The group, which runs 266 HMV stores in the UK and Ireland, has secured a £220m banking facility covering the next two years, lifting uncertainty over its immediate future.

But the new package will see its lenders, including Lloyds Banking Group and Royal Bank of Scotland, issued with warrants worth 5 per cent of the company that can be converted into shares from next year.

And they have imposed tough lending terms, including an interest rate of 4 per cent above current market rates and an exit fee of 14 per cent in relation to a £90m portion of the facility if it has not been repaid by January 2013.

Kate Calvert, an analyst at Seymour Pierce stockbrokers, said the terms of the agreement showed the banks “clearly have the company over a barrel”.

The facility has been reduced from an existing £240m package after the banks demanded that some of the £53m from the recent proposed sale of the Waterstone’s book shop chain is used to reduce its debt.

The agreement is dependent on HMV completing the Waterstone’s sale to Russian billionaire Alexander Mamut at a shareholder meeting on June 23.

And reflecting pressure on HMV to pay down its debts, no dividends will be offered to shareholders until the £90m slice of the loan has been repaid.

Simon Fox, HMV’s chief executive, said the new banking facility was another important milestone in securing the financial stability of the group, which has issued four profit warnings in recent months.

HMV has struggled to counter falling sales of CDs and DVDs as more consumers shop online and supermarkets compete for business.

The group hopes to revive its fortunes by selling more gadgets such as iPads and iPods and by growing its ticketing and festival business. It has been encouraged by the performance of six trial stores using the technology-led format and wants to convert another 150 shops to the new format by the autumn.

HMV said current trading was in line with its last update, when it revealed that like-for-like sales at its UK and Ireland stores fell by 18.8 per cent in the 17 weeks to the end of April.

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A new £150m discounted loans scheme, specifically aimed at Britain’s small businesses, has been unveiled today by the multinational financial giant Santander, which has taken over a range of British banks including Abbey National and Alliance and Leicester.

The finance has been secured from the European Investment Bank (EIB), and will be made available at a 0.7% discount from Santander’s typical business lending rate.

In addition, the Royal Bank of Scotland (RBS) is also applying for money from the EIB, and hopes to secure a total of £300m, and will be made available to small firms as 0.6% below its standard rates.

While a series of reports and surveys have shown that small business lending has fallen to new lows in recent months, both Santander and RBS remain adamant that they are committed to helping small companies gain finance.

Discussing the launch of the new discounted loan scheme, Steve Pateman, head of Sander’s corporate and commercial banking division, told the Daily Telegraph: “Ensuring businesses are able to access affordable investment capital is crucial for the UK’s economic recovery”.

Meanwhile Stephen Hester, chief executive of RBS, recently told the Manchester Evening News: “We are trying hard to consistently improve what we do and make sure fewer firms fall between the cracks.

“Some 85% of small businesses that asked us for a loan got one last year, which is as high as it was before the crisis.”

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Published: April 7 2011 19:29 | Last updated: April 7 2011 19:29

George Osborne, the chancellor, is preparing to make more than £4bn of British-backed loans available to Portugal in advance of talks in Budapest today on the eurozone crisis.
Although Mr Osborne is being criticised by Eurosceptic Conservative MPs for helping to bail out a eurozone member, the chancellor also sees the Portuguese crisis as justifying his own tough action to sort out UK public finances.

“First Greece, then Ireland, today Portugal – all of them countries that did not convince the world they could pay their debts,” Mr Osborne told the British Chambers of Commerce conference on Thursday.

“We can see the risks that would face Britain if we were not dealing with our debts and paying off our national credit card. These risks are not imaginary. They are very, very real.”

In a swipe at Ed Balls, the shadow chancellor, Mr Osborne added: “Those in our country who deny the urgent need to deal with our deficit are playing Russian roulette with Britain’s national sovereignty.”

Mr Osborne is waiting to hear precisely what assistance Portugal is seeking, but Treasury officials expect the bail-out package to follow the template of last year’s Irish rescue.

On that occasion, aid was split evenly three ways between the International Monetary Fund and the so-called EU-27 European financial stability mechanism – both of which involve the UK – and the eurozone-only bail-out fund.

If Portugal ends up requesting €70bn to €80bn (£61bn-£70bn), then Britain might guarantee loans of about £3bn through the EFSM and £1bn to £1.5bn as a shareholder in the IMF.

Mr Osborne, who will attend today’s meeting of EU finance ministers in Hungary, will stress that these are loan guarantees and that Britain will have to hand over money only if Portugal defaults.

Mr Balls rejected Mr Osborne’s suggestion that Britain’s problems were similar to Portugal’s at the time of the last election – even if Lisbon’s deficit was lower than that of the UK.

The shadow chancellor argues that Britain had a much lower stock of debt than Portugal and was not constrained by membership of the eurozone.

Also, its public debt does not need refinancing at such frequent intervals.

Mr Balls told Sky News that Mr Osborne’s policies were putting Britain in danger because he was positioning the UK among a group of “slow growth countries” that included Greece, Ireland, Portugal and Denmark.

“The fact is, last year the Portuguese raised VAT twice,” said Mr Balls, claiming that Lisbon’s austerity measures had contributed to its economic downfall.

“They have a market ­crisis because their economy is not growing. If you have not got growth, you can’t get your deficit down.”

Meanwhile, Raoul Rupa­rel, an economic analyst at Open Europe, a think-tank promoting EU reforms, said a bail-out would not help Portugal resolve its long-term problems.

“We strongly believe that the UK government should make its participation in this bail-out conditional on some form of restructuring of Portuguese debt,” said Mr Ruparel.

“Otherwise there will be little impact on the country’s long-term problems. If long-term solutions aren’t found, the UK will remain exposed to eurozone meltdowns in future.”

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There were 529,300 new loans made to house buyers last year, up 3% from 2009, with their value rising 11% to £77.1bn.

The CML said lending was now “stable but subdued”, although it was still at “historically low levels”.

Sue Anderson from the CML says she expects 2011 to be broadly similar to 2010.

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Despite all the government warnings, the clear signs are that the great majority of universities in England will raise fees above £6,000 – with most going straight to the £9,000 maximum.

Oxford and Cambridge were the first to put their heads above the parapet this week.

But others will follow over the next few weeks as universities set their fee levels for the 2012-13 academic year.

There are several reasons why universities say it makes no sense for them to stick to the £6,000 level.

The first is just brass tacks. Universities estimate that, on average, they need to charge at least £7,500 just to maintain their current income levels.

‘Badge of quality’
This is because the government is cutting teaching grant by 80% over the next few years.

Some universities say their “standstill fee” is even higher if they are to compensate for losses in research and capital funding too.

The second reason is that the maximum fee of £9,000 will inevitably become a badge of quality.

No university wants to risk being perceived as second-rate by charging less than others.

The few who did so when the fee cap was raised to £3,000 quickly regretted being out of line.

Indeed, as the NUS President, Aaron Porter, regretfully told an audience of university advisers this week: “Price will be set as a proxy for academic league table standings”.

And it appears that students may take the same view as their vice-chancellors.

But are these warnings just bluster?

It will be two or three years down the road before the independent regulator, Offa, can decide if a university is failing to fulfil the “access agreement” imposed as a condition of exceeding fees of £6,000.

Like a struggling teacher threatening to send recalcitrant pupils to the head teachers’ office, the government also threatened universities with unspecified further punishment if they are found to be “clustering charges at the upper end of what is legally permissible”.

In the guidance letter to Offa, Business Secretary Vince Cable, said the government would consider taking new powers through legislation to ensure there is “differentiation” in fee levels.

However, despite this sabre-rattling, vice-chancellors I spoke to doubted whether Offa has the teeth to impose a reduction in fees.

They also seriously doubted whether the government could take such powers over autonomous institutions.

Finally, there is another reason why universities will see little reason to keep fees down.

This is the result of an anomaly in the repayment arrangements for graduates which means that they will pay back at the same rate, whatever level of fees they have paid whilst undergraduates.

This is counter-intuitive so needs some explaining. Under the new system graduates start to repay their loans once they are earning over £21,000. They will pay 9% of their salary above this level.

So, for example, a graduate on £30,000 a year will pay 9% of £9,000 (the amount they earn above £21,000). That comes to about £16 a week.

They will pay £16 a week whether they have a tuition loan of £27,000 (three years at £9,000 each) or £18,000 (three years at £6,000).

Debts
The only difference for those with the bigger loan is that they will have to keep paying for longer before they eventually repay their full debt.

In the example above, graduates are likely to be paying back for at least 10 years, maybe longer.

Indeed, as we know, the government expects that about a third of graduates will never pay off any debt and another third will only repay a proportion of it.

So, if you are a 17-year-old choosing between a £6,000 university and a £9,000 university, there is really little incentive to choose on the basis of price.

It will make no difference to your outgoings until you are approaching middle age.

So, one way and another, it is a one-way bet that from September 2012 the great majority of students in England will be paying close to £9,000 a year for their courses.

Mike Baker is a freelance education journalist and broadcaster

Addressing the same audience, Professor Julia King, vice-chancellor of Aston University, said student representatives at her university’s council had argued fees needed to be set at £9,000 or they would object the university was planning to spend less on them than other universities.

There is also anecdotal evidence that students feel it may harm their employment prospects if they are seen as coming from a university with a £6,000 price tag, rather than a £9,000 one.

We have all got used to rating things by their price. There is a sense that “you get what you pay for”, whether it is mobile phones or university courses.

Professor King echoed the views of many other university leaders I have spoken to when she said “there is not going to be any real competition on price”.

The government should not be too surprised that universities will not stick to the £6,000.

‘Claw back’
At a meeting this week between the Deputy Prime Minister, Nick Clegg, and vice-chancellors it emerged that the Treasury has modelled its future spending on average fees of £7,500.

And this is where it becomes interesting. On the Treasury model, the cost of funding student loans would be £3.6bn.

But if average fees are more like £8,000 or even £8,500 the Treasury will be out of pocket.

Vice-chancellors were told the government could not allow this to happen and the Treasury would claw back any excess spending on student loans from university teaching grants.

This is the background to the rather desperate warnings from government this week that universities charging above £6,000 could be fined or forced to cut their fees if they fail to admit more students from poorer homes.

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Rupert Jones The Guardian, Friday 14 January 2011

If you have a squeaky clean financial record and are looking to borrow, the good news is that a new year rate war has erupted in the personal loans market.

On Tuesday, Nationwide cut its personal loan rate for its current account customers to a typical 7.2% APR, which it said was “the UK’s lowest personal loan rate” – beating a Santander deal. This new rate is for loans of up to five years between £7,500 and £14,999.

Those who do not have a Nationwide FlexAccount can benefit from a typical rate of 7.3% APR, though to receive it, you have to apply through Moneysupermarket.com. This offer applies to loans between £7,000 and £14,999 for a term of up to five years.

On Thursday, Santander hit back, matching Nationwide’s 7.2% APR offer. The Santander deal is aimed at those borrowing between £7,500 and £14,950 and is only available through price comparison sites such as uSwitch.com. There is also a rate of 8.5% APR for loans over £5,000.

Many other playerss, including HSBC, First Direct, Barclays, Tesco Bank, M&S Money and Sainsbury’s, have also slashed their borrowing costs. However, the rate cuts have generally been targeted at larger loans (£7,000-plus), and in many cases you have to be an existing customer of the bank or lender to benefit, says Andrew Hagger at Moneynet.co.uk.

If you are looking to borrow a smaller amount – perhaps £2,000 or £3,000 – the interest rate will often be well into double figures, and in some cases pushing 20% APR, he adds. Internet bank Smile’s typical rate for a £2,000 personal loan is 19.9% APR, while at Santander it is 18.9% APR.

“Smaller loans may be considered less profitable and a greater risk; however, if consumer spending is to remain strong despite the VAT hike, then lenders need to do their bit by trimming the cost of borrowing across the board,” says Hagger.

Post-Christmas, many people will be giving some thought to sorting out their finances. January is often when people look to consolidate their debts into one loan – something that is certainly not an answer for everyone but may suit some who are juggling various costly debts such as store card and credit card borrowing.

However, before taking the plunge with a personal loan, think about whether another product – such as a credit card with a decent balance transfer offer or introductory offer on purchases – might suit your needs better. “Think carefully about any borrowing. Consumers should be sure they really need to do it, borrow as little as possible, and budget for any repayments,” says Stefan Maryniak at uSwitch.com.

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Belgian financial services group KBC on Thursday warned that deterioration of its Irish loan book and irregularities in a British subsidiary would prompt it to take writedowns and provisions of up to €400m ($524m) after tax.

In an unexpected trading update ahead of its full-year results, the company said underlying results from other business units were in line with expectations, except for moderate results from its merchant banking arm.

KBC is heavily exposed to the Irish mortgage market through its subsidiary, KBC Bank Ireland, and warned that it had seen “a further deterioration in market conditions” there since November, when it last updated investors.

Though the EU-led bail-out agreed for Ireland was likely to reduce the risk of default, KBC said it now expected an accelerated restructuring of Irish banks that would have a negative effect on asset valuations in the industry.

“Consequently, KBC has increased its provisions in respect of its commercial lending portfolio, mainly in its relatively limited real estate development and investment financing activities,” it said in a statement.

“Moreover, any economic recovery will be slower than anticipated in November 2010 and is not expected to have a positive effect on employment levels in the short term.

“The continuously high level of unemployment may cause higher arrears and default ratios for mortgage loans to retail customers. As a result, KBC has also increased its provisioning of its residential mortgage portfolio,” it added.

Despite a €300m impairment provision now expected for the fourth quarter, KBC stressed that its Irish subsidiary remained sufficiently capitalised.

A deterioration in Ireland had been factored in by investors, and was seen by many as the biggest factor behind a slip in KBC’s share price in recent months, from €36.29 in mid-October to €26.67 at close on Wednesday. The shares in Brussels fell further on Thursday, opening 2.8 per cent lower at €25.91.

The bad news in Ireland was compounded with the admission of an unspecified “irregularity” in KBC Lease UK, a project financing arm that had been earmarked for divestment.

The bank said that internal controls in the fourth quarter had “identified irregularities in some of the contracts between that KBC entity and third parties,” which are currently being investigated.

The maximum net suspected impact of the irregularities fraud is €150m and a provision has been made.

“The effect of the above-mentioned events on reported profit will not be substantial,” said the statement.

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The government is facing urgent calls from anti-poverty campaigners for a crack-down on ‘profits from the poor’ due to exorbitant interest rates.

As poverty levels rise, millions of UK citizens are facing increasing financial risks from debt due to excessively high interest rates. Campaigners are calling for government action ls against loan companies and banks making large profits from the exploitation of the poor.

Labour MP Jenny Chapman will introduce a bill next week which gives protection to those on the poverty line from aggressive loan marketing on TV and radio by loan companies who target the cash-strapped on low incomes. The Community Money Advice charity fears benefit reductions, fuel cost increases, the rise in Vat and the cost of living combined with interest rate rises will plunge one in 10 UK homes into serious debt.

According to government figures showing appeals for emergency loans have trebled over th last five years, the working poor and families on benefit run the highest risk. The most vulnerable groups in society applied for a total of over three million crisis loans in 2010, with job cuts, cuts in public services and the VAT increase expected to impact further on the poor.

Inevitable interest rate rises will cause hardship for homeowners on variable rate mortgages, with the numbers heavily in arrears already at a quarter of a million with repossessions looming as banks take a tougher line. In a sign the government is becoming aware of the problem, selected job centres will begin distributing vouchers for emergency food supplies in January and the scheme will be rolled out nationwide in April.

Over 2.1 million working families, the highest number ever, now live in poverty, with a million more joining them when reforms to tax and benefit laws begin to bite. UK personal debt stands at £1.5 trillion, more than GDP. Legal loan sharks charge up to 2,600 per cent annually and calls are increasing for interest rates to be capped and loan advertising to be strictly regulated.

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The Government’s bill for propping up the banking sector has nearly halved from its peak – but still stands at a mammoth £512 billion, a new report reveals.

In its latest update on state support to the banking sector, the National Audit Office (NAO) said the figure had reduced dramatically from the £955 billion seen at the height of the financial crisis.

The outlay has eased after the repayment and closure of some bank support schemes, as well as the removal of guarantees – such as those offered to Northern Rock depositors.

However, the Government is still on the hook for support including £131 billion to Royal Bank of Scotland under the toxic asset insurance scheme, more than £70 billion for its stakes in part-nationalised players and £22 billion in loans to Northern Rock.

The NAO said while the Government would still be paying for the support for many years, the most likely scenario was that there would be no overall loss on the main guarantees, such as the asset protection scheme for RBS.

But the NAO said it was still unclear if the taxpayer would ever be able to recoup its losses on stakes held in RBS and Lloyds Banking Group – currently in the red to the tune of £12.5 billion.

The report confirmed that RBS and Lloyds have not recovered from the financial crisis at the same pace as their competitors, with shares still at a paper loss for both banks despite clawing back into profit earlier this year.

Today’s findings also revealed that despite the overall reduction in total support, the Government is shelling out a mammoth £5 billion a year in interest on borrowings used to finance the bail-out support.

It took out a further £7 billion in net debt this year to finance banks, at £124 billion, after interest on borrowings and money forked out in the restructuring of nationalised Northern Rock.

Interest on bail-out borrowings is 11% of the total interest on public sector net debt, according to the NAO, although it added it was largely being offset by fees and interest received from banks in return for support.

Amyas Morse, head of the NAO, said: “The most likely scenario is that the taxpayer will not pay out on the guarantees.

“Optimism on this score should be tempered, however, with the realisation that the risk of further shocks to the financial markets and of significant loss to the taxpayer has not gone away.

“The Treasury is likely to be paying for the support it has provided to UK banks for years to come.”

The NAO’s conclusion offers welcome cheer, given that the Government had feared the total cost of supporting the banks stood at between £20 billion and £50 billion in 2009.

However, the eventual cost to the taxpayer is dependent on the Government offloading its stakes in RBS and Lloyds and recouping loans made to the banking sector.

Selling these shareholdings will not be easy, given that the total value is more than six times greater than the largest European sale of already listed shares, said the NAO.

It stressed the shares will need to be sold in stages, while the timing is also a moot point given potential regulatory and policy changes – such as the Independent Commission on Banking’s report into competition in the sector, which could recommend breaking-up Lloyds.

The NAO also warned the Government may be called on to pump more cash into the banks before selling its stakes, given the upcoming challenges of new stringent capital reserve requirements.

It said strong banks that meet the new European requirements early may use this to secure competitive advantage, which could force the state to defend taxpayer value in banks, such as by possible future capital injections.

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