Market report: Tuesday close

By MICKEY CLARK FOR MAILONLINE
Updated:

 

STOCKBROKING blue-blood Cazenove will have to summon up all its firepower if it is to get away with a £5bn rights issue for British Telecom - the biggest call ever made on existing shareholders in a company traded in London.

The troubled telecoms giant has brought forward its full-year results from 17 May to this week so that it can introduce a package of measures to reduce £30bn of debt and regain the confidence of City investors.

The measures are expected to include a one-for-one rights issue pitched at a price of between 400p and 420p a share. A cut in the final dividend is also on the cards along with the demerger of its mobile phones operation Cellnet.

Cazenove has been charged with persuading institutional shareholders to support the rights issue. But its job will be made more difficult by the large number of BT shares still held by private investors. At the last count, they amounted to about 17% of the register, many of them having bought when the company was privatised in 1984.

Only last week, David Rough, investment manager at Legal & General, said any rights issue proposed by the group would have to be discounted by about 50% if it was to succeed. But since then BT has sold its minority stakes in Japan Telecom, J-Phone and Spain's Airtel to Vodafone, up 1/4p at 197p, for almost £5bn.

BT fell 36p to 564p, compared with the peak of 1513p reached at the start of last year. US securities house Goldman Sachs continues to rate the shares 'market perform'.

The BT rights issue hung heavily on the rest of the market as share prices made a generally cautious start to the week. Prices traded in narrow limits for much of the day, with the FTSE 100 index ahead up 16.1 at 5886.4.

Brokers say investors are proving reluctant to open fresh positions ahead of Thursday's monetary policy committee meeting. The Bank of England is expected to cut another quarter point off interest rates.

Railtrack lost an early lead to trade 3p lower at 477p with stinging criticism of the management blunders that led to the Hatfield crash ringing loud and clear. Hi-tech companies were to the fore, gleaning support from the overnight statement from Dell Computer and ahead of trading news from Cisco Systems in the US tonight. Energis put on 15 3/4p to 326 3/4p, CMG 34 1/2p to 429 1/2p, and ARM Holdings 8 1/2p to 390p. MFI Furniture gained 1 3/4p to 123p as one buyer paid 125 1/2p each for a million shares. A line of 9.13 million Rolls-Royce shares went through at 214p.

Arena Leisure returned from suspension 7 1/2p higher at 104p after revealing trading losses along with plans to raise £85m through a share placing. The horseracing group also has a one-third stake in Go Racing along with its partners BSkyB, 10p better at 856p, and Channel 4. Go Racing has just signed a 10-year deal for exclusive horseracing media rights.

Over on AIM, shares in returned from suspension 1/4p cheaper at 1p following the reverse takeover of financial adviser Elite Strategies.

• Prices and indices in this section are supplied from various sources and calculated at different times and may not always match those listed on the site.

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