Business asked to cut power use

(Fin24) - Eskom has requested that business cut its energy usage by 10% to 15%, the energy supplier said on Monday.

Speaking to reporters after meeting in Midrand with top business leaders about the energy crisis in SA, Eskom CEO Jacob Maroga said "the biggest lever we can pull is reducing demand and the discussion this morning with the key customers is how we can collaborate in reducing demand".

Maroga said "voluntary saving targets" had been discussed with the 131 executives representing 38 companies present at the meeting.

He said Eskom had been talking with business about voluntarily reductions for some time.

"In some cases we've had some support where they've voluntarily reduced where they can"

He said: "We've put to them that where it's possible they can help us in reducing voluntarily.

"The quantum we are looking at is between 10% to 15%."

Maroga said he would aspire to a 20% reduction; "but anything between 10% and 15% is something we need to aspire to in terms of reduction.

"That reduction will relieve and reduce the probability of loadshedding."

 

Read more at Fin24

Europe Starts to Feel Pinch as U.S. Slowdown Spreads

(Bloomberg) -- The European economy may be starting to suffer collateral damage from the U.S. subprime mortgage slump.

Banks are making borrowing harder, industrial production is shrinking and investor confidence is waning just as the U.S. skirts recession. With the euro's appreciation to a record hurting exports, more economists are betting the European Central Bank will be forced to lower interest rates.

``There is a clear downtrend in the economy now,'' said Michael Schubert, an economist at Commerzbank AG in Frankfurt. He revised his ECB forecast last week and predicts two cuts by October after previously projecting one in the final quarter.

The ECB has so far refused to follow the Federal Reserve and the Bank of England in lowering borrowing costs as contagion from the U.S. housing recession spreads, arguing that inflation pressures are too strong. Government and industry surveys this week may nevertheless show growth risks are mounting and finance ministers meet in Brussels today to discuss the outlook.

Europe's manufacturing and services industries probably expanded at the slowest pace since June 2005 and German business confidence fell to the lowest in two years, according to surveys of economists by Bloomberg News.

Europe's Stoxx 600 index today extended its decline to 20 percent since its 6 1/2-year high on June 1, satisfying the definition of a bear market. The euro fell to a five-month low against the yen after ECB council member Nout Wellink said yesterday that growth may slow more than officials had expected.

Credit Costs

The slowdown is undermining policy makers' hopes that the region will avoid the fallout from the subprime mortgage collapse, which drove up global credit costs.

Luxembourg Finance Minister Jean-Claude Juncker, who will chair today's talks, said Jan. 14 the European Commission may lower its growth projection for this year to 1.8 percent from 2.2 percent previously. That would be the slowest pace since 2005.

Industrial output fell enough in November for economists at Royal Bank of Scotland Group Plc to declare that manufacturing has slipped into its first recession since 2001, while investor confidence in Germany crumbled to the lowest since 1992.

European banks will make it harder for companies and consumers to get loans in the next three months, an ECB survey showed on Jan. 18.

``The days of easy credit appear to be over,'' said Martin van Vliet, an economist at ING Bank in Amsterdam. Royal Bank of Scotland publishes the manufacturing and services reports on Jan. 23 and the Munich-based Ifo institute releases business confidence figures a day later.

 

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Stark Says Growth Will Hold Up, ECB Ready to Act on Inflation

(Bloomberg) -- European Central Bank Executive Board member Juergen Stark said the bank still expects the economy to expand around 2 percent this year and remains ready to raise interest rates to counter inflation.

``We're sticking to our assessment that, based on current data, growth will be around potential in 2008,'' Stark said in an interview in Viernheim, Germany, today. ``I want to repeat that we have said that we will do what is needed to avoid so-called second-round effects. We are ready to act.''

ECB President Jean-Claude Trichet threatened to raise rates on Jan. 10 if unions push through bigger wage demands to compensate for faster inflation. Since then, several ECB policy makers have expressed concern that economic growth may slow more markedly as the U.S. economy teeters on the brink of recession.

Stark said while risks to the growth outlook ``are pointing downward,'' even a more pronounced slowdown wouldn't necessarily damp inflation.

``Price and wage stickiness in Europe is considerably more pronounced than in other regions, for example the U.S., so that a possible growth slowdown does not automatically lead to a drop in the inflation rate.''

 

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ACA Customers Allow More Time to Unwind Default Swaps

(Bloomberg) -- ACA Capital Holdings Inc., the bond insurer being run by regulators after subprime-mortgage losses, won a month's grace to unwind $60 billion of credit-default swap contracts that it can't pay.

ACA, under the control of the Maryland Insurance Administration, extended an agreement that waives collateral requirements, policy claims and termination rights until Feb. 19, the New York-based company said in a statement on Business Wire late yesterday.

The insurer is working with its trading partners ``to develop a permanent solution to stabilize its capital position,'' according to the statement.

Standard & Poor's cut ACA's rating 12 levels to CCC last month, casting doubt on the company's guarantees and triggering collateral requirements. ACA, which lost 97 percent of its market value in the past 12 months, caused Merrill Lynch & Co. to write down $1.9 billion of securities last week and Canadian Imperial Bank of Commerce to sell more than C$2.75 billion ($2.7 billion) in stock to cover writedowns.

Bond insurer shares plunged last week and credit-default swaps rose to a record on concern the companies may be unable to meet their obligations as the subprime-mortgage securities and collateralized debt obligations they guarantee slump in value.

Ambac Financial Group Inc., the second-largest bond insurer, had its AAA credit ranking cut to AA by Fitch Ratings. Both Ambac and its larger rival, MBIA Inc., are under threat of losing the top grades from Moody's Investors Service and S&P, a move that would throw doubt on the ratings of $2.4 trillion of securities.

An after-hours call to ACA last night by Bloomberg News wasn't immediately returned.

Derivative Contracts

``ACA is an important case to follow because it shows how the banks' react to fast-deteriorating counterparty creditworthiness,'' said Toby Nangle, who helps oversee $37 billion as head of global aggregate business at Baring Asset Management in London.

The bond insurers, also known as monolines, guaranteed $127 billion of CDOs backed by subprime-mortgage securities as of June 30, according to S&P. CDOs are created by packaging debt or derivatives into new securities with varying ratings.

Most of those guarantees are in the form of derivatives. Unlike insurance, these contracts are required to be valued at market rates. Derivatives are contracts whose value is derived from assets including stocks, bonds, currencies and commodities, or from events such as the weather or changes in interest rates.

South Dakota Bonds

ACA was founded in 1997 by former Fitch executive H. Russell Fraser, who left the ratings company in 2001 as it shifted focus to structured finance from municipal bonds.

Fraser said his idea was to start an A rated municipal bond insurance company to guarantee a new crop of borrowers he sometimes called ``the cream of the crap.'' ACA's larger competitors such as Ambac and MBIA had enough cash to get the top AAA ratings on their insured bonds.

ACA backed $51.5 million of bonds sold to finance the construction of a jail in Pinal County, Arizona, and $4.7 million of bonds for the city of Deadwood, South Dakota.

CDOs were created by Wall Street by repackaging assets such as mortgage bonds and buyout loans into new obligations for sale to institutional investors. The insurers agreed to pay CDO holders, many of them banks that created the securities, in the event of a default.

CDO Downgrades

The tipping point came last year when the three major rating companies downgraded thousands of CDOs. Ratings on more than 2,000 CDOs were cut in November alone, according to a Dec. 13 UBS AG research report.

Maryland Insurance Administration held off filing delinquency proceedings last month while ACA sought capital. ACA was required under its credit-default swap contracts to post collateral if its rating fell below A-.

ACA gained 2 cents, or 4 percent, to 48 cents in over-the- counter trading on Jan. 18 in New York.

``The monolines are dead, their business model is dead,'' said David Roche, head of investment consultancy Independent Strategy in London. ``The government is going to have to recapitalize this industry or there will be communities in the U.S. where they can't even flush their toilets'' because they can't afford the services.

 

Read more at Bloomberg

Crude Oil Falls as Equities Tumble on U.S. Recession Concerns

(Bloomberg) -- Crude oil fell to a one-month low as stock markets tumbled in Asia and Europe on concern the U.S. will lead a global economic slowdown.

Oil, down more than 11 percent from its $100.09 a barrel record on Jan. 3, led a decline across commodities markets as gold and copper also fell. The MSCI World Index, a measure of global stock prices, slipped 1.6 percent today. Slower growth may cut demand for energy and metals.

``The market is concerned about a recession,'' Thina Saltvedt, an analyst at Nordea Bank AB in Oslo, said today in a telephone interview. ``You will see an effect on demand in the first half of the year.''

Crude oil for February delivery declined as much as $1.90, or 2.1 percent, to $88.67 a barrel in electronic trading on the New York Mercantile Exchange. That's the lowest since Dec. 12. It was at $88.85 at 1:46 p.m . London time. The contract expires tomorrow.

The more active March contract fell $1.49, or 1.7 percent, to $88.43 a barrel at 1:50 p.m. London time. There will be no settlement prices today as the exchange's floor trading session is closed for the Martin Luther King Day holiday.

``Oil prices have lost ground this morning as Asian stock markets plunge lower,'' said Robert Laughlin, a senior broker at MF Global Ltd. in London.

Brent crude for March settlement fell as much as $1.68, or 1.9 percent, to $87.55 a barrel on the ICE Futures Europe exchange. The contract traded at $87.96 in London at 1:51 p.m. local time.

OPEC Waits

OPEC, the producer of more than 40 percent of the world's oil, hasn't yet made a decision on whether to raise output at its Feb. 1 meeting, the United Arab Emirates oil minister told reporters in Abu Dhabi today.

``We are going to meet in February and we will have so many options available,'' Minister Mohammed al-Hamli said. ``We will explore all options. There is a disconnect between the fundamentals and the price.''

Prices advanced earlier after Qatar's Oil Minister Abdullah bin Hamad al-Attiyah said yesterday there is no need for the Organization of Petroleum Exporting Countries to raise output when it meets Feb. 1.

OPEC is ``reluctant to open its taps too wide, especially with a weakening U.S. economic outlook,'' the London-based Centre for Global Energy Studies said in a monthly report today. ``Ministers might veer in the opposite direction and cut production.''

Mexico, the third-largest supplier of crude to the U.S. in 2006, stopped shipments yesterday morning after strong winds and heavy rains shut terminals.

 

Read more at Bloomberg

Vale in Xstrata Talks, Says No `Concrete Results'

(Bloomberg) -- Cia. Vale do Rio Doce, the world's largest iron-ore producer, confirmed it's in talks with Xstrata Plc.

No ``concrete results'' have been reached, Vale said today in a statement. The Rio de Janeiro-based company said it's also studying other possible acquisitions. Vale is prepared to bid as much as $90 billion in cash and stock to buy Zug, Switzerland- based Xstrata, Valor Economico newspaper reported today.

Chief Executive Officer Roger Agnelli, who wants Vale to overtake BHP as the world's biggest mining company, is already spending $59 billion over five years to expand in Canada, Mozambique, Australia and China. Rio Tinto Group rejected a takeover bid by BHP last month that threatens to match Vale's iron-ore output.

BHP's three-for-one share offer for Rio added ``momentum'' to mining mergers, and Xstrata is ``perfectly positioned'' to benefit, Xstrata Chief Executive Officer Mick Davis said Dec. 6. Davis has developed the company's copper and nickel mining capacity through acquisitions including the $16.2 billion purchase of Canada's Falconbridge Ltd. in 2006.

Vale is also expanding into nickel, coal, copper and fertilizers. The company bought Canadian nickel producer Inco Ltd. for $17.4 billion in 2006 to become the second-largest producer of the stainless-steel ingredient. Vale has operations adjacent to Xstrata in Canada's Sudbury basin and on the French- controlled Pacific island of New Caledonia.

 

Read more at Bloomberg

U.K. to Back Northern Rock Debt in Plan to Spur Sale

(Bloomberg) -- The U.K. government, struggling to find a buyer for Northern Rock Plc, said it will guarantee a sale of bonds backed by the bank's home loans and gave bidders two weeks to come forward with proposals.

The mortgages, consumer loans and some investment-grade securities of the Newcastle, England-based bank would be packaged as debt and sold to investors, the Treasury said today. Bids based on the new funding plan must be submitted by Feb. 4.

Northern Rock rose as much as 55 percent in London trading on speculation the proposal will revive interest among potential buyers such as Richard Branson's Virgin Group Ltd. Northern Rock sparked the first run on a U.K. bank in a century when it sought aid from the Bank of England in September. Borrowings have since swollen to about 24 billion pounds ($47 billion), hampering a sale and forcing the government to consider nationalization.

``It seems a very reasonable solution for Northern Rock,'' said Simon Maughan, an analyst at MF Global Securities Ltd. in London who has a ``neutral'' rating on the stock. ``The problem comes when the competition cries foul.''

Northern Rock rose 21.75 pence, or 34 percent, to 86.25 pence by 12:35 p.m., valuing the bank at 363 million pounds.

Brown, Darling

U.K. Prime Minister Gordon Brown and Chancellor of the Exchequer Alistair Darling have been accused of ``dithering'' by opposition lawmakers for failing to prevent the run on Northern Rock. The U.K. regulatory framework, designed while Brown was running the Treasury, hampered the central bank's ability to head off the bank run, lawmakers, economists and the Bank of England's governor, Mervyn King, have said.

Brown's government has also been criticized for not making a decision earlier on the future of the bank. Darling will make a statement today on the plan and possibilities for a private sale.

``It's precisely because Gordon Brown and Alistair Darling couldn't make a decision that we are looking at public subsidy for five years to come, with no guarantee the government is going to get its money back,'' George Osborne, who speaks on finance for Britain's Conservative Party, said in an interview on BBC Radio 4's Today program.

Northern Rock, a formerly customer-owned building society whose roots date to 1850, is the U.K.'s third-biggest mortgage lender. The company, which sold shares in 1997, has 76 branches and relied mainly on money markets to finance mortgage lending.

The bank sought the government's help after the U.S. subprime mortgage crash rattled credit markets, choking off its financing. The government guaranteed the bank's customer deposits and will also back the bond sale.

Weighing Options

Northern Rock is weighing private solutions, including a bid by Virgin and a reorganization plan of its own. At the same time, concern has grown the bank may have to be nationalized as bidders struggle to secure financing to repay the Bank of England debt.

Northern Rock welcomed the authorities' preference ``to reach agreement on a private sector solution for the company,'' the bank said in a statement today. The lender said it would work with bidders and the government to develop their proposals and its own standalone plan.

A sale will have to be agreed upon in time to enable a restructuring plan to be submitted for approval to the European Union by March 17, the government said. Pending approval by the EU, the Bank of England's loans would be repaid under the plan, which was devised by Goldman Sachs Group Inc.

 

Read more at Bloomberg

Stocks Plummet in Germany, Hong Kong, India, Brazil in Rout

(Bloomberg) -- Stocks plunged in Germany, Hong Kong, India and Brazil, and U.S. index futures dropped on mounting speculation that the global economy is slowing and company defaults will rise.

Europe's Dow Jones Stoxx 600 Index fell the most since the Sept. 11 terrorist attacks and sank into a bear market, as Allianz SE and BNP Paribas SA slid. Hong Kong's Hang Seng Index had its biggest drop in six years after BNP Paribas said Bank of China Ltd. may write down overseas securities by $4.8 billion because of losses from U.S. subprime mortgages. Citigroup Inc. retreated in Frankfurt.

The MSCI World Index slipped 2.3 percent to 1,405.27 at 1:53 p.m. in London, extending its decline from an Oct. 31 record to 16 percent. India's Sensitive Index lost the most since 2004, while Germany's DAX slid the most since March 2003. Futures on the Standard & Poor's 500 Index sank 3.5 percent. Trading in the U.S. is closed today for Martin Luther King Day.

``It's the worst I've ever seen,'' said Johan Stein, who helps manage the equivalent of about $14 billion at Nordea Asset Management in Stockholm. ``The financial system is in terrible shape, and no one knows where this will end.''

Today's declines follow the worst week for U.S. stocks in five years after President George W. Bush's $150 billion plan to revive the economy and expectations of interest-rate cuts failed to allay recession concerns.

The risk of European companies defaulting soared to a record today on speculation credit-rating cuts at bond insurers including Ambac Financial Group Inc. may trigger forced asset sales. European Central Bank council member Nout Wellink said economic growth in the region may slow more than policy makers had expected.

Market Crisis

``This is a stock-market crisis,'' said Alberto Roldan, head of research at Inverseguros SVB in Madrid. ``Investors believe that neither a government package nor a huge rate cut is going to help evade a recession in the U.S.''

The Stoxx 600 slid 4.2 percent, extending its drop from a 6 1/2-year high on June 1 to 22 percent. A decline of more than 20 percent is the common definition of a bear market. The gauge earlier fell as much as 5.8 percent, which would have been the biggest drop in six years. France's CAC 40 lost 5.1 percent. The U.K.'s FTSE 100 sank 4 percent, and Germany's DAX slid 5.9 percent.

The VDAX-New Index, a benchmark gauge of European stock- market volatility, surged as much as 39 percent, the most since 2001. The measure of expected price swings for stocks is derived from prices paid for options on Germany's DAX.

The MSCI Asia Pacific Index lost 3.7 percent. Australia's S&P/ASX 200 Index slumped for an 11th day. Hong Kong's Hang Seng Index lost 5.5 percent. Japan's Nikkei 225 Stock Average dropped 3.9 percent as the Finance Ministry cut its evaluation of five of 11 regional economies as housing investment fell and employment worsened.

`Sharp Contraction'

The MSCI Emerging Markets Index, a global benchmark, sank 5.1 percent, extending its retreat from an October record to 19 percent.

Brazil's Bovespa index slid 6 percent, the most since February 2007. Russia's Micex Index declined 5.9 percent, the biggest drop in a year.

Allianz, Europe's biggest insurer, tumbled 8.4 percent to 122.01 euros. BNP Paribas, France's second-biggest bank, sank 6.1 percent to 65.15 euros. ING Groep NV, the biggest Dutch investment bank, declined 7.6 percent to 21.66 euros.

``The market is finally catching on to the fact that a recession will lead to a sharp contraction in earnings,'' said Jane Coffey, head of equities at Royal London Asset Management, where she helps oversee about $11 billion. ``We need to see more aggressive changes to forecasts before investors become more positive about looking through the downturn.''

Swiss Reinsurance Co. decreased 8.5 percent to 69.9 Swiss francs. UBS AG cut its share-price estimate for the world's largest reinsurer to 80 francs from 88, citing the probability of more investment losses related to credit-market problems.

Earnings Risk

``We see on-going downside risk to earnings and stock performance until we have better visibility,'' London-based analysts including Ben Cohen wrote in a report to investors.

Bank of China, which has the largest holdings among Asian banks of U.S. subprime mortgages, slid 4.7 percent to HK$3.43. The bank may write down 17.5 billion yuan ($2.4 billion) for the fourth quarter of 2007, and an equal amount for this year, Dorris Chen, a Shanghai-based analyst at BNP Paribas wrote in a note on Jan. 18.

Commonwealth Bank of Australia, the country's second largest, dropped 2.5 percent to A$51.89. National Australia Bank Ltd., the nation's largest, declined 2 percent to A$35.55.

Morgan Stanley raised its 2008 forecast for loan-loss charges at the country's major banks by 26 percent, analyst Richard Wiles wrote in a note today, citing a deteriorating global economy and ``the difficulty faced by some companies in refinancing maturing debt.''

 

Read more at Bloomberg

Murdoch, Packer offer $2.9 bln for Consolidated Media

(Reuters) - Lachlan Murdoch, son of media tycoon Rupert Murdoch, and Australian gaming magnate James Packer launched a joint A$3.3 billion ($2.9 billion) offer on Monday to buy out the Packer-backed publishing company Consolidated Media Holdings CMJ.AX.

The deal would mark Lachlan's first big business move since quitting his father's business in 2005, and is the second major effort by the two rival media empires to forge a venture, after backing One.Tel, a telecommunications company that collapsed in 2001 owing A$600 million.

The move comes less than three months since Packer separated his late father Kerry Packer's media business from gaming to better focus on building up the gambling operations.

The sons of the media moguls are each expected to take a 50 percent stake in the joint venture vehicle Consolidated Media, which was formed from the split late last year.

The indicative offer, which represents a 24.4 percent premium to Consolidated's last traded price, has the blessing of Consolidated's biggest shareholder -- the James Packer-backed Consolidated Press Holdings (CPH).

Consolidated Media Holdings has appointed UBS as its financial adviser.

Consolidated Media owns 25 percent of pay-TV provider Foxtel, about 27 percent of on-line job site Seek Ltd (SEK.AX: Quote, Profile, Research) and 25 percent of PBL Media. Seek rose 7.4 percent to A$7.15 on Monday.

 

Read more at Reuters

Across Asia, food is the new oil as prices surge

(Reuters) - From India to Indonesia, governments across Asia are scrambling for solutions as it dawns on them that sky-high food prices might not fall any time soon.

With food accounting for a third of China's consumer price basket and even more in some other countries, the high prices are a ticking time bomb for the region, where fuel increases periodically touch off sometimes violent protests.

"If the inflation problem gets out of hand, it could have devastating implications for not only economic but also political stability," said Yiping Huang, an economist with Citigroup in Hong Kong.

In Pakistan, where the government has blamed a shortage of flour on smugglers and hoarders, paramilitary troops have begun escorting wheat trucks to deter thieves.

Malaysia briefly rationed cooking oil this month before the government boosted supplies of subsidized oil.

In China, where inflation is at an 11-year high, the government has taxed grain exports to boost local supplies and resorted to command economy-style price controls.

 

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"Help Wanted" highlights skills drain in U.S

(Reuters) - Only half the machines are running at precision parts maker Hamill Manufacturing, nestled in the Allegheny Mountains just east of Pittsburgh, once the booming center of the U.S. steel industry.

But the factory's overcapacity is the result not of a shortage of business -- it has more orders than it can fill, despite a slowing U.S. economy -- but because of a shortage of skilled workers.

"I'd hire 10 machinists right now if I could," said John Dalrymple, president of the company, which makes high-end parts for military helicopters and nuclear submarines. "That's eight to 10 percent of our workforce."

While millions of jobs making everything from textiles to steel have moved to new powerhouses like China in recent years, precision manufacturing remains a crucial niche in the United States, one that is overworked and chronically understaffed.

And, in a bad sign for the United States and its declining economic might, that shortage of skilled workers is likely to get worse as Baby Boomers retire -- with no younger generation of manufacturing workers to take the baton.

"Our workforce is an aging workforce," said Chief Executive Jeff Kelly, whose father founded Hamill nearly 60 years ago. "There isn't a queue of people lining up to come into the industry."

Some 20 percent of small to medium-sized manufacturers -- those with up to 2,000 workers -- cited retaining or training employees as their No. 1 concern, according to a survey by the National Association of Manufacturers. The survey was carried out in 2007 but has not been published yet.

 

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Iron ore supply deficit seen in 2008: report

(Reuters) - A worldwide iron ore supply deficit of between 20 million and 25 million tonnes is likely in 2008, Credit Suisse forecast in a report on Monday, on the back of high demand from steel mills.

Iron ore miners are earmarking billions of dollars to expand mines, build new ore freighters and automate operations to dig faster and deeper to satisfy steel mills hungry for more ore.

Credit Suisse also said it expects annual term iron ore prices to rise by 55 percent versus a consensus forecast of a 35 percent hike.

Iron ore prices are set annually by the big three mining companies, Vale (VALE5.SA: Quote, Profile, Research)(RIO.N: Quote, Profile, Research), Rio Tinto Ltd./Plc. (RIO.AX: Quote, Profile, Research)(RIO.L: Quote, Profile, Research) and BHP Billiton Ltd./Plc. (BHP.AX: Quote, Profile, Research)(BLT.L: Quote, Profile, Research), after closed negotiations with big steel producers in Europe, Japan and more recently China.

Demand for iron ore has taken off in recent years, led by rising steel production in China, now the world's top importer.

"Despite the expected slowdowns in the U.S. and credit tightening in China, 2008 will look very similar to 2007," Credit Suisse said in a report.

It said 2007 was one of the tightest markets ever for iron ore, leaving some steel makers short of the raw material.

"We are estimating another deficit of about 20 million-25 million tonnes against seaborne trade of about 870 million tonnes," it said.

 

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Fujitsu reorganizes semiconductor operations

(Reuters) - Japanese electronics firm Fujitsu Ltd (6702.T: Quote, Profile, Research) said on Monday it would put its struggling semiconductor operations into a new unit, in a move that could smooth the way for partnerships with other chip makers.

Fujitsu's business building system chips, used in products ranging from digital cameras to supercomputers, has suffered from falling prices and the high cost of keeping up with the latest technology.

The company also said it would transfer development and test production of state-of-the art system chips to its Mie plant in central Japan from a technology centre in Tokyo, at a cost of some 10 billion yen ($94 million).

 

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Northern Rock bids deadline set

(Reuters) - Britain set a two-week deadline for a private-sector rescue of Northern Rock, as it confirmed plans to convert its almost 25 billions pounds ($49 billion) of loans to the stricken bank into bonds in a bid to smooth a deal.

The financing package will tie the government to Northern Rock, Britain's biggest casualty of the global credit crunch, for years to come.

But it also increases the prospect of a private-sector takeover, which would avoid a politically damaging nationalization for Prime Minister Gordon Brown, who has seen his popularity slump in opinion polls in recent weeks.

Details of the plan sent Northern Rock's battered shares soaring on Monday. By 1105 GMT they were up 40 percent at 90.5 pence, valuing the bank at 380 million pounds ($746 million), still down over 90 percent since the end of May.

The financing package will be available to the three front-runners for a private-sector deal -- Richard Branson's Virgin Group, a rival consortium led by investment firm Olivant, and an in-house solution under new Northern Rock management.

 

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U.S. energy chief pleads for more Saudi, OPEC oil

(Reuters) - U.S. Energy Secretary Sam Bodman repeated his plea on Monday for more oil from top exporter Saudi Arabia, undeterred by OPEC's cautious response to Washington's request so far.

Oil has fallen by more than 10 percent from a record high of $100.09 a barrel hit early this month, easing some of the pressure on OPEC to raise supplies, analysts said.

Bodman told reporters in Abu Dhabi there were short-term concerns about the performance of the U.S. economy and he was hopeful Riyadh would steer a decision to increase oil supplies at OPEC's meeting on February 1 in Vienna.

"I continue to believe in my earlier statement that we are hopeful they will increase supplies," he said. "I am of the view that there needs to be increased supply in order to call the markets of the world well supplied with oil."

Bodman, who met the Saudi oil minister at the weekend, said the United States expected oil inventories to drop in the first half of 2008 but the Saudis held "different views".

The United Arab Emirates Oil Minister Mohammed al-Hamli said OPEC would examine all options when its ministers meet.

"OPEC ... will look then at all the options," Hamli told reporters on the sidelines of a green energy conference. "There is a disconnect between fundamentals and the price."

 

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L.A. Times editor fired, "significant changes" ahead

(Reuters) - The editor of the Los Angeles Times, James O'Shea, has been fired over a budgetary dispute only 14 months after he took over the post, the newspaper said on Sunday.

O'Shea, a veteran of the Chicago Tribune who was hired by the Times in November 2006, was fired by publisher David Hiller after he refused to carry out some $4 million in cuts, said the newspaper on its Web site, citing an unnamed source. The news was first reported by The Wall Street Journal.

In a separate statement late on Sunday, the newspaper said that like all newspaper companies, it was "facing major challenges in charting a course that will be successful for the future".

"In that vein, we will be making several significant organizational changes to put us in the best position to succeed."

It said as a result of these changes, O'Shea would be leaving the newspaper, and did not elaborate further.

O'Shea's firing comes one month after the paper's parent, Tribune Co, completed an $8.2 billion buyout led by Chicago real estate tycoon Sam Zell.

The deal restructured Tribune as an employee-owned company funded largely by debt.

The Times has struggled along with other media companies in an adverse newspaper advertising environment, and has cut staff and editorial resources in recent years.

 

Read more at Reuters