Forex earned foiled

Article Abstract:

The unusually large difference between US and UK interest rates has been a boon for British companies. Quite a number of UK firms with considerable North American assets have taken advantage of the low American rate to avail of cheap finance. Some companies borrowed in the US even as their money deposited in the UK were earning high interests risk-free. However, the expulsion of the British pound from Europe's Exchange Rate Mechanism has caused sterling interest rates to fall from 10% to 7%, thus narrowing the gap between the British rate and the 3.5% US rate. Economists expect the interest rate differential to shrink even further since the UK rates are likely to drop by an additional 2% around the middle of 1993. This trend can be damaging for companies that pursued the rate differential but did not hedge against exchange rate turbulence.

Analysis, Foreign exchange, Interest rates, International finance

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Testing the partnership to the limit

Article Abstract:

The difficult task of privatizing British Coal Corp (Coal) and British Rail (BR) may strain the privatization relationship between the UK's government and its financial center. The Queen's Speech made it clear that Coal and BR will not be privatized via flotation. Instead, Coal is being readied for a trade sale while a combination of franchising out and trade sales is being planned for BR. The problem is that neither company is attractive to buyers at present. In 1991, BR posted losses worth 742 million pounds sterling before taxes. Coal reported 78 million pounds in profit in the same year, but prospects do not look good for the company considering the diminishing demand for generators and the continuing decline in prices. The two companies require polishing up and reconfiguring if they are to attract buyers.

Railroads, line-haul operating, COAL MINING, Railroads, Mergers, acquisitions and divestments, Privatization, Privatization (Business), Coal industry, British Rail, British Coal Corp.

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