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British business takes fright at prospect of a miliband government


* UK business alarmed by Miliband rhetoric* Business tends to support Conservatives, but backed Blair* Would like EU vote brought forward if Cameron wins* Business could campaign to keep Britain in EUBy Kate Holton and William JamesLONDON, Feb 19 British opposition leader Ed Miliband has so alarmed business executives with his talk of 'asset strippers' and 'tax dodgers' that many want a Conservative win at the election, even if it carries the risk of an exit from Europe. Representatives of some of Britain's biggest firms accuse the Labour party leader of demonising big business as a way to align himself with ordinary voters before the May 7 election. Pledges from the 45-year-old to set energy prices, reform banks and lift the minimum wage have been followed by several uncomfortable meetings with the heads of companies. As a result, executives are backing David Cameron's Conservatives, even though that entails a referendum on Europe before the end of 2017, potentially deterring companies from investing in Britain and, if there is a vote to leave, disrupting trade with the 500 million-strong EU. In return, they would like the in/out vote brought forward."On the one hand we have Labour ... that seems to believe that bashing business will be good business at the ballot box, but you don't have a referendum," Martin Sorrell, CEO of the world's largest advertising agency WPP and an employer of 179,000 people, told Reuters."On the other you have the Conservatives who tend to be more attuned to business but have a commitment to a referendum."British business has long aligned itself with the centre-right Conservatives, but that changed under Tony Blair, Labour's most successful leader, who embarked on a "prawn cocktail offensive" to build relations with Britain's boardrooms before winning three elections starting in 1997. One Blair aide declared that Labour was "intensely relaxed about people getting filthy rich".

But 18 years on and with the Conservatives still blaming Labour for the economic crash, Miliband has sought a different tone. Elected to lead Labour largely with the backing of unions, he set out his stall towards business in 2011 when he described some firms as predators and asset strippers. His pledge in 2013 to cap household energy prices tapped into the frustration of voters tired of constant increases. And he has since painted himself as the man to take on the vested interests of business and the London-centric elite."A lot of the meetings between my clients and Ed Miliband have been very unsatisfactory," said Charles Lewington, managing director of lobbyists Hanover, who counts 25 global firms among his 75 clients."For five minutes he says tell me what your concerns are, and then for 55 minutes he says this is how I think business should operate in a world of austerity where ordinary people are not earning enough."Nearly all Hanover clients back the Conservatives, he said. A recent poll of executives said the same.

"PRAWN COCKTAIL OFFENSIVE" Meetings between senior executives of another FTSE-100 company and Ed Balls, Miliband's finance spokesman, were much more constructive, one source said, and other execs noted that politicians often change their tone once in power. A source familiar with Labour said the party was also being punished for its plans to tax the rich more, which include a "mansion tax" on expensive properties as well as a higher rate of income tax for the top earners. But as the election approaches, with no clear winner in prospect, Miliband has been compared with some of the most anti-business Labour leaders of the 1980s, when an ideological battle raged over the role of the free market and the state. He has billed Cameron's Conservatives as the 'party of the rich' with one set of rules to its friends who avoid tax, and another entirely fir those who cheat the benefit system. A recent opinion poll showed the approach was gaining traction, with nearly twice as many Britons thinking Miliband is on the side of ordinary people as opposed to those who think he is a danger to the economy. But it has set alarms ringing not only in the shining towers of London but in offices and factories up and down the country.

"It's an easy trick for politicians to point at business and call them fat cats," said Richard Steele, the non-executive chairman of pottery company Portmeirion, which employs 600 people and is based in Stoke on Trent, central England."But interventionism is dangerous, Ed Miliband must understand that there are laws of unintended consequences."TOXIC DEBATE Voting Conservative however is no easy option for business. Facing a growing threat from the anti-EU UKIP party and a number of his own party members, Cameron has vowed to clamp down on immigration and renegotiate Britain's ties with Brussels. Several top British chief executives have told Reuters they fear the "nightmare" uncertainty a referendum would bring. Some, speaking on condition of anonymity, said the issue was now so toxic it could only be settled with a vote, and they would like to see a reduction in the bureaucracy coming from Brussels. But the sooner it can happen the better."Despite being pro-European, the damage Labour could do is clearly much bigger than the positive of their position on Europe," the chief executive of one FTSE 100 company said, adding that it would be better to have Cameron win the election and then win a referendum to keep Britain in the EU. For Portmeirion's Steele though, the very prospect is terrifying. While he accepts that the Conservatives are more a friend of business, he worries that an exit from Europe would hit London's position as a financial centre."I feel as though they are (raising the stakes) and I'll be really frightened if they get it wrong," he said. Several CEOs said they would be willing to drop their usual reluctance to speak out and campaign for Britain to stay within the EU, following a similar approach taken in Scotland when business leaders campaigned to keep the country together."If we're going to have (a referendum), let's have it quickly," Jerry Buhlmann, CEO of the 23,000-strong Dentsu Aegis Network marketing firm, told Reuters. "It is legitimate for business to have a point of view. We're not the bad guys."

Rlpc styrolution holds banks to account on 105 bln euro loan


Oct 9 German plastics maker Styrolution's decision to replace two lead banks on a 1.05 billion euro-equivalent (1.34 billion US dollar) leveraged loan shows borrowers taking a tough line with lenders in a softening market, banking sources said on Thursday. Styrolution mandated Citigroup and Credit Suisse to lead the loan, which will refinance existing senior bonds and fund Ineos' $1.5 billion purchase of a 50 percent stake in Styrolution that it did not already own from German chemicals manufacturer BASF. The two banks offered aggressive terms to win the mandate in the summer and launched the deal in July, but were unable to sell it after market conditions changed and the loan was pulled in August. The deal was not underwritten and was being sold on a 'best efforts' basis, which allowed Styrolution and its owner Ineos to review options and change banks. Barclays and JP Morgan stepped in to lead the deal, which was relaunched in October with different terms, including a smaller first lien loan and a new second lien loan. A planned 100 million euro dividend payment to Ineos was cancelled. Citigroup declined to comment. Credit Suisse, Ineos and Styrolution were not immediately available to comment. UNUSUAL MOVE Replacing arranging banks on large leveraged loans is an unusual and an aggressive move, which shows borrowers holding banks to account as market conditions soften.

"Styrolution shows that companies and sponsors need to be more cautious about the terms they negotiate or are offered from banks," a loan syndicate head said. Banks were bidding aggressively and undercutting each other to win mandates before the summer and relying on market flex to improve terms in order to sell the paper to investors if required, but are now growing more cautious."Some banks have been super aggressive and there should be a realisation beginning to dawn that pledging the most aggressive terms and squeezing a deal isn't the best strategy," the loan syndicate head said. Styrolution's decision to replace its lead banks is a cautionary tale for lenders which could lead to less aggressive bidding, as bankers anticipate a volatile fourth quarter.

Citigroup and Credit Suisse were expected to make combined fees of around 12-16 million euros, or 75-100 basis points (bp), on Styrolution's refinancing, two loan bankers said. Styrolution's switch of lead banks has little precedent in Europe. The company was set up as a joint venture between Ineos and BASF in 2011. Ineos is a sophisticated and experienced debt market borrower and is accustomed to calling the shots with banks after completing billions of euros of leveraged loans in the last 10 years. Arrangers of leveraged loans may have to rely less on market flex going forward, which is typically used to sweeten terms on deals that struggle to sell."A lot of banks over promise especially on best efforts deals as the risk is lower, but once they win a mandate they find they can't deliver. It is quite good that the borrower recognised what happened and dealt with it," another loan banker said.

COMPARING TERMS Styrolution's loan was originally structured as a 1.6 billion euro all-senior loan, with price guidance of 350-375bp on the euro tranche and 350bp on the dollar tranche. Both tranches had an Original Issue Discount of 99.5 with a 1 percent Euribor/Libor floor, which guarantees minimum returns for investors. A 100 million euro dividend payment to Ineos was also included, which has now been scrapped. The deal was relaunched as a 1.05 billion euro-equivalent term loan, with price guidance of 450-475bp, an OID of 99 and a 1 percent Euribor/Libor floor. The financing now includes around 350-400 million euros of second lien loans and around 100 million euros of balance sheet cash. Ineos agreed to buy the other half of Styrolution that it did not already own to gain full ownership of company on June 30. (1 US dollar = 0.7834 euro)