Tonight:
4°c
Hugh Osmond is mad as hell, and he isn't going to take it any more. The pizza guy-turned-insurance entrepreneur is so enraged at the prospect of being taxed on his pay at 50% that he may flounce out of the country. Promises.
Like Paul Daniels and Phil Collins before him, Osmond is threatening to waltz off to Switzerland, leaving the rest of us to cope without him.
Collins showed he wasn't bluffing, while Daniels is still here. So we lost a semi-retired percussionist but kept an excellent magician who is working to keep the nation's sprits up in difficult times. It was win some/lose some.
Osmond would leave a greater hole, of course. Without him, who could we trust to buy up zombie insurance companies at the very top of the market, landing his own company with billions of debt in the process? But unless Osmond, pictured below, resolves a fairly serious row with some of his most important investors, there's a chance he might be drummed out of Britain before he gets chance to walk out.
The story so far is that his Pearl Group decided it would not be honouring a £33 million interest payment on a £500 million bond issued by Clive Cowdery's Resolution Life — the business he acquired last year after a takeover tussle for towards £5 billion.
The bondholders are kicking up a fuss, and I'm told they have managed to force Pearl management into a meeting on 6 May.
In the meantime, Pearl has been talking about a flotation, partly to swap some of its £3 billion in debt for equity and partly to raise £500 million to fund acquisitions. Pearl says the two issues aren't connected, but talking to the bondholders, it seems clear the insurer can't float until it has made good on their holding.
The angry bond group include some of the most powerful investors in the UK — Rathbones, Axa, Fidelity and HSBC among them. In other words, the very institutions Pearl would need backing from to get away a float of any kind. “Nothing will happen until the bondholders are looked after,” says one of the action group. Since this group also has the backing, albeit unofficially, of the Association of British Insurers Osmond has some powerful forces to face down.
The bondholders' point is that they rank higher in the capital structure than either Osmond or the lending banks. It would be quite a precedent if they took a loss while the equity holders do not.
There's another issue lurking in the background. The word on the street is that, of Pearl's £3 billion debt, £900 million is held by the Lloyds Banking Group and £500 million by Royal Bank of Scotland.
That gives the taxpayer £1.4 billion of Pearl debt, so if Osmond doesn't get this one right, he'll owe the rest of us even if he has decamped to the Swiss Alps.
There's a big gap at present between what insurance analysts understand Pearl's situation to be and how the group sees it.
Sector watchers assume that the banks have effectively taken control of the company — not so, insist Pearl advisers. There's also questions about how much Pearl's equity is worth at this point — zero is one estimate I've seen, though we'll give Osmond the benefit of the doubt.
That 6 May meeting looks increasingly important. If it goes badly, Switzerland may not be far enough.
Oh Clare, if only you hadn't kept Aviva talking
Had things been different, a million policyholders of Aviva could have been enjoying a bonus payout of up to £3500 from the insurer's orphan estate. Instead they've got nothing — and while discussions between the company and policyholder advocate Clare Spottiswoode, right, drag on, it's unlikely those customers will receive anything like the amount once offered.
Spottiswoode was appointed in November 2006 to fight the policyholder's corner as the insurer geared up, finally, to distribute its inherited estate — excess funds built up over decades — between customers and shareholders. A former gas regulator, she fought hard — keen not to be seen as bowing to the whims of an industry that is seldom accused of being overly generous or transparent about its inner workings. Sadly, it seems fair to say she overplayed her hand, dragging out the talks for far too long.
Before the world imploded and investors began to panic about the solvency of practically every large financial services company, Aviva agreed to pay around 700,000 people between £400 and £1000, while another 220,000 were looking forward to between £1000 and £3500. Earlier this year, Aviva postponed this £1 billion bonanza, blaming tumbling stock markets.
Yesterday, as it unveiled results for the first quarter, the insurer said the value of its inherited estate had fallen from £2.1 billion to just £1.4 billion. Given solvency concerns affected the industry, Aviva can now reasonably argue it needs to keep this whole amount sitting on the balance sheet. Even if it does make a payout, it won't be of £1 billion.
Of course, it's not Spottiswoode's fault the market collapsed. And she wasn't employed to be an equities crystal-ball gazer. But policyholders might wish she'd been quicker to take a deal. Cash in the hand is not to be sniffed at.
JJB gets a sporting chance as Sir David chops the 'copters
Geniuses are few, and when that word is applied to retailers it usually describes someone who briefly got lucky with a particular trend or else someone who just happens to work extremely hard.
But Sir David Jones has certainly got something.
When he arrived at Next in 1985, the shares were something like 6p each. When he quit 20 years later, the stock was trading at £14 or £15 — about where it is now.
It perhaps isn't plausible for him to have a similar effect at JJB Sports, but the early signs are good. The equity gave every sign of heading to zero when he became executive chairman in January. Woolworths had just finally gone under amid a turbulent retail climate and JJB looked to have considerably more difficulties than that High Street stalwart.
Yesterday, JJB agreed a deal with landlords and creditors that appears to have saved the company and about 10,000 jobs — an outcome that was seriously unlikely only a few weeks ago. The deal looks to have settled debts on 140 closed stores, and will allow the retailer to pay monthly, instead of quarterly, rent on its remaining 250 stores.
The stock jumped 63/4p to 25p.
What's his secret? For one, he seems to bring a sense of calm purpose. If he's involved, investors figure, there's a good chance everything will be OK.
When he landed at JJB, the company had, said a spokesman, “an inappropriate number of helicopters”. One of the 'copters has gone and the other is going.
Oddly enough, one of his first moves at Next was to flog the 'copter used by founder George Davies. Some things don't change.
Island with a high rate of boredom
Someone else so outraged at the prospect of paying 50% in income tax that he's thinking of quitting Britain is Peter Hargreaves. The Hargreaves Lansdown co-founder is pondering a move to the Isle of Man, which suggests to me he has never been there.
True, the isle has no capital gains tax, stamp duty or inheritance tax and the top rate of income tax is 18%, but it's such a dreary place that the suicide rate is about the same.
In fairness, it's a low-stress environment, so those who manage not to kill themselves live longer — or certainly feel like they do. The national dish is boiled potatoes and herring. The national sport is Cammag, which is a bit like Irish hurling without the drama.
Even the sheep are bored. Don't do it, Pete.
