Kazakhstan's fourth-largest bank Alliance said on Wednesday it had reached an agreement with creditors on restructuring its $4 billion debt, putting an end to months of uncertainty over its future, Reuters reported. Alliance halted debt repayments in April and has said it would have to write down $2-3 billion due to bad loans and previously undisclosed asset pledges. It has also said a failure to restructure debt would lead to its bankruptcy. The bank said in a statement that its creditors had five options as part of the deal, the most straightforward of which is a debt buyback at a 77.5 percent discount, limited to $500 million. Three other options include extending the maturity of some debt by seven to 13 years at reduced interest rates, with or without a discount. Alliance said the state welfare fund Samruk-Kazyna would buy a controlling stake in the bank after restructuring and provide it with fresh capital. Read more.
Daily Insolvency News Headlines
Wed., July 8, 2009
Nortel Networks Corp. has claimed another victim: Employees on long-term disability are just learning that their benefits, which they thought were insured, may be cut off if the company does not emerge intact from Companies' Creditors Arrangement Act protection, the Financial Post reported. Nortel's imploding benefits package has put the spotlight on the problem of "administrative services only" arrangements, known in the insurance industry as ASOs. The practice surfaced in the Canadian market in the 1970s, and has grown rapidly as a way for employers to reduce the cost of providing benefits. Rather than buying insurance to cover employee benefits, companies can create their own trusts to provide benefits directly to employees, and use insurance companies to simply administer those benefits. But while ASO arrangements offer some tax and premium savings to employers, they put employees at risk when the company hits rough waters. If an insurance company goes bankrupt, its policyholders would continue to receive their LTD payments from Assuris, a non-profit company set up to deliver payments. But employees of Nortel are not covered because Nortel is not an insurance company. Nortel employees' best hope now is that the Nortel Health and Welfare Trust Fund, which cannot be grabbed by creditors, still has some cash in its coffers. Read more.
An investor consortium has agreed to fund a debt-restructuring plan for Montreal-based precision engineering company Mecachrome International pursuant to the Companies' Creditors Arrangement Act (CCAA), TechFinance reported. The agreement and the plan will be submitted for approval to the Superior Court of Québec on Thursday. Under the plan, the investors will invest approximately €56 million in Mecachrome, in equity and in debt, in exchange for a 100% equity interest in the Mecachrome upon its emergence from CCAA. The plan will provide for approximately €30 million in maximum cash consideration to Mecachrome's Canadian unsecured creditors. Read more.
Japanese corporate bankruptcies rose 7.4 percent in June from a year earlier as businesses struggled to get access to credit and the global recession crippled sales, Bloomberg reported. A total of 1,422 companies went out of business in the month, Tokyo Shoko Research Ltd. said in Tokyo today. Bankruptcies climbed 8.3 percent in the first half of 2009 to 8,169 cases, the report showed. Bank of Japan Governor Masaaki Shirakawa said this week that funding remains tight even though some companies are finding it easier to issue debt. While the central bank and the government are helping companies obtain cash, earnings are under pressure amid a dearth of demand at home and abroad. Bank lending increased 2.5 percent in June from a year earlier, the slowest pace in eight months, the central bank said earlier today. Aprecio Co., an internet cafe operator, filed for bankruptcy last month, becoming Japan’s 18th publicly traded company to fail in 2009, Bloomberg data show. Last year, 33 listed companies went bankrupt in Japan, the most in the postwar era. Read more.
A default on Islamic bonds by Kuwaiti firm Investment Dar is just the tip of the iceberg, with more failures expected as the weak global economy hits issuers, industry experts warned on Wednesday. Unlike traditional banking, the $1 trillion Islamic finance industry has just begun to feel the chill of the global downturn, with practitioners and analysts trying to assess the extent of the fallout on the sector, Reuters reported. Investment Dar said in May it had defaulted on a $100 million Islamic bond, the first such default for a major, public Islamic instrument in the Gulf. Troubled Saudi conglomerates Saad Group and Ahmad Hamad Algosaibi & Bros, are restructuring their debt, triggering concerns of a spillover effect on the Islamic finance industry. Neale Downes, a Bahrain-based lawyer at Trowers & Hamlins, estimated that 5-8 percent of Islamic bonds, or sukuk, in the market are susceptible to default as many were raised for real estate projects which have been hurt by the slowdown. The value of sukuk issued in 2008 dropped by more than 56 percent compared with 2007 to $14.9 billion, due mainly to the global credit crunch, according to Standard & Poor's. It expects the market to recover in the second half of 2009 or early 2010. Read more.
The head of General Motors Corp.'s German unit Adam Opel GmbH said the interest of several potential investors is generally positive as it strengthens the auto maker's negotiating position, but it must not delay the sales process. "We need a deal fast," Hans Demant said in an internal letter to staff seen by Dow Jones Newswires Wednesday. Mr. Demant said that takeover talks are being held with Magna International Inc., Ripplewood Holdings, Beijing Automotive Industry Holding Co. Ltd. and Fiat SpA. Each investor has its own strategic approach, Mr. Demant said. Fiat was focused on future technologies, BAIC wants to grow in the Chinese market and Magna plans to expand its own product portfolio significantly in order to create growth in markets such as Russia. Financial investor Ripplewood wanted to "help us as (an) investor through the difficult time," Mr. Demant said. Read more. (Subscription required.)