Ireland’s EU-IMF bailout has been broadly successful, according to a new reports by a leading European thinktank, but risks remain that a second bailout will be required down the line, the Irish Times reported. In an analysis of the manner in which three euro area countries have been bailed out, the report concludes that Ireland’s bailout has been a success, Portugal’s a “potential” success and Greece’s a failure. The report by the Brussels-based Bruegal thinktank argues that in hindsight Greek sovereign debt should have been written down at the outset and “in the Irish case, the bail-in of senior bank bondholders might have been desirable from the Irish point of view”. “But it would have improved the programme’s sustainability far less than in Greece, and it could have had significant negative implications for the funding of Irish banks”. It says the two issues on which troika members have disagreed most were the risk of financial spillovers from imposing losses on senior bondholders of Irish banks, and the restructuring of Greek debt. Read more.
Daily Insolvency News Headlines
Fri., May 17, 2013
A deepening recession and banking stress tests could find Italy's mid-sized lenders short of billions of euros, putting the state on the hook for a new wave of cash calls and triggering an overhaul of how they do business, Reuters reported in an insight. Even ahead of the European stress tests, expected to take place when or shortly before the European Central Bank (ECB) takes over direct supervision of euro zone banks next year, Italy's smaller banks are under pressure to boost their balance sheets after a Bank of Italy audit of problematic loans and to meet stricter Basel 3 capital rules. Bad loans in Italy have been climbing at an annual rate of 20 percent in recent months. Italian banks' efforts to shore up their capital base, especially among the 25 or so lenders expected to come under ECB supervision, is in turn deepening the country's economic recession, as they cut back on lending. With bad debts mounting, analysts expect the Frankfurt-based central bank to take a harsh look at the quality of banks' loans, requiring them to set aside more capital. Read more.
Corporate collapses and debt restructurings have been common in the Persian Gulf since the financial crisis. But the U.S. bankruptcy filing by the Bahrain-based investment firm Arcapita has presented an unusual sight for the region – a debt-laden company which is planning to sell all its assets to repay creditors and wind up its operations, The Wall Street Journal Middle East Real Time blog reported. While nothing new in the developed world, bankruptcy proceedings overseen by courts and done transparently are virtually unknown in Arcapita’s native Bahrain or in the rest of the oil-rich Gulf, where failure carries a social stigma and debt-laden, financially broken companies are often allowed to straggle along instead of publicly going out of business. Even when Gulf companies do want to wind themselves up, lawyers say local systems are rarely used because they’re unpredictable. Arcapita’s winding-up is taking place in plain view because it filed for Chapter 11 bankruptcy in New York, which it was able to do because it made substantial investments in the U.S. The case, filed last March, is expected to conclude this summer. The absence of a properly-functioning bankruptcy regime back in the Gulf has hindered the region’s economic recovery, lawyers and consultants say. As well as keeping unhealthy companies alive for too long, slowing the rebound from the 2008-2009 financial crisis, it has stifled access to credit and stunted the development of financial markets. Read more. (Subscription required.)
Micron Technology Inc. moved a step closer to its takeover of bankrupt Japanese memory chip producer Elpida Memory Inc. this week, The Idaho Statesman reported. The Tokyo High Court tossed out an appeal by creditors to a Tokyo District Court's approval of the company's reorganization plan which calls for Micron to take over the Japanese company. Micron’s acquisition of Elpida will give the memory chip company a larger share of the market for dynamic random access memory used in PC’s and mobile devices. It also will give the company access to mobile technology that will help Micron better compete in the smartphone and tablet markets. Read more.
Thomas Cook Group, the debt-laden travel operator, launched a £1.6bn capital restructuring on Thursday as part of its bid to return to normal trading after flirting with collapse in late 2011, the Financial Times reported. The lossmaking travel group, which is midway through a restructuring programme, said it would raise £425m through a rights issue and share placement. It also plans to sell £441m of bonds, and has renegotiated a £691m debt facility. Harriet Green, Thomas Cook chief executive since July, said the restructuring would ease the company’s debt repayments due next year and put the company on the path of resuming dividend payments. The company axed its dividend at the end of 2011, shortly after a series of profit warnings triggered the abrupt departure of Manny Fontenla-Novoa as chief executive. Thomas Cook reported net debt of £1.2bn for the six months to the end of March, down £175m year on year, and compared with a market capitalisation of £1.3bn. Read more. (Subscription required.)
Ukio Banko Investicine Grupe, or UBIG, the Lithuanian investment company that controls Scottish soccer club Heart of Midlothian, is insolvent, said the Baltic nation’s Department of Enterprise Bankruptcy Management today on its website, Bloomberg reported. The department, part of the Economy Ministry, said that Kaunas-based UBIG, at its own request, had been placed on a list of companies unable or unwilling to meet their obligations. UBIG is a sister company of Ukio Bankas AB, a lender that Lithuania’s central bank closed in February for risky lending to related parties. Russian-born investor Vladimir Romanov controlled both companies. UBIG owns 79 percent of Edinburgh-based Hearts as well as sport, aluminum and real-estate projects in several countries, according to its website. Read more.