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To: maceng2 who wrote (148121)	2/4/2002 8:58:31 AM
From: maceng2	Respond to of 436258

UK market, lots of shares up for sale... thetimes.co.uk Billions of shares set to flood the stock market BY CLIVE MATHIESON AND NIC HOPKINS BILLIONS of pounds’ worth of shares are expected to flood the Stock Exchange in the coming months as distressed companies turn to equity investors to repair their balance sheets and pay off rapacious bondholders and banks. Equity strategists and fund managers said many companies with too much debt on their balance sheets will have no option but to conduct deeply discounted rights issues. Among the debt-laden companies thought to be considering rights issues are Marconi, British Airways, Rolls-Royce and Cookson Group. There was also a warning that the ability of bondholders and banks to bankrupt firms if they missed repayments or broke loan covenants meant that companies in many sectors, such as telecoms, would in future rely on equity markets for funding. The cash drain caused by rights issues, such as the £800 million ICI cash call to be tabled today, is expected to cast a pall over stock markets for several months. Equities markets are already under pressure from the new FRS17 accounting provisions, which will force companies to carry future deficits in pension funds on their profit and loss accounts. This is prompting many firms to switch their investment portfolios out of equities and in favour of more stable asset classes, such as bonds. Steve Russell, UK equities strategist at HSBC, said the increasing number of rights issues was “definitely a drag on liquidity in the market”. He added: “There is too much supply anyway because of FRS17. This is just another negative on the equity supply and demand balance. It points to a very lacklustre first quarter. “For those companies in any form of distress — in terms of profits, cashflow or too much debt — then there is no option but to go to the equity market.” Colin McLean, managing director of Scottish Value Management, said there were several highly geared companies in the UK that could be forced to turn to equity market investors for funding. “I don’t think these companies have a lot of choice in the matter,” he said. “If the banks are insisting that money is put up, then the companies will have to try to do it.” The lack of covenants on Marconi’s £4.5 billion bank facilities taught lenders to demand stricter covenants. Bondholders, who absorbed €60 billion (£36 billion) of new issues in Europe last year, are also becoming more militant to protect their capital.