Daily Insolvency News Headlines

Tue., August 18, 2015

Tue., August 18, 2015

While other countries fret over banks that are too big to fail, South Korea is grappling with the concept of systemically important human beings. Last week President Park Geun-hye announced a special pardon for Chey Tae-won, scion of the founding family of SK Group, South Korea’s third-biggest chaebol conglomerate. Mr Chey was halfway through a four-year jail sentence for embezzling more than $40m from SK companies — his second conviction for defrauding shareholders. But the country’s main business lobby groups campaigned for Mr Chey’s release on the basis of his importance to the economy. That argument was tacitly endorsed by Ms Park in her comments justifying the pardon, issued along with thousands of others to mark the 70th anniversary of liberation from Japanese rule. And the newly freed Mr Chey followed through on Monday by chairing a meeting of SK company chiefs, in which he urged them to carry out large-scale investment plans. His release followed pardons for several of South Korean business’s biggest names under Ms Park’s predecessors — a practice she had previously condemned. The logic might seem absurd. In most developed countries, a big corporate leader caught scamming his shareholders — never mind twice — would never again play any role in managing their assets. But even the chaebol chairmen’s fiercest critics concede that their absence can cause a leadership vacuum, so entrenched is the authority of founding families in the country’s corporate culture. Read more. (Subscription required.)

Tue., August 18, 2015

The shock waves from China’s surprise yuan devaluation are ricocheting through African economies, sending currencies tumbling and stoking anxiety that the continent’s biggest trading partner might be losing its appetite for everything from oil to wine, The Wall Street Journal reported. In South Africa, the rand hit a 14-year low of 12.94 to the dollar on Monday, extending a 2% drop since Aug. 10 and a 12% slide this year. Currencies in other African countries with close ties to China, like Angola’s kwanza and Zambia’s kwacha, are also down sharply after Beijing unexpectedly cut the yuan’s value by 2% against the dollar last Tuesday. China’s demand for Angolan oil, Zambian copper and South African gold has fueled a steep increase in trade, helping fuel rapid growth but leaving economies exposed to policy shifts in Beijing. In 2013, Africa’s trade with China was valued at $211 billion, the African Development Bank said in June, more than twice the continent’s trade with the U.S. By contrast, 15 years ago, the U.S. traded three times as much with Africa as China did. Read more. (Subscription required.)

Tue., August 18, 2015

Allies of German Chancellor Angela Merkel intensified their efforts to prevent a rebellion in their ranks two days before a crucial vote in Parliament on a new, €86 billion ($95 billion) bailout package for Greece, The Wall Street Journal reported. “I am fully convinced that it’s the right decision to vote in favor of it (the bailout), particularly because I didn’t make this decision easy for myself,” Finance Minister Wolfgang Schäuble said Monday in an interview on German television. “Over the past weeks, more progress has been made than most of my colleagues would have thought possible.” Support from Mr. Schäuble is crucial in winning over skeptical lawmakers, given he has been one of the main critics of Greece during the six-month aid negotiations between creditors and the cash-strapped country. “Everybody must think very hard whether he can justify a no,” Peter Tauber, secretary-general of Ms. Merkel’s Christian Democratic Union, said after a meeting of party leaders in Berlin that called for support for the rescue program. The effort to maintain a united front comes as German lawmakers are expected to grill the chancellor and Mr. Schäuble on the still uncertain future role of the International Monetary Fund in the rescue operation when they interrupt their summer break for meetings on the bailout in Berlin on Tuesday. Read more. (Subscription required.)

Tue., August 18, 2015

If finance were a boxing match, then the referee would be getting ready to intervene in emerging markets, the Financial Times reported. Already on the back foot because of fears over tighter US monetary policy, and taking a pounding from sliding commodity prices, the developing world’s stocks, bonds and currencies have just been on the receiving end of a haymaker from China — in the form of its modest but ominous devaluation. The rout has been fierce and broad. Turkey’s lira, the Mexican peso and South Africa’s rand all touched new record lows versus the dollar on Monday, while the currencies of Malaysia and Indonesia slumped to their lowest since the Asian crisis of 1998. JPMorgan’s EM Currency Index has now declined 2.4 per cent this month, to its lowest reading since it was first calculated in 2000. Read more. (Subscription required.)

Tue., August 18, 2015

Global banks are facing billions of pounds-worth of civil claims in London and Asia over the rigging of currency markets, following a landmark legal settlement in New York,the Financial Times reported. Barclays, Goldman Sachs, HSBC and Royal Bank of Scotland were among nine banks revealed last Friday to have agreed a $2bn settlement with thousands of investors affected by rate-rigging in a New York court case. Lawyers warned the victory opens the floodgates for an even greater number of claims in London, the largest foreign exchange trading hub in the world, in a sign that the currency manipulation scandal is far from over. Banks could be hit as early as the autumn with claims in London’s High Court from corporates, fund managers and local authorities, according to lawyers working on the cases. In addition, investors are expected to bring cases in Hong Kong and Singapore, which are also home to large foreign exchange markets. The US settlement comes just months after a record $5.6bn fine was slapped on six banks by regulators for manipulating the $5.3tn-a-day foreign exchange markets. Read more. (Subscription required.)

Tue., August 18, 2015

The opening of the $3.5 billion Baha Mar mega-resort in the Bahamas is expected to be delayed beyond the start of the Christmas season, with the developer deep in an escalating legal battle with the Chinese companies that are providing most of the finance and construction work, Reuters reported. Even if construction on the unfinished resort resumed this month, there is little chance the project could be completed by mid-December, the start of the high season for Bahamas resorts, according to local contractors who have worked on the project. They asked not to be named because they are still seeking payment for some of their work. These sources said it would take a least five months to complete the resort, partly because the project has fallen behind on inspections while some key contractors have moved on to other jobs. Baha Mar missed a March 27 opening because of construction delays and dwindling cash. Missing the high season, when resorts charge premium prices, would further hurt its finances. Sarkis Izmirlian, whose Baha Mar Ltd is developer of the project, is trying to restructure the project's finances in U.S. Bankruptcy Court in Delaware. A Bahamas resident, Izmirlian is the son of Armenian billionaire Dikran Izmirlian who made his fortunate in the peanut market. Read more.

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