ABB in $3.9bn deal for Thomas & Betts

ABB on Monday accelerated its push into the US with a $3.9bn agreed bid for Thomas & Betts, a leading maker of low voltage electrical products.

The Swiss electrical engineering group said it would pay $72 a share for Thomas & Betts, a 24 per cent premium to Friday’s closing price and 35 per cent more than the volume weighted average price over the past 60 trading days.

 

The deal, which will be subject to majority approval at a Thomas & Betts shareholders’ meeting in the second quarter, will propel ABB, which already makes a range of low voltage products such as switches and circuit breakers, into a much more prominent position in the US.

Low voltage products are used widely in the electricity business, and notably in construction.

Joe Hogan, ABB’s US-born chief executive and a former head of GE’s Healthcare subsidiary, has singled out North America as a region where the group is under-represented. Acquiring Thomas & Betts will plug further gaps following ABB’s $4.2bn purchase of Baldor, the biggest US maker of electrical motors by sales, in late 2010.

ABB indicated late last year it had allocated up to $30bn for acquisitions in the next five years. Michel Demaré, chief financial officer, on Monday set a $9bn-$18bn range, the lower end of which had roughly been reached with Baldor, Thomas & Betts and some smaller deals.

Mr Hogan said he hoped to see a similar development with Thomas & Betts as with Baldor, where a predominantly US-focused company achieved a significant spurt in sales and profits after integration into ABB’s international sales and sourcing network.

ABB predicted the latest deal would produce annual synergies of $200m, split evenly between costs and revenues, by 2016.

“Thomas & Betts is a well-run company with strong brands and excellent distribution channels in the world’s largest lob voltage products market,” said Mr Hogan.

“Strategically, it’s a great fit. This is another big step toward our goal of expanding our presence in the key North American market,” he added.

Thomas & Betts, which is based in Memphis and has 9,400 employees, will form a new global business unit within ABB.

The company, which is to announce its 2011 results later on Monday, is expected to report sales of $2.3bn and operating profits of $390m. Low voltage products comprise the overwhelming bulk of Thomas & Betts’ operations, with operating profit margins of about 19 per cent. The group also manufactures electricity transmission masts and heating and ventilation equipment.

“This is the right time for this transaction and I believe strongly that ABB is the right partner for our business going forward,” said Dominic Pileggi, Thomas & Betts’ chairman and chief executive.

ABB was advised by Bank of America Merrill Lynch. Deutsche Bank advised Thomas & Betts.

 

James Murdoch Loosens London Ties

James Murdoch, News Corp.’s deputy chief operating officer, is cutting some of his ties to London ahead of a move to New York that was delayed amid a phone- hacking scandal that engulfed the U.K. business.

Murdoch, the son of News Corp. ChairmanRupert Murdoch, is leaving the board of London-based GlaxoSmithKline Plc (GSK) after less than three years, the U.K. drugmaker said yesterday. Murdoch’s strategy adviser for Europe, Matthew Anderson, is stepping down and moving to San Francisco, News Corp. said separately.

James Murdoch was named deputy chief operating officer last March, four months before reports of voicemail interception by tabloid journalists in the U.K. forced News Corp. to drop its bid for British Sky Broadcasting Group Plc. (BSY) U.K. lawmakers are currently preparing a report about Murdoch’s role in the scandal and may publish their findings in coming weeks.

“The strategy has shifted with the political issues in London, with the phone-hacking scandal, the BSkyB bid falling through, the fact that James is moving from London to New York,” saidAlan Gould, an analyst at Evercore Partners in New York. “Most of the power is in New York. They want most of the strategic planning with the senior executives.”

There are no plans to replace Anderson in London, according to two people with knowledge of the considerations. They declined to be identified because the decision is private. Alice Macandrew, the former head of public relations for News Corp. in Europe, left her role in December.

News Corp. spokesman Jack Horner declined to comment yesterday on the management changes.

Lawmaker Investigation

Murdoch was given the deputy COO job in March 2011, with News Corp. announcing plans to move the 39-year-old, who is Rupert Murdoch’s youngest son, to its headquarters in New York. By July, the company’s News International U.K. publishing unit faced phone-hacking allegations against the News of the World, leading to the tabloid’s closure. Both Murdochs appeared before U.K. lawmakers to explain their role.

The fallout also led to the resignation of Rebekah Brooks, the CEO of News International, and Les Hinton, head of the Dow Jones & Co. division who had previously worked in the U.K.

Shareholders of News Corp. and pay-TV broadcaster BSkyB, partly owned by News Corp., lodged protest votes against Murdoch after the scandal engulfed the company. Murdoch is chairman of BSkyB and also sits on the board of Sotheby’s (BID), the largest publicly traded auction house.

‘Ill-Suited’

Murdoch should quit the board of Sotheby’s, said CtW Investment Group, an adviser to union-sponsored pension funds with more than $200 billion in assets. The phone-hacking scandal makes Murdoch “ill-suited for service” on the boards of Glaxo, Sotheby’s and BSkyB, CtW said.

Sotheby’s spokeswoman Diana Phillips said in an e-mailed statement that “James Murdoch is a valued member of Sotheby’s board.”

Lawmaker Tom Watson, a member of the U.K.’s Labour party and a member of the Parliament’s Culture Committee investigating the scandal, said in July that James Murdoch should face criminal charges and was unsuitable to be a director of BSkyB, in which News Corp. (NWSA) owns 39 percent.

James Murdoch told lawmakers in November that News of the World editor Colin Myler failed to tell him in 2008 that phone hacking at the now-defunct tabloid was common. Myler and the newspaper’s lawyer Tom Crone have repeatedly insisted that they discussed evidence with Murdoch.

Succession

Murdoch joined News Corp.’s U.K. publishing unit News International as chairman in December 2007, after the hacking took place. Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.

When News Corp. announced Murdoch’s New York move, analysts including David Joyce at Miller Tabak & Co. said the decision was probably part of a plan for James to succeed his father at some point.

Following the phone-hacking scandal, it will be important for Murdoch to work with Chief Operating Officer Chase Carey, says Michael Morris, an analyst at Davenport & Co. LLC.

“Chase Carey is the single-most important operational executive at the company, and he’s based in New York,” Morris said. “If executives are going to be geographically aligned with the economics of the business, then most of your executives will be based in New York.”

ArcelorMittal to cut 630 jobs at Czech plant

Global steel conglomerate ArcelorMittal has confirmed it will cut 630 of the 6,000 jobs at its Czech plant in the western city of Ostrava to boost competitiveness.

ArcelorMittal received 700 requests under the voluntary redundancy programme offering employees the equivalent of 11 to 24 months’ salary depending on seniority as part of a compensation package.

“The number of 630 is not definitive, the process is still underway. The plan covers both blue and white collar workers of all ages,” ArcelorMittal Ostrava spokeswoman Vera Breiova told AFP today.

The Czech branch of the company already shed 1,200 jobs in 2009. The first voluntary lay-offs are to take effect on January 31.

Tougher economic times in Europe appear to have dictated the company’s decision. Breiova told AFP it was taken as part of efforts to improve worker productivity.

“Considering the uncertain situation currently dominating the European steel market, the company must be competitive,” she added.

Meanwhile, Vitezslav Prak, a local trade union official at the plant has signalled unions will be seeking wage hikes for remaining employees.

ThyssenKrupp in talks with Outokumpu

ThyssenKrupp, the German steel and technology conglomerate, is in talks with Finland’s Outokumpu about a possible tie-up of the two companies’ stainless steel businesses in a move that could presage long-awaited European consolidation.

ThyssenKrupp’s Inoxum stainless unit, which had sales of €5.9bn in the 2009/10 fiscal year, has long been seen as a good fit with Outokumpu, the smallest of Europe’s four stainless steel groups.

The combination could trigger further consolidation among the continent’s other stainless steel groups, which have for years been troubled by overcapacity, margin pressure and high raw materials costs.

ArcelorMittal, the world’s biggest steel producer, in December 2010 approved the spinoff of Aperam, its European stainless steel unit which many investors viewed as prelude to a merger with another big stainless steel company.

“As part of the ongoing review of a possible sale option, we have entered in preliminary discussions with Outokumpu in order to evaluate a potential business combination of Inoxum and Outokumpu,” ThyssenKrupp said in a statement. The company added that all options – an IPO, spinoff and outright sale to an investor – remained on the table.

Outokumpu said it was in preliminary talks with ThyssenKrupp in order to “evaluate potential strategic options, including a potential business combination with Inoxum”, the stainless steel unit of ThyssenKrupp, Reuters reported.

“These discussions are ongoing and there can be no assurance that any transaction will be proposed or consummated, and if so, what the parameters of such transaction might be,” Outokumpu said.

ThyssenKrupp’s shares rose by 0.3 per cent to €21.24, while Outokumpu’s jumped by 10.7 per cent to €7.44, giving it a market capitalisation of around €1.2bn.

ThyssenKrupp is in the process of hiving off assets comprising around one-fifth of its €49bn revenues as Heinrich Hiesinger, chief executive, tries to rebalance the conglomerate in favour of less cyclical technology.

“An IPO is not possible at the moment and a spinoff is a very difficult story to sell. [So] A merger makes sense in principle. But I don’t believe ThyssenKrupp would merge the whole entity with Outokumpu and retain only a minority stake as Inoxum is much bigger than the Finnish company,” Alexander Haissl at Cheuvreux said.

“A merger of Inoxum’s German unit with Outokumpu seems more likely, with the Italian unit to be sold separately,” he added, noting that Spain’s Acerinoxcould be a possible buyer for these assets.

Outokumpu is the smallest of the four European stainless steel players with operations in Finland, Sweden, the UK and the US. The company is hoping that any deal would help to expand their presence in America and China.

“Outokumpu has been looking to expand into bigger markets for a while now,” said Erkki Vesola, a senior investment analyst at Swedbank. “A potential merger has been on the cards for quite some time ever since ThyssenKrupp said that its stainless steel business was a non core asset.”

He added that there is likely to be further capacity cuts in the European stainless steel sector in the coming years, while also warning that any deal between Outokumpu and ThyssenKrupp could fall afoul of the European Competion commission.

ThyssenKrupp hired Citigroup, Deutsche Bank and Rothschild last year to advise it on options for its stainless unit.

 

Vodafone Not Liable for $4.4B India Tax Bill

MUMBAI, India (AP) — British telecom giant Vodafone is not liable for up to $4.4 billion in back taxes and penalties, India‘s top court said Friday, in a ruling that removes significant uncertainty for foreign companies investing in the country.

The decision will come as a relief to international investors who feared the Vodafone precedent would expose them to unforeseen tax liabilities.

“We welcome the Supreme Court’s decision, which underpins our confidence in India,” Vodafone chief executive Vittorio Colao said in a statement. “We will continue to grow our Indian business — including making significant investments in rural areas and in 3G network coverage — for the benefit of Indian consumers.”

Faced with flagging growth and investment and a weakening currency, the Indian government has been scrambling to rekindle foreign investment.

Analysts say the Vodafone tax case had cast a chill on investor sentiment, serving as a powerful emblem of the danger of shifting regulations in Asia’s third largest economy.

At the same time, the Indian government is eager to boost revenues to help balance its budget and pay for planned increases in spending on social programs in a country where some 800 million live on less than $2 a day.

Analysts say at least eight other companies are facing similar litigation, as India steps up tax collection efforts to help plug its growing fiscal deficit.

“This will improve investor sentiment tremendously,” said Mumbai lawyer Nishith Desai. “Rule of law is re-established.”

He said the verdict will hasten dealmaking which had stalled as companies awaited clarity on tax law.

“We will see a lot of interest in India in terms of FDI (foreign direct investment) and outbound investment as well,” said Desai, who has done work for Vodafone.

The dispute centered on Vodafone’s $11 billion acquisition of the Indian telecom assets of Hong Kong’s Hutchison Telecommunications in 2007.

In May 2007, Vodafone International Holdings BV — a Dutch subsidiary of the British telecom giant — acquired a 67 percent stake in CGP Investments Ltd., a Cayman Islands company which held the Indian telecom assets of Hutchison.

Vodafone says it doesn’t owe tax on the deal because it took place between two foreign entities.

Friday’s ruling overturns a high court decision which favored Indian tax authorities. Mumbai’s high court had found that the deal was taxable in India because it involved the indirect transfer of Indian assets, which accrue revenue in India.

The government said Vodafone owed 112.2 billion rupees ($2.2 billion) in tax and interest, plus up to 100 percent in penalties.

Vodafone said the Supreme Court’s decision absolved it of liability.

Vodafone said the court would also refund, with 4 percent interest, the 25 billion rupee ($496 million) deposit it made on the potential tax bill in November 2010.

GE, SAB Miller, Cadbury, AT&T, Sanofi, and Vedanta are among the companies fighting tax cases in India that could be affected by the Vodafone precedent, said Sandeep Ladda, executive director at PricewaterhouseCoopers in India.

“This settles a prolonged litigation which had created a lot of uncertainty for multinationals,” he said. “This should provide much needed respite to other litigants in other cases.”

But he cautioned that the legal precedent may have limited impact on new deals. India’s new Direct Tax Code, likely to be implemented in 2013, currently contains provisions that would make transactions similar to the Vodafone deal liable to Indian tax, he said.

Desai said he hoped the new tax code would be changed to reflect Friday’s judgment.

India is an increasingly important market for Vodafone. It was home to 145 million of Vodafone Group Plc‘s 391 million mobile customers worldwide as of September.

Vodafone lost 9 million pounds in India during the six months ending in September, but counted on the country for 9 percent of the group’s 23.5 billion pound global revenues during the period.

News Corp. Reaches Settlements in Phone-Hacking Cases

LONDON—News Corp. has entered formal settlement arrangements in a large swath of the civil lawsuits it faces stemming from alleged phone hacking at its now-closed News of the World tabloid, a move to sweep away a big chunk of the financial fallout from the scandal.

Lawyers for hacking victims indicated that the media giant had settled 19 and possibly more of the dozens of cases facing it. The alleged victims—who include celebrities, politicians, victims of crime and others—generally claim that the company’s now-closed News of the World weekly tabloid newspaper breached their privacy by intercepting their voice-mail messages.

Those cases reaching settlements include ones brought by actor Jude Law and politician Chris Bryant, the lawyers said. They added that a slate of test cases, which were due to start being heard in court on Feb. 13, won’t go ahead.

A spokeswoman for News Corp.’s U.K. newspaper unit, News International, declined to comment.

A total of about 60 suits had been filed against the company’s News Group Newspapers unit, which had published the tabloid. Before Thursday, the company had agreed to settle at least about a dozen of those suits. That included an agreement in December to settle with Labour politician and former government minister Tessa Jowell for £200,000 ($308,760). And, earlier last year, the company paid £100,000 plus costs to resolve the claim of actress Sienna Miller.

News Corp. has admitted liability in some cases and apologized for wrongdoing. Michael Silverleaf, who is representing the News Corp. unit that had published the News of the World, said in court in October that the company offered a “sincere and unreserved apology.”

News Corp. owns The Wall Street Journal.

Web of Connections

The scandal, which News Corp. Chairman and Chief Executive Officer Rupert Murdoch has called a “major black eye” for the company, dates back to the arrests in 2006 of a News of the World reporter and a private investigator on the company’s payroll. The two men were sentenced in 2007 after pleading guilty to illegally intercepting voice-mail messages.

The company long asserted that phone hacking had been limited to those individuals. But evidence that the practice was more widespread surfaced in U.K. courts in late 2010 via the civil suits by celebrities and other alleged victims.

That, combined with some new evidence provided by News International to authorities, prompted police in January of last year to reopen their probe into phone hacking. They then expanded the probe to include allegations of corrupt payments by News of the World employees to police officers and other wrongdoing. U.K. authorities have arrested about 20 people in connection with the probes, including former News of the World top editors and reporters. None of the individuals have been charged.

The company has set aside between £15 million and £20 million to cover phone-hacking civil litigation claims. The company also recently agreed to pay £3 million in relation to alleged phone hacking of a murdered teenage girl; the family had not filed a lawsuit.

7,000 Sites Go Dark To Protest SOPA and PIPA

IMF Seeks $500B Boost to Lending Resources

The International Monetary Fund is proposing to raise its lending capacity by $500 billion to insulate the global economy against any worsening of Europe’s debt crisis, according to a person familiar with the talks.

The Washington-based lender currently has about $385 billion available to lend and wants to lift that to $885 billion after identifying the potential for a $1 trillion global financing gap in the next two years, the person said. To incorporate a cash buffer, that means asking its membership for $600 billion.

IMF Managing Director Christine Lagarde said yesterday her staff are studying options to increase the fund’s war-chest. While euro-region nations have already pledged to contribute 150 billion euros ($192 billion), the U.S. has said it has no plans to make new bilateral loans and G-20 leaders ended last year at odds over the issue.

“The biggest challenge is to respond to the crisis in an adequate manner and many executive directors stressed the necessity and urgency of collective efforts to contain the debt crisis in the euro area and protect economies around the world,” Lagarde said yesterday in an e-mailed statement following a discussion among her institution’s board of directors.

The Washington-based lender is pushing China, Brazil, Russia, India, Japan and oil-exporting nations to be the top contributors, according to a Group of 20 official, who spoke on condition of anonymity because the talks are private. The fund wants the agreement struck at the Feb. 25-26 meeting of G-20 finance ministers and central bankers in Mexico City, the official said.

Euro Gains

The push for more money by the IMF may extend this month’s rally in investor sentiment toward European debt markets on speculation the region is enjoying a respite from its two-year debt turmoil and that any euro-area recession may be shallow.

The euro today rose 0.5 percent to $1.2797 as of 12:32 p.m. in London.

In a sign the crisis may have longer to run, the World Bank yesterday cut its global growth forecast by the most in three years to 2.5 percent this year and said the euro area may contract 0.3 percent. Euro-area countries also need to repay 157 billion euros of maturing debt this quarter, according to UBS AG calculations.

Mexico Talks

Lagarde’s proposal is set to be discussed by G-20 deputy finance officials, scheduled to meet this week in Mexico. At a November summit in the French resort of Cannes, G-20 leaders balked at writing fresh checks for the IMF, demanding that Europe’s governments do more to fix their crisis while saying they would ensure the IMF “continues to have resources to play its systemic role.”

A U.S. official reiterated that stance last month, saying President Barack Obama’s administration won’t stump up more cash for the IMF and that a solution to the turmoil must be led by Europe.

Russia’s government won’t decide on any contribution before March presidential elections, First Deputy Prime Minister Igor Shuvalov said in an interview in Moscow today.

Greater support for the IMF also attracted controversy within Europe. Germany’s Bundesbank coupled its 41.5 billion- euro input to a promise that the aid not be earmarked for Europe. Such recycling would violate euro rules that bar central banks from financing government deficits. As a result, the euro area will lend to the IMF’s general resources, not to a special crisis fund.

Options for raising the IMF’s resources include opening a trust fund or not rolling back a 2009 increase. Officials have also discussed increasing the amount of the fund’s Special Drawing Rights.

Emerging markets may try to twin the call for help with a push to increase their clout at the IMF. Such nations, which are growing twice as fast as their developed counterparts, say that their voting power doesn’t reflect their weight in the global economy and they want to end the tradition of selecting a European to head the institution.

Global shares, euro steady after S&P but outlook weak

European shares and the euro recovered from early losses on Monday in the wake of a mass downgrade of euro zone sovereign ratings, but trading was choppy with U.S. markets closed and the outlook for Greek debt talks uncertain.

Standard & Poor’s stripped France and Austria of their triple-A ratings and cut Italy to the same level as Ireland on Friday, shortly after news emerged that Athens’ talks on a bond swap with private creditors, seen as vital to avoid a default in March, had broken down.

Ratings agency Moody’s also weighed in on Monday saying its Aaa rating for France might come under pressure if the public debt keeps rising or if Europe’s debt crisis worsens.

All of that piles pressure on the euro zone’s leaders to shore up defenses, with some glimmers of optimism in the crisis now firmly doused. Investors dumped riskier assets in response, especially bank shares, and sought defensive plays such as UK government bonds, leaving the euro down but not sharply.

“The path of least resistance is a safe haven/risk-off trade,” said Jeremy Stretch, currency strategist at CIBC.

The euro fell 0.2 percent against the dollar at $1.2651 and still looked vulnerable to a test of Friday’s 17-month low of $1.2624.

The FTSEurofirst 300 .FTEU3 index of top European shares was barely changed from Friday’s closing level but the main euro zone bank stock index .SX7E fell around 1.1 percent on fears the sector could be the next target for rating cuts.

World shares overall .MIWD00000PUS recovered from losses seen in Asian trade to be just 0.2 percent lower. U.S. markets are closed for a holiday on Monday.

Standard & Poor’s downgraded nine of the 17 countries that use the euro on Friday and also said it would decide soon whether to cut the euro zone’s bailout fund, the EFSF, from triple-A.

“A one-notch downgrade for France was completely priced in, so no negative surprise here, and quite logical after the United States got downgraded,” said David Thebault, head of quantitative sales trading at Global Equities.

The growing nervousness saw Europe’s commercial banks park almost half a trillion euros at the European Central Bank, the highest on record, as the mix of debt crisis worries and a recent giant injection of ECB cash left banks awash with money but too scared to lend it.

BOND MARKET ADJUSTS

The cost of insuring Italian, Spanish and other euro zone government debt against default rose on the S&P ratings cuts, while shorter-dated UK government bond yields fell. Safe-haven German government bonds retraced gains seen on Friday after reports first emerged of the S&P action.

The ECB was also reported by traders to be active in buying Italian and Spanish government bonds with up to five-year maturities to keep a lid on rising yields.

Italian five-year bond yields, which had been around 6 percent in early trade, dropped to around 5.85 percent on the reports of ECB buying.

The cost of insuring five-year Italian bonds rose to around 518 basis points from under 500 basis points on Friday, meaning it costs 518,000 euros to protect 10 million euros of exposure to Italian debt.

German Bund futures were slightly lower at 139.92, having hit a record high of 140.23 on Friday. Ten-year cash yields were little changed at 1.772 percent.

Italy takes a break from debt sales this week, but France plans to sell up to 8 billion euros of debt on Thursday and Spain comes to the market with sales of 2016, 2019 and 2022 bonds..

Concerns that European financial troubles will drag down global growth and sap appetite for commodities weighed on industrial metals such as copper, while spot gold held steady at around $1,645.25 an ounce.

Brent crude rose above $111 on worries over supply disruptions after Iran warned its Gulf Arab neighbors of consequences if they raised oil output to replace Iranian barrels facing international sanctions.

The latest threat comes as leaders of top Asian buyers of Iranian oil – China, Japan and South Korea – tour alternative Middle East suppliers while the United States pressures nations to stop importing oil from the Islamic Republic.

Black Friday for euro crisis

The eurozone lurched further into chaos yesterday as France was downgraded by a leading credit rating agency and talks on a crucial deal to restructure Greece‘s unsustainable public debt burden broke down.

The value of the euro fell sharply and stock markets in Europe and America witnessed a late selling spree after reports spread that Standard & Poor’s was about to downgrade one of the economic pillars of the single currency. Markets also reacted badly to an announcement from a global banking lobby group that efforts to persuade Greece’s private creditors to agree to a steep reduction in the size of the country’s debts had failed.

While large European banks are prepared to agree to a “voluntary” restructuring of their Greek bonds, smaller hedge funds have refused to accept a writedown in the value of their investments.

“Discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach,” said Charles Dallara, managing director of the Institute of International Finance. The wording of the message hinted at the possibility that Greece’s official backers in the IMF and Europe might simply impose a writedown on the country’s creditors, a move that could destabilise nervous financial markets still further.

The other threat is a Greek default. Germany, the largest contributor to the bailout of Greece, has warned that without a restructuring deal the next instalment of the rescue funds that Athens needs to pay back €14bn of debt on 20 March will not delivered.

French President Nicolas Sarkozy called a crisis meeting of his cabinet last night. France’s loss of its AAA credit rating means the government-backed eurozone bailout fund, the European Financial Stability Facility, would find it more difficult to raise money on the capital markets. But financial market analysts said that the significance of the French downgrade, which was long expected, lay primarily in its symbolism. “This throws the scale and breadth of this crisis into sharper relief,” said Nicholas Spiro of Spiro Sovereign Strategy. “This will doubtless affect sentiment when markets open again on Monday morning. There will be a knee-jerk reaction.”

Before the double shock yesterday afternoon, optimism in financial markets about the future of the eurozone had been rising. Italy, the most vulnerable of the single currency’s economies, which must refinance €440bn of debts this year alone, managed to raise €5bn in the capital markets in loans at a lower interest rate than it previously paid.

Some hedge funds – identified as York Capital, Och Ziff and Marathon Asset Management – are reported to have led the resistance to agreement on a 50 per cent “haircut” in the value of their Greek loans. It has been suggested that the managers of these funds have taken out insurance policies, known as credit default swaps, on their bonds. This means that if Greece were to be forced into a default, the funds would not lose money. This is believed to have emboldened the managers to refuse to co-operate.

Another credit ratings agency, Fitch, said this week that it had no plans to downgrade France’s AAA rating. “France is not a crisis country,” David Riley, Fitch’s head of global sovereign ratings, said at a conference in Paris.

Large European banks, many of them in France, are estimated to hold around €120bn worth of Greek bonds. €80bn of the country’s debt is believed to be in the hands of smaller asset managers, including hedge funds.