Short-sellers target M&B and British Airways

LONDON (Reuters) - Hedge funds and other investors have increased short positions in debt-laden Mitchells & Butlers, Pennon Group and British Airways in recent weeks, research from Dataexplorers indicates.

The data shows that, out of the 50 most heavily indebted companies in the UK, the three companies have seen the biggest rise in short interest since June 12.

Dataexplorers sales manager Alex Hofmann said pubs group Mitchells & Butlers (MAB.L: Quote, Profile, Research) had seen a 32 percent rise in shares out on loan -- a strong indicator of short-selling interest -- since June 12, making it the fifth most-heavily borrowed stock in the FTSE 350 on that basis.

Shorting involves borrowing and then selling shares in the hope their price will fall when it comes to buying the stock later on, to settle the trade and pocket the difference.

"Many UK companies are still labouring under massive amounts of debt which was taken on when banks were more prepared to lend to the corporate sector and revenues were higher," Hofmann said.

"Now that the banks are trying to repay the government as fast as possible, those companies which need to refinance are coming under increasing scrutiny from investors."

Last week Reuters' Hedge Hub blog (www.blogs.reuters.com/hedgehub/) reported that Yell Group (YELL.L: Quote, Profile, Research) was, according to Dataexplorers, among the top ten non-financial companies with the biggest net debt to equity ratios among the UK's biggest 300 compaines.

The company also ranked first in Dataexplorers' Negative Sentiment indicator, which highlights where stock out on loan has been highest and is rising.

On Tuesday, Yell Group's shares fell 15 percent after it said it planned to restrcuture its near 4 billion pounds of debts.