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Tuesday newspaper round-up: Paragon, HBOS, Wolseley

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Date: Tuesday 22 Jul 2008

LONDON (ShareCast) - Paragon, the struggling buy-to-let mortgage lender, is in talks with Blackstone about a potential takeover.

The move shows private equity groups are still keen to invest in the mortgage market, in spite of the crisis it has suffered, as they believe the financial turmoil is creating opportunities for buying bargains, reports the FT.

Barclays and Abbey became the latest mortgage lenders to announce rate cuts yesterday as the cost of an average two-year fixed-rate mortgage fell below 7% for the first time in weeks. Barclays cut some of the rates offered by Woolwich, its mortgage unit, by up to 0.35 percentage points, while Abbey, Britain's second-biggest lender, is set to trim the rates on some of its fixed-rate deals by 0.1 percentage points tomorrow. Other leading lenders, including Halifax, Lloyds TSB and Nationwide Building Society, cut their rates last week, reports the Times.

The investment banks underwriting HBOS’s £4bn rights issue took a £100m paper loss yesterday after the closure of one of the City’s least popular capital-raisings. Dresdner Kleinwort and Morgan Stanley were left with about £2.5bn of stock. HBOS’s shares slumped by more than 6% yesterday to close at 264½p each, wiping £100m off the value of the unwanted rights issue shares, reports the Times.

Meanwhile, hedge funds may have made more than £1bn from shorting shares in HBOS, whose £4bn rights issue faced intense pressure from investors betting on the share price falling. Almost 15%, or about 550 million, of the bank's shares are out on loan, according to Data Explorers, reports the Independent.

The City watchdog has laid out plans to allow banks to tap the Bank of England for emergency funding without informing the market, in a move which might avoid a repeat of the run on the bank which led to the collapse of Northern Rock. Under the European Union's market abuse directive, regulated firms have to disclose price sensitive information. However, the Financial Services Authority yesterday said there were potentially situations where banks would be allowed to keep it secret if they had applied to the Bank, says the Telegraph.

Wolseley, the embattled building materials distributor, has followed up last week's profits warning with a management reshuffle as it struggles to stay within its banking covenants. Nigel Sibley, managing director of the UK and Irish business, is to be replaced by Rob Marchbank, a board director currently heading Wolseley's European operations.The duties of the UK human resources director will also be taken over by Bob Morrison, the European HR chief, reports the FT.

Sloane Rangers' favourite store, The General Trading Company, has collapsed into administration following a suspected downturn in trade as a result of the credit crisis.The Sloane Square emporium, which ran the wedding list for the Prince of Wales and the Duchess of Cornwall's 2005 wedding and has a number of Royal Warrants, appointed MCR, a restructuring specialist, as administrator yesterday, reports the Telegraph.

About 300 wealthy Britons who secretly salted away more than £1bn ($2bn, €1.26bn) in the tax haven of Liechtenstein are facing investigation and possible criminal prosecution by the UK tax authorities.Some clients have been contacted by Revenue & Customs, which says it will consider prosecuting those who have lied about their assets in other probes. Inquiries are expected to take two or three years, reports the FT.

Fears that an impending American recession is eroding US corporate profits were heightened last night after Apple gave warning that sales for the last quarter of the year would be $500 million lower than expected. On Wall Street, traders marked down the price of Apple stock by 10% in after-hours trading as the maker of iPods and the iPhone published its outlook and third quarter results after the New York stock market had closed, reports the Times.

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