Headlines

China’s credit rating agencies are standing by their triple A scores for troubled state-owned enterprises, even as a series of defaults reverberates through the country’s $4tn corporate debt market, the Financial Times reported. Just five Chinese companies out of more than 5,000 have been downgraded to below double A ratings by domestic rating agencies since Yongcheng Coal and Electricity Holding Group, one of the country’s largest coal groups, kicked off a spate of defaults last month, according to data provider Wind.

International investors have cried foul over the sale of an insolvent finance company in India due to concerns surrounding the auction process, casting doubt on the effectiveness of the country’s overhauled bankruptcy code, the Finanical Times reported. The controversy stems from the auction of shadow lender Dewan Housing Finance Limited (DHFL), a company with about $14bn of debt that was taken over last year by India’s central bank, in a process widely viewed as a test of new bankruptcy rules brought in four years ago.

Bank of Nova Scotia and Bank of Montreal (BMO) beat analysts’ estimates for fourth-quarter profit as they set aside less funds than expected to cover potential loan losses due to the COVID-19 pandemic, Reuters reported. Canadian banks have braced for higher loan losses this year and 2021 as the pandemic ravages the global economy and leads to lower household income, with a plunge in oil prices also likely to result in higher defaults in the energy sector. Both banks reporting on Tuesday, however, put aside far less than analysts had expected in the quarter to Oct.

The UK is set to suffer more economic pain from the coronavirus crisis than any other leading economy apart from Argentina, the OECD said on Tuesday, highlighting the spread of the virus and deep downturn across Britain, the Financial Times reported. In its twice-yearly economic outlook, the Paris-based international organisation said that the world economy would on average regain the lost output from the Covid-19 crisis by the end of 2021, but the UK would be far behind the pack.

Italian former prime minister Silvio Berlusconi said on Tuesday his Forza Italia opposition party would not back a reform of the euro zone bailout fund, a move that puts the government in difficulty ahead of a crucial parliamentary vote, Reuters reported. Reform of the fund, known as the European Stability Mechanism (ESM), has lacerated the ruling majority. The 5-Star Movement - the biggest party in parliament - says it would increase the risk of a public debt restructuring.

British department store group Debenhams is set to close all its UK shops after 242 years in business, putting 12,000 jobs at risk in the country’s second major corporate failure in as many days, Reuters reported. The decision to liquidate Debenhams comes after Philip Green’s Arcadia fashion group collapsed into administration on Monday, threatening 13,000 jobs, after the COVID-19 pandemic hit business.

Seadrill Partners LLC said on Tuesday it had filed for Chapter 11 bankruptcy protection as a means to restructure its debt, in another sign of financial difficulties for the wider Seadrill Ltd oil drilling rig group, Reuters reported. “The company intends to use the bankruptcy process to ensure that all customer, vendor and employee obligations are met without interruption and to complete a consensual restructuring of its debt,” Seadrill Partners said.

Up to 18.7% of Spanish companies could be insolvent by the end of the year because of the economic impact from the COVID-19 pandemic, with one in 10 of them unviable “zombies”, according to a worst-case scenario published by the Bank of Spain on Tuesday, Reuters reported. Even in the central bank’s most optimistic scenario, the number of insolvent companies would still rise to 14.5% from 10.5% last year.

The Dutch government expects its debt-to-GDP ratio to have risen to 57.4% by the end of 2020 as a result of heavy spending to support the economy during the coronavirus pandemic, it said on Monday, Reuters reported. Dutch debt to gross domestic product (GDP) stood at 48.7% at the end of 2020, making it one of the few countries to adhere to euro zone rules that allow a maximum of 60%. The budget deficit will be around 6.2% this year, the finance ministry said, high but below a forecast of 7.2% given by Finance Minister Wopke Hoekstra in September.

Coronavirus struck at a tough time for Morocco: it aggravated the impact of a second year of drought, in a country where economic growth is vulnerable to fluctuations in rainfall. Agriculture, which accounts for about 10 per cent of gross domestic product and employs almost 30 per cent of the workforce, was already suffering as a result of two years of poor rains, the Financial Times reported. The pandemic was another disaster, leading to the collapse of the tourism sector and disrupting exports to Europe, the country’s foremost economic partner.