Daily Insolvency News Headlines

Wed., April 1, 2015

Wed., April 1, 2015

China will introduce on May 1 a program to insure bank deposits, the government said on Tuesday, ushering in an overhaul seen as vital for freeing up the highly protected banking sector, the International New York Times reported. Deposits of up to 500,000 renminbi, or about $81,000, will be insured under the program, which is expected to help reduce financial risks and protect the rights and interests of savers, the State Council, or cabinet, said on the government’s website. The move will bring China a step closer to dispelling investors’ belief that the government will always bail out Chinese banks, no matter how reckless their dealings, just to protect depositors’ savings. Crucially, it will also let the authorities abolish controls on deposit rates, which are still managed by the government to shield banks from competition and safeguard profits. After staging one of the world’s biggest bank bailouts from 1998, China has spent many of the years since trying to dispel the belief of both banks and investors that the state will always pick up the bill for irresponsible lending. Read more. (Subscription required.)

Wed., April 1, 2015

Brazilian engineering conglomerate Grupo OAS requested court protection from creditors for nine of its units on Tuesday as it grapples with the fallout from a scandal at state-controlled Petróleo Brasileiro SA, a major customer, Reuters reported. The filing comes after Grupo OAS struggled for months with the effects of a corruption investigation at Petrobras, as the state oil company is known, which undercut the builder's access to financing and contract payments. An economic downturn, government austerity and a slumping currency have also taken a toll on the company in recent months. OAS follows rivals Alumini Engenharia SA and Galvão Engenharia SA, two other engineering firms that have filed for bankruptcy protection since January as the Petrobras scandal escalated. Prosecutors say the three firms were part of a cartel that paid bribes to Petrobras executives and politicians in exchange for contracts. São Paulo-based OAS pledged to sell assets to repay debt and inject cash into its heavy construction unit. Grupo OAS, founded in 1976 by contractor Cesar Mata Pires and his partners in the northeastern city of Salvador, has about 8 billion reais ($2.48 billion) in debt. Read more.

Tue., March 31, 2015

Tue., March 31, 2015

With the prospect of a default looming in Greece, Prime Minister Alexis Tsipras is preparing to meet next week with President Vladimir V. Putin of Russia as a European deal to give more aid to Athens falters, the International New York Times reported. The timing has raised questions of whether the visit is an ordinary component of the new Greek government’s multipronged foreign policy, or a pivot toward Russia for financial aid in the event that Greece’s talks with European officials collapse. Negotiations between the struggling Greek government and its creditors stumbled anew on Monday after European leaders said that a reform plan submitted over the weekend to unlock a fresh lifeline of 7.2 billion euros, or about $7.8 billion, fell short. Greece has warned that it may run out of money soon after Mr. Tsipras meets with Mr. Putin on April 8. Mr. Tsipras, who came to power in January, originally planned to travel to Moscow in May. But he accelerated the meeting with Mr. Putin a couple of weeks ago as Greece came to loggerheads with Germany and other European countries over the terms for releasing the money. Without it, Greece could go bankrupt or possibly exit the 19-nation eurozone, an event that, if it happened, could increase instability in the region. Read more. (Subscription required.)

Tue., March 31, 2015

Australia is considering changes to the way it taxes pension funds and targeting the tax practices of multinationals, as Prime Minister Tony Abbott’s conservatives struggle to shore up the country’s finances amid deep hostility to proposed austerity measures, The Wall Street Journal reported. On Monday, Mr. Abbott called for discussion on how an aging population was progressively shrinking income-tax receipts and urged the opposition Labor party to cooperate with reforms needed to steer Australia through the end of a mining boom that once powered the economy. “What we want is lower, simpler, fairer taxes, so let’s see where the conversation takes us,” Mr. Abbott told reporters in the state of Tasmania following the release of the so-called tax-options paper by his treasurer, Joe Hockey. “This is an important conversation starter.” Like other developed nations, Australia is grappling with how to fund health, education and other welfare spending that is growing continually in a nation where expectations of government services are nearer European levels than those in the U.S. Read more. (Subscription required.)

Tue., March 31, 2015

China on Monday courted home buyers with a bigger tax break as it cut down-payment requirements for the second time in six months, stepping up a fight against sliding house prices that is imperiling the Chinese economy, the International New York Times reported. The People’s Bank of China, the central bank, said on its website that commercial banks could now lower their minimum down-payment requirement for buyers of second homes, and with outstanding mortgages, to 40 percent from 60 percent. The Ministry of Finance, in a separate statement, said that individuals selling houses were exempt from business taxes if they had owned the house for more than two years. Analysts said sellers were previously exempted from taxes only if they owned the houses for at least five years. The policy sweeteners, which were more generous than what the market had expected, confirmed rumors swirling in China on Monday that the authorities were increasing support for the flagging real estate sector. Real estate share indexes rallied sharply in Shanghai on rumors of the change. The Shanghai composite’s property index closed up more than 7 percent, its best day since 2009, while the broader index closed 2.6 percent higher. That China is now trying to lift its property market is an about-face in policy. As recently as early 2014, the authorities were waging a four-year campaign to tame an exuberant market, which pushed home prices to records. Read more. (Subscription required.)

Tue., March 31, 2015

The legal feud between Argentina and a group of “holdout” creditors is inflicting collateral damage on a growing number of victims caught in the crossfire. One of the few winners from the fight might turn out to be Cristina Fernández, the country’s president, the Financial Times reported. As Argentina continues to defy US court orders to pay the holdouts after its 2001 debt default, its citizens are suffering the broader fallout of a struggling economy. Bondholders remain unpaid since the government defaulted again last year. Financial intermediaries blocked by a New York judge from processing payments on restructured Argentine bonds have fallen foul of the dispute. Yet Ms Fernández is set to claim a political victory when her term expires after presidential elections in October by keeping her pledge not to pay what she calls “vulture funds” — led by US billionaire Paul Singer’s Elliott Management — “a single cent more” than the amount accepted by 93 per cent of creditors in debt restructurings in 2005 and 2010. Read more. (Subscription required.)

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