Daily Insolvency News Headlines

Wed., October 15, 2014

Wed., October 15, 2014

Ireland’s government on Tuesday responded to the clamorous criticism of its business-friendly tax arrangements by closing a loophole used by multinational giants like Google, the International New York Times reported. The European Union and the Obama administration have been increasingly vocal about the tax-avoidance strategies of multinational companies and the countries that enable them. The European Commission is conducting a broad investigation into the relationships between multinationals and perceived tax havens like Ireland, Luxembourg and the Netherlands. In recent decades, Ireland has based much of its economic growth and jobs strategy on its low corporate tax rate and other incentives that enticed foreign companies like Google, Apple, Microsoft and Abbott Laboratories. Joe Tynan, tax partner at PricewaterhouseCoopers in Dublin, estimates that the loophole collectively saved companies billions of euros, although it’s difficult to pinpoint the exact amount. Critics also point to the type of Irish tax strategies that have enabled Apple to potentially avoid billions of dollars in taxes over the years. Those deals, which are part of the separate investigation by the European Commission, do not appear to involve the tax loophole the Irish government says it will close. “I am skeptical as to how big a deal this really is,” said Crawford Spence, an accounting professor at Warwick Business School in Coventry, England. “In general, corporations don’t see much legitimacy in corporation tax, and Western countries don’t appear that interested in making them pay it, either.” Read more. (Subscription required.)

Wed., October 15, 2014

Hotel-management chain Aqua Sol, owner and administrator of 15 hotels in Cyprus, Rhodes and Crete, along with its nine subsidiaries has been placed under receivership for its failure to comply with its contractual obligations with the Bank of Cyprus, it was announced on Tuesday, Cyprus Mail reported. According to a June 2013 BoC internal report leaked to the press, Aqua Sol had been extended total credit of €99 million, of which €23 million were in arrears, and approximately €9 million over 90 days past, and the company was deemed a ‘high-risk’ borrower as its loans were restructured on an annual basis. The report also said Aqua Sol kept minimal deposits with BoC relative to its turnover. “The Company Aqua Sol Hotels Public Company Limited and various associated companies have been lawfully placed, as from 13 October 2014, under Receivership, based on the provisions of Floating Charges issued by the Companies in favour of Bank of Cyprus Public Company Ltd,” an announcement by the appointed received, Eleftherios Philippou, read. In addition to property collateral, in 2009 Aqua Sol had issued €70 million worth of company securities as collateral to the BoC, which allowed the bank to place the company under administration in case of non-payment. Read more.

Wed., October 15, 2014

Barbados business leaders and economists say the Caribbean island should seek an accord with the International Monetary Fund as the government struggles to spur an economy with one of the world’s heaviest debt burdens, Bloomberg News reported. Efforts by the government to trim the public sector by firing 3,000 workers and reining in spending failed to spark growth in the first half of the year in a country with a debt load equal to 96 percent of gross domestic product. That prompted the Barbados Chamber of Commerce to say the government should consider talks with the IMF. “We have all the costs of an IMF program already, without the benefits of a loan or stand-by agreement to provide financing for any temporary shortfalls,” said Avinash Persaud, a Barbados-born economist and chairman of London-based investment bank Elara Capital. Barbados’s government is using more than 15 percent of tax revenue to pay interest on its debt, Standard & Poor’s said in a July report in which it predicted no growth for the $4.2 billion economy. While local banks have cash to lend, there is a reluctance on the part of investors that is stifling growth, said Persaud. Read more.

Wed., October 15, 2014

European Union finance ministers committed on Tuesday to lifting the veil on personal banking and financial information by 2017 — but they were forced to offer Austria an extra year in order to reach a deal, the International New York Times reported. The political accord is expected to be completed at another meeting before the end of the year. It would oblige a tax authority in any European Union country to share with another state’s authorities a much larger amount of bank account and personal financial information. “Bank secrecy is dead and automatic exchange of information will be applied in its widest form,” Algirdas Semeta, the European commissioner in charge of taxation, told reporters after the meeting of ministers. The European Union was “throwing open the traditional hiding places of tax evaders,” he said. Such exchanges are currently limited to interest on savings accounts, although member states have already agreed, from next year, to include income from employment, directors’ fees, life insurance products, pensions and property, according to European Union officials. Read more. (Subscription required.)

Wed., October 15, 2014

Troubled steelmaker Lucchini said on Tuesday it planned to ask India's JSW Steel to raise its offer of less than $100 million for the Italian company's core assets in Piombino on the Tuscan coast, Reuters reported. Lucchini, Italy's second-largest steel plant by capacity, was previously owned by Russia's Severstal, but it was declared insolvent in 2012 and placed under special administration. JSW so far has made the only binding offer. Italian media reported on Tuesday that Algerian family-owned conglomerate Cevital was ready to offer $300 million for the assets and commit to building two electric arc furnaces in Piombino. JSW's plan is to use Piombino as a processing facility, bringing the steel in from elsewhere rather than producing it locally. Italian labour unions are opposed to such a piecemeal sale because it would mean job losses. Read more.

Wed., October 15, 2014

The United Steelworkers union has reached a tentative contract agreement with U.S. Steel Canada Inc. that covers workers in Hamilton, marking the first time the steel company has not locked out workers at one of its two major Canadian mills, The Globe and Mail reported. Since the 2007 purchase by United States Steel Corp. of what was then Stelco Inc., the company locked out workers once after failing to reach an agreement covering its Hamilton workers, and twice at its Lake Erie operations in Nanticoke, Ont. The agreement, which covers about 600 active workers in Hamilton and about 10,000 retirees from the Hamilton Works, was reached before the expiry of the current contract on Wednesday and about one month after U.S. Steel Canada was granted bankruptcy protection under the Companies’ Creditors Arrangement Act. That protection was extended last week until next January after lawyers for the company, the Ontario government and the United Steelworkers reached a deal on how U.S. Steel Canada will be financed while the company is operating in CCAA protection. The company has said in court filings that it expects CCAA protection to last until at least the end of 2015. U.S. Steel was granted approval last week by Justice Herman Wilton-Siegel of the Ontario Superior Court to provide debtor-in-possession financing of $185-million for its Canadian unit. Read more.

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