Headlines

The projected surge in public deficits caused by the coronavirus pandemic has rekindled concerns about the sustainability of euro-area government debt, the Financial Times reported in a commentary. Such concerns are kept at bay for now by the European Central Bank’s massive purchases of government paper through its “quantitative easing” operations. Indeed, as long as public debt stays idle in the ECB portfolio, rollover risks are correspondingly reduced.  But what if inflation were to climb?

Norwegian Air Shuttle ASA shareholders approved a restructuring plan that hands almost all of the company’s equity to its creditors, after the coronavirus crisis pushed the struggling airline to the brink of survival, Bloomberg News reported. The plan converts almost $1 billion of debt into stock, qualifying the low-cost carrier for state loan guarantees that, along with the sale of new shares, will keep it afloat for at least several months.

Britain’s biggest care home provider has issued a stark warning that lower occupancy rates and higher staff costs as a result of coronavirus are putting severe pressure on its finances, the Financial Times reported. HC-One said it had faced Covid-19 outbreaks in about two-thirds of its 328 care homes and that more than 700 of its 17,500 residents had died of the virus. The decline in occupancy combined with the increase in costs for essential equipment such as masks and gloves for staff had left it struggling to meet loan repayments.

Greensill Capital, a SoftBank-backed company that says it is “making finance fairer”, has had a string of its clients default on their debts in high-profile corporate collapses and accounting scandals, the Financial Times reported. The London-based finance group, which employs former British prime minister David Cameron as an adviser, arranged funding for scandal-plagued hospital operator NMC Health and controversial “rent-to-own” retailer BrightHouse, which have both fallen into administration in recent weeks.

More than 110,000 small businesses applied for low-cost finance on the first day of the UK’s “bounce back” loan scheme, underlining the demand for credit to survive the coronavirus lockdown, the Financial Times reported. Banks providing the loans said they had approved the vast majority of applications and said the money would arrive in bank accounts as early as Tuesday. Software systems held up despite some banks receiving an application every two seconds. The scheme is aimed at SMEs whose income has fallen because of the lockdown.

Solvency concerns in the developing world are nothing new. But as governments stare down the humanitarian and economic shocks of the coronavirus pandemic, some emerging markets with weak financial positions are at greater risk of defaulting on their debts, Bloomberg News reported. At least 102 nations have already asked the International Monetary Fund for help, and the Institute of International Finance is coordinating an effort to offer some relief to the poorest countries.

Spain scrapped the threat of forced liquidation for companies that run up major losses this year as part of a series of changes announced by the government to stave off insolvencies amid the economic turmoil caused by the coronavirus, Bloomberg News reported. Alongside the adjustment to bankruptcy laws, investors who put money into businesses in the wake of the Covid-19 outbreak will also benefit from higher levels of protection in the event the companies fold.

Argentina is entering a crucial period this month for a precarious debt-restructuring process that will determine whether or not the country falls into default for a third time in just two decades, Reuters reported. After months of negotiations, the South American country made a proposal in April to restructure $65 billion of its foreign debt. This offer expires on May 8, while a grace period for paying interest on three dollar bonds ends on May 22.

The International Monetary Fund on Saturday confirmed it had approved $643 million in emergency assistance for Ecuador, but said the Andean country would need additional support from other external partners to respond to the coronavirus pandemic, Reuters reported. The outbreak of the novel coronavirus and plummeting oil prices and global demand were having a devastating effect on Ecuador, one of the largest oil exporters in Latin America, said IMF Managing Director Kristalina Georgieva.

A public fight between Lebanon’s new prime minister and its once untouchable central bank governor is jeopardising the state’s efforts to secure badly needed international financial support as it grapples with the worst economic crisis in decades, the Financial Times reported. The dispute came to a head this week after prime minister Hassan Diab, a former computer science professor, had lambasted governor Riad Salame’s handling of the country’s monetary crisis.