Ukraine’s economic and political crisis may be heating up, but Kiev still has enough emergency cash reserves to cover its obligations for the next two months, The Wall Street Journal Real Time Economics blog reported. But what would it take to push the country into default? Tensions escalating over Russia’s Crimea incursion, Moscow increasing natural gas prices and any delay in international bailout talks, say economists. “The military stand-off heightens Ukraine’s risk of default,” says Lilit Gevorgyan, a senior sovereign risk analyst at the IHS consultancy, in a research note. Ukraine’s currency, the hyrvnia, has plummeted since the country’s central bank gave up defending the exchange rate value in January. That devaluation means households and businesses have to pay more hyrvnia for the same amount of milk, wheat, steel and other products, putting dangerous pressure on the economy. Newly appointed economy minister Pavlo Sheremeta warned Monday the exchange rate is nearing “critical” levels. As the IMF begins a ten-day bailout visit, Mr. Sheremeta said Kiev needs an international bailout urgently. If the military standoff turns into violent conflict, pitting the interim government in Kiev against Moscow and pro-West Ukrainians against their pro-Russia countrymen, the hyrvnia could fall much deeper into the danger zone. Read more. (Subscription required.)
Daily Insolvency News Headlines
Tue., March 4, 2014
China’s property trusts, grappling with repayments equivalent to the size of Puerto Rico’s economy, face rising default risks as a former central bank adviser dubs real estate the biggest threat to the economy, Bloomberg News reported. The trust funds must repay 634 billion yuan ($103 billion) of debt this year, up 50 percent from 2013, according to estimates from Haitong Securities Co., the nation’s second-biggest brokerage. The yield on the 2014 notes of Myhome Real Estate Development Group Co., based in the central city of Wuhan, jumped 185 basis points in the past year to 7.78 percent. That compares with 3.13 percent on property bonds globally, according to Bank of America Merrill Lynch indexes. The real estate market is “the root of all risks” as falling prices erode local governments’ ability to raise funds for spending that helps the economy, Li Daokui, former People’s Bank of China adviser, said Feb. 25. Property shares slid to a 16-month low last week after Industrial Bank Co. suspended a riskier form of financing for developers, adding to concern as 82 of 181 publicly listed builders have more debt than equity. “The second wave of defaults may be in property trust products, following the first wave in the coal mining sector,” said David Cui, China strategist at Bank of America Merrill Lynch. “Like the subprime crisis, it’s a problem with leverage. In the U.S., it was the individual who borrowed too much money. In China, it’s the companies which borrowed too much money.”Read more.
As Russia's military secured the Crimean peninsula, its currency hit a record low and its stock market plunged in the face of U.S. and European warnings of sanctions over the incursion into Ukraine, The Wall Street Journal reported. The Obama administration took the first steps late Monday, suspending military cooperation with Russia as well as talks aimed at boosting trade and investment, in a bid to isolate Moscow. President Barack Obama said Russia is "on the wrong side of history" as well as international law. Further military moves into Ukraine, he warned, "will be a costly proposition for Russia." Read more. (Subscription required.)
The liquidator of two companies formerly controlled by businessman Philip Marley has written to creditors in recent days to tell them of matters “simply extraordinary” and of “great concern”, the Irish Times reported. Creditors owed substantial sums by Ely-related companies include the Revenue Commissioners; Zolfo Cooper, the liquidators of a British company called Space Student Living Ltd; IBRC; Investec; landlords; an accountancy firm; and an estate agent among others. The report by Collins Garcia, a Dublin accountancy firm, relates to two former firms of the north Dublin businessman – Ely Property Group Ltd and Ely Properties Limited. It informed creditors it was hard to estimate what the Ely-related entities owed the Revenue Commissioners because of a lack of documentation. It estimated a VAT liability of €750,000 was outstanding because it believed Ely “simply made a decision to stop declaring and furthermore paying over to the Revenue Commissioners any VAT for a number of years”. Collins told creditors the underdeclaration of VAT was “systemic and continual”. Read more.
The management of German rooftop PV installer and module manufacturer Centrosolar has unveiled an insolvency plan, which has been approved by the company’s creditors’ committee. The main thrust of the plan is that Centrosolar will in future focus on the US market, trading as Centrosolar America. The plan still requires several further stages of approval before it can be implemented, PV-Tech reported. Centrosolar said that in order to save costs, the parent company will be “slimmed down” considerably. All but one member of the executive board has stepped down and the company aims to transfer trading of its shares to a regulated unofficial market on an unspecified German stock exchange. Two Centrosolar subsidiaries, Renusol and Centrosolar Grundstücksverwaltungs, which are not insolvent, will be sold. The parent company entered insolvency in October 2013. Meanwhile, under the insolvency plan the company’s operational subsidiaries for the production and sale of modules, Centrosolar Sonnenstromfabrik and Centrosolar AG, would cease to be part of the group and will be restructured outside of insolvency proceedings. Previous shareholders will not receive compensation and will lose their status as owners of the company. Non-subordinated creditors will receive any proceeds from the sale of non-insolvent participations, and will also receive company shares through transfer. In return, non-subordinated creditors will be expected to waive all unsettled claims. Read more.
A sawmill company with about 400 employees and about $100 million in annual sales has been placed in receivership, Stuff.co.nz reported. Brendan Gibson and Michael Stiassny, of KordaMentha, were this afternoon appointed as receivers of Dunedin-headquartered Southern Cross Forest Products. The company has four sites in Mosgiel, Milton, Balclutha and Milburn around Dunedin and another site in Thames. In 2012, the last figures available, the company generated revenue of just under $95m. Receivers spent the day meeting with staff at Southern Cross sites, assuring them they would be paid while a buyer is sought for the business. Managing director Tom Whitefield this evening referred questions to the receivers. Gibson said he had spoken to staff throughout the day. He had told them it was hoped the company would be sold as a going concern. "Certainly at the moment we think it is [a going concern]," Gibson said. "It's got profitable parts. It's in a tough industry, but it's got some good products, some good customers, but obviously the business has got too much debt so we are trying to get it out.” Read more.