Chinese Premier Wen Jiabao vowed to continue his government's aggressive stimulus efforts, saying the world's third-largest economy faces persistent problems and uncertainties from the global recession despite an upturn in growth, The Wall Street Journal reported. Speaking to business leaders and others at a World Economic Forum meeting, Mr. Wen said "the pickup in China's economy remains unstable, unconsolidated and imbalanced," pointing to uncertainties that continue to cloud the global economic outlook. China's economy faces weakness in demand for its exports and difficulties increasing domestic consumption, which he cited as a major government goal. As a result, Mr. Wen said, Beijing will maintain its active fiscal policy and what the government calls a "moderately loose" monetary policy. Read more. (Subscription required.)
Daily Insolvency News Headlines
Fri., September 11, 2009
Russia's steel makers, seeking to repay billions of dollars in debts, will struggle to sell foreign assets that have contributed to substantial first-half losses because potential buyers have little cash to spare, Alibaba.com reported. This will force companies to idle plants and seek bankruptcy protection for some units, with Severstal likely to be the worst hit, analysts said. While some have divested peripheral assets, no Russian steel maker has been able to rid itself of the big-ticket items from earlier acquisitions that had piled up $30 billion in debt by the end of last year. That, say analysts, is unlikely to change. Steel makers in Russia, the world's no. 4 producer, have been operating in the red since the world financial downturn slashed demand from key customers in the construction and auto businesses. Read more.
Japan Airlines Corp., the recipient of three government bailouts since 2001, will find out soon if the rules have changed, Bloomberg reported. The Democratic Party of Japan, which takes power Sept. 16, pledged to cut what incoming Prime Minister Yukio Hatoyama called “wasteful” government spending. Japan Air, with 235 billion yen ($2.6 billion) in loans from a state-owned bank, likely will seek more aid after it submits a mid-term business plan by Sept. 30, according to analysts. “I think it’s wrong for the government to provide money to a private company,” said Hirohisa Fujii, the DPJ’s leading contender to become finance minister. “The question is where you draw the line.” Japan Air posted a 99 billion yen loss in the first quarter, the most in at least six years, as business and leisure travel plummeted during the country’s worst postwar recession. The government set up a panel of legal and academic experts last month to help restructure the carrier, which has eight unions and has had losses in three of the last four years. Read more.
By helping a Swedish sportscar maker in its bid for Saab, Beijing Automotive Industry Holding Co. may have found another way to get what it wanted in its failed bid for Opel: access to the same advanced GM technology that drives cars from both Opel and Saab, The Wall Street Journal reported. Turned down once by GM, which owns both Opel and Saab, Beijing Auto has struck a deal to take a minority stake in Koenigsegg Group AB and help Koenigsegg close the funding gap it needed to buy Saab. Brands across GM's empire tend to use the same kinds of vehicle underpinnings, said John Bonnell, JD Power's director of forecasting for Asia Pacific. The cars share the same basic construction and have similar engines and transmissions. It remains unclear what kind of access Beijing Auto would have to Saab technology as a noncontrolling minority shareholder of Koenigsegg, but it's possible Koenigsegg's deal for Saab could give Beijing Auto backdoor entry to the same technology it had sought in its Opel bid. Read more. (Subscription required.)
Istithmar World, the Dubai sovereign wealth fund, is halting investments as part of a restructuring effort after spending more than $25 billion this decade on stakes ranging from a yacht marina to luxury retailer Barneys New York, according to people familiar with the plan, Bloomberg reported. The process may result in a sale of the fund or its assets, they said. Istithmar, run by David Jackson, said this week that co-chief investment officers John Amato and Felix Herlihy would leave the firm. Jackson’s job is under review, the people said. A restructuring by Istithmar and its parent Dubai World may mark the most public reversal of fortune for a state-controlled investment firm since global credit markets seized up in 2007. Sovereign wealth funds, fueled in part by oil revenue, have become sources of capital around the world for companies, including Citigroup Inc. and Morgan Stanley. Read more.
Verizon Communications says it is ready to oppose the sale of the enterprise business unit of Canadian telecom-equipment maker Nortel Networks to Avaya Inc for $475 million, citing public safety and security concerns, Reuters reported. Verizon, a U.S. telecom company, buys and resells a range of Nortel networking technology. As well as numerous private companies, the customer base for these products includes U.S. government arms as diverse as the military, anti-terrorism agencies, the Congress and the court system. In a court filing made earlier this week, Verizon said that if Avaya, a U.S. telecom-equipment maker, buys Nortel's enterprise business and Verizon's existing contracts are not taken up and serviced by Avaya, Verizon plans to oppose the sale. That's because without ongoing maintenance, service and support, Verizon clients that use Nortel's technology could have their communications capabilities disrupted. That poses a significant hazard to the public's welfare, security and safety, Verizon said in a U.S. bankruptcy court filing. Read more.