Editor’s letter

Prior to British Energy’s annual general meeting in early August, a succession of newspaper articles appeared suggesting that bondholders had succeeded in pulling a fast one on the poor patriotic retail stock investors. The Daily Telegraph’s City column wrote: “[Shareholders] have the uneasy feeling that their company has been stolen from them, to the benefit of the moneylenders.”

Credit would like to publish the letter sent to The Daily Telegraph in response.

Sir, by your own admission when British Energy negotiated its debt restructuring “nuclear electricity cost more to generate than it fetched in the market”. As a result, shareholders could have subsidised the company themselves or handed it over to the creditors – they chose the latter. The situation is the same as negative equity: shareholders owned a house which was worth considerably less than their mortgage. Rather than bother paying off an expensive mortgage on a cheap house they defaulted and handed the house over to the bank.

But, in the past 11 months the price of electricity has risen and now “shareholders ... have the uneasy feeling that their company has been stolen from them.” What? Eleven months ago the shareholders decided to hand over the keys to what was, back then, a worthless property – it wasn’t just next to Sizewell, it was Sizewell.

You are now suggesting that the shareholders should ask for their house back. But you fail to appreciate that they have not been “existing shareholders” since this plan was agreed 11 months ago.

The Daily Telegraph replied:

Sir, not quite, I think. If shareholder approval was one of the conditions of the deal, then it’s not done until that condition is satisfied. If the BE board (suitably incentivised) uses delisting to get round that condition, I think it’s fair to say the shareholders are being robbed. This deal gives your readers a windfall they neither expected nor deserve.