Daily Insolvency News Headlines

Mon., August 31, 2015

Mon., August 31, 2015

The upcoming Greek election may reopen the can of worms that the 86 billion euro bailout deal with creditors was supposed to close, the International New York Times reported. Given that no party is likely to emerge from the Sept. 20 vote with a majority, it may be hard to form a strong government that can implement the program. There’s even a risk that there will be yet more elections, tipping Greece back into crisis. When Alexis Tsipras set the election in motion by resigning as prime minister, he probably thought he would win fairly easily. After all, opinion polls in July showed him head and shoulders above his opponents. Mr. Tsipras’s idea was to get rid of the members of Parliament in his left-wing Syriza party who opposed his deal with the eurozone and secure a new mandate to carry out the program, worth the equivalent of $96 billion. But opinion polls that came out last week paint a different picture. In all, Syriza is the leading party, but its gap over the center-right New Democracy party has narrowed sharply. What’s more, Mr. Tsipras’s approval rating, which used to be sky-high, has come down to earth. In a poll by the University of Macedonia, only 30 percent of those asked had a positive view of him, down from 70 percent in March. Read more. (Subscription required.)

Mon., August 31, 2015

To protect jobs and plants, the Chinese government and its state-owned banks sometimes keep money-losing businesses on life support by rolling over or restructuring loans, providing fresh credit or offering other aid. While this may seem like an odd business tactic, it is part of a broader strategy to help maintain social stability, a major goal of China’s leadership. Authorities in China’s provinces and cities also back struggling factories just because they are deemed important to the local economy. Similar strategies have been tried before, with little success. In Japan, such businesses, known as “zombie companies,” are blamed for contributing to that country’s two decades of economic stagnation. As China allows its own “zombies” to stalk the economy, the situation is clouding the country’s outlook, making it difficult to predict where growth is headed. If the leadership doesn’t address the underlying problem, the economic weakness could be prolonged. Read more. (Subscription required.)

Mon., August 31, 2015

With Australia on the cusp of a “looming liquidity crisis’’, corporate turnaround specialists have urged so-called safe harbour laws to protect directors and their advisers in informal corporate restructurings, The Australian reported. While the proposed reforms have been long pondered in Canberra’s corridors, Turnaround Management Association director Cameron Belyea said there was a heightened urgency ahead of the likely drying up of foreign capital, especially from the US. “Rather than being troubled by the hounds of insolvency, directors of troubled companies should be able to come to a solution,’’ he said. “If directors follow a genuine turnaround plan they should continue to have the benefit of a safe harbour defence.’’ The restructuring of Atlas Iron, Billabong and the Nine Network has highlighted the popularity of behind-the-scenes workouts over formal insolvency appointments. The trouble is, directors and their advisers open themselves to accusations of insolvent trading or breaches of continuous disclosure requirements. Mr Belyea, who is also a partner with Clayton Utz, said any legislation needs to strike a balance between protecting directors and not protecting those that are merely playing for time. “If the government doesn’t change its settings, companies with skittish boards will go into administration too early and others with overoptimistic boards could hold on for too long and then fail to come up with a plan.’’ Read more. (Subscription required.)

Mon., August 31, 2015

In recent days, an advice column has circulated widely on China’s most popular social media phone app. Titled “Guide on Safe Passage Through the Economic Crisis,” it is aimed at young Chinese urban professionals, the International New York Times reported. Its nuggets of wisdom include: “Work hard at your job so you are the last to be laid off” and “In an economic crisis, liquidity is the number one priority.” Zhang Yuanyuan, 31, a bank teller in Shandong Province, is among the thousands of people who have shared it online. “Last year we didn’t have any year-end galas or a bonus,” she said in an interview. “I think this year will be the same.” “I try to spend less,” she said, adding that she now buys cheaper clothes online instead of shopping in high-end malls. “And I started car-pooling with co-workers to save on gas.” Many young middle-class Chinese who grew up during the nation’s glittering boom years, when double-digit growth was the norm, are suddenly confronting the shadow of an economic slowdown, and even hints of austerity. Their angst poses dual problems for China’s leadership. The ruling party bases its legitimacy on delivering high rates of growth and employment. It also hopes to encourage consumer spending as a new engine of growth as the manufacturing sector slows and to nudge the economy away from an investment-driven model. Eroding confidence threatens both goals. Read more. (Subscription required.)

Mon., August 31, 2015

Japan’s consumer inflation ground to a halt for the first time in more than two years and household spending unexpectedly fell in July, increasing pressure on policy makers to offer fresh fiscal and monetary support to underpin a fragile recovery. The gloomy data, coupled with soft exports that were blamed on China’s slowdown, reinforces the dominant market view that any rebound in Japan’s growth after the contraction from April to June will be modest. The core consumer price index, which includes oil products but excludes volatile fresh food prices, was unchanged in July from a year earlier, government data showed on Friday. That was the slowest pace of growth since May 2013. Separate data showed household spending fell 0.2 percent in the year to July. Many analysts expect prices to slide in coming months with another drop in oil costs pushing inflation further away from the ambitious 2 percent target of Japan’s central bank. Read more.

Mon., August 31, 2015

The private equity fund that backed the buyout of parts of the former Quinn Group last year is poised to swoop on the Irish arm of troubled Dutch engineer, Imtech, saving 700 jobs, the Irish Times reported. The parent of Waterford engineering business, Imtech Suir, confirmed yesterday that it is in talks about a possible sale of the company to US and European investment fund Endless LLP and predicted that a deal would close next week. The Waterford company is part of Dutch group Royal Imtech NV, which was declared bankrupt two weeks ago in the wake of an accounting scandal in its German subsidiary that led to losses of hundreds of millions of euro. Imtech Suir and its British counterpart are both profitable businesses in their own right and will continue to trade as normal after their sale to Endless. The deal will save 700 jobs in the Irish company, which will remain under the charge of its current management after the sale goes through. Read more.

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