Headlines

European banks are facing as much as €800bn in loan losses and a €30bn hit to their revenue over the next three years as a result of the coronavirus crisis, according to a report from Oliver Wyman, the Financial Times reported. In the consultancy’s base or expected scenario — a slow economic recovery with most countries avoiding a second lockdown — it estimates bad debts would surge to €400bn, about 2.5 times the level in the prior three years.

Creditors of insolvent German lead producer Weser-Metall have decided to start exclusive talks about selling the plant to commodity group Glencore, the creditors said on Tuesday. Glencore said it had no comment, Reuters reported. Weser-Metall GmbH in Nordenham produces about 105,000 tonnes of lead annually and is one of Europe’s main lead producers. It filed for insolvency in May after the coronavirus crisis cut metal demand. Weser-Metall, previously part of French metals producer Recylex, stopped production over the weekend.

Moody’s has clashed with the UN after putting five countries on review for a downgrade in recent weeks, saying that a G20-backed debt suspension scheme poses risks to private creditors, the Financial Times reported. The rating agency took action against Ethiopia, Pakistan, Cameroon, Senegal and the Ivory Coast, after the countries opted into a G20-backed initiative that allows them to freeze official bilateral debt repayments due this year to member nations and members of the Paris Club, a group representing major credit countries.

Latin America is at the centre of the coronavirus pandemic, suffering some of the worst infection rates and highest death tolls in the world, the Financial Times reported. Now economists warn that the region faces more bad news: its sickly economies risk falling into a new debt crisis even worse than the last big bust of the 1980s. The continent was struggling with multiple “pre-existing conditions” before the virus took hold: anaemic growth, weak health systems, low tax revenues, high levels of borrowing and an over-reliance on commodity exports.

The South African government has not committed to fund a restructuring plan for struggling South African Airways (SAA), Finance Minister Tito Mboweni said in court papers seen by Reuters on Tuesday, Reuters reported. Administrators took over SAA in December after almost a decade of financial losses, and last week creditors approved the restructuring plan, which requires at least 10 billion rand ($600 million) of new funds, on the understanding the government would find the necessary cash.

German payments company Wirecard has hired Alix Partners for a forensic investigation of the accounting scandal that led to its collapse, people close to the matter said, Reuters reported. The blue-chip company filed for insolvency last month, owing creditors almost $4 billion after disclosing a 1.9 billion euro ($2.17 billion) hole in its accounts that auditor EY said was the result of a sophisticated global fraud.

Company insolvencies are forecast to rise sharply in the UK over the coming months as government support measures are unravelled, the Financial Times reported. Begbies Traynor, the insolvency specialist, warned businesses were facing the “double whammy” of accruing liabilities and the withdrawal of state support schemes. “I expect we’ll see numbers of insolvencies in excess of what we saw in 2008,” said group executive chairman Ric Traynor, comparing the recession caused by the pandemic with the financial crash.

A keenly watched Indian shadow bank insolvency process has been delayed, highlighting how the virus pandemic is impeding the nation’s nascent bankruptcy regime, Bloomberg News reported. Payments to creditors from Infrastructure Leasing & Financial Services Ltd., whose default in September 2018 triggered a lingering credit crisis in India, are likely to spill over to the financial year beginning April 2021, management said in a call on Monday. It had previously aimed to resolve a bulk of those by this month.

Some of the world’s largest developing economies are set to face a fiscal crisis in the coming years unless they can roll back huge increases in public spending enacted in response to the Covid-19 pandemic, analysts have warned, the Financial Times reported. The economic downturn caused by the pandemic, combined with rising healthcare spending to tackle the spread of the virus, have caused budget deficits to soar in many countries. They will have to face the choice of risking public unrest by cutting back on spending, or negotiating with investors to restructure their debts.

Southeast Asian low-cost carriers, a key growth engine for planemakers and leasing companies for a decade before the pandemic, are faltering financially as demand plunges, raising questions over whether they can replace and double their fleets, the International New York Times reported on a Reuters story. Auditors for Malaysia's AirAsia Group Bhd and Vietnam's VietJet Aviation JSC are concerned about cashflows and funding, while Indonesia's Lion Air has put the brakes on a planned flotation.