Daily Insolvency News Headlines

Tue., September 30, 2014

Tue., September 30, 2014

German prosecutors said Monday that they had filed criminal charges against the former chief executive and the former management board of Hypo Real Estate, accusing them of misleading investors in 2008 during what proved to be the country’s most costly bank failure, the International New York Times DealBook blog reported. Georg Funke, the former chief executive of the Munich-based lender, and seven former management board members are accused of misleading investors about risks facing the bank ahead of its collapse in September 2008. The office of the Munich public prosecutor, however, said it had decided not to pursue charges of fraud in Hypo Real Estate’s acquisition in 2007 of Depfa, a bank in Ireland that played a major role in the parent bank’s collapse. The other charges have been submitted to a judge in Munich, who must approve them in order for the case to go to trial. Wolfgang Kreuzer, a Munich lawyer who represents Mr. Funke, expressed satisfaction that prosecutors did not pursue the fraud charges. Mr. Funke will contest the remaining accusations, Mr. Kreuzer said. The failure of Hypo Real Estate led to by far the biggest taxpayer-financed bailout in Germany during the financial crisis. The government supplied 9.8 billion euros, or $12.4 billion, in capital and issued €124 billion in guarantees for debt issued by the bank, which was nationalized. Its remaining assets are being wound down. Read more. (Subscription required.)

Tue., September 30, 2014

After a two-week pilots' strike that inconvenienced nearly a million passengers and caused Air France to lose an estimated 280 million euros, the airline was slowly returning to the skies on Monday, the International New York Times DealBook blog reported. It was unclear what the pilots had achieved from the strike, other than to delay severely the return to profitability for the French-Dutch parent company, Air France-KLM, and to curb the company’s ambitions for growth in Europe’s fiercely competitive regional market. One outcome may be difficult negotiations in coming months over Air France-KLM’s plans to transform its modest low-cost subsidiary, Transavia, into a credible competitor to well-established rivals like Ryanair and easyJet. Last week, Alexandre de Juniac, Air France-KLM’s French chief executive, said that management’s only major concession to the pilots — to limit Transavia’s growth mainly to the French market — had made him “sick at heart.” Analysts say that the scaling back of the Transavia plan from the broader European expansion that the company had originally announced — the plan that provoked the strike — could undermine the long-term business case for the budget brand. And they predict that it could force Air France-KLM to rely more heavily on profits from its intercontinental and premium-class services, which are under siege from cash-rich Middle Eastern competitors that are eagerly expanding into Europe. Read more. (Subscription required.)

Tue., September 30, 2014

A U.S. judge held Argentina in contempt of court on Monday, saying the republic was trying to find ways to circumvent a prior order requiring it pay holdout bondholders at the same time as other creditors who restructured their debt in recent years, Reuters reported. U.S. District Judge Thomas Griesa in Manhattan deferred a decision on imposing sanctions against Argentina to a later date. But he did say that the "problem is that the republic of Argentina has been and is now taking steps in an attempt to evade critical parts of" his injunction. Argentina's government enacted a new law recently to get around a court ruling saying it must pay more than $1.3 billion to holdout hedge funds who rejected the country's debt restructuring agreements in 2005 and 2010. The country defaulted on more than $100 billion in debt more than a decade ago. Read more.

Tue., September 30, 2014

U.K. Treasury chief George Osborne said Monday that the Conservative Party would cut billions of pounds more of public spending to tackle the deficit, part of a tough-on-the-economy message the party hopes will win over voters in the 2015 general election, The Wall Street Journal reported. Mr. Osborne, who made the announcement in a speech to the center-right party's conference, is looking to draw the battle lines with the main opposition Labour Party over the economy ahead of the election in May. The Conservatives also hope their party's economic message will distract attention from the party's divisions over Europe, which have led to the recent defections of two Conservative lawmakers to a small anti-Europe rival party. With the economy a key issue for many voters, the main opposition Labour Party has accused the government of fueling a "cost-of-living crisis" by focusing too much on austerity policies to cut the nation's budget deficit. But Mr. Osborne sought Monday to argue that the Conservatives were best able to take the tough decisions needed to get the deficit down and the economy back on track. Read more. (Subscription required.)

Tue., September 30, 2014

The Lloyds Banking Group said today that it had terminated the contracts of eight individuals and clawed back about £3 million in bonuses after its settlement of inquiries into the manipulation of global benchmark interest rates, the Irish Times reported. In July, Lloyds agreed to pay more than $380 million to British and US authorities to resolve investigations into the manipulation of rates, including one used to determine fees paid by Lloyds related to a £17 billion taxpayer-backed bailout during the financial crisis. “Having now taken disciplinary action against those individuals responsible for the totally unacceptable behavior identified by the regulators’ investigations, the board and the group’s management team are committed to preventing this type of behavior happening again,” Antonio Horta-Osorio, the bank’s chief executive, said in a statement. Lloyds said it was unable to take disciplinary action against a number of individuals who left the company before the settlements in the summer. In July, Lloyds, which is partly owned by the British government, admitted to criminal wrongdoing by some of its employees who sought to manipulate the London interbank offered rate, or Libor, and other global benchmark interest rates. Read more.

Tue., September 30, 2014

FlyRomania (X5, Bucharest Otopeni) has filed for insolvency with a Bucharest court. A filing seen by ch-aviation has now called for all creditors to lodge claims with the airline's interim trustee, Dinu Urse Associates, with the deadline for submissions set for October 30. Doubts about the Ten Airways (X5, Bucharest Baneasa) subsidiary's long-term viability first surfaced in June when poor load-factors forced it to dramatically scale down its flights, just one month after it launched operations. During its brief operational period, FlyRomania had offered budget flights between Bucharest Otopeni, Tulcea, and Timisoara domestically as well as flights to destinations in Italy, Spain, Germany and Turkey. Read more.

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