Daily Insolvency News Headlines

Tue., August 26, 2014

Tue., August 26, 2014

The majority owner of Bulgaria's troubled Corporate Commercial Bank (Corpbank) said on Monday it was working with Oman's sovereign wealth fund and other interested investors to restructure the lender, Reuters reported. Corpbank's fate has been in limbo since June, when a run on deposits prompted the central bank to seize control of it and close its operations, sparking the worst banking crisis in the poor Black Sea state since 1990s. Tsvetan Vassilev's Bromak owns just over half of Corpbank, the Balkan country's fourth-largest lender. Oman's sovereign wealth fund is the second-biggest shareholder with a stake of about 30 percent. The central bank said on Friday it had asked the two shareholders to unveil plans for the bank's rescue by the end of August. "I believe we are close to unveiling a decision in principle for the bank's rehabilitation that will fully comply with the legal requirements for capital adequacy and liquidity," Bromak owner Vassilev said in a statement posted on his personal website. Two days after Bulgarian Interim Prime Minister Georgi Bliznashki said an unidentified fund based in Vienna had expressed interest in rescuing the bank, the central bank said it had sent letters to the two shareholders. The central bank said in its statement that Bromak had not yet notified it of any initiative regarding support for Corpbank nor had Bromak sought information on the financial state of the lender. Read more.

Tue., August 26, 2014

Argentina's default three weeks ago, and the ongoing legal battle that led up to it, raises practical, theoretical, and moral questions about the ad hoc process that ensues when a country doesn't repay its creditors, Foreign Policy reported. "We're at a moment where a lot of people have been stopped short and are asking: Is this really the way we want restructurings to go forward?" asked Mark Weidemaier, a sovereign-bond expert at the University of North Carolina at Chapel Hill. The fight between President Cristina Fernández de Kirchner's government and hedge fund NML Capital, a subsidiary of U.S. billionaire Paul Singer's Elliott Management, climaxed in late July when negotiators couldn't reach a last-minute deal preventing the country from defaulting for the second time in 13 years. But what seemed like a coda was only a crescendo in the saga. Kirchner is now desperately trying to get The Hague to invalidate a 2012 New York court decision requiring the country to pay its holdout creditors. As the case lumbers forward, setting records for contentiousness along the way, market watchers are pondering what it portends for other nations. And people following the fight closely still fiercely debate who is at fault: the politically motivated Argentine president acting against her country's interest or the greed-crazed hedge funds that will stop at nothing to get paid? The responsibility debate highlights a more fundamental question of fairness underlying sovereign-debt negotiations: When should a country be able to walk away from its debts? Read more.

Tue., August 26, 2014

On desolate salt flats on the far outskirts of China’s sixth-largest city, dozens of enormous half-built skyscrapers stand as a monument to the excess and optimism of the Chinese real estate market, the Financial Times reported. As physical manifestations of China’s property bubble go, few examples can beat this effort to replicate Wall Street in a wasteland 40km outside Tianjin and 150km from the capital Beijing. But after years of soaring prices and frantic construction across the entire country, China’s real estate bubble is showing serious signs of strain and this project’s fate is now in question. The country’s property market is barely 15 years old and nobody has ever experienced a real crash because, before the late 1990s, most urban residents in post-Communist China were still provided housing by their “work unit”. Chinese banks started issuing home loans in 1997 and as recently as 1994 a central bank official charged with translating an American financial document had to look to Taiwan for a translation since no dictionary in Beijing included a Chinese word for “mortgage”. Even before the global financial crisis of 2008 many were already warning of a property bubble in China, prompting the government to introduce purchasing and downpayment restrictions to slow soaring prices. But when the crisis hit and the economy went into freefall, Beijing decided it had no choice but to refill the property bubble with a tidal wave of credit. The result was an immediate rebound and an increase of total debt in the economy from about 140 per cent of gross domestic product at the end of 2008, to more than 250 per cent at the end of June. Read more. (Subscription required.)

Tue., August 26, 2014

Major reforms of insolvency laws are in the process of being enacted, as Singapore tries to position itself as a regional hub for insolvency work and debt restructuring, said Senior Minister of State for Law Indranee Rajah on Monday, Channel NewsAsia reported. Speaking at the Regional Insolvency Conference organised by the Law Society of Singapore, she noted that an increase in global interest rates and a tightening of liquidity in markets are likely to increase the risk of corporate defaults. This could in turn lead to an increase in a number of restructuring and insolvencies. As an open economy, Singapore would have to deal with insolvencies within the country, as well as the impact of regional insolvency events, she said. Ms Indranee highlighted recommendations from the Insolvency Law Review Committee (ILRC) that she hoped would position Singapore as a hub for insolvency and corporate restructuring work in the region. "Firstly, Singapore remains a convenient and neutral location which provides proximity and connectivity to major Asian economies. Secondly, the legal processes such as schemes of arrangement or judicial management that are used to effect a restructuring in Singapore are well established and offer a flexible approach towards restructuring," she said. The final set of the ILRC recommendations were submitted to the Ministry of Law in October last year. The ILRC suggested extending judicial management to foreign companies, giving them the option of coming to Singapore and using a Singaporean process to restructure its debts. Read more.

Tue., August 26, 2014

About a quarter of Malaysia Airlines' 20,000 staff are likely to lose their jobs under a restructuring plan for the loss-making airline hit by two separate jet disasters this year, a source with direct knowledge of the matter said, Reuters reported. The restructuring plan, due to be unveiled later this week, will include route cuts as well as the loss of up to 5,000-6,000 jobs, according to the source, speaking on condition of anonymity. The source was not authorised to discuss the plan publicly. The carrier's majority owner, Malaysian state fund Khazanah Nasional Bhd, is expected to announce the plan to restructure the firm as early as Aug. 28. Khazanah, which owns 69.37 percent of airline, formally known as Malaysian Airline System Bhd (MAS), said earlier this month it is taking MAS private in a $435 million deal. MAS is due to announce second-quarter results on Aug. 28 that are expected to show losses expanding. MAS has been struggling with a slump in business since the unexplained disappearance of Flight MH370 in March tipped the airline into its worst quarterly performance in two years in January-March. Its problems deepened on July 17 when its Flight MH17 was shot down over Ukraine, killing all 298 people on board. The airline is now set to post one of its weakest performance in the April-June quarter, hit by due to cancelled bookings, weak passenger yields and high overheads, according to analysts. Read more.

Tue., August 26, 2014

PT Bumi Resources’ bonds climbed the most in two weeks after holders of its $375 million of convertible debt approved a restructuring in a near-unanimous vote, Bloomberg News reported. The Indonesian coal mining company will issue 6 percent notes due April 2018 to replace the existing 9.25 percent securities that matured Aug. 5, a plan ratified by bondholders at a meeting in Singapore on Aug. 22. The proposal was supported by investors holding more than 98 percent of the debt, director Dileep Srivastava said in an e-mail after the meeting. Standard & Poor’s plans to upgrade Bumi’s rating after it completes the convertible debt restructuring, Singapore-based analysts Vishal Kulkarni and Xavier Jean wrote in a report Aug. 13. The ratings company cut Bumi to selective default from CC after it missed payment on the bonds. “The restructuring comes as a relief because it was seen as a big imminent hurdle,” Sandra Chow, a high-yield analyst in Singapore at CreditSights Inc., said by phone. “There could be some delayed reaction” in the note prices, she said, adding Bumi’s liquidity woes are far from over. The green light from bondholders to restructure the convertible debt will allow Asia’s most-indebted coal miner to keep sorting out its finances, including settling loans owed to China Development Bank Corp. Bumi will also raise 8.05 trillion rupiah ($688 million) from a rights-share offering to help cut total debt, which amounted to $7 billion at the end of June. Read more.

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