Daily Insolvency News Headlines

Thu., February 19, 2015

Thu., February 19, 2015

Greek officials are planning to submit a proposal to eurozone finance ministers for breaking the impasse in debt negotiations between the new government in Athens and Greece’s European creditors, the International New York Times reported. Athens on Thursday will propose an extension of several months to the current bailout program, a government spokesman, Gavriil Sakellaridis, said on Wednesday. He declined to discuss specifics, including the length of the extension being sought, citing the delicacy of the negotiations. But in email comments sent to reporters, the government indicated that Greece would seek a four-month extension of the current program, under which the country has received 240 billion euros, or $272 billion, in exchange for pursuing various economic overhauls. Perhaps crucially, Mr. Sakellaridis said the proposal to extend the bailout program would not include a commitment to continue honoring the terms of the memorandum underlying the loan program, which a former Greek government signed as part of the bailout in 2012. Many Greeks see the memorandum as a contract binding the country to the austerity conditions they blame for undermining the economy and raising unemployment to its current level of 25 percent. Read more. (Subscription required.)

Thu., February 19, 2015

As Athens and Brussels engage in a showdown over Greek debt, the ultimate power broker may reside in neither of those European capitals, the International New York Times reported. Instead, the outcome may largely be determined in Frankfurt, where Mario Draghi presides over the European Central Bank. The new leftist-led Greek government, facing a Friday deadline for coming to terms or risking a cutoff of loan money, plans to submit a new proposal on Thursday. Depending on the specifics, it might receive no better reception from eurozone finance ministers than previous Greek proposals in recent weeks. But the ability of Greece and its banks to remain solvent could depend just as much on Mr. Draghi and a series of decisions by the European Central Bank that might determine the financial fate of Greece — and perhaps the future of the entire 19-country currency union. A street in central Athens. The government is seeking a four-month extension of its fiscal rescue. With political leaders deadlocked, it will be up to Mr. Draghi and the central bank’s Governing Council to decide whether to keep struggling Greek banks afloat. The decision could amount to a verdict on whether the Greek government can avoid financial collapse, continue to service its debts and remain a member of the currency bloc. Read more. (Subscription required.)

Thu., February 19, 2015

The board of Petropavlovsk PLC warned Wednesday that it could face insolvency should its proposed refinancing plan not be passed by shareholders and urged shareholders to vote in favour of the plan, following a call to oppose the proposals from Sapinda Holdings BV Tuesday. Sapinda, which claims to represent a group of shareholders with a 10.7% interest in the Russia-focused gold miner, said it plans to vote against the restructuring of Petropavolovsk's convertible bonds, and said that it believes other holders of a significant proportion of shares also support its position to vote against the proposal. On February 2, Petropavlovsk said it had launched a refinancing programme, including a GBP155.1 million rights issue of new shares and a new five-year USD100 million convertible bond, intended to "secure the group's immediate future" and allow it to increase production in 2015. However, Sapinda Tuesday that the proposal unfairly favours bondholders at the expense of shareholders, diluting them by 94% and issuing the new shares at a price of just 5p, 80% below Petropavlovsk's share price prior to the bondholder proposal. Read more.

Thu., February 19, 2015

A second dry cargo shipper has filed for bankruptcy following a collapse in freight rates that has forced many companies to idle vessels used to haul iron ore, coal and grain rather than hire out the ships at a loss, Reuters reported. Weaker demand from China and an oversupply of ships has led to the worst industry downturn in 30 years, pushing the Baltic dry index - the industry benchmark for freight rates - to an all-time low. China's Winland Ocean Shipping Corp filed for Chapter 11 bankruptcy protection in the United States on Feb. 12, court documents show, the second bankruptcy this month. "Due to current market conditions, the financial position of the company and its subsidiaries has deteriorated, leading to immediate difficulties," the document states, adding that it had therefore filed for Chapter 11 protection. Privately owned Danish firm Copenship filed for bankruptcy earlier in February after losses in the dry bulk market. Read more. (Subscription required.)

Thu., February 19, 2015

The European Union looks set to reduce capital charges on some securitised debt to revive a market that triggered the global financial crisis, but is now seen as key to funding the region’s flagging economy, the Irish Times reported. The EU’s executive European Commission said it was planning to create a new class of high quality, simple, asset-backed securities that could benefit from lighter capital requirements, and help to plug funding gaps in Europe. The plan is part of the EU’s broader Capital Markets Union (CMU) project which aims to unify markets by 2019 and make it easier for companies to raise cash on stock and bond markets. Banks provide the bulk of funding in Europe now. The CMU, which was put out to public consultation on Wednesday, aims to emulate the United States where stock and bond markets generate most of the cash for the economy. It was securitised debt, or asset-backed securities (ABS), based on pooled “subprime” U.S. home loans that turned toxic in 2007, sparking a financial crisis that ended up with taxpayers bailing out a string of banks on both sides of the Atlantic. Under the new plan, Brussels is expected to loosen capital charges on top quality ABS to encourage banks to produce more, and insurers to buy it. Some global regulators have been leery of such a move so far, leaving the EU to contemplate unilateral action, albeit not a return to the pre-crisis regulatory situation. Read more.

Thu., February 19, 2015

Lloyds and Royal Bank of Scotland are set to impose a cap on cash bonuses for the sixth consecutive year, in line with previous agreements made with the Government body that holds the taxpayer’s shares in the banks, The Telegraph reported. The two banks negotiate with UKFI each year before setting their bonuses. As well as adhering to European rules that cap bonuses at a maximum of 200pc of base salary, Lloyds and RBS are expected to limit cash rewards to £2,000 per employee, in line with a long-standing agreement with UKFI. RBS paid a total of £576m in bonuses last year, which included deferred shares, compared to £679m in 2012. Lloyds’ bonus pool rose 8pc to £395m in 2013, with most paid out in deferred shares. The latter’s investment banking operations are smaller than at RBS, leading to lower spending on bonuses. UKFI holds 80pc of RBS shares and 24.9pc of Lloyds, a legacy of the banks’ state rescues in the wake of the 2008 financial crisis. Read more.

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