Simon Evans: Flotations look set to take off, but don't get carried away

Companies aiming for the market have little time
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The Independent Online

There's a new game in town for financial journalists at the moment. One year ago we began trying to find out which companies had hired expensive restructuring experts to come and sort out their creaking finances. I think we are going to be playing that game for a while yet because in the next 12 to 18 months plenty of companies will breach covenants as the banks get tougher.

After restructurings, the next game was finding out which companies were going to come to market and ask investors for cash from rights issues. The banks were predictably the first out of the starting blocks but plenty of others across the corporate landscape have tapped their shareholders for more cash to prop up their businesses. So far this year, British investors playing the stock market have had to plough in nearly £30bn to bridge the gap left by the banks closing credit facilities to corporates. HSBC, British Land, Travis Perkins, Hammerson, Land Securities and 3i are just some of the big names to come to market.

But the rights issue game has been eclipsed: now it's all about trying to find the next flotation as private companies look to raise cash in the public arena. With the doors to the debt markets still shut and the equity markets charging of late, perhaps it's understandable that the hunt for the next flotation is on. There have already been seven flotations in the US, but last week the UK's first flotation of the year came to town and was well supported by the Square Mile. Max Property, a business backed by the veteran real estate entrepreneur and Prestbury founder Nick Leslau, got off to a roaring start on the junior Alternative Investment Market (AIM). Shares in the offering rocketed by more than 30 per cent on the first day alone. And you thought property was dead. Speaking to City institutions and banks, the success of Mr Leslau and Co has clearly had a dramatic effect. All of a sudden, the prospect of other flotations isn't as fanciful as it once might have been.

Beside Leslau last week was the publication of Merrill Lynch's monthly fund manager survey, which was positively bursting in upbeat sentiment. Fund managers are running down their long cash positions and putting money to work, with a fifth of those fund managers saying that they expect corporate profits to improve in the next 12 months. These are, of course, the same fund managers that were horribly gloomy at the turn of the year.

Forgive me for re-inserting some gloom for a moment but I just don't really think this new found confidence is build upon solid ground. If anyone is going to get a flotation done they had better be damn quick because the foundations of this rally are fragile. True, the FTSE has risen by 25 per cent since March but, as last week showed, signs of tiredness are creeping in. Another correction and that brittle confidence will snap.

Firms have a window to get things done but that window is set to close quite quickly. June is around the corner and the summer shutdown will start. September will see a brief opening but the hunkering down before Christmas and the banks' year ends is likely to start in October. Those green shoots might be sprouting but don't get too excited.

Travel isn't declining because of pigs or the media: it's called a recession

A striking thing about the swine flu scare was how people avoided overreacting to the virus threat. The London Underground was as crammed as ever, people worked without wearing masks, and flying around the City was an email picturing Winnie the Pooh walking home with Piglet, in which the honey-loving bear is thinking: "If the pig sneezes, he's dead."

It would seem that everyone was sufficently informed to realise that we were not in the grip of a pandemic, but rather that there was the potential for H1N1 to spread. It was, after all, only in a second, more violent, wave that the Spanish flu of 1918-19 took so many lives.

Despite the relative calm, top travel bosses would have us believe that the media has whipped up a frenzy that is destroying their industry. At last weekend's Global Travel & Tourism Summit in Brazil, senior travel figure after senior travel figure laid into the media over its coverage. Jean-Claude Baumgarten, the president of the World Travel & Tourism Council, even bemoaned the sector's "lack of control over how the media handled the story".

Mexican hoteliers at the conference told sob stories of how the worldwide media coverage had turned the country's travel resorts into ghost towns. Hotel occupancy there is barely 5 per cent.

Blaming the media – and yes, I would say this, wouldn't I? – has become a cop-out. There is still the potential for the virus to adapt, and the media would not be doing its job if it failed to warn of the possibility that H1N1 could become a pandemic. The coverage was obviously going to hurt Mexico, where the scare began. But otherwise there is the feeling that the travel industry is looking for someone to blame for their falling sales.

Travel is suffering because of the decline in discretionary spending in a time of recession, not because of the way the media has covered our germ-ridden, porcine friends.

Money grows on hedgies: Lawyers set to feast on turmoil

When those legal guys get a smell of blood they really do go for the jugular, don't they? I'm told that a presentation on hedge funds drew a packed audience of legal bods right through to practising QCs and judges. Apparently many lawyers hadn't the foggiest idea about even the basics at the start of the seminar. However, by the end of the evening it was, by all accounts, smiles all round at the prospect of an avalanche of legal strife in the hedge funds world. America has had its fair share of hedge-fund travails in the past year, the most prominent being the Madoff scandal, but we Brits have got off lightly, with the Weavering Capital mess perhaps the worst. Sadly, more are likely to emerge. Poor old investors will once again lose out while the lawyers profit. Some things never change.

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