Faced with public outrage over tax-evasion scandals at a time of austerity budgets, European leaders pledged Wednesday to ensure that everybody—from high rollers to big multinationals—pay their fair share to cash-strapped governments, The Wall Street Journal reported. But the small steps that leaders took at their Brussels summit underline how difficult it is to effectively fight tax evasion by individuals and tax avoidance by companies at a time when countries are also competing for foreign investment. Luxembourg and Austria said they are willing—in principle—to soften their bank-secrecy laws, giving other countries a better view into the riches their citizens may be depositing there. That would open the door for a broader renegotiation of information-sharing between national tax authorities, going beyond the savings accounts held by individuals now covered by most European Union countries. But both havens said changes in their own laws depended also on moves by other countries with similar banking rules. "Our aim is to pursue a deal outside the EU—with Switzerland, San Marino—with the aim, not the blocking condition, to move forward," said Austria's Chancellor Werner Faymann. Tax evasion has become a hot topic in Europe again as years of recession or anemic growth drain public coffers. Read more. (Subscription required.)
Daily Insolvency News Headlines
Thu., May 23, 2013
Local creditors of Wuxi Suntech, the bankrupt unit of Chinese solar panel maker Suntech Power Holdings Co Ltd, on Wednesday claimed the subsidiary owed them a combined $2.5 billion, at the start of a debt restructuring process expected to last months. Wuxi Suntech, the biggest subsidiary of New York-listed Suntech Power, filed for bankruptcy protection in China in March, five days after its troubled parent company defaulted on a $541 million dollar convertible bond. The restructuring of Suntech's domestic debts is being closely watched by its overseas creditors, whom analysts say are expected to take a "haircut" - or suffer losses. Last week Suntech Power said it reached an agreement with some foreign creditors to further defer its obligations on the bond. The claims for the domestic debts of 15.6 billion yuan ($2.5 billion) came from more than 500 creditors, including banks and some of Wuxi Suntech's suppliers, but most of the claims have yet to be reviewed and verified by its court-appointed debt administrator, creditor representatives told Reuters. The court held the first meeting of Wuxi Suntech's creditors in the eastern Chinese city of Wuxi - where Suntech Power is headquartered - on Wednesday to brief creditors on the debt restructuring and the debt administrator vowed to protect creditors' interest. Read more. (Subscription required.)
The rising number of bad loans – both mortgage loans and those to businesses – and the reconfiguring of the banks so that they can lend profitably to support growth are the two main challenges to the Irish economy, according to the Central Bank’s second annual Macro-Financial Review, the Irish Times reported. The report, which assesses the strengths and weaknesses of all areas of the Irish financial system, states that the greatest single risk to the domestic economy is “the health of banking system and its ability to support the real economy”. International investor confidence in the Irish soverign remains subject to “a rapid reappraisal by financial markets” which could reverse recent positive developments and “hinder continued market access and debt sustainability in the medium term” according to the review. The long term viability of the banking system will depend on boosting net interest margins, which have been in decline for more than a decade, and the weaning off of the banks’ still-heavy dependence on central bank funding. The woes of the banking system have caused financing conditions for companies to worsen since the last review, “especially for Irish-owned, small- and medium sized enterprises” the studies notes. “Bank lending is lower, and interest costs remain high” it goes on to say and that this has happened despite cuts in the European Central Bank’s base rates. Also hindering the supply of credit to business is the riskiness of lending to many companies, often owing to debts run up during the construction bubble and invested in property. The report observes that the “rate of liquidations of potentially-insolvent companies is over twice the average of the past 20 years”. Read more.
Japan's Elpida Memory Inc asked U.S. Bankruptcy Court in Delaware on Wednesday to enforce its reorganization plan sale to Micron Technologies Inc, a final step to creating the world's second-largest maker of memory chips, Thomson Reuters News & Insight reported. Boise, Idaho-based Micron has been losing money as the market for personal computers steadily loses ground to smartphones and tablets. Acquiring Elpida will allow Micron to create greater economies of scale and will rank the company behind Samsung Electronics in the memory chip market. The majority of Elpida's secured and unsecured creditors approved the plan, which included the sale of assets to Micron for 60 billion yen ($582 million) in cash and another 140 billion yen ($1.36 billion) paid in annual installments until 2019. However, U.S. creditors led by hedge funds Linden Advisors, Owl Creek Asset Management and Taconic Capital Advisers have argued that Elpida is worth 300 billion yen ($2.91 billion). They have been actively fighting the plan, although their final appeal in Japan failed last week, leaving the U.S. courts as their remaining venue. Elpida still needs to have its reorganization plan recognized and enforced by a U.S. Bankruptcy Court to protect its U.S. assets from creditors under Chapter 15 of the bankruptcy code. Read more. (Subscription required.)
The International Monetary Fund urged the U.K. government to counter the effects of its austerity program by raising spending on infrastructure projects to avoid long-term damage to the nation's growth prospects, The Wall Street Journal reported. Launched in 2010, the austerity program is the government's cornerstone policy, and Chancellor of the Exchequer George Osborne has indicated he won't change course. The IMF had been a backer of the plan, allowing Mr. Osborne to use the fund's approval to validate his measures to improve the country's public finances. But the IMF now believes that without action to soften the impact of the program, businesses will be reluctant to invest, and that will hinder the U.K.'s ability to generate economic growth by becoming more competitive and raising exports. "The key risk is that persistent slow growth could permanently damage medium-term growth prospects," the IMF said. "After five years of relatively weak activity, additional measures are needed to raise long-term expectations of potential growth, while rebalancing necessitates a transformation to a high-investment and more export-oriented economy." The U.K. was one of the first major economies to embark on spending cuts and tax increases to tackle a budget deficit that swelled during the financial crisis. Its progress is closely monitored by other debt-laden Western countries. Read more. (Subscription required.)
Creditors of struggling Mexican homebuilder Homex could seek accelerated payment of the company's debt after Homex missed payments on derivative positions, according to a filing on Wednesday, Reuters reported. Failure to meet payments due on derivatives "arguably" constitutes an event of default on debt owed by Mexico's second-largest homebuilder, the company said in its delayed annual filing with the U.S. Securities and Exchange Commission. The company at the end of December had a total of $900 million in three bonds due in 2015, 2019 and 2020, according to its fourth-quarter report. But in the filing with the SEC, the company said its bonds, or senior guaranteed notes, totaled 11.6892 million Mexican pesos ($900,000 using the company's 12.988 peso conversion rate) at the end of December and are due in 2015, 2019 and 2020. Read more.