Daily Insolvency News Headlines

Wed., May 13, 2015

Wed., May 13, 2015

The Canadian and U.S. judges charged with dividing the $7.3 billion from the liquidation of Nortel Networks rejected proposals from former regional businesses and opted for a pro rata split of the money in long-awaited rulings on Tuesday, Reuters reported. Judges on the U.S. Bankruptcy Court in Wilmington, Delaware and Ontario Superior Court of Justice held an unprecedented joint cross-border trial on the dispute, with the courtrooms linked by video. The legal battle has raged for years through numerous courts, chewing up more than $1 billion in fees for lawyers and other advisors. Nortel filed for bankruptcy in 2009 and sold its global operations and patents, raising the cash in dispute. In the years that corporate entities in Canada, the United States and Europe have fought over the funds, retirees and bond investors have awaited repayment. U.S. Bankruptcy Judge Kevin Gross and Justice Frank Newbould said in separate opinions that each regional business would receive cash to pay its creditors based on their claims against it as a percentage of the overall claims worldwide. The judges said in their simultaneous opinions that a pro rata division was the most fair and satisfactory way to split the money. Read more.

Wed., May 13, 2015

Ukraine’s $23bn debt restructuring negotiations appeared to reach boiling point late on Tuesday after the government issued a sharply worded statement that questioned the transparency, responsiveness and good faith of a creditors’ committee, the Financial Times reported. With positions hardening weeks before a planned June deadline to avoid default, the finance ministry of war-torn and recession-battered Ukraine in the statement said it was “concerned about the approach taken by the creditors’ committee representing the country’s external debt holders and their lack of willingness to engage in negotiations.” Claiming that the creditor committee refused “despite numerous requests” to reveal its membership, the finance ministry stressed that it and debtholders needed by June “to agree on a sustainable debt level and debt service objectives meeting the targets” of an International Monetary Fund programme granted earlier this year. The tough words come amid increasing market expectations that the restructuring talks are likely to stretch on through the summer as Ukraine continues — in the face of creditor disapproval — to demand a haircut, cuts to the coupon and maturity extensions to free up $15bn over the next four years. Read more. (Subscription required.)

Wed., May 13, 2015

By now it has become familiar: Greece warns that it is about to run out of cash, then manages to scrape together enough to avoid defaulting on its debts. A larger catastrophe is averted in the eurozone, and Greece and its creditors return to haggling over whether the country can get more financial aid, the International New York Times reported. That sequence played out again this week, when Greece managed on Tuesday to make a loan payment of about 750 million euros, or about $837 million, to the International Monetary Fund. From now through the autumn, Greece will repeatedly run this obstacle course, needing to find tens of billions more to pay other debts owed to creditors and to meet basic obligations like salaries and pensions for government workers. But Greece cannot keep the game up for long. Its economy has taken a turn for the worse, reversing a mild recovery that started last year. And analysts say growth is unlikely to recover any time soon, prolonging a cycle of dependence in which Greece continues to lean on creditors to help pay its debts. Read more. (Subscription required.)

Wed., May 13, 2015

A year after declaring the days of “borrow and spend” were over for Australia, treasurer Joe Hockey on Tuesday shifted the government’s strategy to boosting the economy by ruling out fresh austerity measures, the Financial Times reported. Delivering his second budget against the backdrop of a collapse in commodity prices and lacklustre growth, Mr Hockey cut taxes for small businesses and increased spending on childcare and infrastructure in a bid to create jobs. Mr Hockey proposed to pay for the new spending measures by redirecting funds from existing programmes, raising revenue from multinational companies avoiding tax and levying sales taxes on overseas digital services. “Every nation must live within its means, and Australia is no different. But we cannot tax our way to prosperity,” he said. The government forecast at least four more years of budget deficits, although it expects the deficit to fall from its current level of A$41.1bn to A$35.1bn in 2015-16 and A$25.8bn in 2016-17. As a percentage of gross domestic product the forecast deficits are equivalent to 2.5 per cent, 2 per cent and 1.3 per cent respectively. Last year’s budget projected the deficit in 2015-16 to be A$17bn, half the estimate this time. Read more. (Subscription required.)

Wed., May 13, 2015

European banks are as vulnerable to failing today as they were in the run-up to the 2008 global economic crash and subsequent recession, according to new research, the Irish Times reported. In the first study to compare sources of systemic risk in European banks, economists found banks in southern countries, including France, Spain and Italy, are highly vulnerable to failure. Banks in northern countries appear to be more resilient. Dr Nikos Paltalidis, of the University of Portsmouth Business School, who led the research published in the Journal of Banking and Finance, said: “The European banking system remains highly vulnerable and conducive to financial contagion, which implies that the policies designed to reduce systemic risk are not necessarily doing the job.” “The findings suggest we might need additional policies to better protect the euro zone and increase the resilience of the financial system,” he added. The researchers modelled a range of inter-connected, dynamic economic shocks on 170 euro zone banks in 16 countries, and the spread of that effect to other countries from 2005-2013. The researchers used three independent channels of systemic risk - the interbank loan market, the sovereign credit risk market and the asset-backed loan market - to test which banks were resilient and to track how shocks spread between domestic and international banks. Read more.

Wed., May 13, 2015

EnBW has been named preferred bidder for insolvent wind farm operator Prokon, Germany's third-biggest power utility said on Tuesday. EnBW has made a binding offer to acquire all assets of Prokon for a "mid-level three-digit million-euro" amount, the company said. The all-cash offer would value Prokon, which filed for insolvency in January last year, at more than 500 million euros ($561.6 million), one person familiar with the matter told Reuters on Monday. A creditor panel at Prokon will probably take a final decision on EnBW's bid in early July, the utility said. Prokon filed for insolvency last year after consumer groups accused it of attracting investors with the prospects of making annual returns on their investments of at least 6 percent without giving sufficient warning of the risks. If successful, the acquisition would help EnBW diversify away from loss-making coal and gas-fired plants, which have come under pressure from Germany's push to increase electricity generation from renewable sources. Read more. (Subscription required.)

Syndicate content