The archbishop of Cyprus has taken the unusual step of urging thousands of small investors in the island’s biggest bank to reject a €1bn share sale agreed with international fund managers and the European Bank for Reconstruction and Development when it comes up for approval next month at an extraordinary general meeting of shareholders, the Financial Times reported. The intervention is aimed at protecting almost 90,000 “old” shareholders of Bank of Cyprus who took a hit last year when large depositors were forced to convert a sizeable chunk of their savings into shares as part of an international rescue package, and now face further dilution if the private placement goes ahead. Kypros Chrysostomides, legal adviser to the old shareholders, said they wanted the value of their shares to be restored through the recognition of a €1.8bn profit made by Bank of Cyprus from its takeover of Laiki Bank, the island’s second-largest lender which collapsed last year. Read more. (Subscription required.)
Daily Insolvency News Headlines
Wed., July 30, 2014
Barring a last-minute deal, Argentina will default on billions of dollars of bonds on Wednesday, the International New York Times reported. It would be Argentina’s second default in 13 years. But unlike the last time, when scores of unhappy Argentines took to the street as unemployment rose to 25 percent and inflation soared, this default would look decidedly different. Argentina’s equity, bond and currency markets, which have been volatile in recent days, would certainly feel a jolt. The government and Argentine companies, which have been largely locked out of global markets since the last default in 2001, would find it even harder to raise money. And the economy, which has struggled with stagflation for years, would most likely slow further. But the reaction will probably be muted because this default is not a surprise. “This is kind of a chronicle of a default foretold,” said Arturo Porzecanski, director of the international economic relations program at American University, referring to the novella by the Colombian writer Gabriel García Márquez, “Chronicle of a Death Foretold.” A default has been in the making since a group of New York hedge funds gained significant victories in American courts, where they are demanding that Argentina pay them in full on government bonds that defaulted in 2001. Read more. (Subscription required.)
Germany’s borrowing costs have fallen to their lowest level on record as Europe’s weak economic recovery persuades the region’s central bank to keep interest rates vanishingly low, the Financial Times reported. The yield on Germany’s 10-year Bunds dropped 2.6 basis points to 1.12 per cent on Tuesday morning. Aside from distortions during the years of hyperinflation in the 1920s, this is Germany’s lowest borrowing rate since the early 1800s. Across Europe, low interest rates have pushed government bond yields down to historic levels. French, Spanish, Italian and Dutch government borrowing costs are now at rates not seen for hundreds of years. Benchmark government borrowing costs for the Netherlands have fallen to a 500-year low, according to data compiled by Deutsche Bank and GFD. Spain’s benchmark government borrowing costs dropped below 2.5 per cent this week – a two century record, and French 10-year yields dropped to 1.52 per cent on Tuesday morning, the lowest point reached over a period of more than 250 years. Read more. (Subscription required.)
A Luxembourg court on Tuesday accepted requests for creditor protection filed earlier by Espirito Santo Financial Group (EFSG) and Rio Forte Investments, holding companies of Portugal's troubled Espirito Santo family, Reuters reported. The commercial court said in a statement that it had declared the demands of ESFG and Rio Forte admissible. ESFG is Banco Espirito Santo's largest shareholder, with a stake of about 20 percent, and is controlled by the bank's founding family, the Espirito Santos. Espirito Santo International, which owns Rio Forte, received creditor protection earlier this month. Rio Forte holds a 49 percent stake in ESFG. Read more.
Germany’s Zweibrücken Airport has announced insolvency, but will continue operations because agreements have been reached with airlines, clients and suppliers, according to several media reports, Air Transport World reported. Insolvency administrator Jan Markus Plathner has been quoted by several German media outlets as saying the collapse of the airport had been avoided, but the search for a potential investor is urgent. Talks with possible investors have already begun. Earlier this year, Germany’s regional Lübeck Airport filed for insolvency. In April 2013, Black Forest Airport, near the small German city Lahr, also filed for insolvency. Read more.
Top bankers in Britain will become directly accountable for their actions under proposals unveiled by regulators on Wednesday, with those behaving recklessly facing jail, Telegraph.co.uk reported. The Bank of England’s Prudential Regulation Authority (PRA) will also publish final rules on clawing back bonuses paid to bankers found guilty of misconduct, and consult on closer scrutiny of how awards are made. Bonuses handed to “code staff”, those who take the biggest risks at a bank, will be subject to a clawback lasting seven years from when they were awarded, Sky News reported. This would ease bankers’ fears that they would face measures for up to 10 years after they were handed payouts. A proposal to apply the new rules retrospectively will be dropped. The measures are in response to public anger over having to bail out lenders such as Royal Bank of Scotland and Lloyds in the 2007-09 financial crisis, with few individual bankers punished. Read more.