Monday morning business bulletin

Sep 22 2008 By Karen Dent

Stock markets could see more volatile trading today as they react to the US Government’s planned US$700bn (£383bn) banking sector bail-out.

US Treasury Secretary Hank Paulson is working on legislation that will allow the US government to buy up hundreds of billions of dollars worth of "toxic" bank assets that have led to the current banking crisis and threatened world economies.

It has been described as the largest operation of its kind since the Great Depression.

The plans were unveiled at the end of last week following a tumultuous week of financial turmoil, and were being finalised by officials in Washington over the weekend. The White House was hoping to get them agreed today.

Lord Turner, the new chairman of City Watchdog the Financial Services Authority (FSA), said the scheme could prove to be a turning point.

Building supplies giant Wolseley today announced a sharp fall in profits but said it remained confident it will meet its banking covenants this year.

Faced with a significant deterioration in trading conditions, the Build Center and Plumb Center owner reported bottom-line pre-tax profits of £145m for the year to July 31, compared with £634m a year earlier.

The period included £76m of restructuring charges, including from 270 branch closures and a 7,100 reduction in headcount, mainly in north America.

Another 600 roles have been removed since the start of the new financial year, while property and business disposals of £46m have been realised.

Chief executive Chip Hornsby said the actions taken so far left the group well placed to meet its banking covenants over the year.

Yellow Pages owner Yell Group today suspended dividend payments to shareholders in a bid to reduce debt.

The directories firm, which assured its financial performance is "on track", said it aims to bring debt below four times its underlying earnings figure.

Yell has debts of about £3.7bn, built up from acquisitions in Spain and the US. It is also seeking additional flexibility from its lenders through an increase in its future covenant headroom.

The Sunday Times reported yesterday that in return for the new covenants interest rates on Yell’s loans were likely to be raised from 7%, to possibly as high as 9% annually.

The pound at 9am was US$1.8424 compared to US$1.8310 at the previous close, while the euro at 9am was £0.7899 compared to £0.7871 at the previous close.