It is not only a solvency problem that the market faces it is

It is not only a solvency problem that the market faces, it is a cash shortfall, too. With creative accountancy Lloyd's might somehow be able to pass that solvency test But with cash you either have it, or you don't. It therefore needs a credible rescue plan in place ahead of its annual round of capital-raising this autumn.However, as our story today makes clear, the problem is now looking even more urgent. The beleaguered insurance market brought forward its annual statement and David Rowland, the Lloyd's chairman, spent half the week in TV studios trying to calm market fears He did enough stonewalling to qualify as a Cabinet minister But he has yet to address the central plank of our story. This is that Lloyd's looks set to fail its crucial solvency test in August 1996.

It cannot trade beyond 1 January if it believes it will fail that test. Meanwhile, preference shareholders who are too impatient to sit things out can always sell in the market.Time runs out for Lloyd'sWILLIAM GLEESON'S story in this paper last week that Lloyd's might have to close caused quite a stir. And the preference shareholders only account for 29 per cent of the votes. However, if the episode concentrates minds a bit more on reconstructing the absurd balance sheet, so much the better.

Institutions holding the ordinary shares are not about to vote against the management which steered the business back from the brink. That would damage relations with suppliers and certainly wouldn't help to elicit a top price.My soundings suggest McAdam will comfortably win this battle. It would only be adopted if Signet could get more than £700m for its businesses. Ordinary shareholders, who rank behind the banks (owed £350m) and preference shareholders (owed £454m) would get 20p per share plus 20 per cent of any proceeds over £800m.

In effect the pref shareholders would be waiving up to £150m.The one big flaw is that Signet wouldn't get £700m for its assets. That's the view of John Richards, the top-rated stores analyst at NatWest Securities, who reckons any break-up of the UK businesses would be the kiss of death for Signet.Jim McAdam, Signet's chairman, says the proposal amounts to an eight- week public fire sale. The unpaid interest amounts to £130m and continues to accrue at the horrifying rate of £100,000 a day. The idea has surface attractions. Rebel preference shareholders have tabled a resolution demanding that the group seek out potential purchasers of the operating businesses. In effect, they want the jewellery group broken up and the proceeds divvied up You can understand their frustration Signet stopped paying dividends on the prefs years ago.

Its extraordinary general meeting this Friday promises to be a lively affair, though perhaps not as colourful as the truly extraordinary meeting three years ago when furious shareholders bayed for the blood of Gerald Ratner, who was then still in charge despite denigrating some of the merchandise as "total crap". SELLAFIELD will always be Windscale to me. And Signet Group will always be Ratners, however much the company tries to expunge its old name and humiliating past from the public consciousness. Gary Marsh, head of group corporate affairs at the Halifax Building Society, said that "even if there is a rise, it would be less than the increase in base rates".The timing of any rate rise is not clear. It could be announced on Friday or could be left for the Governor to announce the following week."It doesn't look good either way," suggests Roger Bootle, chief economist for HSBC Greenwell.. "I felt that it would not have been helpful, but I did not mean to hide anything.