A month of overcast skies and frequent showers indicates it is business as usual for the British summer, and for one company each day of rain brings particular displeasure.

British car cleaning firm IMO Car Wash is struggling with more than 350 million pounds of debt, and some detractors say demand for its services drops each time it rains. As such, the value of the company is almost as changeable as a British summer.

This is a headache for both its private equity owner and lenders, who have been trying to settle a restructuring of IMO’s finances since the start of the year. Disputes over valuations have sparked a battle between different groups of lenders, with the result set to be decided in a London court on Monday.

The court case has wider ramifications for European restructurings, as I wrote earlier, because the case is likely to set the tone for many restructurings to come.

Senior lenders hope to be able to clear out junior creditors from the list of borrowers if the value of the company falls below the amount of senior debt owed. The seniors think they have done enough to prove the value of the company is less than their debt; the junior lenders disagree.

The decision is now with Mr Justice Mann at London’s Royal Courts of Justice. Such is the interest amongst distressed debt and mezzanine investors it’ll likely be a tight squeeze in the court’s public gallery on Monday.

Maybe they should all have heeded Rose Royce: as the Seventies act once warned, “you might not ever get rich” working at the car wash.

    Anglo American hasn’t yet received a formal bid from Xstrata. But the miner’s interim results read very much like a defence document.
    The highlights alone give a pretty good idea of what chief executive Cynthia Carroll and new chairman John Parker will focus on if Xstrata does eventually pounce.
    Anglo’s case hinges on four things.
    First, that its plan to cut $2 billion of costs by 2011 is ahead of target. Second, that it is getting on top of its $11 billion net debt, and third, that progress is being made in restructuring its problem child Anglo Platinum <AMSJ.J>. Lastly, Anglo acknowledges that it is an objective to reinstate the dividend.
    Added to these elements, lest they appeared to have too defensive a flavour, is the promise of growth, largely through its Minas-Rio iron ore project in Brazil and its Los Bronces copper development.
    Of these, cost savings are a crucial point of contention in the Xstrata debate, with the rival miner’s chief executive Mick Davis confident he can squeeze a further $1 billion out of a combination with Anglo, taking the total to $3 billion.
    Anglo isn’t making any promises beyond those already given but the tone of the language — which includes talk of being ahead on “asset optimisation”, procurement and job reductions — hints that it may be able to find more savings on its own, without handing anything to Xstrata.
    So far the market seems largely happy to let Carroll stick to her plan — highlighting Anglo’s leading position in platinum, diamonds and iron ore alongside its cost cutting success. But investors might ask more searching questions in the event that Xstrata did come back offering a premium.

    The war between Continental and Schaeffler rumbles on. Karl-Thomas Neumann has got board assent for the capital increase he wants to pay down Continental’s heavy debts, a hard-fought for move that is likely to dilute the company’s largest shareholder Schaeffler.
    But it is only a partial victory for the chief executive of the German auto parts group — and one that may yet turn out to be Pyrrhic. Neumann may yet be ejected from Conti for resisting Maria-Elisabeth Schaeffler and her right-hand man Juergen Geissinger (CEO of the privately-owned ball-bearing maker).
    Schaeffler has already seen off several former Conti bosses — Manfred Wennemer left in August last year and CFO Alan Hippe has since quit. If it succeeds in pushing out Neumann and replacing him with its own candidate, Elmar Degenhart — at a meeting scheduled for August 12 — Schaeffler will then certainly push ahead with the sale of Conti’s well-known rubber business as a way of reducing its 11 billion euro debt.
    Conti and Schaeffler have been deadlocked since the private group took a majority stake last year after an acrimonious takeover battle. Schaeffler’s ability to exercise control is constrained by its own heavy borrowings, much of which are against Conti stock which has lost two-thirds of its value.
    Meanwhile, Conti is also labouring under massive borrowings, which its banks would like it to reduce. Both groups are at odds over how to reconcile their differing interests. Schaeffler, which has entered into a standstill agreement which prevents it from taking over Conti till 2012, does not want the target to issue more equity because it doesn’t have the cash to follow its money. Nor does it want to merge with Conti because it fears the exchange ratio would be disadvantageous.
    What it would like is for Conti to sell assets to reduce its debt — even though this is hardly an ideal moment to do this. Shares in Michelin <MICP.PA> are trading at less than half their mid-2007 peak, while Bridgestone <5108.T> shares are at just over half their level in May 2006 and Pirelli <PECI.MI> shares are less than a quarter of their peak.
    Neumann wanted Conti to raise 1.5 billion euros in fresh equity and then to merge with Schaeffler. The board has now consented to the first of these moves. However it remains to be seen if the banks will be queuing up to underwrite the issue, especially as Conti seems keen to issue it at a very narrow discount to the market price.
    If Conti goes ahead, and neither Schaeffler nor its allies follow their money, Schaeffler’s direct stake could fall to 35 percent from 49.9 percent and its total stake (including shares held by its banks) to 63 percent from nearly 90 percent.
    What seems clear is that the key players in this deadlock are the banks to both companies. They may themselves have differing interests. Conti’s bankers may not be keen on a change of management at the company, especially given the rapid changes which have already taken place at the top. And Schaeffler’s bankers might not welcome capital increases at Conti that diluted their equity position.
    Debt has become an albatross around the necks of both companies, which only the banks are able to remove.

Now that the dark days of TARP force-feedings, congressional hearings and ill-conceived mergers are behind it, Bank of America is getting back to the business of expanding in the world’s most enduring pot of fabled gold, China. The bank sent a memo around saying it had rehired a China hand to head its corporate finance business there.

Wang Bing, who worked for Merrill Lynch between 2004 and 2008 in various management roles, including dealmaking in China, is back with Bank of America-Merrill Lynch as a managing director, according to the memo. On Thursday, we reported that Bank of America plans to set up a wholly owned subsidiary in China to bolster its corporate, investment banking and wealth management businesses.

In May, Bank of America sold $7.3 billion worth of shares in China Construction Bank. It needed the cash, so turning its back on such a long-term position made sense at the time. The news this week is hardly as dramatic, in scope or in value, but it is significant. If nothing else, it shows the bank trying to get back to the business of anticipating global growth. It will be interesting to see if the bank is any more effective at growing in China as a local business rather than as a partner with big, Beijing-favored China Construction Bank.

It would be hard to describe July as a banner month for mergers and acquisitions.

Friday’s data from Thomson Reuters shows it was the first month since Sept. 2004 where announced deals totalled less than $100 billion, and the first month in almost six years without a single $5 billion-plus deal. But top executives are starting to talk M&A again, and bankers are starting to lay the groundwork for future deals. As Michael Erman and I wrote earlier:

“Bankers are pointing to early signs of a pick-up in mergers and acquisitions (M&A), with stronger stocks and easier credit conditions helping company bosses regain the confidence to do deals.

“Global announced M&A totaled $968 billion in January to June — little more than 40 percent of pre-crisis volumes in 2007 — and financiers do not expect a sudden return to the hectic dealmaking of the boom years.

“But they say an August holiday lull could be followed by an upswing toward the end of the year, based on more active discussions with clients and in some cases growing pipelines of future deals.”

Full story here. For full details of Deloitte’s recent CFO survey, which we referred to in our piece, click here.

Highlights and low points — syndicated loans, for example, at their lowest since 1993 — from the July Thomson Reuters Investment Banking Snapshots:

DEBT CAPITAL MARKETS

Asia Pacific & Chinese Issuers Reached New Corporate Bonds High in July – Asia Pacific issuers raised a record US$41bn in July, up 11% from June 2009 (US$43.3bn) and double the level of July 2008 (US$24.1bn). Chinese issuers accounted for 49% of the regions’ activity with a record US$23.4bn raised, up 3% from June 2009 (US$22.7bn) and up 218% from July 2008 (7.4bn). Financials (US$16.2bn, 70%) and Materials (US$4.7bn, 20%) were the main sectors driving the surge in China.

European High Yield Bonds Hit 2 Year High – Global issuance of high yield bonds reached US$12.3bn in July 2009, down 27% from June 2009 (US$16.7bn) but up 270% from July 2008 (US$3.3bn). This marked the third highest level of activity for a month of July on record and the best since 2003 (US$18.6bn). European issuers accounted for 44% of total with US$5.4bn raised, the highest monthly volume since June 2007. European activity consisted of two issues, Wind Acquisition Finance (US$3.7bn), the second largest HY bond of the year globally and the second largest European bond ever issued after NXP Semiconductor (US$5.95bn, 2006) and Fiat Finance & Trade ($US$1.8bn).

EQUITY CAPITAL MARKETS

Global ECM Up 22% in July as IPO Reached 14 Month High – Global ECM reached US$78.7 billion for the month of July up 22% when compared to the same month last year. Global IPO volumes reached a 14 month high with US$9.2bn, and account for 12% of the total ECM market for July. Global follow-on Issuance reached US$61.3bln for July this year, and accounts for 78% of ECM activity for this month. The largest ECM Issue of July was the US$12.27bln rights issue by Rio Tinto in the UK

BRIC Issuers Raised 26% of Global Equity in July – BRIC ECM accounts for 26% of global ECM issuance for July 2009 this is the largest level of activity for this region in 20 months, BRIC follow-on issuance has also reached an all time monthly high of 36 issues for July. BRIC market IPOs account for 93% of the total IPO activity for this month, which is due to one issue in particular — the China State Construction Engineering IPO worth US$7.3bln

Global ECM Pipeline for 2009 Currently Stands at US$93.9bln – Follow-ons (US$72bn) and IPOs (US$19bn) account for 77% and 20.2% of the pipeline respectively. Emerging market issuers could raise up to US$48.1bln or 51% of the total ECM pipeline.

SYNDICATED LOANS

Monthly Loan Issuance at its Lowest Since 1993 – Global issuance of syndicated loans in July 09 reached US$34.6bln, down 88% from July 08 (US$278bn) and marks the lowest level of monthly activity since October 1993 (US$28.7bn). On the year to date global issuance stands at US$820bn, down 54% from the same period last year (US$1,788bn). European loans issuance reached US$7.7bn in July 09, down 93% from July 08 (US$115bn) whilst US issuance reached US$11.6bn, down 90% from July 08 (US$115bn). The largest loan for July is US2.2bln US Georgia-Pacific Corp issue

MERGERS & ACQUISITIONS

First sub-$100 billion Month for Worldwide M&A since September 2004 -  Worldwide M&A totals $1.1 trillion for year-to-date 2009, a 43% decrease over 2008 levels.  With just $96 billion in announced deals this month, merger activity in July marks the first monthly period since September 2004 with less than $100 billion in volume.

Mid-Market M&A Bolsters July Activity; Shutout for Deals over $5 billion – For the first time in nearly six years, not one worldwide M&A transaction over $5 billion was announced in a monthly period.  Deals under $500 million accounted for 40% of overall activity in July, with 22% of mid-market deals coming from companies in the United States, 12% from deal activity in China and 7% from Japan.

Financials & Energy Power Top Sectors – Comprising 21% of overall activity for the month, financial target M&A was driven by activity in the insurance and banking sectors, while energy and power targets were lifted by activity in the oil & gas space.

Morgan Stanley Leads Worldwide Rankings; JP Morgan leads Mid-Market; Evercore moves into Top 5 in the US

Ford Motor Co has slowed the sale of its Volvo car unit as it plans to open up the auction to losing bidders for General Motors’ Opel, the Wall Street Journal cited a person close to the company as saying.

In other M&A related stories reported by Reuters and other media on Friday:

Russian mobile network Mobile TeleSystems (MBT.N) is set to pay $1.28 billion, or $5.98 per share, for a 51 percent stake in fixed line carrier Comstar (CMSTq.L), newspaper Kommersant reported.

Low-cost carrier Southwest Airlines is preparing a bid to acquire bankrupt Frontier Airlines for a minimum of $113.6 million, exceeding the $108.8 million bid from Republic Airways Holdings. For the Reuters story, click here.