Daily Insolvency News Headlines

Tue., April 14, 2015

Tue., April 14, 2015

Greece is preparing to take the dramatic step of declaring a debt default unless it can reach a deal with its international creditors by the end of April, according to people briefed on the radical leftist government’s thinking, the Financial Times reported. The government, which is rapidly running out of funds to pay public sector salaries and state pensions, has decided to withhold €2.5bn of payments due to the International Monetary Fund in May and June if no agreement is struck, they said. “We have come to the end of the road . . . If the Europeans won’t release bailout cash, there is no alternative [to a default],” one government official said. A Greek default would represent an unprecedented shock to Europe’s 16-year-old monetary union only five years after Greece received the first of two EU-IMF bailouts that amounted to a combined €245bn. The warning of an imminent default could be a negotiating tactic, reflecting the government’s aim of extracting the easiest possible conditions from Greece’s creditors, but it nevertheless underlined the reality of fast-emptying state coffers. Default is a prospect for which other European governments, irritated at what they see as the unprofessional negotiating tactics and confrontational rhetoric of the Greek government, have also begun to make contingency plans. Read more. (Subscription required.)

Tue., April 14, 2015

In a related story, the International New York Times reported that even if it survives the next three months teetering on the brink of bankruptcy, Greece may have blown its best chance of a long-term debt deal by alienating its eurozone partners when it most needed their support. Prime Minister Alexis Tsipras’s leftist-led government has so thoroughly shattered creditors’ trust that solutions that might have been on offer a few weeks ago now seem out of reach. With a public debt equal to 175 percent of output and an economy struggling to pull out of a six-year depression, Athens needs all the good will it can summon. It owes 80 percent of that debt to official lenders after private bondholders took a hefty write-down in 2012. Since outright debt forgiveness is politically impossible, the next-best solution would be for Greece to pay off its expensive I.M.F. loans early, redeem bonds held by the European Central Bank and extend the maturity of loans from eurozone governments to secure lower interest rates. “This step would save Greece’s budget billions of euros, while reforming the troika arrangement, eliminating the I.M.F.’s and the E.C.B.’s financial exposure to Greece,” said Jacob Funk Kirkegaard, senior fellow at the Peterson Institute for International Economics. The troika is the group of Greece’s international creditors: the I.M.F., the European Central Bank and the European Commission. Read more. (Subscription required.)

Tue., April 14, 2015

Just months after resigning, the former head of the embattled Chinese property developer, the Kaisa Group, returned unexpectedly to the helm, raising doubts about whether the company’s rescue by a rival will move forward, the International New York Times DealBook blog reported. The surprise comeback on Monday of the chairman and chief executive, Guo Yingcheng, is the latest twist in the Kaisa story. Once a darling of global investors, Kaisa started to stumble last fall, after the government blocked the sale of some of its properties in Shenzhen, its largest market. The company’s stock sank and its bonds plummeted, as analysts raised concerns about its debt load and finances. Late last year, Mr. Guo departed, citing health reasons, and other top executives left soon after. Then in February, the chairman and his family agreed to sell their entire 49 percent stake in Kaisa to another Chinese property developer, Sunac China. Now, that deal is in question. Analysts said that the management announcement could be a sign that Mr. Guo was seeking to regain control of the company that he co-founded with family members in 1999. Read more. (Subscription required.)

Tue., April 14, 2015

Debt-saddled Mexican homebuilder Desarrolladora Homex said Monday that it is back in the good graces of Mexican mortgage institution Infonavit, which extends the majority of home loans in the country, The Wall Street Journal reported. Homex said it has reached an agreement with Infonavit so that the builder can once again sell homes to Infonavit borrowers. Homex’s relationship with government-run Infonavit has been strained since mid-2013 when the lender began withholding disbursements to the builder in adherence to court orders, while creditors fought to collect payments on Homex debt. Infonavit also sought to have Homex return subsidies the company had received in advance of the completion of certain projects. “This is an important milestone for the company because the relationship with Infonavit is essential for the reactivation of the company’s projects, and this agreement sets a strong foundation for a successful relationship with the institute going forward,” Homex Chief Executive Gerardo de Nicolás said in the company’s statement. Culiacán-based Homex, which filed for bankruptcy protection in 2014, said Infonavit provides mortgage loans for 60% of the builder’s customers. Read more. (Subscription required.)

Tue., April 14, 2015

Tumbling interest rates in Europe have put some banks in an inconceivable position: owing money on loans to borrowers, The Wall Street Journal reported. At least one Spanish bank, Bankinter SA, the country’s seventh-largest lender by market value, has been paying some customers interest on mortgages by deducting that amount from the principal the borrower owes. The problem is just one of many challenges caused by interest rates falling below zero, known as a negative interest rate. All over Europe, banks are being compelled to rebuild computer programs, update legal documents and redo spreadsheets to account for negative rates. Interest rates have been falling sharply, in some cases into negative territory, since the European Central Bank last year introduced measures meant to spur the economy in the eurozone, including cutting its own deposit rate. The ECB in March also launched a bond-buying program, driving down yields on eurozone debt in hopes of fostering lending. Read more. (Subscription required.)

Tue., April 14, 2015

A company that shares its director with the Noggi Frozen Yogurt chain has entered voluntary administration, SmartCompany.au reported. Stewart Free and Bradd Morelli of Jirsch Sutherland were appointing administrators of SKS Partners on April 9. An investigation by SmartCompany has revealed SKS Partners has close ties with the franchised Noggi Frozen Yogurt chain, which was founded by John Suh in 2009 during the height of the frozen yoghurt craze in Australia. Suh is listed as the director and secretary of SKS Partners on business directory FindTheCompany, while SKS Partners and Noggi parent company, SKS Services, share the same street address in Gladesville, New South Wales. However, SKS Partners and SKS Services have different Australian business numbers (ABN). SKS Partners also owns the trademark for “Noggi Pure Frozen Yogurt” in class 43, restaurant and hotel services, and previously owned the trademark for “Noggi Loves You Body”. Noggi currently operates 11 frozen yoghurt outlets in New South Wales, Queensland and the Australian Capital Territory. Read more.

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