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Tuesday newspaper round-up: Mervyn King, Melrose, Shire

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Date: Tuesday 22 Apr 2008

LONDON (ShareCast) - More British banks are poised to tap shareholders for billions of pounds in emergency capital, Mervyn King, the Governor of the Bank of England, revealed yesterday, reports the Times.

As Royal Bank of Scotland put the finishing touches to a £12bn rights issue, expected to be announced today, King hinted strongly that RBS would be the first of many. JPMorgan estimated that Britain’s four largest banks had a £37bn shortfall in capital — £13bn for RBS, £11bn for HBOS, £8bn for Barclays and £4bn for Lloyds TSB.

Alistair Darling will press lenders to offer better fixed-rate deals and mortgage holidays to homeowners in trouble in return for a £50 billion injection of public money. The Chancellor told MPs that taxpayers were “entitled to expect” the benefits of the government-backed loans to be passed on. However, he accepted that the intervention would take time to reach consumers, writes the Times.

Goldman Sachs has advised clients to take out "short" positions on British 30-year gilts before a rash of new issues by the government floods the bond market, reports the Telegraph. The closely watched US investment bank said it was concerned about the "heavy supply of longer-dated paper" likely to weigh on the price of British sovereign debt.

Engineering group Melrose is poised to seal its £500m takeover of industrial conglomerate FKI. Last night, FKI's board was due to recommend Melrose's offer after the turnaround company spent the last two weeks raising the funds for a formal 84p-a-share offer. Melrose is understood to have raised about £750m to refinance FKI's £350m debts, provide adequate working capital for the company going forward and pay for some of the cash element of the offer, writes the Telegraph.

Net investment in hedge funds has fallen to almost zero this year as poor returns and the high-profile implosion of funds such as the $2bn (£1bn) Peloton fund have driven away investors. Data from US-based institution Hedge Fund Research (HFR) shows the capital managed by hedge funds in the three months of this year rose by less than 1%. The increase of $16.5bn on a total of $1,875bn managed by hedge funds globally is the smallest increase since the beginning of 2004, reports the Telegraph.

Investors in Langbar, the AIM-listed cash shell that collapsed in 2006, could finally see some of their money returned after former chairman Mariusz Rybak and his family agreed to pay the company £30m. The settlement, which was approved by Mr Justice Blackburne in the High Court yesterday, came after 56 days of evidence in the case which dates back to early 2006, reports the Telegraph.

BAA’s near monopoly over UK airports is harming consumers, competition watchdogs will suggest on Tuesday in a report that will leave the company struggling to avoid a break-up, writes the FT. The Competition Commission will call for evidence on how potential new owners of UK airports could overcome severe capacity constraints and bring more competition to the industry, people familiar with the year-old inquiry say.

Meanwhile, the Spanish-controlled company that owns Heathrow, Gatwick and Stansted airports will not pay any corporation tax for several years, potentially leaving the Exchequer £1bn out of pocket, writes the Telegraph. The tax credit is mainly explained by 2007's cut in UK corporation tax from 30% to 28% and its impact on BAA's deferred tax liabilities of around £7bn.

Computer hackers trying to steal confidential information have attacked more than one in 10 large UK businesses, a 10-fold increase compared with two years ago, according to a government report. About 13% of large companies have detected unauthorised outsiders in their networks, according to the study by the Department for Business, Enterprise and Regulatory Reform, to be published on Tuesday at the Infosecurity Europe show in London, reports the FT.

The UK's Financial Services Authority lacks transparency in its oversight of the booming derivatives markets, a top US financial regulator warned yesterday. In an unusually sharp rebuke of a regulator by a peer, Bart Chilton, a commissioner at the Commodity Futures Trading Commission, said that Britain's financial watchdog needed to apply "greater oversight and enforcement," reports the FT.

Shire, the world's largest producer of treatments for attention deficit hyperactivity disorder (ADHD), said it was "perplexed" by a new US recommendation that all children should be given a heart test before being allowed to take its treatment Adderall. Investors feared that the introduction of such tests would deter some parents from putting their children on the drugs, reports the Independent.