A U.S. judge ordered Argentina and investors who did not participate in the country's past debt restructurings to meet "continuously" with a court-appointed mediator until a settlement is reached, warning of the threat of a new default, Reuters reported. U.S. District Judge Thomas Griesa in New York told Argentina and lawyers for investors who declined to restructure their bonds after the country defaulted on about $100 billion in 2002 that time was running out to reach a deal and avert a fresh default. "That is about the worst thing I can envision. I don't want that to happen," the judge said. Jonathan Blackman, a lawyer for Argentina, Latin America's No. 3 economy, said even with around-the-clock talks, it would be "unlikely, if not impossible, to result in settlement." "It simply can't be done by the end of the month," he said. Griesa ordered the parties to meet with Daniel Pollack, a New York lawyer appointed to oversee settlement talks, "continuously until a settlement is reached." Pollack scheduled a meeting Wednesday at 10 a.m. EDT (1400 GMT). Pollack, who was appointed June 23 as a mediator, has been holding meetings with the parties, publicly acknowledging talking twice with Argentine officials. Read more.
Daily Insolvency News Headlines
Wed., July 23, 2014
Britain and other non-euro states are at risk of losing their influence over financial legislation as single currency members pursue their banking union project, respondents to a UK Treasury review have warned, the Financial Times reported. The report into the balance of power between Westminster and Brussels recorded strong backing for Britain’s membership of the single market, with leading companies saying it was a key reason for their decision to locate in London. However, the report found there were “significant concerns” that the advent of banking union could have an “unfair or damaging effect” on countries such as Britain that have opted against joining. “While the ultimate impact of the banking union is hard to predict at this stage, it is likely to pose a number of challenges to the UK’s interest in maintaining a central role of influence in an internationally competitive financial market in the EU,” the report said. George Osborne, chancellor, has argued for single market protections for non-euro members to be written into the EU treaties, an idea backed by Wolfgang Schaüble, his German opposite number. Read more. (Subscription required.)
Spain has taken an important step toward completing the cleanup of its banking sector by selling the state-owned Catalunya Banc to BBVA for 1.19 billion euros, or $1.6 billion, the International New York Times DealBook blog reported. The sale, announced on Monday night by the state banking restructuring fund, comes after a difficult and delayed auction process for Catalunya. Spain had to inject more public money into the lender than initially expected to attract bidders. Catalunya, based in the northeastern region of Catalonia, resulted from the merger of three smaller savings banks, or cajas, that were severely hurt by the 2008 bursting of Spain’s construction bubble. Crippled by bad property loans, Catalunya was nationalized and ended up receiving €12 billion of rescue money as part of a broader bailout led by Bankia, the giant lender whose problems plunged Spain into a banking crisis two years ago. After seizing control of Bankia, the government was forced to negotiate a European bank bailout in June 2012 to keep Bankia and others afloat. However, Spain ended up using only €41 billion of the available €100 billion of European rescue money. The restructuring fund then proceeded to sell the rescued banks after transferring their most troubled property assets to a so-called bad bank that has since been selling them to other investors. Read more. (Subscription required.)
A defect in the personal insolvency legislation that gives banks extra powers to vote down debt deals will be fixed, officials have pledged. The Department of Justice insisted the change to the personal insolvency legislation will be given priority when the Dail returns in the autumn, The Independent reported. But it emerged at the weekend that the Government has known about a flaw in the insolvency law since last April. A briefing note provided to new Justice Minister Frances Fitzgerald has informed her of an urgent need to amend the Personal Insolvency Act 2012. Sloppy wording in the act means banks could end up with greater powers to veto debt-settlement deals. Failing to change the legislation could lead to uncertainty and court challenges. The memo, uncovered by 'The Sunday Times', also states there has been a "slow uptake of insolvency arrangements under the act". However, the memo says that the Department of the Taoiseach was concerned that it would look bad to have to amend legislation so quickly. Read more.
Euro zone public debt rose to 93.9 per cent of economic output in the first quarter of this year, approaching the peak it is expected to reach later in 2014, official data showed on Tuesday, the Irish Times reported on a Reuters story. Government debt of the 18 countries sharing the euro stood at €9.055 trillion in the first three months of this year, compared to €8.905 trillion in the last quarter of 2013, the EU’s statistics office Eurostat said. The EU’s executive arm - the European Commission - expects the debt to peak at 96 per cent of gross domestic product this year and then ease to 95.4 per cent of GDP in 2015. Nearly 80 per cent of the euro zone’s debt is in bonds and treasury bills. Loans account for 17.9 per cent of the debt. Twice bailed-out Greece was the euro zone’s most indebted country with sovereign debt of 174.1 per cent of GDP, followed by the third-biggest economy Italy, with debt equivalent to 135.6 per cent of GDP in the first quarter. Only two countries - Germany and Luxembourg - saw their debt fall compared with the last quarter of 2014 and the first quarter of 2013. Read more.
The Japanese government trimmed its economic-growth forecast for the current fiscal year ending in March but said that it won't give up on its long battle to bring its debt issuance under control, The Wall Street Journal reported. The world's third-largest economy is projected to grow 1.2% in the fiscal year ending next March, figures released by the Cabinet Office showed Tuesday. That compares with its previous projection in January for a 1.4% increase. The Cabinet Office said the forecast reflects weak export growth, stronger-than-expected imports and a pullback in private consumption following the first major sales-tax increase in 17 years. At the same time, Prime Minister Shinzo Abe's advisory panel laid out principles for drafting the country's budget for the fiscal year starting in April 2015. They called on the government to avoid the kind of major fiscal stimulus that has been implemented over the past two years and to stick to its goal of steadily reducing its new debt issuance. In dealing with the dual policy challenges of reinvigorating the economy and dealing with the country's unwieldy sovereign debt, Mr. Abe faces a tricky balancing act. With its debt-to-GDP ratio well above 200%—the worst among industrialized nations—economists and government officials say Japan must find a way to improve its fiscal situation. But the timing of when to tackle this issue head-on remains problematic as a series of stimulus measures that Mr. Abe introduced over the past 19 months were largely financed through the country's sovereign debt. Read more. (Subscription required.)