Germany and France slam hedgie rules

 
City A.M. Reporter
FRENCH economy minister Christine Lagarde looks set to dash hopes of an imminent deal on EU hedge fund rules when she meets finance ministers in Brussels this week, diplomats with direct knowledge of the matter said yesterday.

France’s refusal to back a “passport” scheme that would allow foreign funds to do business across all of the EU’s 27 states will effectively scupper any chance of a deal between ministers on a new regime for the industry. Lagarde, who sources close to the talks said had won the backing of Germany, is expected to reaffirm this position on the sidelines of a meeting with finance ministers including Germany’s Wolfgang Schaeuble and British financial services minister Mark Hoban.

The stand-off could lead to a lengthy delay for one of the most high-profile reforms planned in Europe.

It would also be a setback to Brussels’ attempts to catch up with Washington, which recently voted through a regulatory overhaul of financial rules. “We were heading towards a unanimous compromise on the basis of same rules, same rights [for foreign funds],” said one diplomat who followed preparatory talks among officials ahead of the ministers’ arrival.

“However, France suddenly dropped a bombshell and led a frontal assault with its counter proposal that would fragment Europe. It’s a total deadlock now,” the diplomat added.

FAST FACTS | NEW HEDGE FUND RULES
● The EU “passport” is part of the talks to pass the Alternative Investment Fund Management Directive.

● The UK is home to 80 per cent of Europe’s hedge funds and backs the “passport” scheme.

CITIGROUP
CITIGROUP has landed the lead role advising Michelin on its surprise €1.2bn (£1.03bn) rights issue.

It is understood that senior banker, Catherine Oules led a team advising the French tyremaker on the deal out of the bank’s London office. The relationship with Michelin, however, is managed out of Citi’s Paris office.

Michelin announced its rights issue on Tuesday, startling brokers and investors.

As part of the share offer, investors may buy two new shares at a deeply discounted €45 for every 11 they hold.

Citi was joined on the deal by French rivals BNP Paribas and Credit Agricole. BNP is thought to have arranged the share issue, while Citi and Credit Agricole acted as bookrunners.

It has been a busy year for Citi, as the bank won a spot as one of the lead advisers on the $25bn (£15bn) rights issue, which was launched by Brazilian oil group Petrobras in June.

Other banks on that deal included Itau Unibanco, Bank of America, Morgan Stanley, Bradesco and Santander.

Citi has also acted as underwriter on a long stream of previous rights issues, including Lloyds Banking Group’s 2009 capital raising.

Emma Sadowski