Coronavirus: Darts fired at bankers over Jet2 role amid FCA probe

Two lenders to the owner of Jet2, the travel and leisure group, have secured roles on a £170m share sale despite not acting as brokers to the company – sparking new questions about banks’ behaviour amid a probe by the City watchdog.

Sky News can reveal that Barclays and HSBC agreed to a temporary waiver of Dart Group’s lending covenants before being added to the syndicate of investment banks which worked on the emergency placing.

Dart Group, which owns Jet2.com and Jet2Holidays, has been hit hard by the coronavirus pandemic, with much of its revenue base stalled by the international travel freeze.

The company also owns Fowler Welch, a distributor of chilled foods.

On Wednesday, it announced an equity-raise arranged by its corporate broker Canaccord Genuity, Barclays and HSBC.

 Jet2 plane

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Jet2Holidays is part of the same group

In the accompanying statement, Dart said its existing lending banks were “supportive and recognise the strength of Dart’s business model”.

“The company is in discussions with them to extend debt facilities and agree longer-term covenant resets, which are appropriate for the new outlook,” it said.

“As an indication of that support, Dart has already received agreement from the group’s existing lending banks to waive the semi-annual covenant test for September 2020 on its existing debt facility, conditional upon a minimum gross equity raise of £100m.”

On Thursday morning, the company announced to the stock exchange that it had successfully raised £172m.

Dart has a market value of more than £850m.

The line-up of banks on cash calls by London-listed companies has become an acutely sensitive topic following the Financial Conduct Authority’s (FCA) letter to bank chief executives last month, which warned that it would examine behaviour which appeared to tie lending relationships to other services.

Megan Butler and Jonathan Davidson, the FCA’s executive directors of supervision, said in the letter: “We have heard reports that banks may have used their lending relationship to exert pressure on corporate clients to secure roles on equity mandates that the issuer would not otherwise appoint them to.

“In some cases, these roles may be ‘in name only’, with few or no additional services being provided in exchange for a share of the fee pool.”

They warned that they would be “looking into this further, but want any practice of this nature to cease immediately”.

Sky News revealed at the time that Numis Securities, the independent investment bank, had complained to the FCA about lending banks muscling in on emergency equity-raises on the basis that it was unfairly shrinking the fee pool for corporate brokers.

The Dart fundraising may draw scrutiny as part of the FCA’s investigation, according to some people, because Barclays does not employ an analyst who researches the stock, and because the temporary covenant waiver was announced simultaneously with the share placing.

HSBC does cover Dart’s shares through its equity research team.

A person close to Barclays said it was “hardly surprising” that Dart would have used it to help sell shares, saying that it was the top-ranked bank for UK equity capital markets activity.

“Their brokers may not be set up to deliver so much in such a short time frame,” the source said.

Whitbread still operates pubs but the bulk of its sales come from the Premier Inn budget hotel chain

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Whitbread is the owner of the Premier Inn hotel chain

Barclays and Dart declined to comment.

Many billions of pounds have been raised by listed companies during the coronavirus pandemic as they seek to fortify their balance sheets.

Two of the latest examples – the caterer Compass Group and Whitbread, the hotelier – have announced plans to secure £3bn between them in the form of rights issues.

Others have included estate agent Foxtons, online fashion retailer Asos and the high street retailer WH Smith.

In many cases, the lists of banks credited with those transactions have included lenders to companies which have a scant track record in UK equity fundraising activity.

The FCA’s probe has become a major talking point in the City because it has triggered echoes of the banking misconduct which swept through the industry during and after the 2008 financial crisis.

The so-called ‘bundling’ of services – where banks make the provision of one product, such as a credit facility, dependent upon the acceptance of others through the signing of restrictive clauses – was banned by the FCA in 2017.



A Waterstones store in Nottingham at start of lockdown 23/3/2020



Waterstones plans to quarantine its books

In last month’s letter to bank chiefs, the FCA warned that they would face further scrutiny over the issue.

“We will be separately contacting your firm directly to speak to the relevant senior manager if you have had both a lending relationship and equity role with any of the issuers who have recently raised significant equity capital,” the regulator said.

“We want to understand how you ensured your clients were treated fairly, and inside information was handled appropriately.”

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