Cyprus’ president has asked eurozone leaders for a complete revamp of his country’s €10bn bailout, warning Nicosia may not be able to meet the rescue’s current terms because it has harmed the country’s economy and banking system even more than expected. In a letter sent last week and obtained by the Financial Times, Nicos Anastasiades wrote that the restructuring of the country’s two largest banks was “implemented without careful preparation”, wiping out the working capital of many Cypriot companies and requiring unprecedented capital controls that were suffocating the island’s economy. “[The] economy is driven into a deep recession, leading to a further rise in unemployment and making fiscal consolidation all the more difficult,” Mr Anastasiades wrote to the heads of three EU institutions and the International Monetary Fund. “I urge you to review the possibilities in order to determine a viable prospect for Cyprus and its people.” Mr Anastasiades has asked EU leaders to unwind the complex restructuring and partial merger of its two largest banks, which account for 80 per cent of the domestic banking sector, backed by further eurozone loans. Read more. (Subscription required.)
Daily Insolvency News Headlines
Wed., June 19, 2013
G8 leaders tried to plug the holes in their public finances with a sweeping commitment to shake-up international corporate tax rules, including a new crackdown on tax evasion and the shadowy owners of shell companies, the Financial Times reported. The leaders of eight of the world’s biggest economies signed a 10-point Lough Erne Declaration that calls for tax authorities around the world to automatically share information. It also urges countries to change the rules that let multinational companies shift profits across borders to avoid taxes and require them to report “what tax they pay where”. In addition to the push on tax, David Cameron, British prime minister and host of the Northern Ireland summit, sought action on greater transparency on “beneficial ownership” and the establishment of central company registries. The G8 is concerned about the use of shell companies in tax havens to hide the true ownership of companies and avoid tax. Read more. (Subscription required.)
Alpine Holding GmbH, the Austrian builder owned by Fomento de Construcciones y Contratas SA, may incur the country’s biggest insolvency in three years after attempts to reach a restructuring failed and were terminated, Bloomberg reported. Alpine Bau, the company’s operating unit with businesses in Austria, Germany and eastern Europe that employ 15,000 staff, plans to file for restructuring to rescue parts of the group, Alpine said in a statement yesterday. Alpine Holding will probably go insolvent in the process, it said. Alpine’s bonds fell to record lows yesterday on reports it may run out of cash. Alpine, which built German soccer team Bayern Munich’s Allianz Arena stadium, had total liabilities of 2.1 billion euros ($2.8 billion) at the end of June 2012, the latest full accounts it has published. Net debt stood at 550 million euros at the time, according to the half-year report. An insolvency of that size would rival that of A-Tec Industries AG (ATEC), the Austrian industrial group that defaulted on a bond in 2010. The insolvency ends efforts of creditor banks led by Erste Group Bank AG and UniCredit Bank Austria AG, which had agreed to cut their 520 million euros of claims by 30 percent in March. That debt cut had left the holders of three bonds worth 290 million euros unscathed. A second debt cut would have involved bondholders too, Alpine said this week. Read more.
The International Monetary Fund has said Ireland is on track with the conditions of its bailout programme, the Irish Times reported. The IMF, one of a trio of lenders overseeing Dublin’s €85 billion bailout, said Ireland’s economy grew modestly in 2012 for the second year in a row and employment during the first quarter of this year was up 1 per cent from the same period a year ago. The IMF’s board approved the tenth disbursal of about $1.27 billion, bringing to $27.79 billion the total funds that Ireland has received from the IMF so far. The country must meet conditions attached to the loan to get each subsequent disbursement. Acting chairman David Lipton of IMF’s executive board said Ireland has been steadfast in two-and-a-half years of work to control its deficit and improve its economy. Public debt is expected to peak this year with economic growth accelerating next year. Unemployment remains high at 13.7 per cent and a quarter of bank loans “are nonperforming and losses persist, hindering new lending,” said the IMF. In April, the IMF forecast Irish growth of 1.1 per cent this year and 2.2 per cent in 2014. Ireland was the second euro zone country to be bailed out by the IMF in 2010, after Greece, and has been one of the success stories in the euro-zone debt crisis, with European and IMF leaders eager to congratulate the country for the fiscal discipline that has helped it get back on its feet. Read more.
Co-operative Bank PLC asked bondholders to take heavy losses to stave off a potential collapse, the latest case in Europe of debtholders, rather than taxpayers, taking a hit, The Wall Street Journal reported. Co-op Bank, part of the Co-operative Group Ltd., a mutual conglomerate with businesses from funerals to supermarkets, said it aims to raise £1 billion ($1.57 billion) in fresh capital this year by offering holders of its £1.3 billion in subordinated bonds a mix of new senior debt and shares. Co-op Bank expects to raise a further £500 million in 2014 by selling loans from its portfolio and the disposal of Co-operative Group's general insurance business. The move marks the first so-called bail-in of a U.K. bank. It represents a win for the government and regulators because the plan spares taxpayers the financial burden they would have faced had the government rescued the lender in a bailout like those seen during the financial crisis. Subordinated bondholders—including some retail, or individual, investors—will lose roughly 25% to 30% of their capital, according to people familiar with the plans, depending on market prices on the debt when the terms of the swap are completed in September. Read more.
Spanish property developer Bami has filed to begin insolvency proceedings, a company spokesman said on Tuesday, the latest in a series of real estate groups and other firms in the recession-hit country to struggle to refinance their debts, Reuters reported. Dozens of property firms have collapsed in Spain, where house prices have fallen 40 percent from their 2007 peak, and banks that have set aside money to cover losses in the sector are becoming tougher with firms still in business. Unlisted Bami, 49 percent-owned by French property firm Gecina, has 620 million euros ($830 million) of debt with banks. "A year ago we began negotiations with our syndicate of creditors to refinance the debt and we have not been able to reach an agreement," a Bami spokesman said. France's Natixis, Spain's Banco Popular and German lender Eurohypo are the company's main lenders, Bami said. Read more.