Outlook: Stuart Rose tells Green to get his sun loungers off his lawn

Marconi's refinancing; Euro inflation

The sun lounger becomes such a bore after a while, doesn't it? Even when it happens to be located on a luxury yacht bobbing gently around in the sea somewhere off the coast of Monaco. So time to get on the blower and stir up a bit of excitement. Yes, Philip Green, retail entrepreneur extraordinaire, is bored, and having apparently most of what he can with Bhs, he's desperate for another deal, even if, for a change, he has to pay a decent price for it.

Over the past several months, he's called on just about every high street name in town in his determination to do a deal that will give Bhs the critical mass it needs to underwrite his position as one of Britain's most successful retailers. With Woolies, where the intention was to reverse Bhs into the publicly quoted company, the City turned its nose up at the idea of this rough diamond of an operator as head of a listed enterprise, so now he's switched his intentions to buying Arcadia outright instead.

To Mr Green, 365p a share in hard cash must look like a very fancy price indeed, and he must have thought that with £23m in share options riding on it, Stuart Rose, Arcardia's chief executive, would bite his hand off to get it. Arcadia in its present reinvigorated state is not the sort of business Mr Green usually buys. His speciality is poorly managed, asset rich, basket cases. So to be paying 10 times earnings, and a premium no less to the prevailing stock market price, must seem positively profligate.

Not to Mr Rose, who wants something with a four in front of the number before he'll even look at it. By leaking his interest and price to the press, Mr Green achieves the double purpose of keeping his name in the headlines, which he enjoys almost as much as making money, and testing the waters among shareholders. What he discovered yesterday cannot have pleased him. The City thinks the world of Mr Rose. He achieved an excellent price for shareholders with Argos and the turnaround at Arcadia has been perfectly executed. Institutions are not about to vote against his judgement on Mr Green's bid.

Besides, the City believes Mr Green has dipped into its pockets through his endless wheeler dealing once too often and it is not about to roll over and let its tummy be tickled again. If Mr Green thinks it worth paying 365p a share for Arcadia, then the company is almost certainly worth a lot more, even taking account of the fact that he is able to defray some of the cost by onselling assets to the Icelanders. Mr Green is desperate for a deal, but he also wants a bargain, and this time around the City is in no mood to play ball. If he sticks another 35p a share on the table, then he's in with a chance. Otherwise it's back to the sun deck and the pina coladas. What a life.

Marconi's refinancing

It's always nice to be proved right. This column none the less takes little pleasure in reminding readers that it has been warning that Marconi shares are almost completely worthless for many months now. This unpalatable truth is likely to be confirmed shortly by the announcement of debt-for-equity swap terms that will leave existing shareholders with virtually nothing. If they are lucky, investors might be offered warrants giving the right to buy back in at a later stage provided business targets have been met. Even so, the bottom line is that once bankers and bondholders have taken their pound of flesh, there will be nothing but inedible scraps left to quarrel over.

Despite this, the shares have continued until very recently to command a relatively big value on the stock markets. At the beginning of the year they were trading at more than 40p each and even as recently as two months ago, they were still changing hands at 5p each. Yesterday, they sunk to just 1.5p. The only reason traders still assign them a value at all, given the wipe-out promised by the debt-for-equity terms, is that some short positions remain to be redeemed.

It is still hard to believe that a company once valued in billions could now be worth nothing at all. Unfortunately, many small investors found it so incredible that they have been buying all the way down from the top in the misguided belief that there must be a recovery story in there somewhere. This is a process sometimes known as bottom fishing. Lamentably, in Marconi's case there is no bottom. Shortly before his death, Lord Weinstock, former managing director of GEC, came to realise that his once mighty company was a busted flush without hope of redemption and liquidated his remaining shareholding. Others would have been wise to follow suit.

It's mean of creditors to leave nothing at all for shareholders in the debt-for-equity swap arrangements they have been negotiating. Mike Parton, chief executive, and his chairman, Derek Bonham, thought they might be able to salvage something from the wreckage. One of the few decent things that John Mayo, the former finance director, did while he was there was to negotiate a covenant free banking facility, giving bankers considerably less power than they usually have in a corporate collapse of this type. As a result, the management was able to keep more than £1bn of free cash from asset disposals sitting around in a separate account while bankers haggled over the refinancing. That in itself seemed to give investors some degree of comfort.

It proved misplaced. The management's manoeuvring have in the end succeeded only in seriously angering already frustrated bankers and bondholders. Some shareholders are already threatening to sue over a refinancing they regard as vindictive and unfair. They won't succeed. Equity capital confers the right to a company's profits only after all other creditors – bankers, bondholders, suppliers and employees – have had their take. In a highly successful company, its rewards can be spectacular, since all these other calls become marginal. In Marconi's case, there's simply not enough to go around, even among preferred creditors, let alone shareholders. Marconi has become a textbook example of what happens to equity when a company is mismanaged. There may still be a decent business in there somewhere, but as shareholders are about to discover, it doesn't belong to them any more. It's a brutal lesson, but it is also the way the system is designed to work.

Euro inflation

Anyone who has just been on holiday in euroland won't believe the latest euro area inflation figures. According to data published yesterday, the rate of inflation is falling in large parts of euroland. Only in Spain and Ireland is it rising year on year. Across euroland as a whole, core inflation was just 2.4 per cent in July. Well, not if you are a tourist on the Cote d'Azur it's not. Here and in other favourite sunspots, the cost of eating out, hotels, drinks, ice creams, or even a spin round the bay on a plastic banana has risen markedly since the legal requirement to display prices in both euros and the old legacy currencies was dropped in June. Many prices have risen 20 per cent or more. Those local traders prepared to admit the sleight of hand say it is to compensate for a generally poor season, but that's surely not the way the market is supposed to work, is it? If demand is poor, you put your prices down not up. Not if you can get away with confusing people with a new currency you don't.

jeremy.warner@independent.co.uk