Shareholders in Lloyds Banking Group could reap a windfall worth more than £500m early next year following a deal that will see it repaid loans in full by the owners of The Daily Telegraph.
Sky News has learnt Britain’s biggest high street lender will be in a position to write back more than £500m on the value of a £700m loan extended years ago to the Barclay family.
One banking analyst said the writeback, the precise size of which will be disclosed in Lloyds’ annual results next February, would pave the way for Lloyds to return a significant amount of capital to investors, potentially through a special dividend or share buyback.
Lloyds is expected to receive a total of £1.16bn early next week from the Barclays following an agreement between the family and RedBird IMI, an Abu Dhabi-based vehicle which is majority-funded by members of the Gulf state’s royal family.
RedBird IMI plans to convert a £600m chunk of the loan into shares in the Telegraph newspapers and The Spectator magazine if it gains regulatory approval for the deal.
On Thursday, Lucy Frazer, the culture secretary, confirmed a Sky News report that she was issuing a Public Interest Intervention Notice (PIIN) that will subject the transaction to scrutiny by Ofcom and the Competition and Markets Authority.
Ms Frazer is seeking the regulators’ responses before the end of January, after which the takeover of the broadsheet newspapers could be approved or blocked.
Dozens of Conservative MPs, including the former party leader Sir Iain Duncan Smith, have called for the deal to face further investigation under national security laws.
The debt repayment to Lloyds is, however, unaffected by the PIIN.
The bank has already given notice to the government of the debt repayment, with the funds expected to be transferred early next week.
The outcome will be a stunning one for Lloyds and its chief executive Charlie Nunn, who had rejected a series of partial repayment offers from the family lodged after the Telegraph’s holding company was placed into receivership during the summer.
In addition to the £700m value of the principal loan, the Barclays are paying more than £400m in interest which has accrued over many years.
“The writeback is pure profit for Lloyds and will flow straight to the bank’s bottom line,” the analyst said.
One person close to the situation said that Lloyds had written down the majority, but not all, of the loan’s original £700m value.
A writeback of over £500m is therefore expected to contribute a meaningful proportion of the bank’s 2023 annual profit.
Analysts say the company is already generating significant sums of excess capital and that the absence of a substantial acquisition would therefore give Lloyds’ board the freedom to return the Telegraph loan windfall to shareholders.
RedBird IMI, which is fronted by the former CNN president Jeff Zucker and funded in large part by Sheikh Mansour bin Zayed Al Nahyan, the owner of Manchester City, has pledged to preserve the Telegraph’s editorial independence.
The repayment of the Lloyds loan will trigger the dissolution of a court hearing in the British Virgin Islands to liquidate a Barclay company tied to the newspaper’s ownership, and temporarily put the family back in control of their shares in the broadsheet title.
However, the Barclays will be subject to restrictions imposed by the government which are expected to be outlined shortly.
A trio of independent directors, led by the Openreach chairman Mike McTighe, will remain in place while a public interest inquiry is carried out.
RedBird IMI’s move to fund the loan redemption has circumvented an auction of the Telegraph titles which has drawn interest from a range of bidders.#
Read more from Sky News:
House prices ‘show further growth’ after pause in interest rate hikes
Volta Trucks is saved but bulk of 600 UK workers are currently out of a job
Cristiano Ronaldo faces $1bn lawsuit
The battle for control of The Daily Telegraph has rapidly turned into a complex commercial and political row which has raised tensions between the DCMS and the Foreign Office over Britain’s receptiveness to foreign investment.
Prospective bidders led by the hedge fund billionaire and GB News shareholder Sir Paul Marshall had been agitating for the launch of a PIIN.
Sky News revealed recently that Ed Richards, the former boss of media regulator Ofcom, is acting as a lobbyist for RedBird IMI through Flint Global, which was co-founded by Sir Simon Fraser, former Foreign Office permanent secretary.
The Telegraph auction, which has also drawn interest from the Daily Mail proprietor Lord Rothermere and National World, a London-listed local newspaper publisher, has now been paused until next month.
The original bid deadline had been shifted from 28 November to 10 December to take account of the possibility that Lloyds might be repaid in full by the Barclay family by December 1.
That bid deadline is now expected to be cancelled.
Until June, the newspapers were chaired by Aidan Barclay – the nephew of Sir Frederick Barclay, the octogenarian who along with his late twin Sir David engineered the takeover of the Telegraph in 2004.
Lloyds had been locked in talks with the Barclays for years about refinancing loans made to them by HBOS prior to that bank’s rescue during the 2008 banking crisis.
A Lloyds spokesman indicated that any capital distributions would be evaluated in the usual way by its board ahead of the bank’s annual results, but declined to comment further.
Next weighs move for stricken cosmetics chain The Body Shop
Next has approached administrators to The Body Shop about a potential deal to purchase parts of the stricken cosmetics chain.
Sky News has learnt that executives from the UK fashion retailing giant have contacted FRP Advisory to express an interest in acquiring assets as part of any sale process it decides to launch.
There were doubts this weekend, however, that FRP, which was appointed to handle the insolvency of The Body Shop in the UK earlier this month, would elect to run a conventional auction, with one source suggesting that contact between FRP and Next had already stalled.
Next is understood to have been monitoring The Body Shop for some time, but people close to the FTSE-100 company confirmed that it had expressed an interest in assembling a deal.
The retailer, run by Lord Wolfson, has become one of the most prolific buyers of distressed retail businesses in Britain in recent years.
Among the brands it has acquired are Fat Face, Joules and the online furniture retailer, Made.com.
It has also snapped up Cath Kidston and JoJo Maman Bebe, the maternity wear retailer, while it has struck partnerships with Victoria’s Secret and Gap.
One obstacle to any deal with The Body Shop may lie in the fact that its brand and intellectual property (IP) assets are not part of the administration process.
It is understood that Aurelius, which has only owned The Body Shop since 1 January, is financing the rest of the business, and as part of that has secured major assets including stock and IP.
FRP is expected to decide whether to launch an auction within weeks, with a sale of the restructured business in its new form back to Aurelius a possibility.
If Next did pursue a purchase of the chain, it would be unlikely to retain many, if any, of The Body Shop’s British stores.
This week, FRP announced the closure of nearly half of its 198 UK stores, with seven shutting immediately.
“Following the earlier sale of loss-making businesses in much of mainland Europe and parts of Asia, and to support a simplified business, The Body Shop will also restructure roles in its head office,” the administrators said on Tuesday.
Hundreds of jobs will be lost from the store closures and a downsizing of its head office that will leave roughly 400 people employed there.
“This swift action will help re-energise The Body Shop’s iconic brand and provide it with the best platform to achieve its ambition to be a modern, dynamic beauty brand that is able to return to profitability and compete for the long term,” FRP added.
Sky News’ revelation that Aurelius was preparing to appoint administrators sparked a vigorous debate about why the brand founded by the late Dame Anita Roddick and her husband Gordon nearly 50 years ago had faltered.
‘Mismanaged for years’
Aurelius bought the business from Natura, a Brazilian company, late last year and rapidly discovered that it had insufficient working capital and that it was trading even more poorly than anticipated.
One retail executive suggested there were serious questions for Natura to answer, saying: “This company did not fail in the last six weeks, it has been underinvested in and mismanaged for years.”
The Body Shop’s businesses across most of Europe and parts of Asia have already been offloaded to a family office following the company’s acquisition by Aurelius in a deal it said was valued at £207m.
At the time of the deal, The Body Shop employed about 10,000 people, and operated roughly 3,000 stores in 70 countries.
Although it has struggled for profitable growth for years, it has retained a prominent presence on British high streets.
The Roddicks were prominent champions of environmental causes, a positioning which helped it gain an edge over rival retailers during the 1980s and ’90s.
Listen and subscribe to The Ian King Business Podcast here.
Its opposition to the animal testing of cosmetics was also unusual in the decades immediately after it was founded.
Its distinctiveness has, however, been diminished in recent years by the emergence of competitors which have also put sustainability at the heart of their businesses while more effectively targeting younger consumers.
Dame Anita died in 2007.
Natura was reported to have paid more than $1bn to buy The Body Shop in 2017.
It was owned by L’Oreal, the cosmetics giant, prior to its sale to Natura.
Next, FRP and Aurelius declined to comment.
Worst airlines for customer satisfaction revealed
The worst airlines for customer satisfaction have been revealed
The UK’s flag carrier airline, British Airways, ranked among the worst airlines in the survey.
BA’s customer score for long-haul flights was the joint third lowest out of 17 carriers analysed by Which?, at 59%.
The airline received just two stars out of five for boarding experience and value for money, and achieved three stars for the other six categories assessed.
For short-haul flights, British Airways’ score was 56%, which was the fifth lowest among 22 airlines.
At the other end of the spectrum, the best airline for long-haul flights was Singapore Airlines (83%) and for short-haul Jet2.com (81%) took the top spot.
The worst performers in the long-haul ranking were Lufthansa (56%), Air Canada (58%), American Airlines (59%) and British Airways.
Wizz Air (44%) was ranked bottom for short-haul flights for the second year in a row, followed by Ryanair (47%), Iberia (49%) and Vueling (53%).
Which? said the standard of service last year often “fell well short of the mark”, with many passengers struggling to get support when they needed it.
UK air fares reached record highs in 2023.
Rory Boland, editor of magazine Which? Travel, said: “Air fares have soared in recent years, and the bare minimum passengers should expect in return for their hard-earned cash is a reliable service, with friendly, easy to access customer support when they are let down.
“While the likes of Jet2 continue to excel in this regard, our survey shows that passengers of many airlines are sadly being shortchanged – with high rates of last minute cancellations, abysmal customer service and sneaky extra fees for luggage hiking up the final price.”
A British Airways spokesperson said: “We always work hard to get our customers to where they need to be on time.
“We apologise to customers for any disruption they’ve faced during these challenging periods and again thank them for their understanding.”
Marion Geoffroy, UK managing director at Wizz Air, said: “We do not consider the findings of this report to be representative or the methodology used to be transparent.
“Only 124 Wizz Air passengers were surveyed, while Which? spoke to several thousand people who had flown with some of our competitors.”
The survey of Which? members was conducted in October last year and relates to more than 10,000 flights with customer scores based on overall satisfaction and the likelihood to recommend an airliner to a friend.
Energy price cap to fall but bills to include ‘temporary’ charge to help tackle record debt
The energy price cap is to fall by £20 a month, the industry regulator has announced, but households are to face an additional “temporary” charge to help suppliers support struggling customers with record levels of debt.
Ofgem confirmed a 12% price cap reduction will take effect from 1 April, taking the annual energy bill for a typical household paying by direct debit for gas and electricity to £1,690.
The current level, in place from January to March, is £1,928.
The fall reflects lower wholesale prices, with natural gas costs over the peak winter season falling across Europe due to higher stockpiles.
A mild winter has been a factor in the drop.
The adjustment by Ofgem, while some relief for household budgets squeezed by the tough economy, still leaves the cap more than 50% up on pre-crisis levels.
The regulator confirmed alongside the cap figure that it was taking action to tackle a record £3.1bn in bill arrears, though prepayment meter customers would not be affected.
“To address this challenge in the short-term, Ofgem will allow a temporary additional payment of £28 per year (equivalent to £2.33 per month) to make sure suppliers have sufficient funds to support customers who are struggling”, its statement said.
“This will be added to the bills of customers who pay by direct debit or standard credit and is partly offset by the termination of an allowance worth £11 per year that covered debt costs related to the COVID pandemic.”
Ofgem said its wider action would include further closing the gap between the higher charges that prepayment meter customers pay and what most other households face.
It said those on prepayment meters would save around £49 per year while direct debit customers would pay £10 per year more.
The watchdog said the new figures, taken together, meant bills would still fall to their lowest level since Russia’s invasion of Ukraine in February 2022.
Russia’s vast gas supplies to the continent were shut down shortly after its military action began, forcing a scramble for replacement volumes.
Much of the void has been filled by additional supplies from Norway and heightened shipments of liquefied natural gas (LNG).
Market experts have warned that a return to pre-crisis energy prices is unlikely to occur given the new realities over the source of supply hampered, in the short term at least, by attacks on shipping in the Red Sea that have forced LNG cargos to make longer journeys.
The trend of higher prices has led to questions over whether the price cap, initially introduced to prevent rip-off charges, has become a barrier to competition. Ofgem is working with the government to address the cap’s future.
It is now utilised by the vast majority of homes in the wake of the supplier crisis that began in 2021 that saw dozens of operators collapse, including Bulb.
Fixed deals have been hard to come by ever since but there are some that have undercut the price cap.
Research for professional services firm KPMG, released separately on Friday, suggested 48% of households believed the price cap was a barrier to fixed-term offers by suppliers.
A third of respondents said they no longer shopped around because of the cap.
Price comparison site uSwitch said Ofgem’s wider action on elements of the price cap bill should help improve the volume of offers.
Its director of regulation, Richard Neudegg, said: “Consumers have been patiently waiting for better tariff choices, and many are desperate to take advantage of cheaper rates.
“If you are on a standard variable tariff, now is the time to start keeping an eye out for deals.
“The end of the Market Stabilisation Charge also on 1st April will be a positive step, taking out an unnecessary premium on deals.
“However, Ofgem’s decision to extend the Ban on Acquisition-only Tariffs for another year is a gamble.
“Although this could be cut to six months, while it’s in play, fixed deals risk being more expensive than they would otherwise be, at a time when customers are finally hoping to lock in some certainty.”
Sports1 year ago
‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
Sports11 months ago
MLB Rank 2023: Ranking baseball’s top 100 players
Environment9 months ago
Japan and South Korea have a lot at stake in a free and open South China Sea
Sports2 years ago
Team Europe easily wins 4th straight Laver Cup
Environment1 year ago
Game-changing Lectric XPedition launched as affordable electric cargo bike
Technology3 years ago
Game consoles were once banned in China. Now Chinese developers want a slice of the $49 billion pie
Politics2 years ago
Have the last few wobbly weeks seen a turning point for Johnson as PM?
Environment10 months ago
Tesla advances Powerwall pilot project with German electric company