An independent Scotland would face an immediate debt repayment of 23 billion pounds to the UK Treasury, British media reported, citing a leading economics research body's estimate. According to newspapers including The Guardian, The Telegraph and The Times, The National Institute for Economics and Social Research (NIESR) has warned that Scotland would have to borrow 23 billion pounds in its first year of independence, at interest rates of up to 1.65 percent higher than the UK Treasury's rates. In September Scotland will hold an referendum on whether to sever its 307-year tie with England, with Scottish nationalists arguing that a split would give them greater economic freedom. The newspapers quoted NIESR's macro-economist Angus Armstrong as saying that the calculations were based on the Scottish government's promise after independence to repay its share of UK debt, which is expected to hit 1.7 trillion pound by 2015-16. The NIESR said that Scotland would need to make extra spending cuts above those planned by the UK government of nearly 1 percent of GDP owing to declining oil revenues, in order to meet the Maastricht target of getting national debt down to 60 percent of GDP within 10 years, according to media reports. Read more.
Daily Insolvency News Headlines
Wed., April 9, 2014
A Manitoba First Nations business success story is showing signs of financial trouble, as one of its companies, Arctic Beverages Ltd., is seeking creditor protection, CBC News reported. Arctic Beverages, which bottles and distributes PepsiCo. and other products, has taken the first step to avoid bankruptcy, according to documents obtained by CBC News. The Winnipeg-based company filed a notice of intention last month to make a proposal to its creditors under the Bankruptcy and Insolvency Act. The documents, which were filed in late-March, indicate that Arctic Beverages owes more than $26.2 million in total to creditors and the company says it cannot meet its financial obligations at this time. Of that amount, $11.5 million is owed to the Tribal Council Investment Group of Manitoba Ltd., which owns Arctic Beverages. It owes Pepsi about $1.2 million, according to the documents. "This was a necessary step initiated to ensure the ongoing viability of the ABL business," a letter from the company to its creditors, dated March 25, states in part. "We also want to let our stakeholders know that ABL and its sister company, Arctic Beverages Sask Limited, have entered into a sale process aimed at ensuring stable long term ownership is put in place and for this purpose, they have engaged PricewaterhouseCoopers Corporate Finance to manage the sale process." Read more.
A small manufacturer of polyester yarn based in China's wealthy Zhejiang province has declared bankruptcy, threatening its ability to meet an interest payment on a high-yield bond due in July, Reuters reported. Zhejiang Huatesi Polymer Technical Co Ltd asked a local court for bankruptcy protection in early March, according to an announcement on the website of the Anji County People's Court. The firm sold 60 million yuan ($9.7 million) in bonds in a private placement in January 2013 at an interest rate of 11 percent. The next interest payment is due on July 23, while the bond matures in January next year. A string of credit defaults in recent weeks has highlighted rising credit risks in China, partly fuelled by signs that the economy is slowing down. China's domestic bond market experienced its first-ever default early last month when Shanghai Chaori Solar Energy Science and Technology Co Ltd missed an interest payment. That bond carried no guarantee, and it remains unclear if investors will be repaid. Read more.
European Central Bank officials are being lobbied by bankers today over the complexity of gathering data for the health check of the region’s lenders and how to disclose the results, according to a briefing note obtained by Bloomberg News. The European Banking Federation has nine main issues to address with officials at a meeting of the so-called “SSM Strategy Group,” the document dated March 27 shows. An accompanying agenda says the gathering was set take place at the Frankfurt headquarters of Commerzbank AG, with Jukka Vesala, a director general in the ECB’s Single Supervisory Mechanism, scheduled to speak before it concludes at 4 p.m. Banks across the euro area are undergoing the unprecedented review of assets as part of preparations for a new single supervisory body led by the Frankfurt-based central bank. The exercise, aimed at restoring confidence in bank balance sheets in order to spur lending to the economy, is due to culminate in a stress test based on the new asset data with complete results to be published in October. Read more.
Ulster Bank chief executive Jim Brown told the Oireachtas finance committee yesterday that it was not in the business of writing off mortgage debt for customers in arrears with their home loans, the Irish Times reported. “Writing down an arbitrary amount of debt for a small number of people while they remain in their home is not something we will do,” he said. “We do not believe that it is an appropriate solution. The write-down or write-off of debts is, we believe, an unhelpful distraction that is likely to create issues around moral hazard, transparency and fair outcomes for customers.” On questioning from committee chairman Ciarán Lynch, Mr Brown did concede that Ulster Bank does write off debt in the case of repossessions. Mr Brown said the focus should be on “affordability” and not negative equity and reiterated that Ulster Bank does not want to repossess homes. Ulster Bank told the committee that 14,231 owner-occupied mortgage accounts were in arrears of 90 days or more at the end of December and 2,657 buy-to-lets. The bank said 4,323 owner-occupier mortgage customers were in some form of legal proceedings along with 1,487 buy-to-let customers. Mr Brown said this was a result of customers being unwilling to engage with the bank or to make repayments on their loans for up to two years. He said the number of customers in arrears had fallen each month since March 2013, with 2,500 moving out of arrears in the past seven months. Read more. (Subscription required.)
Italian Prime Minister Matteo Renzi cut the government’s forecast for economic growth and renewed his promise to slash benefits for top civil servants, saying the working poor are shouldering too much of the pain, Bloomberg News reported. Gross domestic product will expand 0.8 percent this year, Renzi said late yesterday in a news conference in Rome after his cabinet approved his multi-year budget plan. That compares with the 1 percent growth projected in September by Renzi’s predecessor, Enrico Letta. Italy’s GDP contracted 1.9 percent last year, the second decline in a row. Renzi, 39, has focused on the lifestyle gap between blue-collar workers in the private sector and the chauffeured civil servants running agencies and state-owned companies. With resources limited by European Union deficit limits, Renzi is counting on public spending cuts to help finance the centerpiece of his stimulus plan: tax cuts for lower-income workers. “We have to tell the people that politicians are making sacrifices,” Renzi said. “It’s time for politicians, directors and public managers to feel the urgency.” Renzi reiterated the government’s target of a budget deficit to gross domestic product ratio of 2.6 percent this year and said Italians should expect 4.5 billion euros ($6.2 billion) in spending cuts. The reduction in the GDP forecast puts pressure on the government’s campaign to reign in its debt. Read more. (Subscription required.)