Daily Insolvency News Headlines

Fri., May 15, 2015

Fri., May 15, 2015

Sharp Corporation of Japan said it had secured a $1.7 billion bailout from banks, its second major rescue in three years, after its smartphone display business came under intense pricing pressure from Asian rivals, the International New York Times reported. Mizuho Bank and Bank of Tokyo-Mitsubishi UFJ will inject a combined 200 billion yen in a debt-for-equity swap, Sharp said in a statement, a move that will buy it time but is unlikely to allay worries about the long-term viability of its display business. A corporate turnaround fund, Japan Industrial Solutions, will also provide 25 billion yen in funding, the company said. In return, Sharp will embark on further restructuring that will include cutting 10 percent of its global workforce, including about 3,500 jobs in Japan. It reported a net loss of 222.35 billion yen ($1.9 billion) for the past financial year, its third loss in four years. Read more. (Subscription required.)

Fri., May 15, 2015

Multinational companies drawn to Southeast Asia by hopes of a long consumption boom are witnessing a reversal of fortunes in its three biggest economies as shoppers lose their mojo, the Financial Times reported. Household debt, sluggish wage rises and political uncertainties are dragging on spending growth in Thailand, Indonesia and Malaysia. Urbanisation and a growing middle class will continue to drive long-term thirst for goods from cars to fridges in the 10-country Association of Southeast Asian Nations, economists say, but the dream of miracle growth now comes with qualifications firmly attached. “Corporate executives were rubbing their hands because of spending in Asean,” said Frederic Neumann, co-head of Asian economic research at HSBC. “In the long term that may well hold — but this soft patch in household spending is likely to stay for quite a while.” Indonesia’s economy — Asean’s largest by far — slowed to its lowest pace of annual growth in more than five years in the first quarter of this year, driven in part by a fall in government spending and flat consumer demand. Thailand, the region’s second-biggest economy, has seen consumer confidence steadily decline alongside rising household debt. Malaysia, number three in Asean, has recorded weak manufacturing wage growth and credit card spending. Read more. (Subscription required.)

Fri., May 15, 2015

Members of businessman Sean Quinn’s family have been refused permission by the High Court to make a crucial amendment to their case aimed at avoiding liability for €2.34 billion loans made to Quinn companies by the former Anglo Irish Bank, the Irish Times reported. Mrs Patricia Quinn and her five adult children sought to amend their case, due to open on June 3rd, to argue they were “innocent parties” in relation to how they provided guarantees and securities concerning the loan transactions and thus, they argued, were not caught by a recent Supreme Court decision on a key preliminary issue in the case. Irish Bank Resolution Corporation, in opposing the proposed amendment, disputed the Quinns’ interpretaiton of the Supreme Court decision, issued last March, and argued that decision meant the family cannot avoid liability for the €2.34 billion loans even if those were found to be unlawfully made. That Supreme Court ruling was to the effect, even if the loans were unlawfully advanced by Anglo, as the Quinns allege they were, they are still enforceable. Read more.

Fri., May 15, 2015

Greece on Thursday offered a concession to its international lenders by pushing ahead with the sale of its biggest port, Piraeus. Greece has asked three firms to submit bids for a majority stake in the port, a senior privatisation official said, unblocking a major sale of a public asset as the EU and the IMF demand economic reforms from Athens. Despite the conciliatory move, Germany’s Bundesbank showed no sign of easing off on its hardline stance towards Greece. Bundesbank chief Jens Weidmann criticised weekly top-ups of emergency funding to Greek banks, saying in a German newspaper interview that this broke a taboo against the European central banking system financing governments. Greek banks have been drawing emergency liquidity assistance from the country’s central bank, a funding lifeline provided in exchange for collateral. Greek banks have been using the money to buy short-term government debt, helping to keep the country’s finances afloat. Read more.

Fri., May 15, 2015

Mario Draghi has warned central banks to beware of the risk that aggressive monetary easing, including mass bond buying, could lead to financial instability and worsen income inequality, the Financial Times reported. The European Central Bank president said the apparent success of policies such as the ECB’s landmark €1.1trn quantitative easing package should not “blind” policy makers to the potential consequences of their actions on risk-taking in financial markets and in exacerbating wealth disparities. “Because the use of these new instruments can have different consequences than conventional monetary policy, in particular with respect to the distribution of wealth and the allocation of resources, it has become more important that those consequences are identified, weighed and where necessary mitigated,” Mr Draghi said at the International Monetary Fund. Central banks around the world have faced criticism that their response to the financial crisis is stoking asset-price bubbles and increasing inequality. However, this is the first time Mr Draghi has spoken in depth about some of the biggest concerns about aggressive action by the world’s central banks. Read more. (Subscription required.)

Fri., May 15, 2015

An operationally troubled thermal oilsands project in northern Alberta, built for nearly half a billion dollars, is to be shut down this summer while its insolvent owner tries to find a solution to its money woes, The Calgary Herald reported. Calgary-based Southern Pacific Resource Corp. said Thursday it will “hibernate” its STP-McKay facility by the end of July, turning off all of the equipment for up to three years while it looks for funding to get it going again. “We’re going to be shutting the plant completely but preserving it so that it can be started up again at a future date. So we have to make sure the facility is winter-proof, clean all the fluids out of the vessels and protect all of the equipment as best we can,” said company president and chief executive Byron Lutes in an interview. Southern Pacific obtained protection under the Companies’ Creditors Arrangement Act in January after it failed to find a buyer, partner or other source of funding to allow it to continue to service its debt and fix persistent operational problems. It has continued to look for help under the supervision of its court-appointed monitor but decided to halt its money-losing facility to preserve capital. Read more.

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