Headlines

Yu Yongding, the Chinese economist whose calls for liberalizing the yuan heralded its 21 percent gain since 2005, said the government should reduce sales aimed at keeping the currency weak so it can someday float freely, Bloomberg reported. “The People’s Bank of China should try to reduce intervention on the exchange rate as much as possible,” Yu, a member of the central bank’s monetary policy committee from 2004 to 2006, said in an interview.

Emergency growth-stimulating policies are still needed to support continental Europe’s fragile economic recovery, even though Germany and France have emerged from recession, a top European Central Bank policymaker has warned. Axel Weber, Germany’s Bundesbank president, made it clear he would not rush to withdraw the extensive measures taken by governments and the ECB – which he said had helped the recent improvement in economic performance in Germany, the Financial Times reported.

Linklaters and Allen & Overy (A&O) have taken lead roles on the €12 billion (£10.3 billion) debt restructuring of ball-bearing manufacturer Schaeffler, in a move which could lead to a merger with auto-parts manufacturer Continental, LegalWeek reported. Linklaters advised a consortium of five lending banks comprising UBS, Royal Bank of Scotland, UniCredit, Commerzbank and LBBW, with London and Frankfurt-based banking partners Stephen Lucas and Marc Trinkaus leading the team. The debt restructuring should clear the path for a merger between Schaeffler and Continental.

Banco Bilbao Vizcaya Argentaria SA, the second-largest bank in Spain, won a U.S. government auction for Guaranty Financial Group Inc., a Texas bank that has been warning for months it was on the verge of collapse because of swelling losses, according to people familiar with the situation, The Wall Street Journal reported. The purchase, expected to be announced by the end of this week, marks the first time since the financial crisis erupted that a non-U.S. financial institution has swooped in to take over a failing U.S. bank.

A new article published in the latest overseas edition of China's Communist Party flagship newspaper addresses an issue of growing urgency in global financial markets: how to best manage the world's largest pile of foreign reserves, The Australian reported. With more than $US2 trillion in stock, China faces a number of challenges as it seeks to diversify its foreign reserves without hurting the value of its massive US dollar assets, including Treasuries. The commentary highlighted two major problems.

New Zealand investment company St Laurence managing director Kevin Podmore is adamant that investors will be better off if it is allowed to continue with a repayment plan rather than being put into receivership, The Dominion Post reported. The company's trustee, Perpetual Trust, has indicated that it is reviewing the situation and will decide within two weeks whether to let St Laurence continue with its moratorium plan, or be placed in receivership. This reassessment came after St Laurence was hit by $103 million of bad debts for the financial year to March.

Canadian companies facing bankruptcy are being given access to a new $1-billion lifeline from Ottawa and major financial firms to provide breathing space to restructure operations and return to solvency, Export Development Canada said yesterday. The EDC said it has agreed to become the top contributor to a new fund that would act as the bank of last resort to struggling companies who are unable to obtain credit through normal channels, The London Free Press reported on a Canadian Press story.

Deutsche Bank Research, a unit of Germany's biggest bank, says in a paper published on Wednesday that Japan’s economy is in a valley of tears with record public debt heading for 300% of GDP (gross domestic product), Finfacts reported. The world's second biggest economy reported on Monday that growth of 0.9% was achieved in the second quarter of 2009, after a steep slump.

It was meant to be war when European investors came to restructure debt from busted LBOs, The Wall Street Journal reported in an analysis. The Continent lacks the uniformity of the U.S. Chapter 11 approach. Mixed with complicated, multilayered capital structures and an influx of new lenders with differing motives, this was expected to lead messy conflicts that would hinder deals and risk inflicting excessive damage on companies. So far, the market's worst fears haven't materialized. Why the outbreak of pragmatism?

BlackBerry maker Research in Motion says Canadians want and expect the Canadian government to prevent the $1.1-billion sale of Nortel Network's coveted wireless assets to Ericsson of Sweden, The Associated Press reported. Canada-based RIM issued a statement Wednesday after the deadline passed for appeals to challenge a bankruptcy court ruling allowing the Nortel sale to the Swedish telecommunications firm. RIM says the transaction must be reviewed to ensure that Canada's national interests are met. RIM wants Canada's industry minister to help negotiate a deal between RIM and Nortel.