Now gather round, neighbours, and switch off your phones,

As I sing you the ballad of John Harvey-Jones.

Years before Sugar, Jeff Randall or Peston,

Gerry Robinson, Davis and all of the rest on TV,

Along came a master, an awesome man-mountain,

Raring to challenge your business accountin’.

With a line in straight-talking to match any Dragons,

He made managers quake and circle their wagons.

His terrible ties, moustache and big hair

Affrighted directors as he explained to them where

They should put their smart spreadsheets and management fads

(Refinements that he, as a lad, never had).

His straightforward approach, whether hiring or firing,

Was a breath of fresh air that most found inspiring.

Now he’s gone, just a week after ICI’s deal

With Akzo put paid to the brand he helped heal.

We may never know – though we surely can guess –

What John thought of high finance: CDOs, CDS.

This derivative nightmare, born of computer,

Is a crisis in need of a new Troubleshooter.

Yet in corners of Britain where goods are still made,

Where metal is bashed and hard work is well-paid,

Let us gather with thanks, and silence our moans,

As we honour the memory of John Harvey-Jones.

Rights and wrongs

Receivership or rights issue? You decide. You would have thought this was among the easier choices that Paragon’s shareholders will have to make over the coming weeks. But framing the terms of the rescue share issue at the buy-to-let mortgage lender still represents a tactical gamble.

While debt was the financing instrument of choice, rights issues fell into disuse. Intermediate Capital Group announced one on Thursday, but that was from a position of strength, as discussed here on Friday. The risk at Paragon, already one of the markets most heavily shorted stocks, is that investors will take fright and push the market price below the rights price. That is what happened in 2002 when Cookson, the indebted industrial group, announced a deeply discounted rights issue. More than
92 per cent of the shares were eventually taken up, but the deal teetered on the brink of failure in a volatile market.

Unlike Cookson, Paragon is paying UBS to underwrite the issue, ensuring the lender will receive the money if shareholders approve the move later this month. In theory, the size of the discount should make no difference to investors. In practice, the bigger it is, the worse the signal. Given the scale of the offer – 25 shares for every one held – UBS needed to ensure the ex-rights price (theoretically 13.5p) would stand at a sufficient premium to the rights price of 10p to persuade investors to subscribe (or to compensate investors that wanted to sell their rights). But it also needed to make sure the market price would not slip below the rights price, Cookson-style, leaving it and sub-underwriters holding the shares. Paragon closed at 61.5p yesterday, leaving a reasonable cushion against volatility.

The lender should be able to count on shareholder approval of the issue, given the dire alternative. The more difficult question is whether the buy-to-let market will succumb to uncertainty in the UK housing market.

A successful rights issue would at least improve the odds that Paragon will still be around to hear the answer.

The other Sir John

Sir John Rose of Rolls-Royce has committed his company to what he calls “a continuing trend towards globalisation”. Last November, he announced a £150m investment in two assembly plants in Singapore and the US. One clear objective was to cut further the group’s exposure to the weakening US dollar – the currency in which engines are priced.

Given that some 40 per cent of Rolls-Royce’s staff are already outside the UK, so-called “dollarisation” of the supply base is the sort of trend that makes British unions understandably nervous. When employees here woke up yesterday to hear that the group was planning to cut as many as 2,300 positions, many may have assumed that the axe was falling in their direction. It will, in fact, hit the rest of Europe and the US, as well as the UK – but the cuts are a sign of rude health rather than gloom.

Record order books can tempt companies into complacency – but that is not Rolls-Royce’s style. While the group searches for cuts among managerial, professional and clerical staff, it has retained a commitment to recruit employees that actually make the products its customers need.

A successful British-based manufacturer makes a hard choice in the interest of the whole company: that’s the kind of decision that Sir John Harvey-Jones would have applauded.

andrew.hill@ft.com

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