Tuesday 3 March 2020 ★ FINANCIAL TIMES 17
UK COMPANIES
All aboard the Challenger Bank
Express, the train few desire to take.
Mandarins want business customers to
wave farewell to Royal Bank of
Scotland and hello to any one of a crop
of challengers. They made it a
condition of the 2008 RBS state
bailout. But despite a golden ticket
worth up to £50,000 a time for
businesses prepared to switch banks,
customers just won’t go.
The clunkily named Banking
Competition Remedies is the body
employed by the government to
engineer the change. It has £775m of
RBS’s money to pay business
customers to switch away and small
banks to find ways of attracting them.
That is a good idea in theory. Cash
helps to convince inert customers to
move. It should also give newbies more
heft to break the oligopoly of RBS,
Lloyds, Barclays and H SBC. BCR is
more than halfway through the
scheme, however, and only a fifth of
the 120,000 customers that RBS is
meant to lose have left. Efforts to boost
alternative lenders are also veering off
track. BCR says it is not to blame for
problems with the project design. It is
the “engine driver”, or so its boss says,
following a route set by others.
The route-map is full of
misdirection. Customers only have
until August to get the incentive payout
for switching, unless the scheme is
extended. If they switch now, the
challengers may not have the products
in place to service them. Lenders
received funds from BCR to invest in
their business banking less than a year
ago. It takes longer than that to build a
bank. Challengers should not be
pressed to move faster either. Titches
complain they are hindered by onerous
capital requirements. The Bank of
England has already warned that
lending standards at fast-growing firms
are lacking.
But progress has not just stalled, it is
reversing. BCR must take
responsibility. It gave credence to pie-in-the-sky plans by challengers
predicated on soaring current account
switching and market growth. BCR
rewarded Metro Bank with its biggest
prize — £120m — even after the lender
admitted it had bodged its sums. It
took the bank, not BCR, to decide last
week that the prudent thing to do was
hand some back. BCR has forfeited its
credibility.
Some of the money will reach the
right destination. But RBS’s money
could have been more effectively
deployed by a better qualified driver.Feverish Finablr
Thrice-infected Finablr, floated in
London by UAE-focused tycoonBR
Shettylast year, is increasingly
feverish. Yesterday the owner of
Travelex sketched out the effect of the
cyber virus that hit the currency
business in January and of coronavirus.
Airport traffic is down sharply but the
effect of Covid-19 is still uncertain, it
said. The cost of the malware is
significant. Not least Finablr has had to
delay publishing 2019 numbers.Travelex’s first-quarter earnings before
nasties — which were £2.5m last year —
will be £25m lower this time.
Finablr hopes to claw back
something through insurance, but for a
business forecast to make $254m in
total in the year to December, the
impact is serious.
So, too, is the ague that Finablr has
caught from other parts of Mr Shetty’s
business empire. Shares in NMC
Healthcare, also founded by Mr Shetty,
were suspended last week after a string
of revelations including regulatory
probes, off-balance sheet payments
and board resignations. In February,
Mr Shetty admitted he did not know
how many shares he owned in NMC
after pledging them against loans.
Ditto Finablr. Mr Shetty — Finablr’s
chairman, founder and majority
shareholder — has pledged just over
half of Finablr’s shares against loans
tied to the purchase of Travelex in- And Finablr’s board doesn’t
know quite how many shares he owns
in the payments group. It promised to
clarify the holding by the end of
February “at the latest” but has yet to
do so. Finablr is weakened by infection.
Its shares, floated at 175p in May last
year, are now 61p.
The group said it had contained the
spread of malware to protect customer
data. The board must now do
everything it can to contain further
contagion from the Shetty empire.Bramson battles on
Edward Bramson, scourge of Barclays,
is not giving up. Sherborne Investors C
has edged up its stake in the bank and
published its letter urging Barclays’
board to act decisively againstJes
Staley, the chief executive under
regulatory investigation for his
chumminess with the late Jeffrey
Epstein. The usually icy Mr Bramson
seems heated. But then perhaps time is
running out for him, too. Since
Sherborne first began agitating
Barclays to ditch its investment bank,
the bank’s shares have fallen 70 per
cent. Sherborne has returned little to
investors other than a bill for his fees.[email protected]
BCR: [email protected]Businesses and aspiring bankers have been badly served by RBS cash
Cat
Rutter
Pooley
Finablr, the payments company,
warned that its profits would be hit by
the coronavirus and a cyber attack on
its Travelex foreign exchange unit.
On New Year’s Eve, Travelex was
targeted by criminals who blocked its
systems and demanded a ransom in
return for the tools to decrypt them.
The company yesterday said the
disruption was expected to knock
about £25m from Travelex’s first-
quarter earnings. The attack left it
unable to access all of its financial
reporting tools for part of January,meaning it will not publish its full-
year 2019 results until mid-April.
Travelex said cyber insurance
would eventually offset “a material
proportion” of the profit impact.
Finablr echoed warnings from
other travel businesses about the
impact of the coronavirus, but said
it was too soon to gauge the financial
impact of the outbreak.
It cautioned that non-travel units
could suffer if the outbreak
worsened.Nicholas Megaw
See LombardCyber attack
Finablr warns
over Travelex
hacking cost
S I M E O N K E R R
NMC Healthhas called on lenders for
time to stabilise its finances, as the
embattled healthcare group looks to
safeguard cash and sustain its opera-
tions.
The company, which is under investi-
gation by UK regulators, said yesterday
that it had sought a so-called “informal
standstill” agreement in which lenders
hold off exercising any “rights and rem-
edies” they may have in the event of
“currentorfuturedefaults.”
The largest private healthcare group
in the United Arab Emirates has been in
turmoil since December, when a short-
seller attack raised concerns over its
debt and cash positions. Initial findings
of an independent investigation into the
allegations commissioned by NMC last
week revealed unauthorised off-bal-
ancesheetfinancing.
The Abu Dhabi-based group, whose
shares were suspended last week, has
been struggling to pay salaries, accord-
ingtoemployees.
“NMC is asking for continued support
and an informal standstill in relation to
existing facilities from its lenders to
achieve an immediate stabilisation of
the group’s financing,” the company
saidyesterday.
Although NMC reported £500m of
cash on its balance sheet in June, the
true state of its finances is unclear after
it disclosed last week that it had found
discrepanciesinitsbankstatements.
FounderBRShettyandEmiratiinves-
torsSaeedal-Qebaisi andKhalifaal-Mu-
hairi, now hold less than 30 per cent of
the group’s shares, NMC said. That has
triggered a change of control provision
in a $2bn loan facility allowing the
group’slenderstorequestrepayment.
Dubai-basedIthmar Capital said yes-
terday that it had taken over manage-
ment of the roughly 9 per cent of the
company controlled by Messrs Qebaisi
andMuhairi.
Banks have become worried over
theirexposuretoNMCgiventhesignsof
a cash crunch. Investors have also que-
ried the true debt position of the group,
which has resorted to pledging future
creditcardpaymentstosecurefunding.
HSBC,JPMorgan andStandard Char-
teredare among NMC’s lenders. The
banksdeclinedtocomment.
NMC’s$400mofsukukdebtwastrad-
ing at around 60 cents on the dollar yes-
terday,showingbondholdersarebraced
forlosses.Healthcare
NMC pleads for
breathing space
from lenders
Hospitals group seeks
‘informal standstill’ to
stabilise its finances
L E K E O S O A L A B I A N D P E T E R S M I T H
Ninety One, the asset management
arm of South African banking group
Investec, is proceeding with its initial
public offering in London this month,
despite volatile conditions in global
markets following the coronavirus out-
break.
The asset management company yes-
terday set a price range of 190p to 235p
per share, implying a market capitalisa-
tionofbetween£1.75bnand£2.17bn.
The IPO follows similar moves from
UK insurance groupPrudential, which
hived off its investment business,M&G,
andDeutsche Bank, which spun out
DWS.
Ninety One’s chief executiveHendrik
du Toithas a 1.92 per cent stake which
could be worth up to £41.7m after the
float, whileKim McFarland, finance
director,wouldhavea£27.1mholdingat
thetopoftherange.
Forty Two Point Two, an employee
share ownership vehicle that represents
about 40 senior managers and fund
managers, led by Mr du Toit, already
owns a fifth of Ninety One. That could
rise to 24.8 per cent as part of the share
offer and be worth £538m at the top end
oftherange.
The company expected to raise
£182m-£226m from the IPO, which
may include up to £108m from Forty
TwoPointTwo.
The go ahead for the Ninety One IPO
followed a tumultuous week on global
stock markets, which tumbled by more
than a tenth, a drop that could have
potentiallythreatenedthelisting.
Ninety One said that despite the
recent volatility, the flotation was “sup-
ported by an attractive financial pro-
file”. For the six months to September
30, the business had net inflows of
£3.2bn, with assets under management
of £121bn. Pre-tax profit in the year to
Marchwasflatat£178m.
The company will be dual listed in
London and Johannesburg and was
expected to be eligible for inclusion in
several equity indices, including the
FTSEUKIndexSeries.Financials
Investec pushes ahead
with Ninety One IPO
JAV I E R E S P I N OZ A— BRUSSELS
KAT E B E I O L E Y— LONDONThe Competition and Markets Author-
ity has emerged as the most aggressive
antitrust enforcer worldwide after it
frustrated the highest proportion of
deals in the past five years and
increased the fines it imposed.The authority, which is seeking tougher
powers after Brexit, thwarted 6 per cent
of the deals it assessed in the period,
according to a report by Allen & Overy,
the law firm. That compares with less
than 1 per cent of deals scrutinised by
theUSandGermany.
Lastyeartheauthoritythwartedeight
deals, three of which were prohibited
and five abandoned. It blocked only one
merger in 2018. The authority has also
increased the fines it levied relating to
procedural infringements from one of
£20,000in2017toatotalof£778,000of
lastyear.
Andrea Coscelli, the CMA’s chief exec-
utive, envisages a more active role in
scrutinising large mergers and tackling
anti-competitivebehaviour.
Industry insiders expect the trend to
continue, and the CMA has already
decided to provisionally bar three deals.
They include the proposed merger of
Sabre, the travel services operator, and
Farelogix,thetechnologycompany;and
JD Sports’ proposed £90m takeover of
Footasylum,itssportswearrival.
Antonio Bavasso, partner at Allen &
Overy, said the push by the authority to
frustrate mergers follows accusations
from academic circles that enforcers
havebeentoolenientinrecentyears.
Brexit was likely to propel the CMA to
take more action. He said: “After the
transition period the UK is expected to
continue this trajectory of tough
enforcement. Internationally they will
also hope to have a seat at the table in
which their voice on international
mergersismoredistinctlyheard.
“The CMA will not be shy of making
tough decisions even if there is a politi-
calprice,”headded.
The UK push is part of a firmer line by
European regulators, not least Mar-
grethe Vestager, the EU competition
commissioner, who recently blocked
theAlstom/Siemensrailwaydeal.
Allen & Overy said Europe’s tougher
stance partly led to a nearly 40 per cent
increase in the number of deals blocked
or abandoned in 2019 across the region,
equivalentto40dealsthwarted.
Germany has also emerged as an
active enforcer, frustrating nine deals
last year, four of which were blocked —
representingthehighestsince2012.
The UK’s approach was evidence of
“its willingness to take an expansive
approach to jurisdiction”, said Allen &
Overy, and was evident in its scrutiny of
minority stake investments such as that
sealedbetweenAmazon andDeliveroo.
The decision to refer for in-depth
investigation a $575m investment by
the tech group last year prompted back-
ers of the food delivery business to com-
plain of intervention that would
threateninvestmentinUKtech.
The CMA also referred an increasing
number of deals for in-depth investiga-
tion. Some 15 cases were referred for a
so-called Phase 2 inquiry, a lengthier
and more detailed process, up from 10
casesthepreviousyear.Competition
CMA hailed
as toughest
antitrust
enforcer in
the world
N E I L H U M ELekoilhas blamed its advisers for fail-
ing to detect a phoney loan deal that
plunged the London-listed oil producer
into crisis.Announcing the results of an investiga-
tion into the agreement, Lekoil said the
checksandduediligenceundertakenby
the company, including a third party
report,hadproved“inadequate”.
“The fraud, whilst relatively elabo-
rate and sophisticated, should have
been capable of being detected by par-
ties engaged to advise on the Facility
Agreement, internally or externally,
priortoitsexecution,”thegroupsaid.
In one of the most bizarre scandals
to hit the Aim market, Lekoil revealed
in January that a $184m loan from
Qatar’s sovereign wealth fund to
develop its main asset — an oilfield off
Nigeria’scoast—wasafake.
Its shares plunged after the news was
madepublicandthecompanylaunched
aprobe.
At the centre of the deal was a Baha-mas-based consultancy calledSeawave
Invest, which was paid $450,000 to bro-
kerthedeal.
LekoilsubsequentlyclaimedthatSea-
wave had introduced the company to
individualswho“constructedacomplex
facade in order to masquerade as repre-
sentatives” of theQatar Investment
Authority.
“The Board only approved the execu-
tion of the Facility Agreement after a
third-party global risk consultant
engaged to undertake the due diligence
investigation on Seawave provided a
report that did not identify any ‘red
flags’ on Seawave or its principals,”
Lekoilsaid.
While it did not name the advisers,
the FT has previously reported that
Norton Rose Fulbright, an international
law firm, provided legal advice on the
loan agreement andControl Risks, a
consultancy headquartered in London,
prepared a due diligence report based
on“publicrecord”searches.
Norton Rose Fulbright and Control
Risksdeclinedtocomment.Oil & gas
Lekoil blames failure to detect
sham loan deal on advisers
Phil Noble/ReutersLegal Notices
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