Headlines

A record pace of defaults in China has triggered greater application of safeguards to local bonds, a silver lining for investors looking for some protection, Bloomberg News reported. The ratio of domestic bonds with a cross-default covenant, which puts a borrower in default of other debt if it fails payment on one bond, has surged to 82 percent of all company notes sold this year. That’s up from almost zero five years ago.

The European Commission has lowered its growth forecasts for the euro area, blaming growing trade tensions and rising energy prices, the Financial Times reported. Brussels said that it was now projecting euro area growth of 2.1 per cent this year compared with a forecast in May of 2.3 per cent. Germany is one of the countries to have seen the biggest reduction in projected growth. In May, the commission predicted that the German economy would expand by 2.3 per cent this year, but this has now been moderated to 1.9 per cent.

Steinhoff International Holdings NV began seeking sign-off from lenders for a debt restructuring plan that will support the South African retailer’s balance sheet for three years and prevent a potential collapse, Bloomberg News reported. The owner of chains including Mattress Firm in the U.S. and Conforama in France has been negotiating for months with creditor groups represented by financial advisers FTI Consulting, Houlihan Lokey Inc. and PJT Partners Inc. to reach an agreement on a way to postpone the repayment of borrowings.

Confronted with a plunging lira, Turkey’s central bank last month urged the general public to borrow in the currency in which they are paid. That warning came too late for the country’s energy companies, Bloomberg News reported. Turkish power producers are emerging as one of the biggest risks to the nation’s banks after they plowed billions of dollars into new power generation, distribution projects and deals over the past 15 years.

A reluctance by banks in Ghana to lend is threatening to stall one of Africa’s fastest expanding economies, Bloomberg News reported. With almost a quarter of all outstanding loans in the country at risk of not being repaid, credit granted to the private sector is increasing at nearly the slowest pace in four years. At stake is the 6.8 percent growth that the government is hoping to achieve to boost revenue and narrow its budget deficit.

ARM Cement Ltd. of Kenya has yet to reach an agreement with the International Finance Corp. about a capital injection in the struggling Kenyan company, Chief Executive Officer Pradeep Paunrana said. Business Daily, a Kenyan newspaper, reported Wednesday that the IFC had agreed to take over $120 million in loans in a bid to settle ARM’s more expensive debt, Bloomberg News reported.

The eurozone’s chief banking watchdog has finally said what it plans to do to pressure banks to deal with bad loans left over from the region’s financial crisis, the Financial Times reported. The European Central Bank said on Wednesday that it would set “bank-specific expectations” to deal with the stock of non-performing loans — one of the biggest problems left over from the economic slump. “In March 2017, ECB Banking Supervision published guidance to banks on non-performing loans, which provided an effective toolkit for banks when tackling non-performing loans,” the ECB said.

Eurozone financials stocks are falling for a second day, with investors reflecting concerns about profitability among the bloc’s big lenders, the Financial Times reported. Spanish banks are taking the brunt of the sell-off on Tuesday morning, with Banco de Sabadell shedding nearly 4 per cent, Bankia off 3 per cent, and CaixaBank down 2 per cent. But prices are sliding on banks across the single market, with BPER Banca, UBI Banca and Banco BPM down 2 per cent in Milan, and Deutsche Bank and Commerzbank losing 2 per cent in Frankfurt.

Airbus faces a logjam of undelivered A330 jets worth well over $1 billion for airlines affiliated to China's debt-laden HNA Group following a stand-off over late payments, according to industry sources and a Reuters examination of parked aircraft, the International New York Times reported on a Reuters story. Companies belonging to the troubled Chinese aviation-to-finance conglomerate have delayed payments for several months, leading Airbus to withdraw deliveries rather than step in to finance the aircraft itself, the sources told Reuters.

European Commission officials say Greece will still be subject to quarterly inspections from creditors after the bailout program ends in late August. Greece has already committed to two more years of budget austerity policies after its third consecutive international rescue program is concluded, the International New York Times reported on an Associated Press story. But creditors on Wednesday said Greece will remain under an "enhanced surveillance framework" to ensure that it meets ambitious budget targets through 2022.