Daily Insolvency News Headlines

Wed., August 20, 2014

Wed., August 20, 2014

Argentina will send a bill to Congress to authorize the payment of foreign debt in local accounts in a bid to skirt a U.S. court ruling that is blocking payments and caused the nation to default on July 30, Bloomberg News reported. Argentina will seek to remove trustee Bank of New York Mellon Corp. and deposit funds for foreign bondholders at an account at the central bank, President Cristina Fernandez de Kirchner said in a nationwide address. The swap will be voluntary and the government will continue to deposit funds even for those bondholders who decline to change the jurisdiction, she said. Argentina defaulted for the second time in 13 years last month after U.S. District Court Judge Thomas Griesa blocked the nation’s $539 million debt payment because it didn’t also set aside money for creditors from the nation’s 2001 economic crisis who refused to participate in debt restructurings and successfully sued for full repayment. Read more.

Wed., August 20, 2014

The Karstadt supervisory board announced Tuesday that it had postponed a meeting scheduled for August 21, where executives would have discussed plans for the floundering department store chain's restructuring, Deutsche Welle reported. Chairman Stephan Fanderl said the meeting had not been rescheduled because the board wanted to wait for a decision by German anti-trust regulators on the recent takeover of the 133-year-old retailer by Austria's Signa Group. "We are still determined to start restructuring Karstadt thoroughly and as soon as possible," Fanderl said. Last Friday, Karstadt's board asked Germany's Federal Cartel Office to approve the retail group's takeover by Signa. A decision on the transaction is not expected until mid-September at the earliest. Read more.

Wed., August 20, 2014

Bank of China Ltd. more than doubled its money set aside for bad loans as profit growth cooled to the slowest pace in five quarters on weakness in the economy, Bloomberg News reported. Provisions for potential soured debt climbed to 12.7 billion yuan ($2.1 billion) in the second quarter, up 116 percent from a year earlier, based on half-year figures released by the Beijing-based company yesterday. Net income rose 8.5 percent to 44.4 billion yuan, the earnings statement showed. The nonperforming loans of China’s fourth-largest bank surged to 85.9 billion yuan, the highest in more than five years, as companies struggled with repayments in an economy at risk of the weakest full-year growth since 1990. The nation’s lenders are already trading at the cheapest price-to-earnings valuations of global banks. “The biggest concern for Bank of China is their asset quality,” Chen Xingyu, a Shanghai-based analyst at Phillip Securities Research, said by phone. “The trend is very obvious. We expect nonperforming loans to continue rising in the next two quarters.” Read more.

Wed., August 20, 2014

Ukraine has asked Switzerland for help in recovering assets moved to the Alpine country by members of ousted leader Viktor Yanukovych's inner circle, according to a Swiss official, The Wall Street Journal reported. Since the start of the summer, Switzerland's justice department has received three requests for assistance in repatriating the assets, spokesman Folco Galli said. The requests concern funds linked to the 19 members of Mr. Yanukovych's entourage, rather than to the former Ukrainian leader himself, Mr. Galli said. In February, Switzerland froze the assets of the group of Ukrainians, which includes Mr. Yanukovych's son, Oleksandr. Authorities haven't released the total value of the assets, but Swiss newspapers have reported they are worth roughly 100 million Swiss francs ($110 million). The justice department will now examine the applications to decide whether they comply with Swiss law, Mr. Galli said. They will then be passed on to either the Federal Prosecutor's Office, the cantonal authorities or the Department of Justice, he said. Under Swiss law, the frozen assets can be held for three years and eventually returned to Ukraine if they are found to have been obtained illegally. Read more. (Subscription required.)

Wed., August 20, 2014

Europe’s banks have done the heavy-lifting in the toughest ever test of their financial strength, but an intensive quality assurance process and decisions still to be taken by supervisors means they cannot work out how they have fared, the Irish Times reported. The European Central Bank (ECB) has spent the last five months reviewing the books of about 130 of the euro zone’s largest banks, including Ireland’s three main lenders Bank of Ireland, Allied Irish Banks and Permanent TSB, and is now running “quality assurance” checks on the information gathered before a “stress test” into how those banks would fare in another financial crisis or recession. Banks will have to wait until around October 17th, for the ECB to publish its verdict and individual capital raising requirements. This will coincide with results of European Banking Authority (EBA) “stress tests” on whether about 125 of the EU’s most important banks are strong enough to deal with future crises. Banks submitted their own simulations of the stress tests to supervisors in early July and some bankers believe they already have enough information to figure out if they need more capital. Read more.

Wed., August 20, 2014

Argentina's unemployment rate rose to 7.5% in the second quarter as the country's recession appeared to worsen and more companies laid off workers, The Wall Street Journal reported. The jobless rate, published by the government on Tuesday, is up from 7.1% in the first quarter and 7.2% a year earlier. Economists expect the unemployment rate to rise further this year as the recession worsens and more people find it harder to find jobs. "We expect the economy to contract by around 3% this year," said Ariel Coremberg, a University of Buenos Aires professor who specializes in measuring economic growth. "Of course, with this decline in growth the jobless figure will worsen in the private sector, mainly in the industrial sector. The unemployment situation is going to get worse in the second half of the year." Argentina's automotive industry has been hit hard this year, both by weaker demand at home and from lower sales to Brazil, Argentina's top trading partner. Last month, vehicle production fell about 31% from a year earlier while sales crashed almost 34%. In recent years, Argentina's federal government and provincial governments have been key sources of job creation. Mr. Coremberg said private-sector job creation hasn't been as impressive and that many new jobs are in the underground economy, where neither employees nor employers pay taxes. Read more. (Subscription required.)

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