Daily Insolvency News Headlines

Tue., June 23, 2015

Tue., June 23, 2015

Greece and its European partners appeared on Monday night to be heading for a deal by the end of the week that would secure further funding for Greece and a likely promise of more debt relief in return for changes in the pension and tax systems, European Union officials said, the International New York Times reported. Even so, there is no great confidence that a deal reached when all 28 European Union leaders have a summit meeting here Thursday and Friday will be more than a short-term easing of the Greek crisis, which has preoccupied the European Union for the last five years. And there remains skepticism that the Greek government will follow through on whatever deal is finally struck. One senior official from a European country, asked if this may be peace in our time, answered, “Well, it’s peace for a week.” Given the past pattern of broken promises and sudden changes of position from the left-wing Greek government of Alexis Tsipras, even this outline of a modest deal could come apart once financial experts come to grips with the numbers. Read more. (Subscription required.)

Tue., June 23, 2015

Greek banks probably will get only a short respite with the help of the European Central Bank from accelerating deposit outflows unless a deal is struck soon by politicians, Bloomberg News reported. Greeks withdrew 20 percent of deposits held with the nation’s lenders this year as concern of an exit from the euro intensified. A drip-feed of liquidity from the ECB and Greece’s central bank has kept lenders afloat. As deposit outflows accelerated, the ECB increased the ceiling of funding three times in the last seven days alone. “They’re being given 48 hours of respite, but if there’s no deal they can’t avoid a collapse,” said Jerome Forneris, who helps manage more than $8 billion at Banque Martin Maurel in Marseille. “They are under breathing assistance with the ECB providing hundreds of millions every day.” Greece early on Monday presented creditors a new set of proposals that form the beginnings of a possible deal, Dutch Finance Minister Jeroen Dijsselbloem, who chairs meetings of his euro-area counterparts, said in Brussels. Meanwhile, euro-area finance chiefs remained divided over the possible introduction of capital controls as banks may be running out of the collateral they post to receive funds. Read more.

Tue., June 23, 2015

Welcome to what is likely India’s largest ghost city, which extends across five expansive parcels of land along the highway adjacent to the racetrack. What was meant to be the crowning achievement of Jaypee Group and Jay Prakash Gaur, its 85-year-old patriarch, has become a monument instead to unrealistic aspirations and poor execution on the one hand and a shortfall in growth, the high cost of capital and an uncertain political landscape on the other, the Financial Times reported. The scale of Jaypee’s ghost city rivals that of some of China’s famous unoccupied cities. Fortunately for Jaypee, it also owns a collection of power and cement plants across India as well as three listed companies. Unfortunately, it also has about $12bn of debt, creditors and analysts say. Jaypee is not alone in its plight. The company is ranked number six of 10 indebted Indian conglomerates that collectively owe about $125bn to their bankers, and account for 13 per cent of all bank loans in India, according to data from Ashish Gupta, an analyst with Credit Suisse. Others on the list include Lanco, a construction and power company; GVK, an energy and transport group; and GMR, an infrastructure conglomerate. They are among the companies that should be leading India’s efforts to bolster its inadequate infrastructure, but instead are hampered by high debt levels and weak balance sheets. Read more. (Subscription required.)

Tue., June 23, 2015

The date of the meeting of the Finance Ministry of Ukraine, the IMF and the Creditors' Committee on restructuring Ukraine's debt obligations hasn't been agreed yet, according to a letter released by the committee which Interfax-Ukraine has acquired, the Interfax-Ukraine news agency reported. "Arrangements are also being made for a meeting between the Committee, Ukraine and the IMF in Washington to take place as soon as possible. No date for this meeting has yet been agreed despite Ukraine's public statements to the contrary. We view it as vital that all parties sit down and negotiate a deal in good faith, without preconditions, as soon as possible," reads the letter. The Committee's advisers are currently evaluating the restructuring proposal submitted by Ukraine on June 19, certain details of which had been briefed to the media before the advisers had received it. The proposal is based on IMF assumptions about the Ukrainian economy which have not yet been placed in the public domain and which are not scheduled to be made public until mid-July. In order to properly consider the proposal, the Committee and its advisers have urged Ukraine and the IMF to publish those assumptions as soon as possible. In the meantime, the Committee said it still believes that the proposal submitted to Ukraine in May remains the best way forward for the country. Read more.

Tue., June 23, 2015

China is bailing out the nation’s heavily indebted local governments, relying on trusted methods to keep its financial system stable despite promises to allow market forces to play a greater role, The Wall Street Journal reported. Beijing is permitting provinces to issue at least 2.6 trillion yuan ($419 billion) in bonds in 2015, the first local government issuances in more than 20 years, to stave off a debt crunch. Local administrations have accumulated some 18 trillion yuan, equivalent to a third of China’s economy, in bank loans and bonds to fund risky land and property deals. As the real-estate market slows, state-owned banks that did much of the lending are on the hook. The municipal bonds are aimed at allowing local governments to refinance short-term bank loans, which carry high interest rates of 7%. The move won plaudits from economists and investors as a market-based solution to the debt problem. What is transpiring, however, is more akin to the public bailout of China’s state-owned banks in the 1990s. Back then, the government pumped billions of dollars in fresh capital into the banks and carved out bad loans from the lenders. Only around a fifth of the soured debt was ever recovered. Read more. (Subscription required.)

Tue., June 23, 2015

Employers’ group Ibec has warned the Government not to legislate against minimum hour or flexible contracts, saying such a move could be detrimental to the economy, the Irish Times reported. Danny McCoy, Ibec ’s director general, was responding to claims by trade unions that uncertain terms of employment are exploiting workers. Mr McCoy also said that the tradition of a single job with a single employer has become “exceptional,” adding that full-time contracts in the past have allowed for people being kept in work despite lower demands for services. Read more.

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