Headlines

Italy is in talks with the European Commission over a plan to rid state-owned Monte dei Paschi di Siena of around two thirds of its soured loans to pave the way for a sale of the bank, a source with direct knowledge of the situation said, Reuters reported. Hurt by a pile of problem debts and a derivatives scandal, Monte dei Paschi was for years at the forefront of Italy’s banking crisis until a bailout in 2017, which handed the state a 68% stake in the world’s oldest lender.

Businessman Denis O’Brien’s Digicel may seek to refinance at a discounted price some $1.3 billion (€1.2 billion) of bond debt due to be repaid in early 2021, to take advantage of the fact that they are trading at a discount in the market, according to US debt research firm Xtract Research. However, such a move would be considered by debt ratings agencies as a more aggressive distressed debt manoeuvre than the one completed by Digicel earlier this year, The Irish Times reported.

Business activity in Germany’s services industry worsened more than expected last month, as the woes in the manufacturing sector bled into the greater economy, magnifying fears of a looming recession, the Financial Times reported. The composite purchasing managers’ index for the eurozone’s biggest economy showed a contraction for the first time in six years. The index, a weighted average of manufacturing and services figures, fell below the 50-point level for the first time since April 2013, according to a closely watched poll, and at the swiftest pace of contraction in seven years.

The UK’s economic outlook is darkening, according to a set of surveys released this week suggesting that activity slowed sharply in September while a growing proportion of employers cut staff, the Financial Times reported. The index of service sector activity, compiled by research group IHS Markit, fell from 50.6 in August to 49.5 last month, well below analysts’ expectations. Any reading below 50 means that a majority of companies reported falls in activity.

Indian stocks declined amid a global sell-off on deepening concerns over an economic slowdown and domestic worries about the health of the financial sector, Bloomberg News reported. The S&P BSE Sensex declined 0.5% to 38,106.87 as the 3:30 p.m. close in Mumbai, while the NSE Nifty 50 Index slid 0.4%. Renewed doubts about debt and the availability of liquidity for non-bank lenders have helped spark a bearish turn in the market.

Irish lender AIB Group Plc added its name to a growing list of borrowers shunning English law for their riskiest bank bonds in preparation for life after Brexit, Bloomberg News reported. The state-owned bank used Irish law for a sale of contingent convertible bonds on Wednesday that are set to replace its existing English-law governed notes. The move reflects a wider trend among European banks. Only 14% of euro-denominated CoCo paper sold by European lenders this year is governed by English law, down from more than 40% before 2019, according to data compiled by Bloomberg.

Four Seasons, Britain’s second biggest care home operator, failed to pay millions of pounds of rent this month with no warning to landlords, raising concerns over the care of thousands of elderly residents, the Financial Times reported. The non-payment comes amid a shortage of residential places and as the Conservative party conference this week discusses the crisis in elderly care. Four Seasons, which runs 320 homes housing 16,000 residents, has been fighting for survival since 2017 after its owner — Guy Hands’ private equity firm Terra Firma — defaulted on an interest payment.

Brazilian state bank Caixa Economica Federal has filed a legal motion requesting the liquidation of engineering conglomerate Odebrecht SA, according to court documents seen by Reuters, in what could be a dramatic end to the graft-plagued company, Reuters reported. Caixa also demanded that creditors appoint new management at the conglomerate and its subsidiaries if the judge does not order the company’s liquidation. The move by Caixa adds pressure on Odebrecht to restructure its debts in one of Latin America’s largest-ever bankruptcy cases.

Argentine economists forecast a deeper recession and maintained a pessimistic inflation forecast at a shade under 55% in the latest central bank monthly poll of analysts released on Wednesday, Reuters reported. The prediction follows weeks of political uncertainty and a plunge in the value of the peso after Alberto Fernandez, a Peronist candidate, soundly beat market-friendly incumbent President Mauricio Macri in an August primary election.

The number of Indian real estate companies tipped into insolvency has doubled in less than a year since the collapse of a key shadow bank, an event often compared to the Lehman crisis that squeezed American funding markets a decade ago, Bloomberg News reported. As many as 421 developers entered bankruptcy court by the end of June, up from 209 in September 2018, around the time when the government seized control of Infrastructure Leasing & Financial Services Ltd. The move triggered a credit crunch for smaller financiers and property firms, which depend on funds from shadow lenders.