Creditors of a bankrupt Spanish motorway business will meet on Friday to decide whether to liquidate it, piling pressure on the government to come up with a way to avoid billions of debt from nine failed toll road companies ending up on its books, Reuters reported. After more than a year of negotiations between ministries, banks and construction companies, the government has yet to find a way of saving the motorway businesses without debt of over 4 billion euros ($5.4 billion) hitting its finances. Spain wants to minimise the effect of any rescue on Europe-agreed deficit targets as it negotiates the politically difficult task of bailing out private sector operators with taxpayers' money just two years after sinking over 40 billion euros into the country's failed banks. If the creditors of the AP-36, a toll road owned by Ferrovial and Sacyr, reject a viability plan put forward by its owners, the business will go into liquidation and under Spanish law the government will have to pay its debts of around 500 million euros. Others could follow suit, with banks holding debt linked to failed motorway companies of around 3.9 billion euros, with a further 470 million of debt with builders. The maximum hit for the deficit would be 3 billion euros, a government source said. Read more.
Daily Insolvency News Headlines
Fri., July 18, 2014
Austria and the World Bank may end up in court over the planned wipe-out of junior creditors of nationalised Hypo Alpe-Adria-Bank International , the Austrian finance minister said, the Irish Times reported. The Austrian government was “surprised” to see that the World Bank, through its International Bank for Reconstruction and Development unit, owns €150 million of subordinated Hypo Alpe bonds, Michael Spindelegger told Austrian state radio ORF today. The Washington-based lender’s claim that it can’t be expropriated is being reviewed, he said. “What we have to do now is to investigate whether it’s accurate what the World Bank says,” Mr Spindelegger said. “We’ll have to clarify that in court if necessary.” Austria is preparing to impose losses on subordinated Hypo Alpe creditors, effectively bypassing a guarantee by the country’s province of Carinthia. The €890 million of junior debt, including bonds held by the World Bank’s IBRD, will be wiped out once a law on Hypo Alpe’s wind-down, passed by Parliament’s lower house, gets final approval. The plan is complicated by World Bank statutes that protect the lender’s assets from expropriation. Read more.
With the latest round of sanctions against Russia, the United States Treasury Department said it had “increased the cost of economic isolation for key Russian firms,” like the state oil company Rosneft and the banking arm of the natural gas giant Gazprom, the International New York Times reported. The isolation, though, does not extend to the companies’ growing reliance on Chinese lending, a trend in the Russian natural resources industry that will blunt the effect of sanctions aimed at the finances of Russian oil companies. Energy companies form the backbone of the Russian economy. If oil and gas are taken together, they export more energy than Saudi Arabia, and that money props up the military of President Vladimir V. Putin. Rosneft is the world’s largest publicly traded oil company, pumping about 4.1 million barrels daily. Given the gigantic outlays for drilling wells and building pipelines in the Siberian wilderness, such companies rely deeply on cheap sources of capital. The Chinese have been willing to oblige. Read more. (Subscription required.)
Banco Espirito Santo (BES) could be sued over a loan that one of its founding family's holding companies failed to repay to Portugal Telecom, sources said on Thursday, as credit rating agencies downgraded the bank and its key shareholder. Still, Finance Minister Maria Luis Albuquerque said the problems faced by BES, Portugal's largest listed bank, and the family's Espirito Santo Group did not pose an imminent danger to the country's financial system and reiterated the government did not plan to use public funds to help the bank. But other risks loomed for BES following Tuesday's failure by the family's Rioforte company to repay 847 million euros ($1.15 billion) in debt to Portugal Telecom, which forced the telecom firm to take a cut in its stake of a merger with Brazil's Oi. Sources close to the process told Reuters that Portugal Telecom was considering taking BES to court due to the non-payment as the commercial paper was bought with funds deposited at BES bank accounts, and was considered risk-free by the telecom firm. A BES spokesman pointed to the bank's July 10 statement in which it said institutional clients "are considered qualified investors, in accordance with applicable legal criteria, hence with more capacity to assess risk". Read more.
Eurozone banks that are told they have holes in their balance sheets will have just two weeks this autumn to come up with plans to plug the gap, according to new information from the European Central Bank, the Financial Times reported. The Frankfurt-based regulator on Thursday published an update of its plans as it prepares to carry out stress tests in the coming weeks on 128 of the largest banks across the eurozone before it takes over supervision of the lenders in November. Banks will be given the results of the stress tests in October along with feedback on a so-called asset quality review that has seen the ECB seek to identify inconsistencies in the way lenders measure their riskiest assets. Lenders’ balance sheets will be stress-tested under both a baseline and an adverse scenario. Banks will have two weeks to come up with their plans and then six months from October to cover shortfalls in the baseline case and nine months in the adverse case. The ECB has stressed the need to make its probe more rigorous than previous European banking stress tests that failed to identify serious problems with some lenders. As a result, the outcome of the AQR for each bank will be used as a starting point for the balance sheet strength of the bank during the stress test, which the authority called a “key strength” of the exercise. Read more. (Subscription required.)
Austria must add about 8 billion euros ($11 billion) liabilities of state-owned KA Finanz AG to its accounts, the European Union said, putting further pressure on the country’s debt burden, Bloomberg News reported. The EU’s statistics office Eurostat told Austria to change the classification of KA Finanz, the wind-down unit for failed Kommunalkredit Austria AG, and revise government statistics for the past five years, according to a letter posted on Eurostat’s website. The letter, dated July 3 and addressed to the country’s statistics office Statistik Austria, advises to make the revisions by Sept. 1. A tightened Eurostat rulebook for government accounting and another nationalized bank are already set to swell Austria’s debt this year. The biggest increase is due to the breakup of Hypo Alpe-Adria-Bank International AG, which is also set to spin off a “bad bank.” The new rules force Austria to add bigger parts of the state railway and other state-owned companies to its debt, Statistik Austria has said. Read more.