Debts & Loans

Yesterday as a broker gave warning that many of the miner’s investors believed “muddling through” its debt repayments without a rights issue was not an option.

Debt repayments – $9 billion (£6.1 billion) by October next year and another $10 billion the year after – have become an issue since BHP Billiton, up 39p at £10.75, pulled its bid.

One-for-three $7.5 billion rights issue at a 20 per cent discount to the market price would alleviate the fears of many of his clients over the state of balance sheet.

He has committed to pull in the dividend next year, insisted last week that no equity issue was required and that he was comfortable with the debt levels. He and the chief executive, are pinning their hopes on disposals and slashing capital expenditure to raise the cash they need.

Yet metals prices are falling drastically, reducing cashflow, and there are doubts about how many buyers for its assets it will find in squeezed credit markets.

A Citigroup analyst, said that he would have to cut back its dividend growth: “He is bearing the full brunt of the economic slowdown as its commodity exposure, dominated by iron ore, aluminium and copper, has experienced a sharp reduction in profitability . . . The balance sheet is severely constrained.”

A warning of a slowdown in London train commuter passenger numbers from Stagecoach sent its shares down 28.3p to 143.2p. Go-Ahead, thought to be the next-most-exposed to City job losses, fell 154p to £10.18, FirstGroup fell 35¼p to 394¾p, National Express fell 47½p to 499p and Arriva – thought to be least exposed – slid 37p to 558½p.

The FTSE 100 rose 47.1 points to 4,169.96, dragged up by a strong start on Wall Street.

Man Group, the hedge fund manager, was the top performer, up 16p to 256p, after AHL, its flagship futures fund, reported 5.8 per cent growth in value over the past month.

AstraZeneca rose 133p to £26.08 after good trial results from its antiinflammatory drug for arthritis sufferers.

Drax, the coal-fired power station, fell 30p to 558½p after Credit Suisse cut its target price from 660p to 400p, saying that long term oil prices of $50 a barrel would make its electricity look relatively expensive.

In the FTSE 250 Ashtead, the construction equipment hire group, fell 3¼p to 30p before interim results next week that are expected to show a further fall in demand. Singer retained “buy” advice but gave warning that the falling pound meant the size of its dollar-denominated debt mountain would have grown from £852 million to £1 billion in the past three months.

DS Smith, the paper and cardboard packaging group, rose 10p to 61¼p amid relief that there was no profit warning with its results. Powerflute, its AIM-listed rival, which ended the day down 1p at 16½p, gave warning last week. Mondi rose 11p to 174¼p.

New York: A robust report on American holiday spending online offset dismal economic data that stoked worries about the recession deepening. The Dow Jones industrial average was up 172.60 points at 8,591.69 at the close.