Probe into AIG Finance activities in the UK

February 16th, 2009 by admin | Filed under Daily News, Recession, UK Bank Accounts, UK Banks, World Banks.

The Serious Fraud Office (SFO) announced on Friday its intention to launch a “preliminary inquiry” into the UK operations of AIG Financial Products, owned by American International Group (AIG) of America.

In their statement, the SFO were said to cooperating with US authorities currently investigating conduct at AIG Financial Products Corporation as well as Britain’s Financial Services Authority. The SFO hastened to point out that their inquiries do not concern any of AIG’s insurance businesses either here or abroad, who recently received a $150 billion cash injection from the US government as the result of the Financial Product group’s heavy losses on toxic mortgage debt.

The SFO said its probe was separate to two other inquiries into American International Group Financial Products (AIGFP) being carried out by U.S. authorities and Britain’s financial services regulator, the Financial Service Authority.

On the media front, former talkSPORT head Kelvin McKenzie and Sir Richard Branson’s Virgin group told (OFCOM), the independent regulator and competition authority for the UK communications industries that they wanted the regulator to sell the radio frequencies used by stations Classic FM, Absolute Radio and talkSPORT at auction. Virgin Radio co-founder John Pearson said: “We believe the national radio licences should go out to tender. We think other potential broadcasters should be given a chance.” The current licence holders believe that the auction process should be scrapped. Classic FM’s will be the first licence up for sale, with an auction scheduled for September 2011.

In another case of “former owner buy back” the announcement on Sunday that children’s wear chain Adams had been acquired from administrators PricewaterhouseCoopers by its former owner John Shannon through his newly formed company JS Childrenswear. Adams had been in administration with PricewaterhouseCoopers for six weeks, who had succeeded in winding down almost 150 outlets resulting in the loss of 1,100 jobs. The buy- back deal is expected to save 120 UK stores and 1,900 jobs.

Rob Hunt, PricewaterhouseCoopers partner and joint administrator for Adams said: “This transaction demonstrates that, with the right business model, retailers can be rescued from administration in the current economic climate.”

In a drive to cuts costs against a decline in advertising revenues ITV the United Kingdom-based advertising funded broadcaster is considering the disposal of Friends Reunited and other digital assets. ITV bought Friends Reunited in 2006 for 175 million pounds and since then analysts believe the value of the social networking site has consistently fallen, with competitors, particularly Facebook, taking a much larger share of the market. In the hope of attracting more advertising revenue, ITV group has stopped charging the public for access to the site. ITV is also planning job cuts and a reduction of an expected 10 percent of its workforce.

Another major British institution in financial hot waters came to the public notice over the weekend. But this time it’s personal. The UK’s wealthiest landowner, the Duke of Westminster, is in advanced talks with his bankers to prevent his two billion pound property fund business from breaching bank covenants. Investors in the Duke’s funds have been upping the pressure on suggestions that his property managers got carried away on a wave of euphoria and failed to heed advice to reduce borrowings 18 months ago, in anticipation of the collapse in property values.

The duke’s private investment company, Grosvenor, this weekend confirmed that it was in negotiations with its banks, whilst rejecting suggestions that banks could step in to seize assets.

The Duke of Westminster got a great start in building up his property portfolio, inheriting one of the most valuable property holdings on Earth, centred on the ultra-exclusive Mayfair district in Central London. Westminster has maintained the family tradition of never selling any buildings. However with the property investment circus at its height, the Duke dispensed with tradition and simultaneously began to borrow colossal sums to finance expansion as well as inviting international institutions and wealthy families to co-invest in shopping centres, London offices and residential assets further diluting his assets.

A report released over the weekend by the Confederation of British Industry (CBI) announced that the U.K. economy is liable to shrink in 2009 at almost twice the pace previously forecasted. The seemingingly unsolvable credit famine looks liable to plunge the nation deep into the worst recession seen or almost 30 years.

Britain’s gross national product (GNP) is now being predicted to contract by 3.3 percent, instead of the 1.7 percent previously expected.

Richard Lambert, the CBI’s director general, when interviewed, stated “The world has changed dramatically. Faced with a global confidence crisis, a rapid fall in demand and credit constraints, U.K. firms have been forced to scale back investments and cut jobs.”

On stock trading Friday, the FTSE 250 index fell by 0.49% or 31.67 points to 6494.71 while the FTSE 100 finished the session down 0.39 per cent, or 16.03 points, at 4,173.56

Sterling rose slightly against the dollar and the Euro as well as against the Japanese Yen and the Swiss Franc:

Pound/US dollar 1.4222

Pound/Euro 1.1150

Pound/Japanese Yen 130.69

Pound/Swiss Franc 1.6647

Wall Street shares had a bad day on trading Friday. The Dow Jones Average dropped 83.25 to close at 7850.41. Nasdaq fell 7.35 points to 1534.36