Daily Insolvency News Headlines

Mon., October 20, 2014

Mon., October 20, 2014

The European Central Bank’s investigation of the eurozone’s largest lenders is raising further concerns over the future of German publicly owned Landesbank HSH Nordbank, as its bloated shipping portfolio comes under intense scrutiny, the Financial Times reported. Germany’s largest shipping lenders, including HSH Nordbank, NordLB and Commerzbank, will see their shipping assets written down by between 10-20 per cent in the ECB’s stress tests, according to bankers familiar with the investigations. The results of the tests will be revealed on October 26, giving banks that are found to have holes in their balance sheets just two weeks to come up with a plan to plug the gap. HSH Nordbank, the world’s largest shipping lender, is seen by bankers in Germany as one of the most likely candidates to fail the tests. Senior executives at the Hamburg and Kiel-based lender said they were concerned about the hit that HSH would have to take on its shipping portfolio, following intensive discussions with ECB officials in recent weeks. Read more. (Subscription required.)

Mon., October 20, 2014

Saudi contractor Mohammad Al-Mojil Group's (MMG) board had approved a recovery plan that use most of its existing capital base to pay off debts and new cash raised through a share issue, it said on Sunday, Reuters reported. The firm, which got into difficulty after over-extending itself trying to take advantage of a boom in construction in the kingdom, has not traded on the Saudi bourse since July 2012, when its shares were suspended by the regulator after breaching rules relating to accumulated losses. MMG said in September its accumulated losses for the period ending Aug. 31 stood at 2.689 billion riyals ($717.1 million), equivalent to 215 percent of its paid-up capital. Saudi shares are suspended once losses pass 75 percent of capital. Under the plan approved at a board meeting on Thursday, MMG's capital will be cut from 1.25 billion riyals to 125 million riyals, creating one share for every 10 shares currently possessed, it said in a bourse filing. Such an accountancy technique will allow the company to effectively write off some of its accumulated losses. Read more. (Subscription required.)

Mon., October 20, 2014

Six years after Iceland’s banks defaulted on $85 billion in debt and brought the Atlantic island’s economy to its knees, Islandsbanki hf is seeking to sell shares to international investors, Bloomberg News reported. The island’s second-largest bank, formed from the remnants of failed Glitnir Bank hf, wants to sell shares to investors in a Scandinavian capital or London, the Reykjavik-based bank’s Chief Financial Officer Jon Omarsson said in an Oct. 16 interview in Stockholm. Tapping new investors would benefit bondholders in the failed bank, many of which are hedge funds that snapped up assets after the collapse. Islandsbanki is now primarily owned by the creditors of its predecessor. The bank is betting an IPO will help it emerge from an economic regime still operating behind capital controls that have remained in place since Iceland’s 2008 financial meltdown. After a rapid international expansion, Iceland’s three largest lenders, which included Kaupthing Bank hf and Landsbanki Islands hf, collapsed under a mountain of debt. The shock sent the country into its worst economic crisis since it gained independence from Denmark in 1944. Read more.

Mon., October 20, 2014

A court in Luxembourg has denied a creditor-protection request from the main holding companies of the Espírito Santo empire, paving the way for a liquidation of all its assets, The Wall Street Journal reported. Espírito Santo International SA and Rioforte Investments SA filed the request in July after they were unable to meet debt obligations. Espírito Santo International, whose main unit is Rioforte, was found to be in serious financial trouble earlier this year following an audit ordered by the Bank of Portugal. The audit also found accounting irregularities at the holding company. Rioforte holds assets including property and hotels in Portugal, the U.S. and Brazil, and interests in energy and agriculture projects in Brazil. In a statement, the company said the court will now name a liquidator to sell the assets and repay creditors. The same process will happen to Espírito Santo International. Both companies are privately held and their latest balance-sheet figures aren’t public. Rioforte reported total assets of €4.35 billion ($5.57 billion) and total liabilities of €3.42 billion as of December 2013. Read more. (Subscription required.)

In a related story, Reuters reported that a judge in the Dubai International Financial Centre (DIFC) court approved on Sunday an application to liquidate ES Bankers (Dubai) Ltd (ESBD), the latest collapse of a unit of the Portuguese Espirito Santo family's empire. Read more.

Mon., October 20, 2014

As the Cypriot economy reeled from the collapse of its second-largest bank in 2013, the European Central Bank faced a thorny question: Should it keep the institution, Cyprus Popular Bank, alive with short-term loans or pull the plug? By many financial measures, the bank was failing, the International New York Times DealBook blog reported in an analysis. Stung by a disastrous bet on Greek government bonds, Cyprus Popular Bank had been in trouble for the better part of 2012 and depositors were withdrawing their savings in ever larger numbers. It needed cash and fast. Under E.C.B. rules, troubled banks that can no longer raise funds on the open markets are allowed to borrow from their national central bank, which assumes responsibility for this so-called emergency liquidity assistance, or E.L.A. Still, strict rules govern this process. The bank in question must be solvent. And if the loans surpass 2 billion euros, or $2.56 billion, the E.C.B. reserves the right to refuse additional requests for money. The methodology for valuing the collateral used to secure the credit also has to be disclosed. Fearing possible contagion if the bank failed, the E.C.B.’s governing council, a decision-making arm consisting of 24 members, had approved an emergency loan request by one its members, the Central Bank of Cyprus, in late 2011. Read more. (Subscription required.)

Mon., October 20, 2014

Pilots of German carrier Deutsche Lufthansa AG will go on strike again Monday and Tuesday in their continuing dispute over retirement benefits, The Wall Street Journal reported. The pilots union, Vereinigung Cockpit, said in a statement the strike will start at 11:00 GMT on Monday and would end at 21:59 GMT on Tuesday, and would affect Lufthansa’s Airbus 320 family, Boeing 737 and Embraer planes. Lufthansa said about 1,450 flights will be canceled on Monday and Tuesday because of the strikes. More than 200,000 customers will be affected by the walkout, the company added. Long-haul flights and those operated by Lufthansa group airlines Austrian Airlines, Brussels Airlines, Germanwings, SWISS and Air Dolomiti won’t be affected, the company said. The strike is the second to hit Lufthansa in a week. On Oct. 16, pilots of Lufthansa unit Germanwings went on a 12-hour strike to protest the change in retirement benefits. Under current rules, Lufthansa pilots can retire at age 55 and receive 60% of their salary. The European Union recently changed pilot-licensing rules, allowing them to fly until age 65. Lufthansa has said the change made its early-retirement benefits obsolete. Read more. (Subscription required.)

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