Daily Insolvency News Headlines

Wed., October 29, 2014

Wed., October 29, 2014

Italy’s Treasury has not ruled out extending repayment deadlines on hundreds of millions of euros in state aid to help troubled lender Banca Monte dei Paschi di Siena as it struggles to raise fresh capital, according to sources, the Irish Times reported. Officials said Monte dei Paschi chairman Alessandro Profumo and chief executive Fabrizio Viola had held meetings in the economy ministry today to seek options for the bank, after it failed European Central Bank stress tests. Monte dei Paschi, Italy’s third-largest bank, was left badly exposed by the ECB’s health check of 130 European banks, needing to raise €2.1 billion to meet capital thresholds designed to ensure the solidity of the financial system. The person close to the situation gave no details of the talks but said nothing had been ruled out, including options connected with repayment of €750 million euros of state aid, offered in the form of “Monti Bonds” in 2013 to prop up the bank after a previous crisis. Read more.

Wed., October 29, 2014

Chaori Solar’s default on its Rmb1.09 billion ($195 million) bond may not lead to an acceptable template for resolving similar issues, Finance Asia reported. The Shenzhen-listed solar company, which in March became the first Chinese company to default on its onshore corporate bonds, is likely to see the bond bailed out by state-owned enterprises. “According to our calculation, the principle and the interest of the Chaori bond can be fully paid, if the restructuring proposal is well executed, and the related parties exercise the guarantee,” China Securities, the trustee of the bond, said. Chaori will collect a total Rmb1.96 billion from the sale of new shares to a consortium of nine investors plus a sale of assets to other investors, according to Chaori’s proposed restructuring plan, approved by bondholders last week. From this it needs to repay bondholders and other creditors. To ensure every bondholder will be repaid, the company secured two bond guarantors — China Great Wall Asset Management and Shanghai Jiuyang Investment Group — to top up the payment. This was not contained in the proposal, which has caused some confusion. In separate announcements, the guarantors said they would offer a total of Rmb880 million with an effective deadline of December 31 2014. Read more.

Wed., October 29, 2014

For Europe’s major airlines, the world is increasingly becoming one of haves and have-nots: those that have sustainable business models and those struggling to achieve them, The Wall Street Journal reported. For airlines on the back foot, the situation may get worse before it gets better as economic indicators in the eurozone countries decline. That is amplifying the challenge facing carriers such as Air France-KLM SA, the region’s largest by traffic, and rival Deutsche Lufthansa AG. “The weakness of the eurozone is a key concern, and that may well outweigh the eventual benefit of cheaper fuel,” Gerald Khoo, an analyst at Liberum, said. Both carriers have been hit by difficult labor disputes as pilots reject efforts to reform unprofitable short-haul operations. Earlier this month, Air France-KLM warned that a 14-day strikehad hit full-year earnings by €500 million ($637.5 million). With that now out of the way, the key issue for the company when it reports third-quarter results on Wednesday will be whether market softness has spread, Mr. Khoo said. Read more. (Subscription required.)

Wed., October 29, 2014

Dubai, one of seven principalities that make up the United Arab Emirates, has only minimal oil reserves. Instead, the city-state has positioned itself as the hinge connecting Asia to the rest of the world, the gateway city for the fast-growing frontier markets of Africa and a safe haven for investors shunning an arc of conflict that stretches from Libya to Afghanistan, Bloomberg News reported. Still, with real estate prices reaching new highs amid plans for more office towers, more luxury resorts and more gargantuan shopping malls, the question remains: Can Dubai escape the excesses that nearly sank it before? Mohammed Al Shaibani thinks it can. Sheikh Mohammed enlisted Al Shaibani to help restructure as much as 110 billion pounds ($177 billion) in debt Dubai was left holding in 2009. Al Shaibani, 50, is chief executive officer of Investment Corp. of Dubai, which oversees the government’s commercial assets; he’s also director general of the Ruler’s Court, which functions as the emir’s advisory council. His first task was to persuade creditors to give Dubai enough time to figure out exactly how much it owed. Lenders were suspicious that Dubai was trying to cover up the extent of its financial woes. There was no duplicity on Dubai’s part, Al Shaibani says; the city simply couldn’t keep up with its own growth. “Some banks were concerned we weren’t sharing information,” he says. “In reality, we didn’t have the information to share.” Read more.

Wed., October 29, 2014

While multinationals have been bleating about tumbling sales in China, official retail data from the world’s second-biggest economy tells a more robust story. What gives? The correct read on Chinese shoppers’ propensity to buy is key both for the companies who are increasingly dependent upon the market and for the country itself: consumption, billed as a new growth engine, is required to offset the slowdown in investment. Consumer goods manufacturers Unilever, Nestlé, and Colgate-Palmolive all reported declines in China sales in the third quarter to the end of September, with Unilever’s China sales down 20 per cent in value terms. China’s National Bureau of Statistics, meanwhile, says retail sales grew 12 per cent in the first nine months of 2014, down modestly from 13 per cent last year. But analysts say the official data conceal a sharper consumption slowdown. Read more. (Subscription required.)

Wed., October 29, 2014

U.S. Steel is indefinitely idling its coke-making operations in Hamilton as it restructures the company and looks for a potential buyer — part of what a union head calls a piece-by-piece dismantling of the plant, CBC.ca reported. The company is “hot idling” the coke battery, which means it won’t be used after Nov. 1 but will remain prepped for future use. About 100 workers are affected, said Rolf Gerstenberger, president of the United Steelworkers Local 1005. Some will be reassigned to other duties, while others may be laid off. “They need people in other parts of the plant,” Gerstenberger said. “They might take a few temporarily to Lake Erie. Near the end of the week, we’ll start having meetings about where people will be employed.” It’s just the latest move in a major Companies' Creditors Arrangement Act (CCAA) restructuring. The company sought bankruptcy protection in September, citing years of losses. A superior court judge approved an $185-million loan from U.S. Steel Corp, the American parent company, to get it through the next year. Read more.

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