The capital markets hate the thought of new taxation. They much prefer to impose taxes of their own, and last week it was the turn of the shareholders in Mothercare to pay their dues to the great financial machine.

Moth is a mess, as Mark Newton-Jones, its new chief executive, readily admits. He was appointed immediately after the board had rejected a somewhat dubious  300p-a-share takeover proposal from the US, and has now decided the business needs a capital transfusion.

Only too happy to help, say Numis, JP Morgan Cazenove and HSBC. We like Mr Newton-Jones’s plan to bring Mothercare, squalling like an infant, to the digital age, where it can exploit what is still a pretty powerful brand for an easily-identified target audience. So do they want to get aboard for the ride? Goodness me, where have you been?

That was in the old days of rights issues, where new shares were issued at a small discount, offering little dilution to the existing shareholders, with a realistic chance that the underwriters would end up on the share register. This forced them to consider whether the new shares were worth holding, before accepting the risk.

It’s all different now. The last thing today’s backers want is the actual stock, so this issue is nine-for-10 at 125p, half the market price of the existing shares, or a 34 per cent discount to the adjusted ex-rights price.

In other words, Mothercare shares must tank by a third in the next five weeks for the underwriters to be liable for a penny. Since the rights issue was not exactly unexpected, it’s hardly surprising that the shares quickly rallied after the news.

For their risk, the helpful broker and banks are charging £5m, or 5 per cent of the £100m proceeds of the issue. There is no attempt to justify this fee. It’s just the tariff for the job. A private sector tax on the Mothercare shareholders by any other name.

Goldilocks v Gaddafi

At first sight, the courtroom clash between Goldman Sachs and the Libyan Investment Authority brings to mind Henry Kissinger’s comment on the Iran-Iraq war – “If only they could both lose”. The Libyans have portrayed a Gaddafi-era deal that went terribly wrong as the vampire squid sucking the blood from innocent desert Arabs.

The chargesheet against Goldman includes  training programmes, gifts, overseas trips and the offer of a highly prized internship at the bank. Typical bad behaviour, just what you’d expect from a top investment bank; run rings round unsophisticated hicks, lay off the risk and collect the fees.

Except that it doesn’t seem that way any more. The gifts, according to Goldman, were chocolate and aftershave (were they trying to say something?), the training programmes were an attempt to help the client understand the not-terribly-complicated derivative transactions, the overseas trips were to attend the programmes, and the internship came after the deal had closed.

This defence is a great disappointment for those who want to see nothing but greed and evil inside the big investment banks. The Libyans may have further evidence of bad behaviour to present, but chocs away and a splash of aftershave really won’t move the dial on the bribery meter.

Wham bang thank you NRAM

Patience and inactivity are the two hardest disciplines in investment, and for us long-standing investors in NRAM 12 5/8 per cent perpetual subordinated units, the disciplines may be about to pay off. This curious stock is one of the few shoots left from the forest of fixed-interest stocks issued by Northern Rock before it was felled in 2007, and after they were all dumped into NRAM, the bad bank in the government’s reconstruction, the price plunged to £16.

The bad bank has turned out to be not so bad after all, and this week the European Commission removed the restrictions on interest payments for Northern Rock and Bradford & Bingley debt, accepting the argument that keeping the restrictions will cost more than removing them.

The dated stocks can be redeemed, but the 12 5/8 is a former PIB and undated. The price jumped to £149 on the news (though there’s hardly any market) which still doesn’t look enough to give up a yield of 8 1/2 per cent a year for ever…

This is my FT column from Saturday

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