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Collapsed Icelandic banks Baugur and Kaupthing were dumping stock in some of the UK's best-known retailers today in a dash for cash.
Baugur has sold its 13.3% stake in the Debenhams department stores group, resulting in a whopping loss on its original investment. At the same time, Kaupthing is believed to have sold shares worth £82.3 million in the country's third biggest grocer J Sainsbury, 3p firmer at 310¼p.
Broker Cazenove is known to have placed 27 million Sainsbury shares at 305p, amounting to around 1.5% of the company, on behalf of Ernst & Young and PricewaterhouseCoopers, joint administrators for the Icelandic bank.
Only yesterday, Kaupthing's administrators sold 65 million shares, or 25.9% of JJB Sports, worth £7.15 million, at 11p a share. The shares were previously owned by former JJB chief executive Chris Ronnie. JJB rose 2.25p to 11.25p.
It is thought the shares were the remnants of a 10% stake, 168 million shares, originally held by Kaupthing as collateral against a contracts-for-difference position taken out on Sainsbury by financier Robert Tchenguiz. He was forced to offer the shares last year as part payment after Kaupthing increased the margin call on his position. This morning, HSBC arranged an accelerated bookbuilding programme for placing 115.79 million new shares within a price range of 40p to 45p, worth up to £52.1 million. At the last count, Baugur held 116 million Debenham shares. Debenhams responded to the move with a fall of 5¼p at 48¾p, having struck a low just before Christmas of 22½p.
Baugur emerged as a buyer of the stock in the summer of 2007. It paid about 136p a share for an initial 4.5% stake, along with the Unity investment vehicle in which it owned a 42.5% stake. At one stage, market gossips were tipping Baugur to make a full bid.
Debenhams was floated back on the stock market in 2006 at 195p but has badly underperformed since. By last year, debt had grown to more than £1 billion. The company was forced to save cash by cutting the dividend from 6.3p to 3p and slashing capital expenditure from £129 million to £90 million.
Last year profits at Debenhams dropped by almost 17% to £106 million, despite an increase in sales. The group said a growing fear of unemployment had undermined consumer confidence.
Shares generally were able to claw back most of yesterday's losses, supported by Marks & Spencer, which climbed 31¼p to 295¾p as the shorts rushed to cover their positions following a better-than-expected trading update. The FTSE 100 index advanced 130.83 points to 3893.74, with investors pinning their hopes on a strong start to trading this afternoon on Wall Street.
Mining shares made much of the running, partly underpinned by full-year numbers from Kazakhmys, up 37½p at 370p. Credit Suisse says profits are inflated by tax credits, but it has repeated its outperform rating and 360p target. Brokers say it is also worth noting the value in Kazakhmys's 26% holding in rival Eurasian Natural Resources. Valued at $1.6 billion (£1.12 billion) at the start of the year, it is now worth $2.17 billion, having seen its share price climb from 330p to 455p today, up 38¾p, during that time. That compares with Kazakhmys' stock market price tag of $2.5 billion.
Also in the mining sector, Xstrata rose 43p to 468p, while Anglo American put on 84p at 1165p.
Banks, too, rallied from yesterday's sell-off, with Lloyds Banking Group up 4.5p at 69.3p and HSBC 20p better at 390½p. Barclays was 0.8p firmer at 149.9p, having declined to join the Government's asset-protection scheme. Collins Stewart says it is a positive move and repeats its hold rating and 128p target. But Panmure Gordon warns that, despite the recent rally in Barclays' share price, it still sees plenty of risk and maintains its sell rating and 40p target.
Over on AIM, shares in Vectric Corporation were suspended at 2p pending publication of its report and accounts, along with York Pharma at 3¼p.
