The administrator of insolvent German bookseller Weltbild said on Wednesday he had broken off talks with investor Paragon Partners and agreed to do a deal with restructuring specialist Droege International Group instead, Reuters reported. Droege will participate in a 20 million euro ($27.1 million) capital increase at Weltbild and in return receive a 60 percent stake in the group, administrator Arndt Geiwitz said. It will also give Weltbild an unspecified loan. Geiwitz, who said no agreement on the future of Weltbild could be reached with Munich investment group Paragon, will hold the remaining 40 percent on behalf of Weltbild's creditors. Weltbild, owned by the Roman Catholic Church, filed for insolvency early this year after failing to keep up with competition from internet-based rivals such as Amazon.com and to obtain new financing. Geiwitz has said more than 50 of the company's 220 stores were to be shut, and a third of its 3,000 jobs would have to go. Read more.
Daily Insolvency News Headlines
Thu., July 17, 2014
Portugal Telecom and Oi of Brazil said on Wednesday that they had renegotiated the terms of their planned merger to salvage a deal threatened by the financing problems of the Espírito Santo group, which is controlled by Portugal’s most powerful family, the International New York Times reported. As part of the revised merger plan, Portugal Telecom will receive a 25.6 percent stake in the merged entity, down from almost 40 percent when the deal was announced in October. That accounts for the failure of one of the Espírito Santo companies to repay on schedule a loan of 900 million euros, or about $1.2 billion, from Portugal Telecom. The family company, called Rioforte, was scheduled to repay its short-term loan in two tranches this week. Its failure to do so makes it probable that it will become the first of the Espírito Santo companies to file for bankruptcy protection. Rioforte’s portfolio includes hotels and other property, farms in Latin America and investments in the energy and health care sectors. Shares in Portugal Telecom rose about 4 percent in afternoon trading in Lisbon, a sign of relief that the merger was still on track despite Portugal Telecom’s unexpected exposure to Espírito Santo. Still, the renegotiation of the merger is the first evidence of the wider threat of Espírito Santo’s problems to other corporations in Portugal as well as overseas investors, in part because of the group’s entangling investments and loans. Oi operates one of Brazil’s largest wireless networks, and the merger would create a company with more than $19 billion in annual revenue. Read more. (Subscription required.)
Croatia's central bank on Wednesday ordered the liquidation of a small private bank, saying it had more liabilities than assets and had failed to meet supervisory requirements. "The central bank board has decided to propose opening bankruptcy proceedings for Nava Banka," the central bank said in a statement after a board meeting. The decision was taken after determining the bank had failed on three counts, it said. "Its assets were lower than its liabilities, it did not meet the supervisory measures ordered by the central bank and it has long been failing to meet capital requirements," the statement said. Zagreb-based Nava Banka is one of the smallest in Croatia, a former Yugoslav republic of 4.4 million people that joined the European Union in July last year. Its assets accounted for 0.08 percent of the banking sector's total assets, the Jutarnji List daily said on its website. More than 90 percent of banks in Croatia are owned by foreign parents, mostly from Austria and Italy. Read more.
The Central Bank has warned of a potential mortgage arrears time bomb as the high number of interest-only loans taken out during the boom revert to full-repayment arrangements, the Irish Times reported. While interest-only arrangements have been widely used as a means of forbearance in the current arrears crisis, just over 8 per cent of the total mortgage loan book - equating to €7.4 billion - were originally issued on an interest-only basis. Most of the loans were taken out by buy-to-let investors on tracker mortgages between 2005 and 2008, essentially at the peak of the credit-fuelled boom. In a research paper published today, the Central Bank found that interest-only mortgages were more likely to be issued to buy-to-let borrowers in Dublin and for the purchase of apartments. Its research, which is based on data from the three main Irish mortgage providers, noted that the rate of arrears on these loans were higher than on standard mortgages, even though the repayments are relatively smaller. Perhaps most worryingly, the report indicated that 43 per cent of these mortgages were due to revert to principal-and-interest repayment arrangements within the next 18 months. Read more.
A Florida federal bankruptcy judge on Tuesday approved Brazilian bank Banco Cruzeiro do Sul SA's petition for Chapter 15 bankruptcy, a decision that will provide the bank some protection in United States courts while it continues its primary insolvency proceedings in Brazil, Law360 reported. U.S. District Court Bankruptcy Judge Laurel M. Isicoff granted recognition to the bank's petition for Chapter 15 bankruptcy, which was filed on June 5, saying that the bank's foreign representative, Eduardo Felix Bianchini, is qualified and granting the bank protection in U.S. courts. Read more. (Subscription required.)
As Argentina’s multi-billion dollar showdown with its hedge fund creditors nears its finale, global organisations are trying to hammer out a plan that will prevent such a stand-off from being repeated, the Financial Times reported. For the past six months, debt issuers, market intermediaries and investors have been discussing a new idea that would make it more difficult for small numbers of recalcitrant creditors to “hold out” against a critically indebted country that restructures its debt. Like “pari passu” and “vulture” funds, holdouts has become one of the buzzwords synonymous with the Argentine debt crisis. The minority of investors who refused the terms of the country’s debt restructure in 2005 and again in 2010, and who now demand full payment, are subjecting the country to “extortion”, claims Argentina’s President Cristina Fernández. Unless it pays up, Argentina faces default at the end of this month. The investors’ successful fight in US courts has not only had ramifications for the country, say official groups, but could also make sovereign debt deals harder to resolve in future. Read more. (Subscription required.)