Market Report: BSkyB is target of pounds 500m corporate bond whispers

IS BSKYB planning a major injection of funds into its balance sheet?

The satellite television operator was one of the few movers in a motionless market amid whispers that it is about to issue a huge corporate bond.

The stock bobbed and weaved before closing down 3.5p at 588.5p as dealers said that a group of BSkyB's senior managers is touring the City to whip up interest in the fixed-income issue.

Market watchers said that Rupert Murdoch's outfit is contemplating a bond of up to pounds 500m to beef up its balance sheet.

According to this theory, Sky's recent exertions are starting to take their toll on the broadcaster's cash kitty and the arrival of some fresh funds will be welcomed with open arms.

Over the last few months, BSkyB had to face a renewed assault on its customer base from the rejuvenated cable companies and digital TV rival OnDigital. Sky has responded by distributing free decoder to its pay- TV couch potatoes.

The initiative has boosted the number of digital customers, forecast to top one million soon, but has also stretched the company's cash resources.

In the third quarter, before the "Great Give-Away" was announced, Sky's profits plunged 83 per cent and next month's finals will probably show another hefty decline.

Given the context, BSkyB could do with a pounds 500m cash boost.

One of BSkyB's rival broadcasters, Granada, which is a co-owner of OnDigital, firmed 12p to 1,177p amid revived talk of a sale of its BSkyB's stake to the French conglomerate Vivendi.

The remaining blue-chips were stuck in a limbo as many institutions sat tight ahead of last night's US interest rate decision. Traders were also distracted by a closely-fought Wimbledon match between Tim Henman and Jim Courier - a much more entertaining spectacle than the water-treading market.

The FTSE 100 finished its second quarter with a 11.4 gain to 6318.5, while the midcap squeezed 6.8 higher to 5858.2 and the Small Cap slipped 0.6 to 2650.6.

Marks & Spencer rebounded from recent weakness and ended 10p better at 367p on continued rumours of a merger with Tesco or Sainsbury. Broker DKB also helped with a very bullish note.

Tesco saw the flip side of the analytical coin. The supermarket lost 2.75p to 163.25p as a downgrade from Merrill Lynch sparked fears that Tesco could launch a price war to pre-empt the arrival of Wal-Mart.

Rival Safeway bagged a 5.25p rise to 254.5p in heavy volume as the company's advisers remained cagey on reports of a secret meeting between chairman David Webster and Sir Geoff Mulcahy, the boss of Kingfisher, down 20p at 730p.

Storehouse, another retailer in the bid frame, slipped back 5p to 136.5p, despite speculation of a US-backed bid.

Bass was the blue chips' best performer, soaring 42.5p to 920.5p.

The market believes that Allied Domecq, up 1.5p to 612p, will accept the Bass/Punch Taverns offer for its pubs, even though Whitbread, down 36p to 983p, should increase its bid. The loser is tipped to go for Greenalls, up 17p to 356p.

Shell flared 4.75p higher to 475.75p after HSBC raised the prospect of a pounds 1-1.2bn share buyback a year following a meeting with the company.

Drugs were hyped by the prospect of an expansion in the US healthcare plans. Glaxo Wellcome shot 43p up to 1763p, while its mooted merger partner, SmithKlime Beecham rose 14p to 824.5p.

Centrica touched a 149p record high after firming 5p ahead of the expected takeover of the AA. Insurer Sun Life & Provincial was 4.75p better at 453.25p after Goldman Sachs said "buy" and set a 588p price target. Rival Norwich Union inched 0.5p higher to 430.25p on vague bid rumours.

The death of duty free sunk ferry operator P&O, 39p lower to 952.5p, and airport owner BAA, down 14.5p to 610p.

Lemsip-maker Reckitt & Colman fell 16p to 661.5p after Morgan Stanley slashed its 1999 and 2000 profit forecasts.

Vodafone/Airtouch dropped 19p to 1,250p on its first day since the completion of the mega-merger amid some concerns over today's UK mobile subscribers figures. Mobile rival Orange firmed 6p to 930p on rumours that customer growth is strong and new products are on their way.

Bovis Homes rose 4.5p to 340.5p on its arrival to the midcap, but Inchcape stole the FTSE 250 show, jumping 4.5p to 68p, amid growing optimism over its Internet car-dealing business.

Good results sent the developer Peel Holdings - which is still considering whether to go private - 27.5p higher to 690p.

Speculation of a merger with Remy Cointreau propelled Highland Distillers 10p better to 275p.

The minnows were ravaged by bad news.

Danka plummeted 36.5p to 79p. The photocopier producer is in trouble after Schroder Ventures scrapped the $300m purchase of one of Danka's businesses. Profit warnings hammered Regal Hotels, 7p lower at 5-year low of 19p, the ceramic group Flare, down 2.25p to 11.5p and engineer GEI, 3.5p worse at 18.5p.

On the plus side, chip designer Videologic soared 7p to 58.75p after saying that its latest product will be used by STMicroelectronics. The Lloyd's insurer Euclidian jumped 28.5p to 131.5p after receiving a 135p- per-share offer from its management. Textile group Hicking Pentecost rose 28p to 203.5p after sector giant Coats Viyella trumped an offer by US rival Ruddick with a 205p-per-share bid.

Business services tiddler RCO Holdings was 36p better at 265p. The expected bid is believed to be round the corner. Another mooted offer, for aerospace group Bridport arrived at 130p-per-share from US rival Marmon and sent the stock 14.5p better to 126p.

SEAQ VOLUME: 1.16bn

SEAQ TRADES: 80,799

GILTS INDEX: 107.24 +0.58

WEST 175, the maker of television cookery programmes, stewed 5p higher to 255p yesterday amid whispers of a money-spinning deal.

Dealers believe that a US company has agreed to sponsor a series of West's shows due to be broadcast on the States' public TV network. The US firm, believed to be the Internet directory publisher LookSmart, is expected to pay around $20m for the sponsorship contract and West should pocket nearly $7m.

THE PROPERTY minnow Wiggins moved 1p higher to 17.5p in fairly heavy volume. The market is expecting a bullish note from a broker praising the group's plans to build a chain of regional airports.

Wiggins already owns airfields in Kent and Tennessee. In the long-term, it wants to buy more, form an airports' company and float it on the US Nasdaq exchange. Research is expected to say that if everything goes to plan the shares could be worth up to 40p.