Chinese importers have defaulted on at least 500,000 tonnes of U.S. and Brazilian soybean cargoes worth around $300 million, the biggest in a decade, as buyers struggle to get credit amid losses in processing beans. Three companies in the eastern province of Shandong had defaulted on payments for shipments as they were unable to open letters of credit with banks, trade sources said on Thursday. A string of defaults on loans, bonds and shadow banking products in recent weeks has highlighted rising credit risks in China, partly fuelled by signs the economy is slowing. Commodity firms, along with semiconductor and software companies, are among the most at risk of credit defaults, a Reuters analysis of more than 2,600 Chinese companies showed. Up against the cooling economy and signs that authorities will not step in every time a loan goes bad, Chinese banks are becoming more hard-nosed and selective about whom they lend to. Read more.
Daily Insolvency News Headlines
Fri., April 11, 2014
Empresas La Polar SA, Chile’s fourth-biggest department store operator, said it is planning to restructure debt for a second time following its 2011 default. La Polar, which defaulted on 493 billion pesos ($1.1 billion) of debt after revealing accounting irregularities at its in-house credit card operation, said in a filing to regulators that it will seek to meet with creditors as soon as possible. It had total debt of 207 billion pesos at the end of 2013, including 189 billion pesos of bonds, according to company financial statements. The retailer’s board of directors decided to try to renegotiate its bond agreements after reviewing a study completed by Grupo BTG Pactual, according to the regulatory filing. Chairman Cesar Barros said in a statement that the “current financial burden limits La Polar’s capacity to grow and the possibility for shareholders to receive dividends.” The Santiago-based company’s 2011 default came after it said that it had been unilaterally restructuring past-due consumer loans to make them look current, capping loss provisions and boosting profit. After amending financial reports, it recorded a 2011 loss of $1.12 billion, according to data compiled by Bloomberg. Read more.
The Bank of England will have to rethink how it acts as lender of last resort after Britain failed to revise incoming EU rules that could scupper its scheme to give covert support to banks in difficulty, the Financial Times reported. Three EU countries rebuffed Britain’s last-minute pleas to “clarify” the fine print of an agreed rule book on bank crises so that central banks are allowed secretly to prop up lenders facing short-term funding difficulties. The rejection marks a setback for London on a problem spotted months after it gave its approval to the draft bank recovery and resolution directive, a post-crisis reform designed to shield taxpayers from the costs of bank failures. The discussion between Britain and its partners hinged on whether central bank support can be provided to a lender in trouble without triggering a so-called bail-in, a process where losses are imposed on private investors who lent money to a bank. The Netherlands, Finland and the Czech Republic formally objected to the UK request to exempt such liquidity assistance, saying it reopened and potentially weakened a fundamental element of the reforms. Germany also expressed concerns. At this late stage, unanimity was required to make changes. Read more. (Subscription required.)
Get ready for the biggest vote in the Co-op's 170-year history. Amid the squabbles, resignations and rows over pay, the poll on 17 May on boardroom reform will take place with the organisation's finances looking ghastly, The Guardian reported in a commentary. This is where attention will soon be concentrated once the Co-op Group publishes its accounts for 2013. It is also why the group's lenders, who have remained silent so far, could yet influence the struggle for power. Group debts were £1.2bn at the half-year stage. That was a reduction on six months earlier but achieved largely by mortgaging the swanky new head office in Manchester. Once the cost of meeting the Co-op Bank's call for an extra £400m is factored in, borrowings could soon be higher: the Group's share of that bill is £120m. It appears as if Group debts could be about three times the annual top-line profits from the supermarkets, pharmacies and funeral service. That ratio would be considered aggressive even for a large retailer trading strongly. But Co-op's supermarkets profits fell 10% last year and competition is becoming stiffer. Aldi is even taking bites out of Tesco. Remember, too, that trading profits for 2013 will be overwhelmed by huge write-downs from the Co-op Bank and a harder-headed appraisal of the real value of past acquisitions, such as the Somerfield supermarket chain. All-in-all a bottom-line loss of about £2bn is on the cards. So far the Co-op's lenders – led by Barclays, Lloyds and Royal Bank of Scotland – have stayed in the background. But they may feel obliged to act if the Co-op votes no to reform. Read more.
Argentina’s biggest unions paralyzed metro, train and bus services today and blocked the main entrances into the capital to protest rising prices and crime, Bloomberg News reported. Trash started to pile up in downtown Buenos Aires as garbage collection was suspended and union members blocked Corrientes, one of the main thoroughfares with a sign that read “enough economic adjustments,” a reference to a 19 percent devaluation in January and a sharp increase in interest rates. Other unions from metal to oil workers didn’t join the strike, according to a statement published in Cronista Comercial by the Labor Ministry. President Cristina Fernandez de Kirchner is facing rising social discontent after devaluing the peso to encourage grain exports and cutting government subsidies as she attempts to shore up international reserves that have fallen near a seven-year low. Read more.
A significant number of company failures are expected to materialise this year, despite new figures showing a continued steady decline in the level of corporate insolvencies during the first quarter of the year, the Irish Examiner reported. According to corporate recovery and insolvency experts, Kavanagh Fennell, the first three months of this year saw a near 13% year-on-year reduction in insolvencies, with 303 failures being recorded compared to 347 for the same period last year. The company said that, while the first quarter figures continue to paint a positive picture, it expects to see “a significant number” of insolvency actions this year as a whole, mainly in the property sector and helped by new legislation making it cheaper and easier for firms in trouble to apply for examinership. According to Kavanagh Fennell partner David Van Dessell: “Although the incidence of corporate insolvencies could fall further during 2014, we do not anticipate the drop will be significant, as we expect an increase in examinership applications — particularly under the new legislation, where SME directors can utilise the process to restructure SME corporate debt, while continuing to trade under the protection of the court.” Read more.