Asia Pacific

The focus of media coverage of the last week has been squarely on Kingfisher Airlines (KFA), when the cancellation of a 40-odd flights on a single day, a number that eventually exceeded 80, triggering shock waves in business and consumer circles, the Business Standard reported today.

China’s banking regulator warned lenders that some projects backed by local governments may run out of funds, and loans to property developers are likely to sour as sales slow, a person with knowledge of the matter said, Bloomberg reported. The China Banking Regulatory Commission told lenders last week to step up asset sales and debt restructuring for unprofitable local government financing vehicles that are struggling to repay loans, the person said, declining to be identified as the instructions were private.

The Reserve Bank of India has warned of deep imbalances in the country’s banking system saying that capital is being allocated to a handful of elite industrialists but not to the broader, more dynamic economy. Such a constrained banking system in a large emerging market threatens to put a major drag on economic growth, according to the RBI and economists. It also poses a social threat in an economy that needs to create millions of jobs among a young population. K.C.

Lenders to Vijay Mallya-promoted Kingfisher Airlines may have no option other than restructuring the carrier's loans again. In case of a second restructuring, banks have to classify the asset as non-performing, which requires higher provisioning, the Business Standard reported. Bankers are working on a formula that would aim to keep the re-payment period and the net present value of the asset specified during the first restructuring intact, by increasing the interest rate. In this case, there would be no increase in the provisioning requirement.

Diplomatic deadlock is curbing China's will to provide cash to help end the euro zone crisis after Europe spurned the simplest of Beijing's three key demands, two independent sources have told Reuters. China had offered help in return for European support to grant it either more influence at the International Monetary Fund, market economy status in the World Trade Organization, or the lifting of a European arms embargo, said the sources, both of whom have direct knowledge of the matter, including one who has ties to the leadership in Beijing.

A consortium of 17 banks have agreed to a restructuring package for Air India where Rs 20,000 crore of short term working capital loans will be converted into longer duration term loans and part of this money will be converted to unsecured credit that the government will repay, the Financial Chronicle reported. The repayment period of the loan has been extended by 10 years with a corporate guarantee from the Government of India and hypothecation of aircraft with the instalment beginning within two years.

Olympus Corp's losses on securities investments mounted to more than 100 billion yen ($1.3 billion) at one point, the Nikkei business daily said on Wednesday, citing sources close to the matter, Reuters reported. Olympus, engulfed by a scandal that has brought the 92-year-old company to its knees, admitted the previous day to using M&A transactions to conceal past losses.

While many businesses in the United States struggle to stay afloat and workers collect unemployment checks, China has the opposite problem: an economy, pumped up by expansive lending by state-controlled banks, which is growing too fast to keep inflation and speculation in check, the International Herald Tribune reported. Beijing’s solution: Create an artificial shortage of credit.

Tokyo Electric Power (Tepco), operator of the Japanese nuclear plant destroyed by the tsunami in March, forecast a second year of heavy financial losses even as it secured Y890bn (US$11.4bn) in government aid to help compensate victims of the nuclear disaster, the Financial Times reported. The utility on Friday projected a Y600bn net loss for the year to March 2012, its first earnings guidance since the triple meltdown occurred at its Fukushima Daiichi facility. If the estimate is realised, it would bring its losses since the tsunami to Y1,847bn.

The board of Proserpine Cooperative Sugar Milling Association Ltd. has refused to accept a A$120 million takeover offer by Chinese state-owned Cofco Group's local unit Tully Sugar Ltd., Tully said Sunday. The Proserpine board has chosen to enter administration despite Tully tabling a binding and unconditional asset sale and loan agreement, Tully said in a statement.