Daily Insolvency News Headlines

Fri., February 20, 2015

Fri., February 20, 2015

Greece is headed toward a potentially destructive standoff with Europe after Germany rejected a last-minute request on Thursday to extend its loan program, the International New York Times reported. Unless the two sides can bridge their differences, Greece could find itself cut off from its financial lifeline and facing insolvency. The country’s current bailout program is set to expire in little more than a week. Neither country seems willing to budge at this point. While Greece on Thursday formally requested a six-month extension of its loan agreement, it stopped short of explicitly agreeing to complete some of the more onerous terms of the bailout. In a two-page letter to eurozone officials, the Greek finance minister, Yanis Varoufakis, said the goal was to ensure that “any new measures be fully funded while refraining from unilateral action that would undermine the fiscal targets, economic recovery and financial stability.” Germany, though, is insisting that Greece stick with the original commitments to push through deeper reforms. A German Finance Ministry spokesman, Martin Jäger, said in a statement that the letter from Athens was “not a substantial proposal to resolve matters.” The impasse sets the stage for another tense round of negotiations on Friday at a meeting of eurozone finance ministers here. Read more. (Subscription required.)

Fri., February 20, 2015

Japanese financial services provider Orix Corp has expressed interest in participating in the reconstruction of budget airline Skymark Airlines Inc, two people familiar with the situation said. Skymark, which filed for bankruptcy last month and agreed on a sponsorship deal with Tokyo-based fund Integral, is seeking co-sponsors to help it turn around its business, Reuters reported. Thursday was the deadline for non-aviation companies to submit expressions of interest. Airlines will have until Feb. 23. Japan Airlines Co Ltd, Japan's second-largest carrier, said earlier on Thursday that it would not participate in the rescue plan. Read more.

Fri., February 20, 2015

Investment banks in the UK face an investigation by the Financial Conduct Authority regulator into possible conflicts of interest and anti-competitive practices, the Financial Times reported. However, the probe is unlikely to lead to an overhaul of the sector, say financial experts, and some of its intended beneficiaries question whether it is needed at all. The FCA announced on Thursday a review of investment and corporate banking, invoking new powers that could force banks to stop selling products and be more transparent about how they charge clients. Bankers professed to be “stunned” at the potential intervention into activities worth more than £10bn annually, even though the FCA began an initial review of wholesale banking markets last July. Their collective organisation, the BBA, said London’s wholesale market was already “one of the most competitive in the world”. Read more. (Subscription required.)

Fri., February 20, 2015

Six years after suffering Europe’s biggest recession, Latvia is trying a controversial recipe used in some U.S. states to free people of household debt, The Wall Street Journal reported. Parliament on Thursday passed a set of laws allowing people to choose a “non-recourse” mortgage, that will allow household borrowers the option of returning the keys to the banks if they can’t pay their loans, while preventing the lender from pursuing the borrower’s other assets. The legislation was partly modeled on non-recourse mortgage laws in 11 U.S. states. Non-recourse mortgages have been accused of aggravating the U.S. housing crisis in the mid- to late 2000s, triggering steeper losses for banks and fueling uncertainty about the extent of future defaults. The final Latvian proposal was watered down to allow a choice of options after the Scandinavian banks dominating the region said a law making non-recourse mortgages mandatory, passed last fall but not yet in force, would price middle-class families out of the market by doubling down payments. Read more. (Subscription required.)

Fri., February 20, 2015

Ulster Bank was not aware of an alleged £25-30 million black hole in one-time property giant Taggart Group’s finances, the High Court heard Thursday, the Irish Times reported. A senior banker who was part of the firm’s relationship management team claimed information that emerged later showed it was not a well-run business. Richard Ennis was giving evidence as part of the bank’s multi-million pound legal battle with former housebuilding tycoons Michael and John Taggart. The Co Derry brothers are suing for alleged negligence and improper conduct they say contributed to the fall of their business empire. Once a huge operation on both sides of the Border, with further interests in Britain, continental Europe and the US, the firm was decimated in the 2007 property market crash. Within a year the Taggart Group had gone into administration. In a claim for damages the brothers allege they were kept in the dark about credit concerns within the bank. Read more.

Fri., February 20, 2015

Small business owners, particularly in the construction industry, should be breathing a sigh of relief this week. The Supreme Court has delivered a decision which upholds their rights to keep payments made by companies which subsequently go into liquidation, against demands from liquidators to "claw back" the money so that it can be used to satisfy the claims of other creditors of the insolvent company, The New Zealand Herald reported. The law's approach to insolvency is (relatively) straightforward: when a company goes into liquidation, its assets, including any debts owed to the company, get consolidated and then shared out among the creditors by the liquidator on a pro rata basis, after any secured or preferred creditors have been paid. This is known as the "pari passu" principle. As part of this process, liquidators can try to claw back any payments made by the company up to two years before it became insolvent. The good news for business is greater certainty. The decision makes it much less likely that they will be on the end of liquidators' claw-back demands simply because a company they worked for in the past has gone bust. Read more.

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