Did she miss a memo?

I see that Labour MSP Pauline McNeill has refused to acknowledge the lesson of Ms Capulet. Her intervention in the Health debate from last week:

Pauline McNeill (Glasgow Kelvin) (Lab): On a point of order, Presiding Officer. The member cannot continue to misname the Scottish Labour Party as new Labour. Surely we are entitled to our proper title in this chamber.

Her party's website, however, sees things a little differently. In the top right hand corner she could find the legend "new Labour for Scotland". Or perhaps denial is no longer in Egypt?

Ee-aw, ee-aw, 'e always calls me that.

Don't bank on it!

HBoS has published its circular to its shareholders ahead of asking them to vote the bank out of existence.

Couple of things I noticed - it talks about the hard times in the global market and insists that

As a result of these factors, HBOS sought to restore confidence and stability through negotiating the proposed transaction with Lloyds TSB, as announced on 18 September 2008.

That's not what Victor Blank said - he said they'd been at it for years.

The circular also says:

While it is possible that the Proposed Government Funding might be available in the event that the Acquisition does not complete there can be no certainty that this will be the case or as to the terms on which it might be available.

Even Darling's given up on this rotten chestnut and admitted that any qualifying bank can apply.

Then there's this bit:

the boards of HBOS and Lloyds TSB announced that they intended to participate in the Proposed Government Funding by committing to raise £11.5 billion of new capital to be raised by HBOS (consisting of £8.5 billion in ordinary shares and £3 billion in preference shares (before costs and expenses)) and £5.5 billion of new capital to be raised by Lloyds TSB

Lloyds TSB (the smaller bank) requires £7 bn if the deal doesn't go through - 27% higher than its needs if the deal goes through.

On 11 October 2008 the FSA gave a preliminary indication to HBOS that if the Acquisition were not to occur, it would require HBOS to raise £12 billion of additional capital

An increase of £0.5 bn, or 4% higher. HBoS, of course, has a larger asset base than L-TSB.

HBoS is a healthier bank than Lloyds TSB - even with its current problems. Don't take my word for it:

However, despite higher funding costs, net interest income from banking businesses has increased and HBOS’s Insurance & Investment business has made a good contribution.

Good news from HBoS against:

The Lloyds TSB Group continues to trade well and deliver good income growth from its relationship businesses in an immensely challenging period for financial services companies. However, the impact of market dislocation, insurance related volatility and higher impairments, particularly in Lloyds TSB’s corporate lending portfolios, has led to a substantial reduction in statutory profit before tax in the first nine months of the year.

In other words, parts of L-TSB are losing money while the profitable bits are struggling to stay so. If the takeover goes through Lloyds TSB will be a drag on HBoS.

There's also this wee snippet:

If for any reason the Scheme does not become effective, the share capital reorganisation described above will be reversed and HBOS Shareholders will retain their current holdings of HBOS Shares and any Open Offer Shares which they have taken up. In such circumstances, HBOS has covenanted to HM Treasury to apply to
the UK Listing Authority for the Open Offer Shares and the HMT Preference Shares to be listed on the Official List and to the London Stock Exchange for the Open Offer Shares and the HMT Preference Shares to be admitted to trading on the London Stock Exchange’s main market for listed securities.

Good to see they're already prepared for the collapse of the deal and there will be some movement immediately after the collapse.

Anyone who, like me, wondered why HBoS directors were busy fending off alternative offers instead of seeking the best possible deal can find the answer in the Implementation Agreement:

Under the terms of the Implementation Agreement, HBOS has agreed to certain
non-solicitation commitments in favour of Lloyds TSB, including that HBOS shall not, directly or indirectly, solicit, encourage or otherwise seek to procure any competing offer for HBOS or enter into any inducement or break fee arrangement of any nature with any other party. Additionally, HBOS has agreed to pay Lloyds TSB an inducement fee (inclusive of value added tax, if any) of one per cent. of the offer value under the Acquisition (based on the Closing Price of a Lloyds TSB Share on the Business Day prior to the date of the occurrence of the relevant event set out below) if:
* the HBOS Directors do not unanimously and without qualification recommend the HBOS Shareholders to vote in favour of the Scheme and the resolutions to be passed at the HBOS General Meeting necessary to implement the Scheme or they (or any committee of the HBOS Directors) withdraw, or adversely modify, or qualify their
recommendation to HBOS Shareholders to vote in favour of the Scheme and/or the resolutions necessary to implement the Scheme at or prior to the HBOS General Meeting and the Court Meeting;
* at any time after approval of the Scheme by HBOS Shareholders at the Court Meeting but before the grant of the Court Orders, the HBOS Directors, in exercise of their fiduciary duties, decide not to proceed with the Scheme;

* without the consent of Lloyds TSB, HBOS withdraws the Scheme or takes steps to defer (or adjourn) the holding of the Court Meeting or the HBOS General Meeting or the Court Hearings to approve the Scheme to a date later than 28 February 2009; or
* a competing proposal is announced prior to the Scheme lapsing or being withdrawn, which competing proposal subsequently becomes or is declared wholly unconditional or is completed.

Yup, HBoS directors agreed with Lloyds TSB that they wouldn't fight for the best deal for their shareholders, staff, and customers. Meanwhile, Hornby makes sure he's OK with his deal to net him £60,000 a month if the deal goes through.

Recycling

James likes to encourage recycling, so I nicked this from his blog:

Let's have a look at what we've learned

Respice, Prospice I say, mainly because sic transit gloria ...

So let's look at the evidence so far:

HBoS Chief Executive Andy Hornby is in line for a £60,000 a month (£720,000 a year - not bad kelly if you can get it) consultancy with Lloyds TSB if the merger goes through.

The merger could result in 60,000 job losses (although the Unite trade union seemed happy enough with the deal!) Jobs in the banking sector tend to have a higher salary than the average salary, so the impact on Edinburgh's economy, and therefore Scotland's economy, could be pretty painful.

A former director of Lloyds TSB is being moved in to run the company that Gordon Brown's Government has set up to administer the public stake in the banks.

There will be no place for the Scottish bankers in the new bank if the deal goes ahead.

Gordon Brown is insistent that the deal goes ahead.

There has been plenty of other interest in HBoS.

Concerns that HBoS directors were not acting properly has already been expressed.

That would be those directors who have admitted they were running this financial institution more like a stall in a flea market.

Many commentators are now calling for HBoS directors to go.

The Economist magazine has said the deal should be called off.

As has the Financial Times.

Lloyds TSB reckons it can make £1.5 billion in synergies.

HBoS is selling its Australian assets - giving the bank an immediate funding benefit of £8 billion, reducing its dependence on the Government bail-out. The deal was done in early October (subject to regulator approval) - with the backing of Lloyds TSB at a time when L-TSB valued HBoS at only £12.2 bn in total. That offer has subsequently been reviewed, of course, and with L-TSB's share price falling to around half of what it was at the time and the offer being amended to three quarters or so of the original offer, L-TSB is now valuing HBoS at around £4.5 bn.

We've had some of the best-known banking names in Scotland weighing in to say the Lloyds TSB deal is mince.

We've had the Chief Executive of the Financial Services Authority saying that there is no need for this deal to go through - that HBoS can continue to stand on its own.

We've had the OFT saying that the merger would be damaging.

There are indications that L-TSB is in this deal to strip the assets.

We know that L-TSB is already ignoring the requirement from the Treasury to forego bonus payments.

We know that Victor Blank and his troops at L-TSB were eyeing up HBoS two years ago:

Blank insists the two sides first talked two years ago but threw in the towel because competition issues would almost certainly have blocked the ambitious deal

All he needed, of course, was the permission of his mates:

Blank's political tentacles extend not just to Gordon and Sarah Brown, whom he calls his friends, but to Alastair Campbell and Tony Blair, and also to Sir John Major, the former Conservative prime minister whose friendship caused some controversy in Labour ranks when Blank was chairman of the publisher Trinity Mirror.

This wasn't the first time that Brown's Government gave preferential treatment to Blank's bank, though. L-TSB got first dabs on the Northern Rock mortgages held by that bank - after it had been nationalised.

When the deal was first mooted, L-TSB was seeking to smooth the path by promising to keep jobs in Scotland - not what Gordon Brown was saying to workers in Halifax, right enough.

There was also speculation that the 'leak' of the news of the merger which forced the pace was because other institutions were about to lend support which would have scuppered the need to waive the regulations on takeovers.

We know that the Government bail-out amounts to the equivalent of 2.5% of HBoS assets and 2.4% of L-TSB assets but that the amounts are massively different if we look at Tier 1 assets where L-TSB comes in as needing around a 60% bail-out while HBoS is down about 50%. That's for the 13th October Government announcement.

We know that HBoS raised another £2.4 bn in private money through a 2-year bond issue on the 29th of October - the same day that Darling said that the FSA could re-assess the deal if the merger didn't go ahead.

The truth, my dear, is out there - and it was published by Lloyds TSB in its circular to shareholders on the 3rd of November when it admitted that if the merger didn't go ahead L-TSB would be left £7 bn short of what it needs to keep going - even with the money it has already secured from the Government:

If the Acquisition and Placing and Open Offer do not complete, HM Treasury has stated that it would expect Lloyds TSB to take appropriate action to strengthen its capital position. The FSA has advised Lloyds TSB that if the Acquisition were not to occur, it would require Lloyds TSB to raise £7 billion of additional capital, made up of £5 billion of Core Tier 1 equity and £2 billion of Tier 1 instruments. Whilst Lloyds TSB would be able to seek to raise such additional new capital in the public markets, there can be no certainty that Lloyds TSB would be able to successfully raise such capital or as to the terms on which such capital could be raised, including the terms of
any participation by HM Treasury in any such capital raising, or as to whether any such fundraising would be on a pre-emptive basis.

There you have it - the truth is that it is Lloyds TSB which is bust according to the Financial Services Authority and that HBoS is 'bullet-proof' according to the Chief Executive of that body.

Don't let them grind you down, but do take a wee look at this website.

Toodle-pip!

The HBoS aria

Just a few things rumbling about make me wonder.

I was under the impression that the Chief Executive of a company would be under some kind of obligation to get the very best deal possible for the customers and shareholders of that company and would be eager to avoid any conflict of interests or appearance of a conflict of interests.

I was surprised, therefore, on leafing through Banking Times to find out that Andy Hornby, our dear old friend from HBoS headquarters, is on a £60,000 a month sweetener from Lloyds TSB if the deal goes through. How, exactly, does he square that with a requirement to fight for the very best deal for HBoS interested parties?

The HBoS board has refused to countenance any deal other than the Lloyds TSB one, with board members saying that there is no other deal on the table. Methinks they do protest too much.

HBoS perfidy in the Treasury

The Scotsman reported that at least one of those parties interested in HBoS is being deterred by the Treasury.

Time the Treasury started getting honest and letting us know exactly what is going on.

It's time we all started asking some serious questions.

Cracking value

A couple of Parliamentary Questions asked by John Park have revealed the extraordinary value for money of the SNP Government's National Conversation (you know the National Conversation, the one that everyone can take part in - unlike the Commission for Repainting Devolution where you have to be invited).

Chopper Park asked how much National conversation events cost and how many people turned up, here you go:

4 February
First Minister launches Scotland in the World Forum at Aberdeen University
Costs met by organiser
100 people

13 February
First Minister National Conversation speech at Trinity College, Dublin
Costs met by organiser
100 people

12 March
SCVO National Conversation event in Edinburgh
*
45 people

26 March
First Minister launches National Conversation Civic engagement programme at Edinburgh University
£8,400
110 people

1 April
First Minister National Conversation speech Scotland Week University of Virginia address
Costs met by organiser
200 people

23 April
First Minister leads Scotland in Europe seminar
£1,700
60 people

3 May
Bruce Crawford Church Without Walls event
Costs met by organiser
205 people

19 June
Church leaders event in Parliament
£106
19 people

20 June
Bruce Crawford addresses SCVO event at SECC
*
45 people

29 July
First Minister and Cabinet event in Dumfries
NA
120 people

1 August
Young Scot event in East Ayrshire
*
100 people

5 August
First Minister and Cabinet event in Inverness
NA
100 people

7 August
Young Scot event in Stranraer
*
165 people

19 August
First Minister and Cabinet event in Pitlochry
NA
104 people

23 August
Young Scot event in Irvine
*
330 people

26 August
First Minister and Cabinet event in Skye
NA
105 people

30 August
Young Scot event in Inverurie
*
375 people

8 Sept
SCVO event in Uist
*
20 people

Note: *Costs met from within the allocation of Scottish Government funding to Young Scot and the SCVO.

It's your National Conversation - get involved I say!

HBoSing across the universe ...

I read with interest that the Financial Times is now backing the campaign to save HBoS from Gordon Brown's backroom deal.

If I may be so bold:

Conceived in the crucible of the financial crisis eight weeks ago, the proposed takeover of Halifax Bank of Scotland by Lloyds TSB now looks hasty, maybe even ill-judged.

Not only but also:

Nor is the merger an attractive short-term prospect.

I'm not done yet:

Assuming it is still viable, it could make more sense for the bank to remain independent. Sure, it would need more state support. But it could tap the government’s recapitalisation scheme for that. Some jobs might be saved and competition preserved as a result.

Then there's this:

Only investors can block the merger now. Rejecting the deal may lead to share price falls. But it is in the ultimate interests of consumers that they do.

Read the whole thing yourself, you'll enjoy it. I'm delighted to see that everyone is agreeing with me these days (well, except those who disagree). Hornby and Stevenson should go now and let people with the best interests of the bank at heart come in to do what they can.

Gordon Brown, of course, continues to support his mate's bid - which bolsters everyone else's opinion that Lloyds shouldn't be allowed near HBoS.

Of course, if you want the other take on this, read Alf 'irrepressible ray of sunshine' Young's piece in today's Herald (I can't find it online) where he alleges that these two elder statesmen of Scottish banking are coming out of retirement to protect their reputations. To use his own words,

for this long-term observer of both men, there's a strong self-justificatory streak in what they are about.

Read the whole article, though, it's an eye-opener, it's like he's been obsessed since his teens.

Personally, I can't wait for the website to go live.

HBoS - save the bank

Right, the Bank of China is interested in buying HBoS, joining Tim Goode's European American Capital in sniffing around the opportunities presented by the determination of the Labour Government to send HBoS to the dustbin of history.

Brown and Darling told us that no-one would invest in the bank, that the ba was on the slates, that Gordon's mate, Victor Blank, was doing us all a favour by taking this burden on. I take it that he will withdraw rapidly now that someone else is available, scuttling off down the corridor while wiping the sweat of fear from his forehead with a large spotted handkerchief? No, I don't think so either.

We've had George Mathewson and Peter Burt insisting that Lloyds TSB is in a worse state than HBoS, following on from the lead I gave some time ago (breathes on fingernails and buffs them on waistcoat) - although I suspect that they have looked into it somewhat more closely than I have.

I'll say it again - Lloyds TSB is broke. The Treasury has not disaggregated the figures for the bail-out of HBoS and L-TSB - and my suspicion is that this is because it would reveal just how fragile L-TSB is.

Labour's Government continues to insist that there is no alternative to the deal brokered between Brown and Blank on the sly (the New Labour equivalent of a smoke-filled room, I suppose), and they refuse to examine any proposal. It's not as if Burt and Mathewson are just punters like me pontificating on these grand affairs of state from a position of informed ignorance - they're serious punters in the banking arena.

They're right to call for Hornby and Stevenson to go now - this pair have ruined a perfectly decent building society and a fine bank by managing them in a manner more befitting a certain trading organisation based in Peckham. Instead of acting with honour and stepping down for the benefit of the customers and shareholders of HBoS, this pair are fighting back, claiming that Mathewson and Burt don't offer certainty or stability.

Hang on, says I, was it Burt and Mathewson who got HBoS into trouble? No, indeed it was not, it was Stevenson and Hornby, these are the jokers who got the bank hopelessly lost and are now claiming to have the map which will get the bank back out of the swamp. Who do you trust?

There is also, of course, Jim Spowart claiming that the L-TSB deal is cack. Another chap I'd trust a mile and a half ahead of those currently 'running' HBoS - and ahead of Brown's mate Victor Blank.

Then there's the OFT report saying that the deal isn't in the public interest, the interests of shareholders or the interests of consumers.

This stinks of a dodgy political fix for partisan advantage. I say that Spowart, Burt and Mathewson should be allowed to get on with sorting out the bank. In the meantime, we need the truth from Brown, Darling et al about what they are really up to.

Hing on a wee minute

I was sitting here watching some news roll by and it suddenly struck me. I did, of course, immediately ask "who threw that?" But I digress ...

Has there or has there not been a bit of a paradigm shift in Scottish politics when the SNP is disappointed at failing to overturn a 10,500 majority? We're a bit cheesed off at only increasing our share of the vote by 13%, sad that we only slashed the majority, gutted that we never took one of Labour's safest seats, pure miserable that we didn't sweep everything before us.

Jings, crivvens, help ma boab, we're still improving.

Right, back to cheese...