Sunday 20 April 2008

Sunday's news

There are a couple of interesting linked pieces in The Observer today, though I'm growing steadily more disenchanted with their business section. First there is this piece about energy companies putting up their prices again. Unfortunately the story only tells us these increases could be "up to 25%" so the actual potential range is unclear.

But then over the page is this report on how indebted utility companies are, and how this may mean they are unable to fund necessary repair work. It is another hangover from the debt binge, and arguably could be seen as side effect of the private equity boom. As the IMF suggested in a report this time last year, the buyout boom could be seen as a form of capital structure arbitrage, as private equity was more willing to make the most of cheap debt. But a knock-on effect was that companies wanting to avoid a buyout also took on more debt.

You do wonder therefore if the indebtedness of utility companies may further exacerbate the problem of rising fuel bills.

The other interesting bit in The Observer is the front-page story about the idea of 'mortgage holidays' for those that get into financial difficulties. It's not a huge stretch from flexible mortages really, so it seems like it ought to be doable, we just need watch that providers don't sting customers for using the service. I think it's little innovations like this that could make the financial system much more useful for the average punter.

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