A plan to tighten financial-market regulation is pitting the U.K., home of Europe's financial center, against other members of the bloc, The Wall Street Journal reported. At a European Union summit starting Thursday, a key issue will be how much power should be handed to regulatory bodies that the EU's executive arm, the European Commission, wants to establish, and who will head them. The U.K.'s resistance to the EU plan comes amid tensions among British officials over financial regulation. In a speech Wednesday, Mervyn King, the head of the Bank of England, warned that the U.K. government must get its debts under control -- and offered a vision of regulatory reform that differs in key respects from that of the government. Among other things, Mr. King said the U.K. should consider forbidding banks from combining government-guaranteed retail operations with riskier investment-banking business, and said the government hadn't given the central bank the tools to fulfill its new responsibility for financial stability. The U.K., home to the region's largest and most lucrative financial-services market, is resistant to pan-European regulators supervising individual banks and other financial-system players. France and Germany, among others, say the financial crisis has exposed flaws in the bloc's patchwork of national rules and enforcement bodies. They have called for a stronger EU-wide authority. Read more. (Subscription required.)
Daily Insolvency News Headlines
Thu., June 18, 2009
Creditors of bankrupt Lyondell Chemical Co. are seeking court permission to sue billionaire financier Leonard Blavatnik, the company's board of directors and certain banks for allegedly burdening Lyondell with too much debt in a recent merger deal, Bankruptcy Law360 reported. In a motion filed Monday in the U.S. Bankruptcy Court for the Southern District of New York, the official committee of unsecured creditors sought permission to bring fraudulent conveyance and breach of fiduciary duty claims, among others, resulting from the leveraged buyout and acquisition of Lyondell by Basell AF SCA, which was owned and controlled by Blavatnik. "If successful on the claims, the debtors' estates could recover billions of dollars; avoid billions of dollars of obligations and liens; and receive other significant relief, including awards of money damages, all to the extent necessary to ensure that general unsecured creditors receive a full recovery in these cases," the committee said. Of the $22 billion in secured loans needed to finance Basell's acquisition of Lyondell, more than $12 billion went to Lyondell's former shareholders and an additional $1 billion was paid out in transaction fees, the motion claims. Blavatnik only agreed to this because he had so little of his own money at stake, according to the creditors. "The overleveraged and inflexible capital structure imposed upon the debtors as a result of the acquisition left the debtors insolvent, with unreasonably small capital and unable to pay their debts when they became due," the creditors said. Read more. (Subscription required.)
Wed., June 17, 2009
The Canadian Press reports that Canwest Global Communications newspapers' unions were asked discuss concessions as the company faces restructuring to cope with debt of C$3.9 billion. In a copy of a provided to the Canadian Press by the company, Canwest Newspaper Operations President and CEO Dennis Skulsky suggested a 5% wage cut for all Canwest newspaper employees would result in $C20 million in savings a year and could help the company avoid bankruptcy. Representing workers at five of the Winnipeg-based group's papers, the Communication Workers of America/SCA Canada told CP it thought similar letters were sent to other union leaders at Canwest newspapers. Canwest seeks a deal by mid-July after having received extensions from bondholders while it worked to sell assets and renegotiate debt. It recently received about $175 million in financing from U.S. investors but may have to install new management in any restructuring.Read more.
The Commonwealth Bank has been forced into a embarrassing backflip over its involvement in the $3 billion collapse of Queensland financial planning firm Storm Financial earlier this year, The Australian reported. After initially defending its role as a margin lender to thousands of Storm clients, CBA chief executive Ralph Norris said today the bank was “not proud of our involvement in some of these issues”. The bank, which provided margin loans to about 2500 Storm clients, admitted it made mistakes in the way it lent money. Storm had about 14,500 customers, together owed up to $3 billion, when it failed in January. The CBA is believed to be owed $27 million. In February, Mr Norris said the situation Storm “got themselves into is their responsibility”. But today, he said the bank acknowledged “that the position in which some Storm Financial clients find themselves, while not caused directly by the bank, involves the bank to some degree”. Read more.
Bankrupt German retailer Arcandor has filed for insolvency of further 15 business units affecting another 6,700 staff, it said on Wednesday. Its roughly 53 percent stake in Europe's second-largest travel company Thomas Cook, its home shopping channel HSE 24 and the specialty mail order companies of its Primondo subsidiary are not affected by the filing, it said. Read more.
Porsche Automobil Holding SE said Wednesday that the company's owner family backs its talks with Qatar over taking a stake in the Stuttgart-based company, dismissing a German media report published earlier Wednesday, Dow Jones reported. "The family unanimously supports the talks with an investor," Porsche said in a statement, adding that there was no family meeting at which Ferdinand Piech allegedly hindered a decision for Qatar to take a stake. Financial Times Deutschland reported earlier Wednesday that the planned deal with Qatar was at risk after Piech intervened at a family meeting. The Porsche and Piech families control 100% of the German sports car maker's voting stock. Porsche is Volkswagen AG's majority shareholder and has agreed to enter talks with the Wolfsburg-based automaker over forging an integrated company after its net debt tripled to around EUR9 billion when it built its stakeholding. The prospects of the talks with Volkswagen, however, remain unclear, as Porsche is seeking to hammer out a deal with Qatar at the same time. Porsche described the Financial Times Deutschland report as a blatant attempt to interfere in the talks with Qatar. Read more. (Subscription required.)
In a related story, the country’s prime minister said Qatar expects to reveal the outcome of talks on buying a stake in Porsche SE in two to three weeks. The talks are centered around the size of the stake, Sheikh Hamad bin Jassem al-Thani said in remarks carried by the Qatar News Agency. Read more.