Dubai Group, an investment company owned by Dubai's ruler, has agreed to a $10 billion debt restructuring with its main bank creditors after three years of talks, potentially lifting a cloud of uncertainty that has engulfed the emirate since the financial crisis, The Wall Street Journal reported. If it goes through as expected, the restructuring will be a major step in the broader reorganization of Dubai's government companies in the wake of the financial crisis, analysts say. Under its terms, Dubai Group would get up to 12 years to repay its banks as it tries to sell assets and generate cash, according to a person familiar with the talks. The deal covers $6 billion of bank debt and a further $4 billion that the company owes to its parent firm, called Dubai Holding. The banks involved include Citigroup Inc., a unit of France's Natixis, and local lenders Emirates NBD, Mashreqbank and First Gulf Bank, among others. Representatives for the banks couldn't immediately be reached for comment. The terms weren't disclosed. Under a previous settlement with other banks, Dubai Group paid 18.5 cents on the dollar. Dubai Group is part of a complex web of state-linked firms that ran into difficulty paying their debts when the global economy sputtered after the financial crisis and the tiny emirate's property bubble burst. Dubai was forced to borrow $20 billion from its wealthier neighbor, Abu Dhabi, in 2009.Read more. (Subscription required.)
Daily Insolvency News Headlines
Fri., May 10, 2013
Slovenia pledged to sell 15 state firms and raise VAT on Thursday in a desperate bid to avoid an international bailout, but gave little detail and delayed the spending cuts investors say are needed to stabilise its finances, Reuters reported. The much-anticipated package offered no timeframe for the sell-off of state firms including the country's second largest bank, its biggest telecoms operator and the national airline. Nor did it say how much they were worth. It also said cuts to the public sector wage bill would have to await the outcome of negotiations with unions. The former Yugoslav republic was a trailblazer for ex-Communist eastern Europe when it joined the euro zone in 2007 as the bloc's fastest growing economy. Buoyed by exports of Renault cars, household appliances and pharmaceuticals, successive governments shied away from the unpopular sale of state assets, including the country's biggest banks, and reform of the welfare system and rigid labour market. Exports hit a wall with the onset of the global crisis, driving up bad loans, borrowing costs and exposing widespread cronyism and corruption that saw disastrous loans made to politically-connected businessmen. Prime Minister Alenka Bratusek said the package, which includes a rise in value added tax from July 1 to 22 percent from 20 percent, would be enough to prevent the tiny Alpine country following Cyprus in the euro zone queue for a bailout from the European Union and International Monetary Fund. Read more.
Canadians keep getting new credit cards. And, despite all the worries about record-high household debt, they keep paying them off, The Wall Street Journal Real Time Canada blog reported. Overall consumer credit, excluding mortgages, has grown robustly in the years since 2009, but delinquency and default rates have remained at low levels, according to credit-card data released Thursday by credit rater Equifax and Moody's Analytics. Although outstanding balances on credit cards have been flat or falling over the past year, the amount of available credit outstanding grew 2.2%, the report says. “The total number of open accounts has grown even more swiftly, expanding at a 3% rate,” it adds. Moody’s models indicate credit delinquency rates will continue their current downward trajectory, bottoming out at 3% of all outstanding balances over the next year. But, like many other observers of Canada’s economy, Moody’s sees considerable risk Canada’s highly leveraged households will run into problems if the economy weakens. “Should the situation deteriorate, [default] rates could rise to 4.5% or even 5%, surpassing those of 2009,” the report warns. Read more. (Subscription required.)
Extra efforts to engage with the unemployed to get them back to work are required, according to the EU/IMF troika after its latest visit to Ireland, the Irish Times reported. The troika also says that strict implementation of this year’s budget is essential to keep the country on track to exit the bailout. In a statement today on its tenth review of the implementation of the bailout programme the troika said significant progress had been made but remaining challenges required continuing policy efforts. In particular the troika highlighted the need for enhanced engagement with the unemployed and the opening up of competition in sheltered sectors like legal services. “Ireland’s programme remains on track, the gradual recovery is continuing and there have been further improvements in market conditions for the sovereign and the banks,” said the statement following a visit to Ireland by the troika between April 23rd and May 2nd. Read more.
Japanese Prime Minister Shinzo Abe, who is to announce next month his much-anticipated strategy for economic growth, has quietly put aside plans to overhaul a rigid labor system that is blamed for many of the woes facing once-dominant Japanese corporations, The Wall Street Journal reported. Mr. Abe touts the growth program as indispensable to turning recent improvements in the economy into sustainable growth, and says that part of this effort must involve changing entrenched labor practices. "If everybody in a declining industry tries to cling to their jobs, the whole industry will lose competitiveness and collapse, causing the loss of employment for everybody," he said in March. But members of the council drafting the proposals, including Kotaro Tsuru, who heads the government's labor panel, say that changes in employment rules are off the table—at least for now. "It's like a tax increase. Anyone who talks about labor flexibility faces a public bashing," said Mr. Tsuru, a professor at Keio University who is chairman of the labor task force of the deregulation council. "It's a taboo topic." Read more.
Bailed-out Portugal added to the unemployment woes of southern Europe on Thursday as the country's jobless rate hit a startling 18% of the working population, The Guardian reported. The first quarter figures from the national statistics institute revealed that youth unemployment had soared even higher, with 43% of the under 25s who are not studying now unable to find work. "It is a dramatic and brutal increase," said Helena Pinto, a deputy for the Left Bloc party, who also pointed to a leap in emigration by people desperate to find work. Portugal's economy is expected to shed yet more jobs and shrink by a further 2.3% this year, as prime minister Pedro Passos Coelho's government forces ever-deeper austerity on the country at the bidding of the troika of lenders who keep it afloat - the International Monetary Fund, the European Central Bank and the European Commission. Portugal has now been in recession for almost three years and Passos Coelho's announcement last week that he would cut another €4.8bn spending over the next three years is expected to harm short-term growth further. Recent measures include the decision to sack one in twenty public employees, increase civil service working week from 35 to 40 hours and raise the retirement age by a year to 66. On Thursday government sources let it be known that civil service pensions may also suffer as the country tries to plug holes in the social security system. Read more.