Bank of America Corp. (BAC) said it will pay $100 million to settle a 2004 lawsuit which sought $10 billion regarding the 2003 bankruptcy of Parmalat SpA, Dow Jones reported. The Italian dairy company was plunged into chaos after an accounting fraud came to light. Bank of America was later sued by Parmalat's new management for allegedly helping former officials engage in one of Europe's biggest-ever corporate frauds. Further details of the settlement will be disclosed after it is filed in federal court in New York, where the case is being handled. "The legal record to date - including the recent unanimous ruling in our favor from the three-judge panel in Milan - makes it clear that no one at Bank of America knew or could have known of the true financial condition of Parmalat," the company said in a statement. "We have defended ourselves vigorously in these cases and are satisfied with this outcome today." A decade-long fraud, allegedly at the hands of top managers, left the company saddled with €14 billion ($19.94 billion) in debt. A Milan judge in December acquitted seven defendants, including former Bank of America employees and auditors who worked with Parmalat, of charges related to the collapse. Read more. (Subscription required.)
Daily Insolvency News Headlines
Wed., July 29, 2009
The International Monetary Fund’s board on Tuesday approved disbursement of $3.3 billion in fresh financial support to Ukraine, one of the world’s economies hardest hit by recession, the Financial Times reported. This, the third tranche from a $16.4 billion standby loan programme, brings the total amount of funds disbursed to Kiev to $10 billion since the global financial crisis struck last autumn. To secure the fresh aid, Kiev’s government agreed to reduce expenditures and begin increasing natural gas prices this autumn for households to market levels. A safety net is to be established to protect the most vulnerable citizens. Last Friday, lawmakers overcame weeks of deadlock to adopt key bank sector reforms required to secure further IMF support. IMF officials have called upon Ukraine’s feuding political camps to put rivalries aside in order to deal with deep challenges still ahead. Economists say Ukraine’s export-oriented economy, largely driven by steel exports, has suffered dramatically from falling orders during the global recession. Gross domestic product contracted by 20 per cent in the first quarter of 2009 and is estimated to have constricted by 18 per cent in the first half of the year. Read more. (Subscription required.)
The insolvency administrator of German retail and tourism group Arcandor said on Tuesday that he had appointed two banks to assess separate restructuring solutions for the units Karstadt and Primondo. However, the move did not imply there would be a break-up of the German retailer, a spokesman for the administrator said. Arcandor filed for insolvency in June after its requests for state help failed. It has been Chief Executive Karl-Gerhard Eick's mantra to find a solution for the group as a whole. But the departure earlier this month of Horst Piepenburg, who had been hired as a restructuring specialist by Arcandor, sparked speculation as to whether such a solution was still feasible. Three financial industry sources told Reuters that Merrill Lynch had been chosen to look into possible options for the department store unit Karstadt, while private bank Metzler had been appointed to look at the mail-order business Primondo. Read more.
Executives at Avtovaz, the largest Russian carmaker, are reportedly considering laying off about 27,000 employees to improve performance at a factory that has been clobbered by the sharp drop in demand for cars, The New York Times reported. The factory, where Lada cars are built, is one of the least efficient in the industry, a behemoth built by the Soviets that was never fully reformed and had never, until now, contemplated laying off considerable numbers of its huge work force. The layoff plan was reported Tuesday by the Interfax news agency, which cited comments made by a vice president, Igor Komarov, at a meeting with regional officials. The report named a precise number of cuts: 27,691 jobs. Read more.
Tue., July 28, 2009
Lithuania’s economy plunged a preliminary 22.4 percent in the second quarter, the worst recession since 1990 independence, as output crashed and retail sales slumped, Bloomberg reported. The decline, the deepest in the European Union, compares with a revised 13.3 percent contraction in the first quarter, the Vilnius-based statistics office said in an e-mailed statement today. The economy grew 5.2 percent in the same period last year. The Baltic economies of Estonia, Latvia and Lithuania are collapsing after a real-estate bubble burst, cheap credit evaporated and slacking demand in foreign markets undermined exports. The three countries, which had the EU’s fastest growing economies from 2004 to 2006, now have the steepest declines of all developing regions. Read more.
U.K. Chancellor of the Exchequer Alistair Darling warned banks Monday that they must pass on interest rate cuts and said the government will comb through the lending activities of individual institutions in coming weeks, Dow Jones reported. Following a meeting with senior bank executives, Darling told the British Broadcasting Corp. the "advantage of low interest rates needs to be passed on." Darling rejected the argument made by the banking sector that the government is asking them both to increase lending and repair their balance sheets, saying both can be done thanks to government support for the sector. The government, the BoE and international institutions, like the Organization for Economic Cooperation and Development have all named the slow pickup in bank lending as a key impediment to the recovery. The U.K. economy has been in a recession since April 2008, the worst downturn in decades. Read more. (Subscription required.)