Daily Insolvency News Headlines

Fri., August 22, 2014

Fri., August 22, 2014

A planned $2bn deal between Rosneft and oil trader Vitol has been shelved, in the latest sign that tougher western sanctions are hampering the Russian state oil group’s ambitions, the Financial Times reported. Vitol, the world’s largest independent oil trader, had been in talks for several months to raise about $2bn from US and European banks to make an advance payment to Rosneft in exchange for future oil supplies. The talks were first reported by the FT in March. However, two people familiar with the matter said that since the last round of sanctions in July the deal had been shelved. One person described the deal as “dead”. Successive rounds of Western sanctions in response to Moscow’s failure to de-escalate tensions in Ukraine have triggered a sharp outflow of capital and hurt the already struggling Russian economy. Read more. (Subscription required.)

Fri., August 22, 2014

A federal court judge said on Thursday that Argentina’s attempt to skirt one of his rulings was “lawless” but stopped short of finding the country in contempt of court, the International New York Times reported. Exasperated lawyers for a group of New York hedge funds that are seeking more than $1.5 billion in bond payments that Argentina has refused to pay pleaded with the judge to take a harsher stance. In a heated moment, one of the lawyers, Robert A. Cohen of Dechert, even went so far as to propose monetary and other sanctions that would “bite the republic in a way that will make the republic pay.” Judge Thomas P. Griesa of the Federal District Court in Manhattan held the emergency hearing on Thursday at the request of the hedge funds’ lawyers after Argentina’s president, Cristina Fernandez de Kirchner, announced on Tuesday that her government was proposing legislation to bypass a ruling by Judge Griesa that has prevented Argentina from making regular payments to its bondholders. The judge at times indicated his own frustration at what he called years of “lawless” actions by Argentina in his courtroom. But, he added, “In my judgment, it does not add to the scales of settlement to make a finding of contempt.” Read more. (Subscription required.)

Fri., August 22, 2014

When Nobel Prize-winner Joseph Stiglitz was asked in Germany this week if the country and its neighbours would suffer a lost decade, his response was unequivocal, the Financial Times reported. “Is Europe going the same way as Japan? Yes,” Mr Stiglitz said in Lindau at a meeting for Nobel Laureates and economics students. “The only way to describe what is going on in some European countries is depression.” Dire gross domestic product figures, which showed the eurozone’s recovery had stuttered to a halt in the second quarter, and inflation at a four-and-a-half year low of just 0.4 per cent in July have been a stark reminder of the problems befalling the world’s second-largest economic bloc. Hopes of a meaningful recovery this year have faded, overtaken by concerns that a rise in geopolitical tensions could worsen conditions in the months ahead. Beyond the latest figures, the big picture is bleaker still. Despite hopes that the worst ravages of the region’s sovereign and banking crises are behind it, the eurozone’s economy remains smaller than it was before the collapse of Lehman Brothers in the autumn of 2008. Read more. (Subscription required.)

Fri., August 22, 2014

As Europe slogs through its latest round of bank stress tests, a growing number of analysts have already reached their own conclusion: Eurozone banks need additional cash, the International New York Times reported. To buttress their case, some analysts have dusted off an obscure American bank metric that highlights the extent to which Europe’s increasing number of nonperforming loans is threatening to overwhelm existing bank cushions. The measure, called the Texas ratio, was developed by an analyst who covered troubled United States banks during the late 1980s and early 1990s. During that period, numerous Texas-based financial institutions collapsed under the weight of faulty real estate loans. Part of what has made the Texas ratio attractive to analysts and regulators is its simplicity. When the ratio of bad loans to equity and cash set aside exceeds 100 percent, it suggests that the bank is either ready to fail or is in desperate need of new capital — as was the case with Texas banks in the 1980s. “We found it to be a very good guide telling you which banks would fail,” said Gerard S. Cassidy, the bank analyst who introduced the formula and coined the name. “It’s a ratio that everyone can understand.” Now as the European Central Bank prepares to become the primary bank regulator in the eurozone, the extent to which lenders in troubled economies like Spain, Italy, Portugal and Greece have sufficient cash to protect against ever-rising bad loans has emerged as a crucial question for investors, banks and regulators. Read more. (Subscription required.)

Fri., August 22, 2014

Dutch lender Rabobank said today its net profit slipped 3 per cent to €1.1 billion in the first half of the year, due to charges related to Dutch bank SNS which was bailed out by the government. The outlook for 2014 is uncertain, the bank said in a statement, partly due to the Ukraine crisis and the possible impact on the global economy, the Irish Times reported. Rabobank said its net result in the first six months of 2014 was reduced by a one-time €214 million levy imposed on Dutch banks. Rabobank, the largest Dutch mortgage lender, said in a statement it was not yet able to give guidance on the possible impact of the European Central Bank’s asset quality review, or “stress test” of European banks. The bank said it “was expecting a cautiously continuing economic recovery in the second half of the year,” citing rising consumer consumption and positive signs in the housing market. It added that the trade conflict with Russia over the Ukraine crisis “represent an uncertain factor”. Read more.

Fri., August 22, 2014

In the decade before Greece's debt crisis, businessman Aristides Belles rode a wave of acquisitions to turn his company, Nireus Aquaculture SA, into one of the largest fish farmers in the world—a staple of supermarket shelves across Europe, The Wall Street Journal reported. Today, Nireus—named after an ancient Greek sea god—is awash in an ocean of debt and has become a parable for the bad loans crippling Greece's corporate sector. Most of the company's big investors have fled, profits and dividends have disappeared and Nireus shares have fallen more than 70% in the past five years. And ever since Nireus missed bond-interest payments two years ago, the company and its creditors have been in a stalemate caused in part by Greece's bankruptcy laws, which make it almost impossible for Greek banks either to rescue the company or shut it down without the consent of its major shareholders. Mr. Belles, who owns 22% of the company, has refused to concede control. He is resisting a debt-for-equity swap proposal from his banks, as well as plans for a three-way merger with rivals Selonda Aquaculture SA and Dias Aquaculture SA. Both are equally steeped in debt, but a combination could result in cost savings that could help a combined company re-emerge from the crisis in a relatively strong position. Read more. (Subscription required.)

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