UK Approves

123jump.com Staff
29 Jan, 2009
New York City

The U.K. government approves

[R]1:00PMNew York, 6:00PM London – The U.K. government approves £50 billion bonds and commercial paper purchase by the Bank of England. Xstrata plans to raise £4.1 billion from rights issue.[/R]

London stock indexes dropped on the worries that more companies will sell new shares in order to boost their balance sheet after Xstrata announced today that it intends to raise £4.1 billion from a rights issue.

In London trading, FTSE 100 index declined 2.5% or 105.09 to 4,190.11.

Of the FTSE 100 index stocks, 12 gained, and 90 dropped. Xstrata led gainers in the index shares with a rise of 3.6% after it reported that total consolidated production in the year to December 31 rose to 85.5 million tons from 82.8 million tons a year ago.

Government Approves £50 billion Purchase

The Chancellor of the Exchequer Alistair Darling approved the Asset Purchase Facility from the Bank of England to increase the availability of corporate credit.

The UK Government will indemnify the central bank and fund from any losses arising “out of or in connection with the facility.”

According to the letter, the Bank is mandated to buy under the Credit Guarantee Scheme, corporate bonds, commercial paper, syndicated loans and asset backed securities created in viable securitization structures.

“The aim of this facility is set to improve levels of liquidity in U.K. financial markets. I expect the Bank to wind down the fund as normal conditions return. The facility will consequently be withdrawn when it is no longer needed. Having consulted the Bank, I confirm at each budget whether I intend to authorize the continued operation of the facility in the following financial year,” said Darling.

Xstrata Proposes £4.1 billion from Rights Issue

Xstrata said that it intends to have a right issue to raise £4.1 billion in order to boost its balance sheet. The company also intends to pay its debt and acquire Colombian coal assets from Glencore International AG.

The miner will offer 1.96 million shares priced at 210 pence each.

Gainers & Losers

Xstrata led gainers in the FTSE 100 index shares with a rise of 3.6% followed by increases in Thomas Cook Group of 2.7%, in Randgold Resources Ltd. of 2.6%, in British Sky Broadcasting of 2%, and Balfour Beatty of 1.9%.

Xstrata increased as the miner reported that cumulative production in the year to December 31 gained to 85.5 million tons from 82.8 million tons a year ago.

3i Group led decliners in the FTSE 100 index shares with a fall of 16.4% followed by losses in Lloyds Banking of 11.8%, in Old Mutual of 11.1%, in Legal & General Group of 9.8%, and Wolseley Plc of 9.2%.

3i fell after the debt rating agency cut its credit rating for the company one notch to A- yesterday citing rising debts.