FirstGroup is considering legal action against the Department for Transport after it pulled the controversial West Coast rail bid in a humiliating about-turn, plunging the entire industry into chaos. The bus and rail operator, which had been awarded the contract after bidding £13.3bn to run the London-to-Scotland services until 2028, saw its shares dive by more than a fifth, falling 50.6 to 193.4p. Analysts said the potential loss of £40m cash flow this year and £50m of operating profits next could lead to fresh fears over FirstGroup’s balance sheet and signalled a near-certain dividend cut. Karl Burns, at Shore Capital, said: “This could lead to fears over the loss of the franchise and subsequent balance sheet concerns.” Gert Zonneveld at Panmure Gordon said: “I don’t think the dividend looks sustainable.” The decision by new Transport Secretary Patrick McLoughlin to pull the contract came after the “discovery of significant technical flaws in the way the franchise process was conducted”. Three DfT officials have been suspended, The Telegraph says.
Senior officials from Germany and other parts of the Eurozone’s AAA core have warned Spain privately that angry parliaments are likely to impose stringent conditions on any further rescue loans. Fear of escalating demands by Germany, Finland and Holland is a key reason why Spanish premier Mariano Rajoy continues to drag his feet on a full sovereign bail-out. Spain’s refusal to act has frozen the Eurozone rescue machinery and begun to rattle markets. The European Central Bank will not buy Spanish bonds until the country requests aid from the European Stability Mechanism (ESM) and signs a “Memorandum” giving up fiscal sovereignty. Finance minister Luis de Guindos told Spain’s parliament Wednesday that there will be no bail-out until the terms are clear. “The government will take the best decision for Spain and its European allies when it knows all the details,” he said, The Telegraph writes.
Royal Bank of Scotland has been left facing an €212m (£170m) loss after the collapse of one of Spain’s largest housebuilders. Rivero y Soler, which is controlled by the Rivero family and Bautista Soler, yesterday filed one for one of the largest bankruptcies in Spanish history with debts totalling €1.6bn. RBS is among the largest creditors to the struggling Spanish builder, along with several domestic lenders. The bankruptcy follows the failure by two of the company’s subsidiaries, Alteco and MAG Import, to refinance an outstanding loan. Together the two companies own a 31% stake in Gecina, France’s largest property company, raising questions about the future of the holding. RBS is unlikely to have to write-off the entire loan and the state-backed lender has already made substantial provisions for new losses, according to The Telegraph.
Capita has lost a flagship contract to manage the Criminal Records Bureau — and some analysts believe the reason is that the company has had it too good for too long. Kevin Lapwood, at the brokers Seymour Pierce, said: “There’s a suspicion that Capita has been earning too high a margin on certain central government contracts.” The Home Office will drop Capita, which has provided IT support to the CRB for more than a decade, in favour of a rival bidder, named by unions as the Indian-owned Tata Consultancy Services, when its £400m deal expires in March. Capita said it was “disappointed” to lose the contract, which involves vetting the background of anybody who gets a job working with children or vulnerable adults. Among those who are routinely screened are teachers, social workers and clergy, The Times reports.
Royal Bank of Scotland is said to have found buyers for the full 33 per cent stake of Direct Line it is selling to stock market investors, just three days into a nine-day marketing drive. The bank is selling Direct Line, Britain’s biggest motor insurer, to win European Union regulatory approval for a government bailout it received during the 2008 financial crisis that left it 82% state-owned. A source close to the flotation said: “The book is now fully covered within the range, and to get that done three days in is pretty encouraging.” Direct Line, which also includes the Churchill and Green Flag brands, would be worth £2.66bn at the mid-point of the 160p to 195p a share price range, at the lower end of market forecasts. Another source said banks handling the sale had so far focused on attracting British investors, and would now turn to marketing the shares in North America and continental Europe. If priced at 195p, the insurer could raise as much as £975m, making the sale London’s biggest IPO in over a year. Order books, which opened on 28 September, are due to close on 10 October, The Scotsman explains.
Spread-betters readied sell orders before a trading update from Michael Page International next week. The recruitment giant may have the global footprint to cope with economic lethargy in the West, but with Australia feeling the pinch and China slowing, punters suspect that it, too, may struggle. GFT Markets offered 357.3p-358.7p on Michael Page, The Times says.
Canny punters were keeping a close eye on Premier Gold, 2.7% easier at 0.36p. The word is that results from soil samples in Kyrgyzstan are back from the lab and geologists think that it should look at multiple targets over 5 sq km, similar to bigger gold mines in that area. Premier plans to dig deeper next year to determine the amount of gold, writes The Times.