Headlines

Leaving a financial crisis is like leaving an awkward social gathering: a good exit is essential. In 1936-37, the Federal Reserve made a colossal mistake in its “exit strategy”, the Financial Times reported in a commentary. This time round it is crucial that central banks get their timing right. there is much concern about the inflation potential of the roughly $700 billion (€494 billion , £425 billion ) accumulation of excess reserves on the Fed’s balance sheet as well as excess reserves on many other central banks’ balance sheets.

Canadian bankruptcies rose 51.6 percent in June compared to a year earlier as more consumers were unable to pay debts, but business bankruptcies rose only modestly despite the recession, a government report showed. The number of consumer bankruptcies in June rose 54.3 percent to 10,823 from June 2008, while business bankruptcies rose 10.8 percent to 515, the Office of the Superintendent of Bankruptcy Canada said in a report.

Latvia's economy shed nearly one-fifth of its value in the second quarter compared with the same period last year, official data showed Monday, signaling a deepening of the Baltic state's recession, The Wall Street Journal reported. Gross domestic product fell 19.6% from a year earlier in the April to June period, the national statistics agency announced, led by a 28% slump in retail and a 19% drop in industrial production. The restaurant and hotel sector plunged 35% year-to-year. The fall is the sharpest since Latvia began keeping records in 1996.

Heavily indebted New Zealand dairy farmers face a financial "perfect storm" and many could go under, finance experts warn. Dairy farms are especially vulnerable as farmers face falling commodity prices, increased costs and some farm asset values had dropped by 30 to 40 percent, The National Business Review reported. There were a lot of stressed farmers running significant cash deficits this year, PricewaterhouseCoopers partner Roger Wilson told The Press.

Bankers are calling for a new London panel to help smooth the restructuring of hundreds of billions of pounds of debt and prevent further ugly fights before courts between lenders, Reuters reported. The group, modelled on the Takeover Panel, would help prevent complex debt workouts being decided before courts, as the number of defaults soars. The restructuring panel would be most useful in cases where a minority of lenders are unreasonably holding out on the other lenders, said Andrew Speirs, managing director at London advisory firm Hawkpoint.

Escada AG, the luxury clothing company whose dresses are worn by Demi Moore, is holding a board meeting today to discuss a plan to file for insolvency after bondholders rejected its financial rescue proposal, Bloomberg reported. The Munich-based company will seek court protection after failing to win backing from bondholders to swap old bonds for new notes and shares, Escada said in a statement late yesterday. The company will make the insolvency filing at a court in Munich on Thursday, Chairman Reinhard Poellath told Handelsblatt.

Lehman Brothers Holdings Inc.'s Bermuda-based life insurance unit, Lehman Re, filed for bankruptcy protection, citing alleged shortfalls on its reinsurance obligations and lawsuits against it in the US, The Royal Gazette reported. The petition for Chapter 15 bankruptcy in Manhattan court on Thursday listed more than $1 billion in debts and as much as $1 billion in assets. Under Chapter 15, companies can win protection from US lawsuits and organise US creditors to help with the company's main bankruptcy in another country.

Nortel Networks Corp. said Mike Zafirovski, its president and chief executive, will step down effective Monday - a "logical departure point" given the status of the company's restructuring and sales process, Dow Jones reported. Zafirovski, who had spent more than three years trying to turn around the former Canadian technology icon, told Dow Jones he had first advised the company's board in April that he had planned to leave in the third quarter. Nortel's board and that of Nortel Networks Ltd. will be reduced to three members from nine.

A district judge has handed off to a bankruptcy court a messy suit brought by investment fund Greenlight Capital Inc., Fulbright & Jaworski LLP, two utility finance cooperatives and others seeking to enforce settlements with leaders of a group of bankrupt Virgin Islands telecommunication firms, Bankruptcy Law360 reported. Read more. (Subscription required.)

Escada AG, a German maker of luxury women’s fashion, will file for insolvency this week if investors don’t agree to swap old bonds for new notes and shares by tomorrow, Bloomberg reported. Escada needs 80 percent of bondholders to accept the company’s offer by the deadline of 3 p.m. tomorrow to win support for a bank loan and avoid insolvency. The bond swap is part of a restructuring that included the sale of a division, a capital increase and the hire of a new designer. On July 14, Escada said the acceptance rate from bondholders had reached 37 percent.