Headlines

Plans to make banks hold greater capital reserves and limit the amount they can borrow have been outlined by the world’s leading banking watchdog in an effort to prevent a repeat of the credit crisis, the Financial Times reported yesterday. The proposals from the standard-setting Basel Committee on Banking Supervision are an attempt to salvage a global regulatory framework for the industry. The Basel Committee signalled that over the long term it would encourage banks to make provisions for bad debts throughout the economic cycle.

Companies around the world are keen to redeploy labor resources and cut costs to cope with the global downturn, but those operating in China may find that laying off people there will not be as easy as previously, Forbes reported. For the ten-month period from January to October, those who lost their jobs numbered 10.2 million, topping Beijing's forecast for the entirety of 2008 by 2.0%, minister of human resources and social security Yin Weimin said at a press conference Thursday. In response, authorities are clamping down on the freedom to dismiss substantial numbers of workers.

Ecuador's debt audit commission said it uncovered “illegality and illegitimacy” in the country's foreign obligations, findings that may give President Rafael Correa the legal basis he's sought to halt bond payments, Bloomberg reported. The commission said in a 172-page report that the global bonds due in 2012 and 2030 “show serious signs of illegality,” including issuance without proper government authorization. The price on the $510 million bonds due 2012 fell as much as 2.5 cents to 24 cents on the dollar, sending yields over 70 percent, after the release of the report.

Failed New Zealand finance company Hanover's secured investors could be repaid little more than half their capital under a five-year moratorium proposal put forward by the company yesterday, according to two independent reports, The Dominion Post reported today. The company's expectations to repay secured investors all their principal were too optimistic and there was a risk that lower-ranked investors, facing the prospect of losing all their money, could instead try to force the company into liquidation, independent evaluation reports show.

Japanese builder Daiwa House Industry Co. said it may bid for failed property developer Urban Corp as it seeks opportunities to buy real estate assets brought low by the financial crisis, Reuters reported yesterday. Daiwa, at the head of a consortium of companies that includes Chuo Mitsui Trust Holdings Inc., is currently in the lead to be chosen to take over Urban's assets and oversee its restructuring, a source familiar with the deal told Reuters. Urban filed for court protection from creditors on Aug 13 with 256 billion yen ($2.67 billion) in debt.

Richmond, Canada-based VRB Power Systems Inc., which laid off most of its employees this week, says it intends to reorganize under the Bankruptcy and Insolvency Act, Oilweek reported. VRB´s directors will resign and the company is asking the B.C. Supreme Court to appoint Abakhan & Associates Inc. as interim receiver, the company announced Thursday. On Tuesday, VRB announced it had ceased accepting new orders after efforts to merge, sell or refinance the company were unsuccessful and had laid off most of its employees.

Anglo-Swedish drugmaker AstraZeneca PLC plans 1,400 job cuts and is closing three plants around Europe as it joins others in the sector tackling increased competition and cost pressures, Reuters reported yesterday. The job cuts announced on Thursday are in addition to the 7,600 announced in July 2007 and will see AstraZeneca closing facilities at Porrino in Spain, Destelbergen in Belgium and Umea in northern Sweden.

A $70 million bank deposit stands between Babcock & Brown and the possibility of financial oblivion as early as next week, The Sydney Morning Herald reported today. That is the amount of money, said by B&B to be a "material sum," to which German bank Bayerische Hypo-und Vereinsbank is refusing to give the debt-laden investment group access, in a dispute that threatens its corporate life.

Heavily leveraged small and mid-sized ethanol operations are likely to be bought out by their larger counterparts, if emergency credit lines from state-owned banks aren't enough to stave off crushing debt obligations, participants at a biofuels conference in Sao Paulo this week said. One large ethanol maker filed for bankruptcy last week to restructure $100 million in debt it could not pay, the Associated Press reported. Analysts and sugarcane growers predict others will follow, and a leading industry association says 50 percent of new equipment orders have been canceled or postponed.

Creditors of French building materials manufacturer Terreal are urgently seeking dialogue with its private equity owner, LBO France, after Terreal defaulted on a 915 million euro loan, Reuters reported today. Terreal failed a leverage covenant test last Friday on the loan, which specified that its leverage ratio must be eight times and the company instead reported leverage of 8.4 times, banking sources said. Terreal's all-senior loan, which was arranged by ING, is now quoted in the secondary market at a steep discount of 22-32 percent of face value, which indicates distress.