Kazakhstan's Alliance Bank, controlled by the oil-rich nation's sovereign wealth fund, will discuss the restructuring of its debt at a creditor meeting in London this week, a source at the bank said on Tuesday, Reuters reported. Alliance, the ninth-largest lender by assets among the Central Asian nation's 38 banks, defaulted on its debt in the aftermath of the 2008 crisis. Its dollar bonds fell to record lows earlier this year on fears that it was heading towards a second debt restructuring. Kazakhstan, the second-largest post-Soviet oil producer after Russia, weathered the financial crisis without sliding into recession, but non-peforming loans still make up more than 30 percent of the loan portfolio of local banks. The bank, in which state investment fund Samruk-Kazyna holds a 67 percent stake, announced on Monday that it would hold a meeting with its investors on Friday to discuss its "current financial situation". It said it had appointed law firm White & Case and investment bank Lazard Freres as legal and financial advisors . It invited holders of its debt, shares and global depositary receipts to the investor presentation. It gave no further details at the time. Read more. (Subscription required.)
Daily Insolvency News Headlines
Wed., December 11, 2013
Finance ministers from the biggest euro-zone countries reached a political understanding on a new system for winding down failing banks, officials said early Wednesday, but final signoff will have to wait until next week, The Wall Street Journal reported. Under the proposed deal, decisions on the shuttering or downsizing of banks would be more centralized and the costs of such resolutions would eventually be shared among European countries. The main points of the plan were drawn up by the finance ministers of Germany, France, Italy, Spain and the Netherlands on the sidelines of a broader meeting of delegates from all 28 European Union countries in Brussels, according to several European officials. Those points are expected to carry a broader deal on the so-called Single Resolution Mechanism at another meeting of finance ministers next Wednesday, those officials said. "When it comes to the framework of a political accord, there is no ambiguity. These are agreed and we will not come back on them." said French Finance Minister Pierre Moscovici, while stressing that many details still need to be ironed out. Although the plan falls short of proposals made this summer by the European Commission, the EU's executive, agreement on the so-called Single Resolution Mechanism would still bring the euro zone one step closer to breaking the link between banks and their home countries' governments. Expensive bank bailouts, exacerbated by national authorities unwilling to deal with problems as they built up, have ruined the finances of Ireland, Spain and other euro-zone countries in recent years. Read more. (Subscription required.)
It's been a good year for the eurozone crisis in the sense that flare-ups have been few and minor. But here comes thinktank Capital Economics with the gloomy diagnosis that Greece's public debt (currently at 170% of GDP) is still unsustainably high and "the country's crisis is not yet over". That is despite the clear improvement in the public finances since the second bailout in 2012, The Guardian reported in a commentary. The problem is not the short-term one of plugging a funding gap (of maybe €11bn) for 2014 and 2015 that will appear next year. Capital Economics, like others, thinks a deal can be done in which Greece agrees to some extra austerity measures and eurozone governments provide more loans. Rather, the worry concerns Greece's longer-term debt dynamics. The existing bailout requires Greece to run a primary fiscal surplus (ie, before debt interest payments) of 4% of GDP until 2030 in order to get the public-debt-to-GDP ratio to 90%. Greeks may not tolerate year upon year of austerity. Read more. (Subscription required.)
While the overall risk to Canada’s financial system has declined for the first time in two years, closer to home the Bank of Canada continues to be concerned about household debt and housing, The Wall Street Journal Real Time Canada blog reported. In the bank’s semi-annual Financial System Review about risks facing the financial system, it credits a lower threat level from the euro zone for bringing down the overall risk level to “elevated” from “high.” On the domestic front, the risk posed by household debt and housing, which the bank still deems the biggest home-grown threat, remains stuck in the “elevated” category it’s been in since the central bank started categorizing and color-coding various risks two years ago in its review, which is published every June and December. The household debt and housing assessment is key as Canadian policymakers fret about the risks posed by Canadians throwing off their traditional prudence and piling on debt to buy houses amid low borrowing costs. In July 2012, the federal government tightened mortgage-insurance rules for the fourth time in as many years in a bid to rein in enthusiasm for debt and cool the housing market. That seemed work, and in its June review the bank had said the risk was less elevated than it had been at the end of last year. But there was a renewed bout of strength in the housing market over the summer, while the debt-to-income ratio rose to a fresh record 163.37% in the second quarter. Statistics Canada will release figures for the third quarter Friday. Read more. (Subscription required.)
As street protests in Ukraine enter their third week, a new crisis is brewing that could force President Viktor Yanukovych’s hand. The nation’s currency reserves have fallen so low that the central bank may soon be unable to support the hryvnia at its current value. Traders’ bets on a weaker hryvnia reached a one-year high on Dec. 10, following a 9 percent plunge in foreign reserves last month, Bloomberg Businessweek reported. Borrowing costs by lenders have soared in recent weeks, suggesting that the government’s efforts to prevent a devaluation are creating cash shortages. “The disruption of normal business operations poses risks for inflation, and potential capital flight could raise pressure” on the currency, analysts Vladimir Pantyushin and Andreas Kolbe of Barclays (BCS) wrote in a report today. The Ukrainian government urgently needs $10 billion to keep the economy afloat. Yanukovych, though, has refused to accept bailout conditions set by the International Monetary Fund, and his recent talks with China and Russia about potential aid have been inconclusive. Yanukovych’s Nov. 21 decision to spurn a European Union trade deal, in favor of closer ties with Russia, sparked the protests that have brought hundreds of thousands of people into the streets. Read more.
Homburg Invest Inc. is suing several companies chaired by Richard Homburg, its former chairman, for $2,895,000, The Chronicle Herald reported. According to court documents, Homburg Invest is undergoing insolvency restructuring under the protection of the Companies’ Creditors Arrangement Act, with proceedings in the Superior Court of Quebec. As part of that restructuring, the plaintiff divested certain U.S. assets, with limited assistance from Homburg Realty Service, whose parent, according to court documents, is Homburg Canada, now Citadel Holdings. The plaintiff alleged that Homburg Realty Services president Neil Chapman withdrew $2.6 million in disputed divestment-related transaction fees from the account of Homburg Holdings (U.S.) on Nov. 29 without authorization. The plaintiff alleged that the defendants conspired to injure it by having the funds transferred from a bank account in Colorado to a bank account in Nova Scotia. The plaintiff further alleged the defendants withdrew, without authorization, another $295,000 from Homburg Holdings (U.S.)’s accounts for alleged property sales commissions and alleged professional fees. Read more.