Finances and budgeting

Australia business confidence holds gains, jobs a worry

SYDNEY Feb 12 Australian business confidence improved in January as sales and profitability recovered from low levels, although firms also reported weakness in hiring that might bode ill for unemployment, a survey reported on Tuesday. The monthly survey of more than 400 firms by National Australia Bank found confidence rebounded in the mining industry in January, perhaps thanks to rising prices for some key commodities, notably iron ore. The survey's main measure of business confidence edged up a point to 3, adding to December's jump. The index of business conditions improved to -2 in January, from -5 the previous month, but remained below its long-run average of 5."While profitability and trading conditions posted solid gains in the month, employment conditions weakened considerably," noted NAB's chief economist, Alan Oster.

"Forward orders were little changed at poor levels, suggesting little upward momentum."The survey's measure of business sales rose 6 points to stand at a net balance of 1 in January, while the index of profitability climbed 7 points to -1.

However, the measure of employment fell back 4 points to -7, with construction again the weakest sector. Measures of labour costs also softened markedly, suggesting wage pressures were abating. There was scant sign of inflation anywhere in the survey, with retail prices falling amid widespread discounting.

"Overall, the survey implies underlying demand growth in the March quarter of around 2.75 percent -- a slight improvement on expectations for the December quarter but still below trend," said Oster. Oster said he still expected the Reserve Bank of Australia (RBA) would have to cut interest rates further, although the next move might not come until May. The central bank cut rates in both October and December, taking them to a record-matching low of 3 percent. It skipped a chance to ease further at its February policy meeting but said it stood ready to cut further if the economy disappointed.

Babson capital raises $5 bln for riskier bank loan investments

May 20 Fund firm Babson Capital has attracted $5 billion of new money to invest in high-yield bonds and loans in the past 12 months, as investors turn to higher-risk bank loans to offset weak returns on their traditional fixed-income investments. Babson Capital, which has more than $180 billion in assets under management, now runs $40 billion in high-yield investments after the fundraising, the firm said on Monday.

UK pension funds have started to increase their investment allocations to loans in 2013, attracted by the high rate of return despite the greater risk of default.

Leveraged loans - given by banks to companies and individuals that already have high levels of debt - are currently generating returns of around 500 basis points over LIBOR, the daily published rate at which banks lend money to each other, pension consultants say.

This compares with returns of 1.9 percent on 10-year UK government bonds and 1.36 percent on 10-year German Bunds, Thomson Reuters data shows.

Bahrains nogaholding seeks debut $350 mln loan sources

Nov 24 Nogaholding, the holding company for oil and gas assets owned by the government of Bahrain, is seeking a $350 million sharia-compliant loan in what would be a first for the group, banking sources aware of the matter said on Tuesday. The firm joins a number of other oil and gas companies, including Saudi Aramco and Abu Dhabi National Energy Co., which have sought to raise money from banks in the past few months to help cushion their finances against the effects of lower oil prices. Nogaholding is looking to arrange the Islamic five-year loan before the end of the year, with the proceeds to be used for general business purposes, two sources aware of the matter said on condition of anonymity as the information is not public.

Nogaholding, which holds stakes in companies including Bahrain Petroleum Company (Bapco) and Bahrain National Gas Company (Banagas), could not immediately be reached for comment. The company was looking for an interest rate of around 250 basis points over the London interbank offered rate (Libor), but recent market moves could see this pushed up towards the 300 bps mark, according to one of the sources.

Bahrain's five-year credit default swaps, used to insure against a default, have jumped more than 20 percent since Oct. 21, a sign that investors are concerned about the country's budget situation. Also last month, Standard & Poor's cut its credit rating on Saudi Arabia, which has strongly supported Bahrain since it experienced political unrest in 2011.

Bahrain's five-year credit default swaps were at 334.9 points by 1135 GMT. But Nogaholding will have no problem raising the money, the sources said, noting there would be support from local banks for one of the most high-profile Bahraini companies. Nogaholding has not raised a loan before so its rarity value should attract banks, while its sharia-compliant structure will distinguish it from a number of other industrial borrowers currently in the loan market.

Britain backs push for alternative small firm funding sources

LONDON May 20 British firms should look for funding outside the banking sector, Business Secretary Vince Cable said on Monday, marking the latest effort to generate growth among small- and medium-sized businesses (SMEs). Faced with a barely growing economy, the government has targeted smaller companies as a major source of growth and has introduced reforms to encourage start-ups and make it easier for existing businesses to expand."Britain's businesses cannot grow, export and innovate without proper access to bank credit. But they also need alternatives when looking for finance," Cable said. "The government wants to see a shift in the market structure towards non-bank lending."

Bank funding for SMEs has shrivelled in the wake of a global banking crisis, which has made traditional lenders more cautious and, according to a recent UK study, created a cash-flow crisis that is stifling small firms.

Cable's comments coincided with the launch of a guide to alternative sources of financing, published by business lobby group the Confederation of British Industry (CBI).

The CBI said high-growth, medium-sized businesses could be worth an additional 20 billion pounds ($30.4 billion) to the British economy over the next seven years if they can gain access to finance through alternative channels. The CBI highlighted traditional but underused funding options, such as the retail bond market and private debt placements, but also promoted more innovative approaches such as online "crowd-funding" platforms which enable individuals and businesses to back specific projects.