Daily Insolvency News Headlines

Thu., May 28, 2015

Thu., May 28, 2015

Greek banks have seen deposit outflows accelerate over the past week as fears rise that the euro zone country will default on debt, two banking sources said on Wednesday. The spike follows a steady outflow of money from Greek lenders this year as Athens and its creditors struggle to agree an aid-for-reforms deal before Greece runs out of money. “The past week in May was more challenging compared to the previous ones in the month, with daily outflows of €200 to €300 million in the last few days,” a senior Greek banker said. Outflows picked up in April to about €5 billion from €1.91 billion in March, three Greek bankers told Reuters. Official data on April deposits will be released by the Bank of Greece on Thursday. Speculation about capital controls has resurfaced after a prominent lawmaker from the conservative opposition said she was worried about the prospect if no deal is reached with creditors and Athens defaults on an IMF payment next month. The government’s spokesman has dismissed such a scenario. After suffering deposit outflows of €12.25 billion in January and another €7.57 billion in February, banks have relied on emergency liquidity assistance (ELA) from Greece’s central bank, for which they must put up collateral. Read more.

Thu., May 28, 2015

Ukraine’s decision last week to grant its government the power to stop foreign debt payments marks a distinct shift in tone for the wartorn and recession-battered country. As negotiations between Kiev and its creditors stall and full-blown bankruptcy nears, the rhetoric of government communiques is shifting from conciliation to accusation. Spot the difference in sentiment. In March a presentation to investors noted that “a collaborative process is paramount . . . Ukraine is committed to undertake consultations with its creditors”. By May the government declared it “has the right . . . not to return loans borrowed by [a] kleptocratic regime”. In sovereign debt circles the tack Ukraine appears to be taking is known as the odious debt argument, which rejects the notion that governments are liable for the debts of their predecessor. Read more. (Subscription required.)

Thu., May 28, 2015

The Japanese government will miss out on Y201.8bn ($1.6bn) in Bank of Japan profits this year as the central bank piles up capital against future losses, the Financial Times reported. According to its annual accounts, the BoJ is keeping 25 per cent of last year’s profit as capital, instead of the legally required 5 per cent. Last year it withheld 20 per cent. The move highlights both the size of BoJ profits from its massive monetary easing and the anxiety it feels about losses when the time comes to raise interest rates. For the fiscal year to March 2015, the BoJ made an operating profit of Y1.7tn, up 34 per cent on last year, as its balance sheet ballooned to Y324tn. It then squirrelled away Y380bn as a provision against possible foreign exchange losses and paid Y342bn in taxes, leaving a net profit of Y1tn. The BoJ kept 25 per cent and paid the rest to the government. When interest rates rise, central banks such as the US Federal Reserve may suffer losses on bonds they bought to stimulate the economy at a time when interest rates were low. Read more. (Subscription required.)

Thu., May 28, 2015

The liquidators of a pair of failed Cayman Islands-based hedge funds run by a former Harvard quarterback are suing Barclays PLC to claw back some $80 million they say was illegally funneled to the bank to cover margin calls, The Wall Street Journal reported. The offshore funds--ICP Strategic Credit Income Fund Ltd. and ICP Strategic Credit Income Master Fund Ltd. -- were so-called feeder funds managed by ICP Asset Management LLC, a money-management firm founded by Thomas C. Priore. Lawyers for the liquidators said in a suit filed in U.S. Bankruptcy Court in New York that Mr. Priore, ICP’s 46-year-old founder and former Harvard University quarterback, fraudulently transferred more than $40 million to Barclays to cover margin calls at a troubled collateralized debt obligation known as Triaxx. “Barclays knowingly participated in ICP Asset Management’s and Priore’s fraudulent purposes,” lawyers for the liquidators said. “Barclays knew that during the first half of 2008, ICP Asset Management and Priore caused other investment vehicles they managed to make over $40 million in fraudulent transfers to Barclays to cover Triaxx Funding’s margin obligations.” In U.S. bankruptcy proceedings, a judge can find certain transfers or payments to be fraudulent if a company was insolvent when taking on new liabilities. The $80 million liquidators are seeking comes from the addition of interest and damages. Read more. (Subscription required.)

Thu., May 28, 2015

A Christchurch-based investment company at the centre of a Serious Fraud Office and Financial Markets Authority probe has been placed in receivership, Stuff.co.nz reported. The development will be bad news for hundreds of nervous investors in the company, Arena Capital, a foreign exchange brokerage trading as BlackfortFX. Auckland accountant Alan Garrett, a liquidator at KordaMentha, has been appointed receiver. The assets of the company were frozen by the Financial Markets Authority last week over concerns the company was breaching regulations and the Serious Fraud Office is investigating. Read more.

Thu., May 28, 2015

People struggling with debts they cannot repay should feel no stigma and should not be afraid of making contact with the Insolvency Service of Ireland (ISI), an Oireachtas committee has been told, the Irish Times reported. Addressing the Justice, Defence and Equality Committee, the head of the ISI Lorcan O’Connor said that there were still 37,000 mortgages in arrears of longer than 720 days and a “lack of engagement” was hampering the resolution of a large number of cases. He said the “vast majority” of those who were struggling financially were the victims of circumstance and had not engaged in reckless borrowing. Read more.

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