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It’s time to move on, and so should Treves and his chief executive, Charles Thomson. They deserve credit for rescuing the society from financial oblivion, but when it comes to seeking compensation they are simply out of their depth.

Risks in store

WHEN a top accountant says something doesn’t make sense, it’s worth listening. He was referring to a £1.75 billion loan just provided to Tesco by a handful of banks at a breathtaking 4.75% — the same as the cost of money.

Tesco has a reputation for driving a hard bargain, but this rate shows just how desperate the banks are to get a toehold in the camp of Britain’s biggest retailer (with the hope of later selling more profitable financial products).

If the rate had been any lower, the banks would have had to pay the retailer to be one of its clients. This is an unprofitable business and it is not confined to Britain’s biggest supermarket chain. Carrefour, the French retailer, has just renegotiated a facility at a similar rate. There are other examples in Spain.

What concerns the accountant are three things. First, to make money out of corporate lending, banks are now being forced further down the risk curve. chasing ever more highly leveraged deals.

Second, having provided these loans, the banks are often selling them on to a third party or taking out a credit derivative to protect their interest should their client default.

Third, nobody knows who is buying this debt or taking on the credit risk. The trading of distressed corporate debt is big business and getting bigger.

The days of guaranteed bank loyalty are over. Often the chief executive of a company now has no idea who the ultimate owner of his debt is.

There are no insider-dealing laws that police the trading of secondary debt and, unlike equities, there is also no shareholder register. That is why it is so loved by the hedge funds, Debt traders can often get more information from companies than owners of the group’s shares. It’s a strange situation that needs to be corrected.

If the economic environment gets tougher, particularly on the high street, we will witness more company collapses. Some of these will be large companies that have been taken private on earnings multiples that cannot be sustained.

Then this game of pass-the- debt-parcel will be tested and we will see where all the risk is sitting. It will not be a pretty sight.

Doctor knows best

A CUP of tea with Tony O’Reilly is an opportunity not to be missed. The self-made tycoon, newspaper proprietor and former Lions winger, has one of the best address books in business. But above all he is a great story-teller and, without breaking confidences, he had a funny tale to tell about his good friend Nelson Mandela.

An annoyed Mandela phoned him to say one of O’Reilly’s stable of South African papers had libelled him and accused the former president of having feet of clay. “Which one?” asked O’Reilly. “The Sowetan,” said Mandela.

He was then quietly reminded by the Irishman that the newspaper in question was owned by Mandela’s doctor — and if anyone should know whether he had feet of clay, his doctor should!

Despite his advancing years, O’Reilly, 69, shows little sign of slowing down.

His two big passions at the moment are ensuring that newspapers still have a business in the internet age. The other is uranium and the re-emergence of nuclear power (as mentioned earlier). Australia has an abundance of uranium, so don’t be surprised if one of his investment vehicles builds up a position Down Under.

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