FMoS news in brief: Tesco | EMI | Gatwick | BT

By THIS IS MONEY
Updated:

 

Tesco, Guy Hands, 31 and Gatwick and AIG in the City news in brief from the Financial Mail on Sunday team:

Asos fashion model

Clothing crunch: Tesco will challenge online fashion house Asos

Tesco is about to throw down the gauntlet to online fashion companies by attempting to woo some of Europe's trendiest labels for the relaunch of its website in the autumn.

The company's head of menswear buying, Jon Bennett, was spotted with his team at fashion trade show Bread & Butter in Barcelona.

Hot brands such as G-Star, Gio-Goi and Superdry use the exhibition to show off their latest looks - often only to selected buyers behind closed doors.

Tesco declined to comment, but a source said: 'For some, this will be very tempting, but many will feel that striking a deal with Tesco might damage their credibility.'

Meanwhile, early signs of a full scale crash in retail sales could emerge in official figures this week.

George Buckley, chief UK economist at Deutsche Bank, said: 'The only way that retailers have been able to stimulate demand has been by cutting prices aggressively. That is ultimately not sustainable. Retail sales could well collapse during the first quarter of this year.'

Guy Hands will meet EMI loan repayments

Financier Guy Hands is preparing to pay the next instalment on the £2.7bn loan from Citigroup he used to acquire music group EMI - and may face paying more if profits are too low.

Hands, who runs the Terra Firma private equity fund, is expected to pay up to £32m as a quarterly interest payment on the loan next month.

Though the loan from Citigroup is believed to have few conditions attached, there is a clause that requires EMI, home to Coldplay and Katy Perry, to maintain a certain ratio of profits before interest, tax, depreciation and other charges to net debt.

The first test of this clause occurred last September and forced Hands' company Maltby, which owns EMI, to inject £16m into the recorded music arm of the business, EMI Music. EMI Music Publishing did not require any such injection.

Hands' company raised an extra £250m last summer specifically to cover the cost of restructuring. It used £68m of this in the six months to September. Any additional sum required for an extra injection of cash would be likely to come from this facility.

Sources close to Maltby say the company can service its debt comfortably and that any extra cash injection required would not be arduous.

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Favoured bidder 3i has 'withdrawn from Gatwick airport bid'

One of the favourites in the five-horse race to buy Gatwick Airport is believed to have pulled out, as it is not willing to pay the price demanded by owner BAA --believed to be more than £2bn.

The 3i Infrastructure fund, backed by two giant Canadian teachers' pension funds, has stopped all negotiations, though the consortium has not yet been disbanded. Its offer was believed to be worth less than £1.75bn.

There are rumours that Global Infrastructure Partners, which owns London City Airport, may also withdraw.

A spokesman for BAA said it was 'very satisfied' with the level of interest in the airport. Its Spanish owner Ferrovial, which is labouring under £25.8bn of debt, is keen to get a buyer by the end of next month.

Ferrovial bought BAA for £10bn three years ago at the height of the market and is understood to be considering selling a stake in BAA to cut its debts.

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Fraud officers to meet US officials over AIG inquiry

Serious Fraud Office investigators are to meet their US counterparts in the next few days as their inquiry into a British offshoot of troubled American insurance giant AIG moves into top gear.

The SFO will also meet representatives of the American parent company, which is understood to be keen for any irregularities at AIG Financial Products to be fully investigated.

The subsidiary, based in Connecticut, conducted much of its business through offices in Mayfair, central London, and is being investigated by the US Department of Justice and its financial regulator, the Securities and Exchange Commission.

On Thursday, SFO director Richard Alderman said: 'It is right for us to look into the UK operations to determine whether there has been criminal conduct.' He added that the inquiry did not relate to AIG's mainstream insurance operations in Britain, but only to AIG-FP, which acted as the company's in-house financial services arm.

AIG-FP became a major supplier of 'credit default swaps' - insurance against the risk of borrowers defaulting on loans, including not only corporate debt but US sub-prime mortgages, the trigger for the August 2007 credit crunch.

With AIG-FP facing meltdown, the rest of AIG was running out of liquidity. In September 2008, the US government effectively nationalised the company.

Boss buys £100,000 of BT shares

BT chief executive Ian Livingston has bought nearly £100,000 worth of shares in the troubled telecoms giant as a mark of confidence after its share price plunged last week.

Livingston moved a day after announcing that profits in the last quarter of 2008 fell 81% to £113m.

Fears that the group's final dividend was in danger saw shares fall eight% on Thursday to 97p. They closed on Friday at 99p.

The company also confirmed Financial Mail's report of January 25 that it would axe more jobs in addition to the 10,000 jobs it had previously said it would cut by March.

It revealed that 9,500 staff, including 7,200 agency workers, had already left.

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