the shares at a discount to the market price so they could sell for a quick profit.

“It’s a good level of takeup for one of the biggest ever rights issues, done in not easy circumstances,” said Alan Beaney, head of investment at Principal Investment Management.

“The company (RBS) is still trading reasonably well and now doesn’t have that capital worry so maybe it can be knocked forward now.”

News reported by BBC