The International Monetary Fund is recommending short-term stimulus for much of Central Europe, where economies are going through their roughest patch in years and the recession in the euro zone has dampened hopes for a quick recovery, The Wall Street Journal reported. In the region, Czech Republic's economy is shrinking at ever-faster rates and Hungary is teetering on the brink of another recession. Poland, the largest of the three, is nearly stagnant after years of robust growth. All three economies—which all rely on exports of manufactured goods to the euro zone—are at risk of deteriorating because of slack demand, Masanori Yoshida, leader of the International Monetary Fund's Czech mission, said in Prague on Monday. Increased government spending to stimulate economic activity and create jobs is therefore warranted, he said. "Short-term economic policies should be geared toward supporting the economy and not creating an additional drag." Read more. (Subscription required.)
Daily Insolvency News Headlines
Tue., May 21, 2013
Early investigations into the collapse of fashion brand Lisa Ho have found that a combination of questionable operating decisions, bad market conditions and "accounting irregularities" affected the viability and the cashflow of the retailer, which has imploded with debts of nearly $11 million, The Australian reported. Lisa Ho Designs and Lisa Ho Retail went into voluntary administration on May 8, less than a month after the company abandoned a listing on the National Stock Exchange, where funds raised were to have been be used to expand the fashion brand offshore and online. At the time, Lisa Ho director Ann Bowering told The Australian that the decision to withdraw its listing was due to interest from private equity groups. However, she also said that funds raised were to be used to pay down debt and expand the business. Early this month, the two companies went into administration with combined debts of nearly $11m. That figure includes a bank debt of about $3.8m, a further $2.3m owed to unsecured creditors and employee entitlements believed to be about $400,000. Administrator Barry Taylor said the initial public offering "was not well thought out" and "misguided". "There are some queries around the accuracy of the financial information that was being produced for management." Read more.
All the pieces of legislation concerning insolvency will be brought together into one Insolvency Code, and the Romanian Justice Minister Robert Cazanciuc plans to send the draft law of this code to the Government this summer, Romania-Insider.com reported. Cazanciuc cited the unhappiness in the legal system caused by the need to make decisions based on several laws, and the high number of insolvencies recorded in recent years. When creating the Insolvency Code, the ministry will also debate it with representatives of the business environment, the minister said. “There’s a need for an insolvency code which will balance between lenders and debtors,” said the minister, adding he does not know yet if an insolvency code for individuals will also be created. In 2011, over 19,000 companies became insolvent in Romania. In 2012, over 23,000 companies started insolvency procedures. Several big companies in Romania filed for insolvency, including the state owned energy producer Hidroelectrica, chemical producer Oltchim, and road builder Romstrade. Read more.
A Swedish prosecutor says three former executives of automaker Saab Automobile AB have been arrested on accounting fraud charges, the Associated Press reported. Prosecutor Olof Sahlgren says the three are "suspected of aggravated attempts to avoid tax controls" by allegedly falsifying parts of Saab's accounts between 2010 and 2011 - a crime that carries a sentence of up to four years in prison. Sahlgren wouldn't identify the three, who worked for Saab while it was owned by Dutch luxury car maker Spyker, which had bought the Swedish company off General Motors. Saab filed for bankruptcy in December 2011 after Spyker failed to revive the lossmaking brand. The Hong Kong-owned company National Electric Vehicle Sweden then bought the carmaker, saying it plans to make electric cars under the Swedish brand. Read more.
Codere SA, the Spanish gambling company that last week reported its worst earnings in more than two years, sunk to a record after Moody’s downgraded its credit rating on concern it may default on loans by the end of June, Bloomberg reported. Codere, which depends on Argentina for more than one-third of its revenue, reported a 21 percent drop in first-quarter earnings after an anti-smoking law went into effect in that country. Earnings before interest, taxes, depreciation and amortization amounted to 62.1 million euros ($79.9 million), the lowest in 10 quarters. Codere has yet to refinance a 60 million-euro senior facility that matures on June 15 and “is vital in enabling the company to continue meeting its obligations at the corporate level,” Ivan Palacios, the lead analyst for Codere at Moody’s Investors Service, said in a report. Moody’s lowered Codere’s “corporate family rating” one grade to Caa3, nine steps below investment grade. It maintained a negative outlook on all ratings for the company, based in the Madrid suburb of Alcobendas. Codere, which operates gambling rooms in countries such as Uruguay and Mexico, lowered its 2013 Ebitda forecast last week to 270 million euros to 285 million euros, from a range of 285 million euros to 300 million euros. A new gambling law expected in Mexico is also adding uncertainty, Javier Esteban, an analyst at Banco Sabadell, said today in a note to investors. Read more.
Saudi contractor Mohammad Al Mojil Group (MMG) said on Monday it had appointed the investment banking arm of Gulf International Bank to advise it on a restructuring of its debts, Reuters reported. No value of the amount of debt being restructured was given in the statement, released to the Saudi stock exchange. MMG Group has been in financial difficulty for some time, with shareholders rejecting a plan to liquidate the company in November after its accumulated losses exceeded 75 percent of its capital at the end of the third quarter. Read more.