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From East Africa to southeastern Australia, large parts of the planet are underwater after unusually heavy rains in unexpected areas

Deadly dam bursts in Kenya and Brazil, a highway sliding down a mountainside in southern China, desert airport runways underwater in Dubai, mining pits flooded in Australia: Large parts of the world are awash.

Extreme rainfall and killer floods that have struck around the globe in recent weeks have been unexpected both in their location and power.

Combined with infrastructure unprepared for such deluges, the intense rains have caused death, destruction and mass evacuations on several continents.

The powerful downpours are the result of natural weather patterns being supercharged by a record-breaking year for global temperatures.

As the globe gets hotter, it is getting wetter too. Simply put, the warmer the air, the more water it can hold.

Scientists still don’t know whether this yearlong record global heat—and the downpours that accompany it—amounts to a statistical blip, or requires a recalibration to a warmer, wetter future that will test national infrastructure, raise insurance premiums and complicate global food production.

In each of the deluges this April, a particular set of severe weather conditions came together to produce the storms, according to meteorologists and climate scientists.

The amount of rain that fell during these spring storms has been unusual, they say. East African countries, for example, were soaked with 4 to 20 inches of rain during April, up to six times the normal amount depending on the area, according to data from the National Weather Service’s Climate Prediction Center.

The intensity of the downpours can cause havoc. Nairobi, Kenya, received nearly 12 inches over a seven-day period, bursting dams, burying towns in mud and turning city streets into deadly rivers.

More than 10 inches fell in a single day in Dubai, submerging its international airport’s runways under at least a typical year’s worth of rain.

Record rainfall totaling 17 inches across the month inundated Guangdong province, in southern China, where on Monday a section of a highway collapsed in a mountainous area, killing 48 people. The province is home to 127 million people and many of China’s technology and manufacturing giants, mostly located along its southern shoreline.

Brazil deployed its armed forces to the country’s southern state of Rio Grande do Sul after 6 inches of rain fell in 24 hours, causing mass flooding over the past week that killed at least 55 people, left some 70 missing and displaced more than 80,000 others.

With one of the region’s main rivers at its highest level on record, roads and bridges were destroyed, disrupting harvests in the country’s second-largest soybean-producing state. Some half a million people were left without access to clean water and 300,000 people without electricity after a small hydroelectric dam burst, sending a 2-meter-high wave of muddy water crashing through local villages.

The rainfall-related disasters are the result of warming global temperatures. There have been 10 straight months of record-breaking global average atmospheric temperatures, and 12 consecutive months of record global average ocean temperatures.

Although questions remain about whether the rise in global temperatures will endure, what is certain is that a warmer atmosphere holds more moisture that later falls as rain, while a warmer ocean evaporates more water to the air, according to Sarah Kapnick, chief scientist of the National Oceanic and Atmospheric Administration.

“These events are happening more frequently now on the extreme precipitation scale,” Kapnick said. “They’re happening in places that we don’t think of as being rainy, like Dubai, so it’s all the more surprising when they do happen.”

Last month’s East Africa floods occurred during a rainy season that runs from March to May, although the actual amount of rain varies in a given year. This time, the rainfall has been amplified by a weather pattern called the Indian Ocean Dipole. In its positive phase, the dipole pushes warm water against the eastern coast of Africa; in its negative phase, the warm water sloshes back across toward Australia and Indonesia.

This year, the dipole is stronger than normal, which is fueling heavy rainfall in areas on the western side of the Indian Ocean, such as Kenya, according to Joyce Kimutai, a climate scientist at Imperial College London and member of World Weather Attribution, a group of scientists from universities and research institutes in Europe and the U.S.

The warm ocean temperatures plus the evaporative effects of a warmer atmosphere helped set the stage for Kenya’s powerful deluge, according to Kimutai.

At least 50 people were killed early Monday when the Old Kijabe Dam overflowed, unleashing a flash flood through the town of Mai Mahiu, which sits beneath the escarpment of the Great Rift Valley, 20 miles north of Nairobi. The incident brought the nationwide death toll from the flooding to 210, as of Friday, with another 90 people missing. “There’s just too much water,” said Kenyan government spokesman Isaac Mwaura. The national electric company reported power outages scattered across the country.

The flooding across the Arabian Peninsula in mid-April that brought Dubai to a standstill was the most severe since record-keeping began 75 years ago. The storm started as a slow-moving low-pressure system over Turkey and then picked up moisture as it moved across the Arabian Gulf and Red Sea, according to the World Meteorological Organization.

Normally, low-pressure systems would have stayed over Europe at this time of the year, but this one moved south and also caused storms over northern Pakistan and Afghanistan, dumping strong rains and killing 50 people, according to news reports.

Over April 14 and 15, Dubai recorded the highest daily rainfall since tracking began in 1949. The desert emirate’s 12-lane superhighways were littered with abandoned cars; schools and businesses shut; and the country’s army of blue-collar and domestic workers were stranded at home. The United Arab Emirates’ government said it would allocate roughly $540 million to help citizens affected by the deluge. Only around 10% of the population have citizenship.

An analysis of the Dubai storm released by the World Weather Attribution group found that the amount of rain that fell was likely influenced by El Niño, a Pacific Ocean weather pattern that leads to warmer ocean temperatures in the Eastern Pacific and can affect drought and rainfall patterns across the entire globe.

The current El Niño began in 2023 and is slowly waning, although it is still having an effect and is partly responsible for the deadly rains this past week in southern Brazil, according to the country’s National Institute of Meteorology.

Historically, the arid Arabian Peninsula receives more periods of heavy rainfall during El Niño years than non-El Niño years, the report said.

The Horn of Africa has had several years of drought, while flooding in Kenya has displaced more than 165,000 people, including tourists and staff evacuated by helicopter and boat from 19 safari camps flooded when the Talek River overran its banks in the Maasai Mara National Reserve, according to Kenyan and Red Cross authorities.

The back and forth between years of drought followed by periods of extreme and prolonged rainfall makes it difficult for soil and vegetation to absorb rainwater, Imperial’s Kimutai said.

“There are a lot of swings between extremes so the ecosystem really doesn’t get time to recover and get back to its natural, adaptive state,” said Kimutai. “It becomes a weakened system over time.”

The immediate impact on agriculture is significant too. In the rain-hardened British Isles, the past winter has been one of the wettest on record. Rains left farmers’ fields flooded in the middle of the planting season, threatening harvests. Combined with the cold, the wet weather has also delayed turning animals out to pasture, farming unions say, meaning fodder reserves for the coming winter are already being depleted. “Up to late April it’s been constant,” said Mike Thomas, a spokesman for the National Farmers Union. “With energy and feed costs going up, it’s been like a perfect storm.” The group is asking retailers for flexibility in the specifications demanded for crops and on contractual obligations given the weather conditions.

Rain damage can be worse in urban areas like Dubai, where water can’t soak into the ground, or in rural areas where vegetation has been cut down for food or fuel, according to Justin Mankin, associate professor of geography at Dartmouth College.

“The land surface has a finite amount of water that it can absorb,” Mankin said. “The built environment shapes how that precipitation gets channeled and presents a hazard to people in the form of flooding. And that’s the case in all these areas whether you’re talking about eastern Australia, Dubai or eastern China.”

The high rainfall hit Australia in March, which was the country’s third-wettest March on record, with rainfall some 86% above a long-term average, according to the country’s Bureau of Meteorology. A tropical cyclone hit the remote northern part of the country that month, prompting authorities to close roads due to flooding and mining companies to suspend operations.

At a manganese mine on an island off Australia’s northern coast, mining company South32 said the storm flooded mining pits and damaged a haulage road bridge, as well as wharf and port infrastructure. Record rainfall hit the island, the miner said.

As hopes of interest-rate cuts fade, some commercial real-estate borrowers want to cut loose

Higher-for-longer rates are forcing commercial property owners to rethink their options.

“Restrictive monetary policy needs more time to do its job.” It was the last thing real-estate borrowers wanted to hear from Federal Reserve Chairman Jerome Powell when the central bank held interest rates steady last week.

Last year’s motto in real-estate circles was to “survive until ’25.” Property owners thought the Fed would cut interest rates throughout 2024. If borrowers could just sit tight, it would soon be easier to refinance troubled loans.

Over the past three weeks, borrowers and lenders have both realized this is probably a fantasy. Inflation has been stuck above 3% for three consecutive months. U.S. economic data have remained robust, despite a weaker-than-expected jobs report Friday.

The one-month forward curve shows that investors now think the secured overnight financing rate, or SOFR, which is closely related to the federal-funds rate, will be 4.825% at the start of 2025. This implies up to two small cuts this year. Back in January, six cuts were expected.

One immediate consequence is that the cost of hedging has shot up again. Lenders require borrowers of floating-rate debt to hedge their interest-rate exposure, often through interest-rate caps. These instruments pay out when a benchmark such as SOFR rises above a set strike rate, which reassures lenders that borrowers will be able to meet their repayments even if rates rise.

The cost of these caps has become a major headache for property owners, according to Carol Ng, a managing director at risk-management firm Derivative Logic. The price of a one-year extension for an interest-rate cap on a $100 million mortgage at a 3% strike rate is now $2.1 million. Back in January, when the market expected more rate cuts, the same extension cost $1.3 million.

It isn’t just borrowers who are in a tight spot. The longer rates stay high, the greater the weight of unresolved property loans on lenders’ books as commercial real-estate loans get rolled over. According to the Mortgage Bankers Association, $929 billion of outstanding property loans will mature in 2024—a 41% increase on MBA’s earlier estimate. This is because many loans that were due to be paid off in 2023 were extended, adding to this year’s pile of maturities.

The so-called extend-and-pretend strategy worked well after the global financial crisis because the Fed cut rates from roughly 4% at the start of 2008 to close to zero by the end of the year. Ultralow interest rates turbocharged property valuations in the subsequent years, bailing out bad loans.

But few people expect rock-bottom rates to make a comeback. Stringing things out may be preferable to reporting losses, but it could tie up a lot of capital. Commercial real-estate loans make up more than a fifth of U.S. banks’ overall loan portfolios on average.

The same thing is happening in securitized debt markets, where loans are also being extended rather than repaid. Investors in commercial mortgage-backed securities are becoming frustrated that their money is stuck in notes that may be generating very low returns by today’s standards. A triple-A CMBS bond issued in 2022 can yield as little as 3%.

Higher-for-longer interest rates could also prolong the deep freeze on property deals. Debt costs are so high that it is difficult for buyers to meet lenders’ requirements that the rental income generated by a property cover the debt-service costs by at least 1.25 times. Sellers could capitulate on price to make the math add up, but they are reluctant to take a hit.

This new reality leaves owners of troubled properties with unpleasant choices to make. Before granting extensions on maturing loans, lenders are asking borrowers to show commitment to their buildings by writing fat checks to cut their debts.

Last month, New York landlords SL Green and Vornado coughed up around $100 million to extend a $1.08 billion loan on an office building at 280 Park Avenue, according to CRED iQ analysis. Less deep-pocketed owners may decide their cash would be better spent elsewhere and hand the keys to the lenders. It is becoming harder to persuade landlords to put more money into troubled properties.

According to Alex Killick, a managing director at real-estate services company CWCapital Asset Management, owners have recently started to talk about a plan B: moving early to sell their buildings. This is unappealing as it is still hard to pin down exactly what price a building might fetch. But if they wait, the risk is that a flood of troubled buildings hits the market at the same time, depressing values further.

“Last year, borrowers were saying, ‘I just need three months for rate cuts to kick in’,” says Killick. “We aren’t hearing that anymore. Powell sounded pretty clear that this is the new normal.”

Investors Were Burned by European Banks for Years—Until Now

Shares in European banks such as UniCredit have been on a tear

After years in the doldrums, European banks have cleaned up their balance sheets, cut costs and started earning more on loans.

The result: Stock prices have surged and lenders are preparing to hand back some $130 billion to shareholders this year. Even dealmaking within the sector, long a taboo topic, is back, with BBVA of Spain resurrecting an approach for smaller rival Sabadell.

The resurgence is enriching a small group of hedge funds and others who started building contrarian bets on European lenders when they were out of favor. Beneficiaries include hedge-fund firms such as Basswood Capital Management and so-called value investors such as Pzena Investment Management and Smead Capital Management.

It is also bringing in new investors, enticed by still-depressed share prices and promising payouts.

“There’s still a lot of juice left to squeeze,” said Bennett Lindenbaum, co-founder of Basswood, a hedge-fund firm based in New York that focuses on the financial sector.

Basswood began accumulating positions around 2018. European banks were plagued by issues including political turmoil in Italy and money-laundering scandals. Meanwhile, negative interest rates had hammered profits.

Still, Basswood’s team figured valuations were cheap, lenders had shored up capital and interest rates wouldn’t stay negative forever. The firm set up a European office and scooped up stock in banks such as Deutsche Bank, UniCredit and BNP Paribas.

Fast forward to 2024, and European banking stocks are largely beating big U.S. banks this year. Shares in many, such as Germany’s largest lender Deutsche Bank, have hit multiyear highs.

A long-only version of Basswood’s European banks and financials strategy—which doesn’t bet on stocks falling—has returned approximately 18% on an annualized basis since it was launched in 2021, before fees and expenses, Lindenbaum said.

The industry’s turnaround reflects years spent cutting costs and jettisoning bad loans, plus tougher operating rules that lifted capital levels. That meant banks were primed to profit when benchmark interest rates turned positive in 2022.

On a key measure of profitability, return on equity, the continent’s 20 largest banks overtook U.S. counterparts last year for the first time in more than a decade, Deutsche Bank analysts say.

Reflecting their improved health, European banks could spend almost as much as 120 billion euros, or nearly $130 billion, on dividends and share buybacks this year, according to Bank of America analysts.

If bank mergers pick up, that could mean takeover offers at big premiums for investors in smaller lenders. European banks were so weak for so long, dealmaking stalled. Acquisitive larger banks like BBVA could reap the rewards of greater scale and cost efficiencies, assuming they don’t overpay.

“European banks, in general, are cheaper, better capitalized, more profitable and more shareholder friendly than they have been in many years. It’s not surprising there’s a lot of new investor interest in identifying the winners in the sector,” said Gustav Moss, a partner at the activist investor Cevian Capital, which has backed institutions including UBS.

As central banks move to cut interest rates, bumper profits could recede, but policy rates aren’t likely to return to the negative levels banks endured for almost a decade. Stock prices remain modest too, with most far below the book value of their assets.

Among the biggest winners are investors in UniCredit. Shares in the Italian lender have more than quadrupled since Andrea Orcel became chief executive in 2021, reaching their highest levels in more than a decade.

Under the former UBS banker, UniCredit has boosted earnings and started handing large sums back to shareholders, after convincing the European Central Bank the business was strong enough to make large payouts.

Orcel said European banks are increasingly attracting investors like hedge funds with a long-term view, and with more varied portfolios, like pension funds.

He said that investor-relations staff initially advised him that visiting U.S. investors was important to build relationships—but wasn’t likely to bear fruit, given how they viewed European banks. “Now Americans ask you for meetings,” Orcel said.

UniCredit is the second-largest position in Phoenix-based Smead Capital’s $126 million international value fund. It started investing in August 2022, when UniCredit shares traded around €10. They now trade at about €35.

Cole Smead, the firm’s chief executive, said the stock has further to run, partly because UniCredit can now consider buying rivals on the cheap.

Sentiment has shifted so much that for some investors, who figure the biggest profits are to be made betting against the consensus, it might even be time to pull back. A recent Bank of America survey found regional investors had warmed to European banks, with 52% of respondents judging the sector attractive.

And while bets on banks are now paying off, trying to bottom-fish in European banking stocks has burned plenty of investors over the past decade. Investments have tied up money that could have made far greater returns elsewhere.

Deutsche Bank, for instance, underwent years of scandals and big losses before stabilizing under Chief Executive Christian Sewing. Rewarding shareholders, he said, is now the bank’s priority.

U.S. private-equity firm Cerberus Capital Management built stakes in Deutsche Bank and domestic rival Commerzbank in 2017, only to sell a chunk when shares were down in 2022. The investor struggled to make changes at Commerzbank.

A Cerberus spokesman said it remains “bullish and committed to the sector,” with bank investments in Poland and France. It retains shares in both Deutsche and Commerzbank, and is an investor in another German lender, the unlisted Hamburg Commercial Bank.

Similarly, Capital Group also invested in both Deutsche Bank and Commerzbank, only to sell roughly 5% stakes in both banks in 2022—at far below where they now trade. Last month, Capital Group disclosed buying shares again in Deutsche Bank, lifting its holding above 3%. A spokeswoman declined to comment.

U.S.-based Pzena, which manages some $64 billion in assets, has backed banks such as UBS and U.K.-listed HSBC, NatWest and Barclays.

Pzena reckoned balance sheets, capital positions and profitability would all eventually improve, either through higher interest rates or as business models shifted. Still, some changes took longer than expected. “I don’t think anyone would have thought the ECB would keep rates negative for eight or nine years,” said portfolio manager Miklos Vasarhelyi.

​Some Pzena investments date as far back as 2009 and 2010, Vasarhelyi said. “We’ve been waiting for this to turn for a long time.”

Firms including BlackRock, Pimco form committee, hire advisers to negotiate deal

Ukraine’s lenders said Kyiv could wait to pay them back after Russian troops stormed into the country two years ago. Now, their patience is starting to run out.

A group of foreign bondholders including BlackRock BLK 0.91%increase; green up pointing triangle and Pimco plans to press Ukraine to start paying interest on its debt again as soon as next year, according to people familiar with the matter.

The group, which holds around a fifth of Ukraine’s $20 billion of outstanding Eurobonds, recently formed a committee and hired lawyers at Weil Gotshal & Manges and bankers from PJT Partners PJT 1.09%increase; green up pointing triangle to negotiate on its behalf.

The group wants Kyiv, which is fresh off clinching roughly $60 billion in U.S. aid, to strike a deal in which it would resume payments in exchange for forgiveness of a big chunk of the country’s outstanding debt. Some bondholders in the group have discussed the plans with senior officials in Kyiv.

A spokesman for the bondholder group said it “looks forward to engaging constructively to assist with Ukraine’s sovereign debt.”

Ukraine is preparing to start talks with the bondholders this month, and Kyiv’s advisers are working to get the U.S. and other governments on board.

That approval isn’t guaranteed. The U.S. and its allies are concerned that taxpayers’ money will wind up in bondholders’ hands if Ukraine resumes any type of debt service. The countries agreed to give Ukraine a debt holiday on roughly $4 billion of their own loans, until 2027, and have voiced concerns that bondholders could start to be repaid ahead of them.

Without a deal, Ukraine could default after the bondholder-debt holiday ends in August, tarnishing its reputation with investors and complicating its ability to borrow more.

Officials from the International Monetary Fund and some members of the bondholder group met in April in Washington, D.C., where fund representatives indicated total debt relief from the private sector might need to be higher than the bond markets currently indicate. Ukraine’s bonds trade at between 25 and 35 cents on the dollar, according to AdvantageData, implying losses as high as $15 billion.

When the bondholders agreed to a two-year debt holiday in 2022, many thought the war would be over by now.

Even though the conflict is dragging on, lenders say they are optimistic that Ukraine’s finances are stabilizing. The country has clinched crucially needed aid from the U.S. and Europe and boosted its foreign-exchange reserves to a record high in April, while Ukraine’s central bank is considering a rollback of capital controls this year.

The bondholders hope to take in as much as $500 million in annual interest payments after agreeing to debt relief. They have signaled they could be willing to provide further relief later.

Some bondholders have suggested that frozen Russian assets in Europe and North America be used to help repay some of what they are owed.

The IMF and several G-7 countries so far aren’t on board with that idea but have indicated they could support smaller interest payments between now and 2027—at well below market rates. Ukraine would be reluctant to resume a normal debt-repayment schedule before 2027 at the earliest, some of the people said.

If a deal is reached, it could be financially rewarding for investors who bought Ukraine’s bonds at bargain prices.

National security adviser Jake Sullivan tells FT Weekend Festival three-way pact necessary for Mideast peace

US national security adviser Jake Sullivan said the Biden administration would not sign a defence agreement with Saudi Arabia if the kingdom and Israel did not agree to normalise relations, insisting “you can’t disentangle one piece from the others”.

In an interview at the FT Weekend Festival on Saturday, Sullivan dismissed recent suggestions that a bilateral deal between the Biden administration and the kingdom was being considered if Israel refused to make concessions to the Palestinians.

The Biden administration has been pushing a three-way deal to encourage Riyadh to formalise diplomatic ties with Israel as part of plans to ensure a sustainable peace in the Middle East after Hamas’s October 7 attack triggered the near seven-month war in Gaza. It hopes to use the prospect of the kingdom — long Israel’s grand prize — and other Muslim states normalising relations to convince Israel to agree to significant concessions to the Palestinians.

But Israeli Prime Minister Benjamin Netanyahu has repeatedly rejected any moves towards a two-state solution to the protracted Israeli-Palestinian conflict.

“The integrated vision is a bilateral understanding between the US and Saudi Arabia combined with normalisation between Israel and Saudi Arabia, combined with meaningful steps on behalf of the Palestinian people,” Sullivan said. “All of that has to come together . . . you can’t disentangle one piece from the others.”

Sullivan said that President Joe Biden intended to publicly detail “the path [to] . . . a more peaceful region”.

“I do expect in the months ahead that you will hear from the president and others of us more of the . . . of the path that we believe could produce a more secure Israel and a more peaceful region,” Sullivan said.

He added: “All we can do is work out what we think makes sense, [and] try to get as many countries in the region on board with it and then present it, and it will ultimately be up to the Israeli leadership and frankly ultimately the Israeli people can decide whether that’s a path they want to take or not.”

The Biden administration was edging towards a deal for Saudi Arabia to normalise relations with Israel before October 7, which would have led to Washington agreeing to a defence pact with Riyadh and supporting its civilian nuclear ambitions in return for Israel making concessions to the Palestinians.

Hamas’s attack and Israel’s retaliatory offensive in Gaza upended that process, but the US and Saudi Arabia have continued to discuss a potential deal as part of wider postwar plans to secure peace in the region.

But Saudi Arabia has made it clear that after October 7 it would require Israel to make far more significant concessions to Palestinians, insisting it would need to see “irreversible steps” towards the establishment of Palestinian state.

Some analysts believed that media reports this week that the US and Saudi Arabia were considering moving ahead with a bilateral deal if Israel refused to take concrete steps towards a Palestinian state were designed to put pressure on Netanyahu’s government.

Saudi foreign minister Prince Faisal bin Farhan said this week that Riyadh and Washington were “very close” to a bilateral agreement on the US element of a deal, but reiterated that there also “needs to be truly a pathway to a Palestinian state” that is “credible and irreversible”.

Yet Netanyahu, who faces intense pressure from far-right members of his governing coalition to make no concessions to the Palestinians, boasts that he has for years successfully thwarted any progress towards a two-state solution.

Sullivan was speaking as CIA chief Bill Burns was in Cairo, where mediators are seeking to convince Hamas to accept a proposal for deal that would lead to a ceasefire and the release of hostages held in Gaza. Mediators hope to broker an initial six week pause in fighting that would then be used to negotiate a sustainable ceasefire.

US officials have praised Israel for making concessions on the terms for a deal, but Netanyahu still insists that he will launch an offensive in Rafah, the southern Gazan city where more than 1mn people have sought sanctuary.

Arab states have for months been discussing with Washington their vision for a postwar plan, which includes the US and other western powers recognising a Palestinian state and supporting its full membership of the UN and a reformed Palestinian leadership administering Gaza and the occupied West Bank.

New setback for Miami-based investment firm’s attempted takeover of Premier League football club

777 Partners has been accused by one of its lenders of a fraud running into hundreds of millions of dollars, in the latest setback for the Miami-based investment firm’s attempted takeover of Everton Football Club.

According to the lawsuit, which was filed in a federal court in New York on Friday, 777 owes more than $600mn in debt to London asset manager Leadenhall Capital and Leadenhall Life, a related investment company.

Leadenhall is seeking damages after accusing 777 and co-founder Josh Wander of pledging more than $350mn in assets that “either did not exist, were not actually owned by Wander’s entities, or had already been pledged to another lender”.

“Wander acknowledged that there had been a ‘screwup’ and [an] ‘embarrassing’ problem caused by 777 Partners’ antiquated computer system,” the complaint said.

A spokesman for 777 declined to comment.

The lawsuit raises further questions about 777’s ability to close the Everton deal following months of delays. Wander’s firm has been a pioneer of the so-called multi-club ownership model that has transformed football, buying stakes in a series of football clubs.

Backed by Bermudian reinsurer 777 Re, 777 has acquired a portfolio of football club investments, including Genoa in Italy, Vasco da Gama in Brazil, Hertha Berlin in Germany and Standard Liège in Belgium.

777 had aimed to complete the acquisition of Everton by the end of last year but it is yet to obtain approval from the Premier League, which has said 777 must meet a series of conditions for the takeover to go ahead.

The lawsuit portrayed Everton as “the latest shiny object of Wander’s fraudulent scheme”. It alleged that Wander’s strategy has been based on “using debt to acquire new assets that he can then use as collateral for more debt, which he then fails to timely pay off, in a seemingly never-ending cycle of ‘robbing Peter to pay Paul’.”

Everton has climbed to 15th in the table, 11 points clear of the bottom three, the relegation zone that results in demotion from the top flight. Clubs and their owners dread the prospect of dropping out of the Premier League because it cuts them off from lucrative broadcast revenues.

Everton has built a points cushion at a time when its finances are stretched. The club’s net debt position increased to roughly £330mn at the end of June 2023 from £141mn a year earlier. Net losses widened to £89mn in the year ended June 2023, from £38mn the prior year.

Everton’s lenders include New York-based MSP Sports Capital, which is part of a group that has provided £158mn of financing for the club’s new stadium in Liverpool. 777 is required to repay this loan as a condition of the takeover. The other major lender is a company called Rights and Media Funding.

Separately, 777 has provided more than $200mn of loans to Everton since September last year to fund working capital requirements.

British-Iranian businessman Farhad Moshiri agreed to sell Everton after the club ran into financial difficulties due to heavy spending on players and the new stadium, and hits to revenues from the pandemic and its decision to cut ties to sponsors linked to Uzbek-born oligarch Alisher Usmanov after Russia invaded Ukraine.

But 777, Moshiri’s chosen buyer, has come under scrutiny from regulators, rating agencies and the media. The firm’s ties to A-Cap, an insurance group led by chief executive Kenneth King, have also raised concerns.

Leadenhall’s complaint alleged that A-Cap was the “Wizard of Oz behind the 777 Partners’ curtain”. Wander allegedly “disclosed on calls” that A-Cap had a first-priority “all asset lien” over 777’s assets.

“The enterprise is propped up and able to attract new lenders and investors only by the patronage of A-Cap, which pays off the enterprise’s last-minute obligations — including 777 Partners’ own payroll — in ‘Whac-A-Mole’ fashion to keep 777 Partners’ creditors at bay, if only temporarily, and to avoid the entire scheme from being laid bare in public,” the complaint said.

However, A-Cap, which has been told by US regulators to slash its exposure to 777, hit back in a statement to the FT.

An A-Cap spokesman said Leadenhall’s claims were “sensational and unfounded” and represented “yet another desperate attempt by Leadenhall to elevate its collateral seniority and seek payment from A-Cap while undermining A-Cap policyholders”.

“A-Cap, similar to Leadenhall Capital, serves as a lender to 777 — there are no ownership ties. The key distinction lies in the fact that A-Cap holds senior rights to collateral associated with 777,” it said.

“A-Cap will take all necessary measures to safeguard the interests of its policyholders and vigorously defend itself against these baseless allegations,” the spokesman said.

Leadenhall did not respond to several approaches for comment.

Employees are being offered the ‘party drug’ through company health schemes as psychedelic-assisted therapy grows in popularity

Liz Kost had “never experimented” with ketamine, an anaesthetic with a reputation for being a party drug. But she decided to give it a try when she was offered it by her employer. “It was awesome,” she says.

The experience was not for fun, but for therapeutic reasons. Dr Bronner’s, the California-based organic toiletries company, where Kost is a marketing operations manager, provides fully paid-for ketamine therapy as part of its employee benefit package.

The offer coincides with a “dramatic growth in interest in ketamine-assisted psychotherapy over the past few years,” says Jeffrey Zabinski, assistant professor of psychiatry at Columbia University Medical Center.

Ketamine has been approved by the US Food and Drug Administration for use as an anaesthetic since the 1970s. But more recently, specialist clinics have begun touting it as a mental health treatment. While it has not been widely approved by the FDA, it is legal for doctors, psychiatrists or in some states nurse practitioners to prescribe the drug “off label” for these new purposes.

The perk arrived at a “desperate time” for Kost. “I had a pretty traumatic time as a child. I’d suppressed my emotions but when Covid hit . . . that uncertainty unearthed my traumas.” She had anxiety attacks and couldn’t sleep. “I was stuck in a trauma loop.” 

Kost initially sought more conventional psychotherapy, but after watching her company’s founder Mike Bronner talk about the new benefit, she decided to give it a go. “He’d been open about depression in the past and [spoke about] how ketamine had helped.” 

Patients usually have three to six sessions through a specialist clinic, sometimes after being referred by another medical professional. Kost had six over a couple of weeks, with a booster session later. After a consultation with Flow Integrative, a ketamine therapy provider, the service was overseen by Enthea, a health insurance administrator that offers employers psychedelic treatment for staff.

It comes as more companies look to help employees with mental health, offering access to therapy, or apps. Saïd Business School professor Sally Maitlis says employers’ interest in ketamine is at best motivated by “real concern” for depressed employees. But she warned it could also be part of a “scattergun approach”, that avoids tackling complex root causes of mental ill health.

Kost first took the ketamine in lozenge form at home, supervised by a trusted adult and virtually-connected therapist. “I was terrified, I’d never done anything like this. Ketamine immobilises you. When you come from trauma you’re not excited to be immobilised,” Kost says. The home setting wasn’t helpful. “All I could do was think about the laundry.”

Next, she had it intravenously in a clinic. “You sit in a big comfy armchair, they give you a weighted blanket, they hook you up to the IV, and play music. You spend an hour thinking about your life and people you love.” The practitioners were “kind and caring . . . If it was more of a cold clinical setting I might not have done it.”

Ketamine, she says, helped her overcome her tendency to ruminate. “I call it a massage for the soul. It helps kick you out of your trauma,” she says. “[I thought] wow, the universe is a larger place than I imagined. It puts you in a positive mood and mindset.” Having access to therapy, to process thoughts and feelings, was essential, she believes. 

Allan Young, director of the Centre for Affective Disorders at King’s College London, says there is good evidence ketamine helps treatment-resistant depression. Among his patients suffering from it, up to half improved after taking a nasal spray derivative of ketamine, which is approved for use in many countries.

Sherry Rais, Enthea chief executive, says new uses of ketamine are “widely considered normal, safe, and effective” — an example of “off-label” prescribing already common in cases such as the drug propranolol, approved for heart conditions but often prescribed for anxiety.

However ketamine comes with risks. The FDA warns of “sedation, dissociation, psychiatric events or worsening of psychiatric disorders”. Abuse has been linked to bladder and heart problems. Last year, actor Matthew Perry, who had received ketamine-assisted therapy in the past, accidentally died from “acute effects of ketamine”, according to the Los Angeles coroner. This, Young says, means ketamine must “be part of a well formulated care package” following a “thorough assessment” by professionals.

Yet while much about long-term effects is still unknown, Zbinksi says commercial clinics offering the drug for an array of condition are springing up faster than new research. “Some places seem to have minimal screening requirements — as if they’re willing to treat almost anyone who has the ability to pay.”

Ketamine seems unlikely to go mainstream as an employee perk. Kost suspects most companies are too cautious for it to become “a big business trend”. But she remains an evangelist. “It’s definitely worth it . . . I don’t want people to think we’re sitting around taking a bunch of party drugs.”

Windfall tax weighs heavy on North Sea producers

Smaller independent operators say they have taken the brunt of the pain from the 75% tax rate on profits

Investment in the UK’s North Sea has been damaged by a windfall tax on producers that also threatens to derail mergers needed to help the sector survive, industry bosses and analysts have said.

Shares in UK-focused producers have slumped despite a 30 per cent rise in the MSCI’s global energy index since Russia invaded Ukraine in early 2022, and government data shows a big drop in their profitability.

While there has been an 8 per cent rise in the price of crude oil since the end of 2021, the gross operating surpluses of North Sea operators fell from £11.1bn in the third quarter of 2022 to £2.3bn in the final three months of 2023.

The UK introduced an “energy profits levy” on oil and gas producers in May 2022 with the aim of raising an initial £5bn, after an outcry over record profits at BP and Shell. In March, it was extended by a year to end in 2029. Including this 35 per cent levy, industry profits are now taxed at 75 per cent in the UK.

The smaller independent operators that mainly work the North Sea — after the majors retreated in recent years — say they have taken the brunt of the pain from the high tax rate because UK waters account for a bigger proportion of their operations. They argue that benefits from oil price movements since the start of the Ukraine war have generally accrued to the majors, which have diversified businesses, and trading companies.

Many in the industry are worried about the future for investment in the UK’s ageing basin.

“When I started out in this industry there were only major companies mostly with global presence operating in the north sea but in recent years they have all been moving out,” said Mark Lappin, chair of Deltic Energy, who has been in the industry for more than 40 years.

UK oil and gas production was just over 1.2mn barrels a day equivalent last year, its lowest since 1977, according to trade body Offshore Energies UK, which estimates that a further loss of investment in the sector could cost 40,000 jobs by the end of 2030. The body estimates that the industry supports 200,000 jobs, down from about 500,000 a decade ago.

“There are many [producers] that have exited, or are exiting the UK,” said Amjad Bseisu, chief executive of independent operator EnQuest and a former UK business ambassador for energy. “The continuous decline in production and jobs isn’t good from a macro perspective.”

Energy consultancy Wood Mackenzie said buyers had shown “little appetite” to expand in or to enter the UK continental shelf and estimated that £16bn in potential investment could be lost because of uncertainty about tax policy.

The Labour party, which is currently favourite to win the next general election, has proposed increasing the total tax rate to 78 per cent and removing tax relief on new projects.

The industry is likely to feature in election campaigning in Scotland as a weakened Scottish National party seeks to ward off challenges to its dominance.

In one of the few major deals in the UK North Sea since the introduction of the windfall tax, London-listed Ithaca Energy last month agreed to buy almost all of the UK upstream operations of Italian major ENI for about £750mn. This includes the UK assets of Neptune Energy, which ENI agreed to buy last year for $4.9bn.

Under the deal, ENI will receive a 38 per cent stake in the enlarged group.

Chris Wheaton, oil and gas analyst at Stifel, said consolidation in the sector was an essential “defensive move” that would allow companies to combine resources and fund the decommissioning of old assets.

“The UK needs a national champion to manage the decline [in oil and gas production],” he said, adding that while two Norwegian groups — Equinor and Aker BP — accounted for about four-fifths of production in Norway, the top five in the UK were responsible for 45 per cent.

While Labour’s proposed tax rate is the same as that in Norway, analysts argue that Norway has a less mature basin, which makes is cheaper to exploit, generous investment allowances and a tax regime that has not changed for more than three decades.

“After four tax changes in two years . . . the appetite for investment in the UK continental shelf is in a worrying place,” said Ryan Crighton, policy director at Aberdeen & Grampian Chamber of Commerce.

UK-focused producers are trailing a 30 per cent rise in the MSCI World Energy Sector Index since the start of Russia’s Ukraine invasion. Shares in Serica Energy are down 37 per cent, while Harbour Energy, the biggest independent UK producer, has lost 23 per cent.

Gilad Myerson, executive chair of Ithaca, said the prospect of unexpected changes in taxation meant it was “easier to do mergers” than pursue acquisitions that are funded with cash.

“Before you consolidate, you have to put a value on the assets, and it’s very difficult to do that if you don’t know what the fiscal regime is going to be,” said Mitch Flegg, the former chief executive of Serica, who has become an adviser to the company.

Australia-listed Hartshead Resources, one of the smallest producers in the UK North Sea, said earlier this year that it had cut jobs on a gas project in the North Sea because of uncertainty about taxes. Chris Lewis, chief executive, told the Financial Times the company had delayed awarding contracts for the project.

“That has a direct impact on jobs, on supply chain companies in the UK, and on receipts to the exchequer because if you delay our gas production, you delay us paying tax on it.”

Subsidy scheme in Alberta allowed oil major to register carbon credits equivalent to twice the volume of CO₂ captured

Shell sold to Canada’s largest oil sands companies millions of carbon credits tied to CO₂ removal that never took place, raising new doubts about a technology seen as crucial to mitigating greenhouse gas emissions.

As part of a subsidy scheme to boost the industry, the Alberta provincial government allowed Shell to register and sell carbon credits equivalent to twice the volume of emissions avoided by its Quest carbon capture facility between 2015 and 2021, the province’s registry shows. The subsidy was reduced and then ended in 2022.

As a result of the scheme, Shell was able to register 5.7mn credits that had no equivalent CO₂ reductions, selling these to top oil sands producers and some of its own subsidiaries. Credits are typically equivalent to one tonne of CO₂.

Some of the largest buyers of the credits were Chevron, Canadian Natural Resources, ConocoPhillips, Imperial Oil and Suncor Energy.

Keith Stewart, a senior energy strategist with Greenpeace Canada, criticised these “phantom credits”.

“Selling emissions credits for reductions that never happened . . . literally makes climate change worse.”

Shell said carbon capture played “an important role in helping to decarbonise industry and sectors where emissions cannot be avoided” and that realising its potential “requires creating market incentives now.”

Alberta’s environment ministry said the crediting support scheme had not resulted in “additional emissions” by industrial polluters.

Chevron, Canadian Natural Resources, ConocoPhillips, Imperial Oil and Suncor Energy declined to comment.

Energy companies in Canada and around the world are lobbying for more state support for carbon capture and storage. The province of Alberta is home to one of the biggest and most carbon-intensive oil deposits in the world. Production there has boomed in recent years, slowing Canada’s progress towards its emission reduction targets.

The Quest plant is operated by Shell Canada and owned by Canadian Natural Resources, Chevron and Shell Canada, and is part of the Scotford processing and refining complex.

At Quest, CO₂ is removed during the process of making hydrogen gas, which is used in the energy-intensive process of turning the bitumen extracted from oil sands deposits into synthetic crude oil.

Canada has among the most generous incentive schemes for carbon capture and storage, according to energy research group Wood Mackenzie. But the industry still struggles to be commercially viable even there.

According to Quest’s annual report, its total cost per tonne of carbon avoided was $167.90 in 2022, compared with a carbon price for Alberta’s big industrial emitters that year of $50.

According to documents obtained by Greenpeace Canada in a freedom of information request and shared with the Financial Times, Shell originally requested a three-for-one deal on carbon credits at Quest.

Alberta announced the two-for-one scheme in 2011 for plants operational before the end of 2015, applying only to Quest, which started running that year. The bonus fell to three-quarters of a credit in 2022 and was then phased out as the carbon price rose.

Shell is in the process of making an investment decision about a second carbon capture plant, Polaris, at Scotford.

The International Energy Agency has warned that an “inconceivable” amount of carbon capture and storage will be needed to keep production of oil and gas at existing rates while cutting greenhouse gas emissions.

Jonathan Wilkinson, Canada’s minister of energy and natural resources, told the FT a two-for-one system for carbon credits was “probably not appropriate”. “At the end of the day, the oil and gas sector and the oil sands firms in particular need to get going with respect to emissions reductions,” he said.