Daily Insolvency News Headlines

Wed., December 17, 2014

Wed., December 17, 2014

The battered ruble plunged to a record low against the dollar again Tuesday, as investors grew convinced that the Russian central bank’s surprise move overnight to jack up interest rates to 17% wouldn’t be enough to alleviate the pressure on the currency from falling oil prices and western sanctions, The Wall Street Journal reported. By early afternoon in Moscow, the ruble dropped sharply, reaching 80 to the dollar, a record low and a 15% decline from opening levels when it rallied briefly. At 4:30 p.m. local time, the dollar was trading around 73 rubles. However it regained some ground in the evening and narrowed its decline to 5.6% after Economy Minister Alexei Ulyukayev said the government will introduce some “regulatory measures” at the forex market, but said it is not discussing any capital-control measures. His televised comments came after a meeting of the key financial and economic officials with Prime Minister Dmitry Medvedev . “The measures will be aimed at a better balance of demand and supply in the domestic currency market,” the minister said, adding the government will increase refinancing in foreign currency. Mr. Ulyukayev said the ruble is “undervalued” and “doesn’t correspond to current economic fundamentals,” but he declined to say at what level the ruble should trade. He didn’t provide any details on what measures the government or the Central Bank may take to stop the decline. Read more. (Subscription required.)

Wed., December 17, 2014

Showing classic symptoms of a mania, Chinese investors are borrowing heavily to buy stocks and flipping them quickly, the Financial Times reported in a commentary. On average, they are holding them for barely two weeks, compared with four months in the US. This is just the latest frenzy to hit China and its origins date back to 2008. After the global financial crisis hit, Beijing tried to sustain its growth rate by pouring record amounts of money into the economy. Since late 2008, China’s money supply has expanded from $7tn to $20tn, an increase larger than those seen in all other nations put together. There is now more money circulating in the country than in the far larger economy of the US. Yet all this easy money is, on one hand, failing to prevent the economic slowdown while, on the other, fuelling the stock market and widening the disconnect between the two. If China continues to feed these frenzies through its monetary policy, the risk will grow that popping asset bubbles will further slow the economy that has been the single largest contributor to global growth this decade. And, if China’s flagging growth rate slowed by another 2 per cent, that would be enough to slow global growth from the current pace of 2.5 per cent to less than 2 per cent, the level widely considered a worldwide recession. Read more. (Subscription required.)

Wed., December 17, 2014

The results from the Bank of England’s latest health check on Britain’s top banks are in, with one bank failing, one coming razor close to failing and a third looking bad enough at the end of 2013 to warrant significant fund-raising, the International New York Times DealBook blog reported. The central bank said on Tuesday that the Royal Bank of Scotland, the Lloyds Banking Group and the Co-operative Bank would not have had sufficient capital in 2013 to comfortably weather its hypothetical financial storm, although it added that Lloyds had raised enough capital this year to be considered out of danger. The Royal Bank of Scotland, which just barely passed the test, submitted a revised capital plan during the process announcing its intention to raise £2 billion, or about $3.13 billion, in debt capital that can convert to equity to bolster its position. Only the Co-operative Bank completely failed the test, as was widely expected. The bank was required to submit to the Bank of England a new capital plan, which was approved. Under that plan, it will reduce its risky assets by £5.5 billion by the end of 2018. Read more. (Subscription required.)

Wed., December 17, 2014

German developer and publisher BitComposer has filed for insolvency. The studio claimed its own problems stemmed from “the financial difficulties of its suppliers in game development”. As a result, it said, it could not complete work on its new titles and subsequently missed financial targets. BitComposer had applied for a protective shield procedure on September 26th. This protected the company from foreclosure from creditors, while also allowing it to develop an insolvency plan. During this period the firm was able to publish additional titles. As of December 3rd, the studio filed for regular insolvency proceedings. The district court of Frankfurt appointed Robert Schiebe of law firm Schiebe und Collegen as preliminary insolvency administrator. Despite claiming its operations are “running smoothly” amidst what it has termed a crisis, the company is now seeking a new investor to ensure it can continue game development. Read more.

Wed., December 17, 2014

India’s government said banks may be asked to lend as much as 6 billion rupees ($94 million) to billionaire Kalanithi Maran’s SpiceJet Ltd., as the indebted airline seeks investment over the next two months to keep flying, Bloomberg News reported. The loans would be guaranteed by Maran and repaid as soon as investment was secured, part of a package of steps to prevent a shutdown that would damage India’s airline industry, the government said in New Delhi late yesterday. It arranged a credit line for jet fuel for SpiceJet and eased booking curbs imposed after the carrier canceled flights and missed salary payments. The measures buy the budget airline “breathing time” and don’t count as a bailout, Chief Operating Officer Sanjiv Kapoor said by phone. Base fares as low as 2 U.S. cents and jet fuel costs inflated by taxes have stoked more than $10 billion in aviation losses in the last seven years in India, where liquor baron Vijay Mallya’s Kingfisher Airlines Ltd. was grounded in 2012 after accumulating $1.4 billion of debt. Read more.

Wed., December 17, 2014

Din Ruenmeesang spends about half his monthly income making minimum payments on his seven credit cards and multiple bank loans. That isn’t stopping the 33-year-old from borrowing again to buy a new car next year. Spenders like Din are making it hard for Thailand’s central bank to cut interest rates even as Southeast Asia’s second-largest economy struggles with weakening growth. Thai household debt has more than tripled in a decade to a record high 83.5 percent of gross domestic product, and lower borrowing costs may exacerbate that. “Life is short, and I want to enjoy it,” said Din, who works in the finance department of Bumrungrad International Hospital in Bangkok, and has racked up more than 200,000 baht ($6,100) in debt from buying clothes, shoes and decorating his apartment. “When I am short of money, I use personal loans. Interest rates aren’t bad. I still have room to borrow more.” The Bank of Thailand is grappling with an economy that’s already at risk of losing its position as a leading regional manufacturer, as exports may contract for a second year while shipments from Vietnam and the Philippines climb. The majority of economists surveyed by Bloomberg expect the monetary authority to keep its benchmark interest rate unchanged today, though seven of the 23 predict a 25-basis-point cut. Read more.

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