Headlines

The prospect of a hefty Greek government debt restructuring and writeoff has sent the bonds into a twilight zone that's attracting specialist distressed-debt traders more used to dealing with defaulted emerging sovereigns like Argentina. Greece was ditched last year from developed country government bond indices that are typically tracked by the big, often conservative, global institutional funds.

An autopsy of Franco-Belgian lender Dexia shows how funding and solvency are intertwined, highlighting the dangers facing other banks if the eurozone sovereign debt crisis is not resolved soon, International Financing Review reported. There are scores of financial institutions for whom wholesale funding markets are shut and who would be bust were it not for the European Central Bank pumping billions of unlimited liquidity into the system.

Oesterreichische Volksbanken AG, the Austrian lender that failed a European stress test, is seeking a restructuring as writedowns will result in an annual loss of as much as 750 million euros ($1 billion), Bloomberg Businessweek reported. Volksbanken, majority-owned by a group of 62 regional cooperative banks in Austria, will write down the value of its corporate-client unit Investkredit and its Romanian bank by a combined 700 million euros, the Vienna-based company said in a statement.

Losses for private investors on Greek debt in the second financing package for Athens are likely to be between 30 and 50 percent, rather than the earlier agreed 21 percent, euro zone officials said on Wednesday, Reuters reported. The euro zone is reviewing the terms of its second financing package for Greece, including the private sector contribution, because Greece is in a deeper than expected recession and market interest rates have changed since then.

The European Commission on Wednesday set out proposals to shore up European banks in the face of the region's escalating sovereign-debt crisis, calling for a more-stringent review of the banks that will likely result in a broad recapitalization program, The Wall Street Journal reported. The much-anticipated release, labeled a "comprehensive response" by the commission, contains a number of old ideas that had already been announced and a few new ones.

The day after Parliament in tiny Slovakia voted to reject the expansion of a European rescue fund, causing the government to fall and threatening efforts to end Europe’s debt crisis, politicians there struck a deal that should permit the expansion of a rescue fund for the euro after all, the International Herald Tribune reported. The changes to the fund need to be approved in all 17 of the nations that use Europe’s single currency. Slovakia, a small former-Communist country of 5.5 million, is the only holdout.

As many as 10,000 people could see ownership of their homes transferred to local authorities under a scheme proposed by the Inter-Departmental Working Group on Mortgage Arrears, which published its report this morning, the Irish Times reported. Taoiseach Enda Kenny said the move was one of a number of options which would be considered as part of efforts to cure the debt crisis.

Taranaki baking business Yarrows (The Bakers) has been sold by receivers BDO to a member of the founding family, John Yarrow, The New Zealand Herald reported. He had originally sold his stake to his brother Paul in 2005, resulting in a legal fight within the family when Paul took him to court over a purchase price he alleged was too high, before settling out of court. The sale, which also includes a solvent Rotorua company, Gilles Bakery, was for an undisclosed sum and follows a five-month search for a buyer by accounting firm BDO, which was appointed receiver in May.

A Goldman Sachs-led consortium continues to be frustrated in its attempts to secure control of the hotels group Redcape Property Fund, The Australian reported in a commentary. The consortium can get events of default under the fund's banking facilities, but it just cannot get a default notice served, which would trigger a requirement for the default to be remedied or the fund would face almost certain administration and receivership, a possibility that may give the consortium more leverage in negotiating with Redcape's bankers, in particular ANZ.

Slovakia’s government became the first in the eurozone to fall over opposition to bailing out indebted economies after the country’s parliament voted down approval for enhancing the bloc’s rescue fund, the Financial Times reported. After hours of debate, the final vote on approving new powers for the €440bn European financial stability facility failed late on Tuesday evening with only 55 of the parliament’s 150 MPs voting in favour, causing the coalition government of Iveta Radicova to collapse. Slovakia is the last of the 17 eurozone countries to approve the improved rescue fund.