View from City Road: Reluctance to take fight to News Corp

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The simmering row between Rupert Murdoch's News Corporation and investors in its convertible preference shares should have been manna from heaven straight into the mouths of the legal profession. Yet so far they have seen barely a crumb.

Investment bankers are not noted for their reticence when it comes to legal action to enforce what they see as their rights. They have proved strangely reluctant to challenge a powerful potential client like Mr Murdoch, however.

The story goes like this: when News Corp wanted to raise money at the end of 1989, it issued redeemable preference shares which were convertible into shares in Pearson, where News then held a stake.

In 1993, Pearson demerged its china subsidiary, Royal Doulton. News Corp, like most investors, assumed the Doulton shares would belong to the holders of the convertible prefs and put out an announcement to that effect.

A month or so later it unaccountably changed its mind. Complaints flooded in and News was forced to concede that losses incurred as a result of its mistaken notice would have to be met. If you assumed that might be the end of the matter you don't know much about News Corp.

The issue bubbled up again yesterday when the International Securities Market Association, the Zurich-based outfit that represents Eurobond investors, complained that as far as it was aware not a single claim had yet been settled. Understandably the ISMA does not regard it as its job to represent investors in this case. It has become involved because no other investor protection organisation has taken an interest in challenging News Corp, either on its interpretation of the ownership rights attaching to the Doulton shares, or as far as the claims arising from the mistaken notices were concerned.

If not the ISMA, who then? The Law Debenture Corporation, the custodian trustee to the issue, apparently considers it none of its affair. The lead issuer, Credit Suisse First Boston, seems equally uninvolved.

The stock exchanges on which the shares were listed, Amsterdam, Luxemburg and Frankfurt, say it is nothing to do with them. The International Primary Markets Association, which represents issuing houses, would consider any complaints relating to the documentation but, surprisingly, has yet to receive any. It seems that everyone wants to wash their hands of the case. Now why's that?