Rob Davies

Earlier today at the emergency general meeting, the press asked an advisor to Coltrane how the US hedge fund had voted. He said: “I voted for Donald Trump”.

Pretty flippant when you consider this company employs 45,000 people in the UK and manages key public services.

March 15, 2019

Interserve faces administration as rescue plan rejected

NEWSFLASH: Shareholders in UK outsourcing firm Interserve have voted AGAINST the company’s rescue plan.

Over 60% of investors rejected the debt-for-equity scheme, which would have almost wiped them out and handed the company to its creditors.

The company, which cleans schools and hospitals, run probation services and build roads and bridges, is now facing immediate pre-pack administration.

This, it pledges, should mean that services continue as normal.

It has just told the City:

The board of directors of the Company is convening an urgent board meeting to consider its options. In the absence of any viable alternative, it expects to implement an alternative deleveraging transaction, which is likely to involve the Company making an application for administration and, if the order is granted, the immediate sale of the Company’s business and assets (i.e. the entire Group) to a newly-incorporated company, to be owned by the existing lenders. This transaction would achieve substantially the same balance sheet and liquidity outcomes for the Group as the Deleveraging Plan.

The alternative transaction will be implemented very quickly and via a carefully-managed process and the administration and sale is expected to be completed this evening, ensuring that the business will continue to operate as normal for customers and suppliers.

Interserve shareholder vote

Photograph: Investegate


Moody’s: Brexit still weighing on economy

After a wild week, the Brexit crisis has calmed down today. MPs will be holding meetings (and conversing on WhatsApp) about the way ahead, now that parliament has voted to seek an Article 50 extension.

Press Association

#Breaking The DUP is holding “ongoing and significant discussions with Government” over Brexit, the Press Association understands

March 15, 2019

A third Meaningful Vote may come next Tuesday. But in the meantime, businesses face continued uncertainty – and the prospect of massive disruption in just two weeks.

Colin Ellis of credit rating agency Moody says the UK economy continues to suffer:

The uncertainty around the Brexit outcome remains very high and will continue to weigh on investment, hiring and spending decisions, which is credit negative for UK debt issuers

While the EU authorities have signalled that they will certainly consider a request to extend the Brexit process, it is not certain that they will agree to an extension

On balance, Moody’s thinks the EU will probably grant an extension given that it is in the EU’s own interest to avoid a no-deal Brexit.

Sky: Philip Green’s Arcadia plans restructuring

Back in the UK, Sky News are reporting that Arcadia – Philip Green’s retail empire – is about to be shaken up — and that could mean job losses.

Mark Kleinman explains:

Sir Philip Green is accelerating efforts to restructure his Arcadia retail empire through a programme that could involve announcing significant numbers of store closures and substantial job losses as soon as next month.

Sky News has learnt that the billionaire tycoon and his advisers are working on proposals to unveil a Company Voluntary Arrangement (CVA) – a form of insolvency mechanism – within a matter of weeks.

The scheme, which would require the approval of creditors including landlords and the Pension Protection Fund (PPF), would trigger substantial job losses across the Arcadia business, whose brands include Top Shop, Dorothy Perkins and Miss Selfridge.

Formal discussions with landlords are expected to begin in the coming weeks, with property agents expected to be drafted in shortly to work on the programme.

Mark Kleinman

EXCLUSIVE: Sir Philip Green’s retail empire, which includes Top Shop and Dorothy Perkins, is drawing up plans to launch a Company Voluntary Arrangement within weeks that would – if approved by creditors – trigger store closures, rent cuts and job losses.

March 15, 2019

China’s premier Li Keqiang is also concerned about the state of the global economy.

Speaking in Beijing today, Li says that China has “encountered new, downward pressure, and promised to do more to help the economy.

Li pledged:

“Of course, we are faced with many uncertain factors this year….

We can deploy quantity-based or price-based policy tools such as reserve requirements and interest rates. This is not monetary easing but to more effectively support the real economy.”

China’s central bank has already cut interest rates in recent months, while the government has pledged tax cuts to help businesses and consumers.

But what China really needs is an end to the trade war with China. The signs there aren’t good — hopes for a summit between president’s Trump and Xi in March have faded.

The two side are now aiming for April…. or possibly even later, judging by these quote from secretary of state Mike Pompeo:

Meridith McGraw

Pompeo on a meeting with Trump & Xi: “Whether it’s the beginning or middle of April or even take as couple weeks longer we ought to get this right. Hopeful the two leaders can come together to get a trade deal that will benefit not only America but the rest of the world as well.”

March 15, 2019

Back to Japan… and Uhuru, the Japanese-based IoT [Internet of Things] company backed by Softbank, reckons the Bank of Japan is being “typically conservative”.

CEO Takashi Sonoda tells us:

“The Bank of Japan is being typically conservative and basing outlook on historical data. The general mood in Japan is one of confidence. This is especially true in the area of technology.

Japan is positioning itself to be at the forefront of the data distribution economy and is confident this will grow rapidly.”

UK outsourcer Interserve, which handles thousands of government contracts including cleaning hospitals and prisons and providing school meals, may be about to fall into administration.

A pre-pack administration would allow the firm to keep operating:

Rob Davies

Ahead of the crunch vote on the financial restructuring of government contractor Interserve, i’m told largest shareholder Coltrane is refusing to budge and will vote against. Means a pre-pack administration is on the cards.

March 15, 2019

Rob Davies

It sounds bad but is unlikely to result in disruption to the many public services run by Interserve, at least if you believe the company and the Cabinet Office. But it does speak to underlying problems in outsourcing and construction industries.

March 15, 2019

Here’s the background to this morning’s shareholder meeting, on whether to approve a restructuring plan that would almost wipe out existing investors.


SEC sues VW over diesel scandal

Overnight, German carmaker Volkswagen and its former chief executive Martin Winterkorn have been accused of defrauding US investors.

My colleague Jasper Jolly explains:

The US Securities and Exchange Commission is suing Volkswagen and its former chief executive, accusing them of defrauding investors by making “deceptive” claims about the environmental impact of its cars.

The regulator said that from 2007 until 2015, VW carried out a “massive fraud” when selling securities and half a million cars it described as clean diesel, when executives knew about the extent of the cheating, the SEC alleged. The cars emitted 40 times more harmful nitrogen oxides than allowed under US rules.


Vincent-Frěděric Mivelaz of Swissquote Bank says the Japanese economic outlook has deteriorated.

Economic headwinds forced the BoJ to revise exports and production downward. January exports dropped -9% (prior: -5.80%), their lowest in three years and the third consecutive drop while imports have rebounded 0.50% (prior: -2.20%) in the same period.

There was an unexpected pick up in the January current account balance of JPY 600.4 billion (prior: JPY 452.8 billion) amid a sharp rise in investment income due to an expansion phase in financial markets, yet the drop in January machine orders by 5.40% suggests further slowdown in Q1.

BoJ’s change of language from “increasing as a trend” to “recently showed some weakness” shows the situation is not expected to improve until Q3. Assumptions of 2% inflation have now become wishful thinking.


Japan’s stock market rallied today, as investors calculated that the BoJ won’t tighten monetary policy soon given the weak global outlook.

European stock markets have also picked up pace, hitting their highest level in five months this morning.

European stock markets, March 15

European stock markets, March 15 Photograph: Refinitiv

Jasper Lawler of London Capital Group says:

A report that more progress had been made in trade talks between US and China calmed market jitters and lifted Asian markets overnight. Sentiment was also supported by news that the UK Parliament voted to postpone Brexit.

In an ironic twist, the Bank of Japan governor also criticise Modern Monetary Theory, claiming the idea is extreme.

Asked about MMT (very broadly speaking, the idea that government deficits aren’t intrinsically bad, unless they fuel inflation), Kuroda told reporters:

I think it is an extreme argument that won’t be accepted widely.

The government holds responsibility over fiscal policy and Japan’s public debt is very high. It’s important to improve Japan’s fiscal health in the long term.”

MMT advocates might be rolling their eyes, given Japan’s recent economic history. It’s managed to swell its national debt to twice its national income without struggling to finance its deficit. Plus, the BoJ’s money-printing scheme has been notably ineffective in fuelling inflation.

Bloomberg’s Gearoid Reidy tweets:

Gearoid Reidy

Kuroda finally chimes in on modern monetary therory, saying it seems like an “extreme idea”.

Of course Japan has basically been living MMT for the past three decades, with one crucial exception – you have to *pretend* that you actually do care about the debt even if you don’t.

March 15, 2019


BoJ governor Kuroda insisted that he’s not giving up on getting Japan’s inflation rate up to 2%.

He told reporters:

“I don’t think there is a need to make any changes to our price target.”

But…. despite years of record low interest rates, and a massive QE programme, Japanese inflation only rose by 0.4% last month.

Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities, suspects the Bank may have to rethink its plans.

“Over the longer term, the BOJ will probably have to reconsider again what the best policy framework is, given that it will take a very long time to hit the price target.”

There’s a danger that economic weakness could drag Japan close to recession again (it shrank in the third quarter of 2018, before expanding in Q4).

Darren Aw, Asia economist with Capital Economics, reckons the BoJ may be forced to boost its stimulus programme later this year.

Aw says (via the FT)

There is a good chance that Japan’s economy will contract again in Q1, for a third time in five quarters.

Given this, the key question for the Bank of Japan is no longer when it might retreat from its ultra-loose policy stance but whether it can do any more to support the economy.”


Introduction: Bank of Japan feels the gloom

BoJ governor Haruhiko Kuroda.

BoJ governor Haruhiko Kuroda. Photograph: Issei Kato/Reuters

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The Bank of Japan has become the latest top central bank to warn that the global economy is slowing.

At its latest policy meeting today, the BoJ downgraded its view of Japan’s economy – cautioning that exports and industrial output have been “affected by the slowdown in overseas economies.”

BoJ governor Haruhiko Kuroda warned that problems overseas are making it harder for Japan:

“It is true Japan’s exports and output are being affected by lean overseas growth. On the other hand, domestic demand continues to grow. We maintain our baseline view that the economy is expanding moderately.

“It is likely to take longer to achieve our price target.However, the output gap is improving … Most board members think it’s more appropriate to patiently maintain our current stimulus programme.”

So, although Japan’s domestic economy is growing, policymakers left its short-term interest rate target at minus 0.1 per cent.

The BoJ will also continue its policy of buying 10-year Japanese government bonds so that yields remain at around 0 per cent — to drive money into riskier assets and spur growth.

Bloomberg says Kuroda and colleagues are taking a more pessimistic view, given recent weak data.

The BOJ also downgraded its assessment of exports, factory output and overseas economies. The gloomier take on the economy was also largely expected after a raft of weak data over the past month.

The slowdown is making it even harder for the BoJ to achieve its target of raising inflation to 2% through its huge stimulus programme.

Holger Zschaepitz

BoJ fails to stir growth and inflation w/ all the money printing. Global gloom forces #Japan’s central bank to temper its outlook

March 15, 2019

Kurora also warned there was a chance that the global economy deteriorate further — although he’s hoping for a pick-up soon.

He told reporters:

The chance of overseas economies worsening further is low. It’s a risk. However, the baseline scenario is for overseas economies to pick up in the latter half of this year,particularly areas that are currently witnessing signs of weakness such as China and Europe.”

Also coming up today

UK government contractor Interserve is facing a crunch vote on Friday which could push it into administration. It hopes to persuade shareholders to back a rescue deal in which lenders would own 95% of the firm.

But if shareholders reject its debt-for-equity-swap plan in the vote, lenders could push it into administration.

In the City, UK pub chain JD Wetherspoon and eateries chain the Restaurant Group are reporting results.

The agenda

  • 10am GMT: Eurozone inflation for February
  • 2pm GMT: University of Michigan survey of US consumer confidence



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