Headlines

Holders of Zambia’s Eurobonds are squaring up for what is likely to be a complex and lengthy debt-restructuring process. A group of lenders owning about a third of the nation’s dollar bonds, and in contact with another third, have formed a committee to negotiate with the government, Bloomberg News reported. Newstate Partners LLP will advise the creditors, who didn’t disclose who they were. Lazard Ltd. is representing Zambia. Zambia is looking to overhaul as much as $11 billion in foreign debt as part of efforts to unlock emergency funding from the International Monetary Fund.

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Australian-listed oil and gas company FAR Ltd said on Wednesday its Senegalese unit had defaulted on its obligations to the Sangomar joint venture, as the company looked to sell its interest in the project, Reuters reported. The company owns 15% of the Sangomar oil and gas field being developed off Senegal, while Cairn Energy holds 40%, Australia’s Woodside 35%, and Senegal’s national oil company Petrosen 10%, which it has the right to increase to 18%.

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Amid the coronavirus pandemic, preventing a viable firm from prematurely being pushed into insolvency, addressing individual financial distress and other challenges for insolvency regimes can be addressed through simple, transparent and time-bound measures, according to a World Bank Group official, Business Insider reported. Mahesh Uttamchandani, World Bank Group -- Global Lead, on Wednesday also said that due to the pandemic, 100 million people who were uplifted from poverty globally would fall back into poverty.

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Fitch Ratings treats some amend and extend (A&E) exercises initiated by stressed corporate borrowers as distressed debt exchanges (DDEs), eventually leading to restricted defaults (RDs), Fitch Ratings reported. Since the coronavirus pandemic began affecting Europe in March 2020, Fitch has classified 11 transactions in its EMEA bond and loan portfolio as DDEs, which will contribute to default rates rising towards 4%-5% by end-2020 from 1% in 2019.

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Investors are concerned that adjustments to earnings made during the Covid-19 pandemic are becoming too aggressive as borrowers keep earnings artificially high to avoid covenant defaults and delay the onset of restructurings, Reuters reported. Borrowers are adjusting earnings as if the crisis had never happened, known as earnings before interest, tax, depreciation, amortisation and coronavirus (Ebitdac), or “earnings before coronavirus.” “Companies may be keeping earnings artificially high in order to avoid a financial covenant breach.

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Saudi Arabia’s economy will shrink by 6.8% this year, the International Monetary Fund (IMF) said on Wednesday, a sharper decline than the 2.3% contraction estimated in April, as low oil prices and the coronavirus pandemic hit the kingdom hard, Reuters reported. In an update of its April World Economic Outlook forecast, the IMF said it now expects a deeper global recession in 2020 and a slower recovery in 2021, as the coronavirus crisis intensifies in many emerging and developing countries.

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Even as the Centre has temporarily suspended the Insolvency and Bankruptcy Code (IBC) due to the current economic crisis following the Covid-19 pandemic, academicians have highlighted the threat of a possible surge in riskier behaviour of firms under extended immunity from the IBC, Business Line reported. Earlier this month, the Centre had issued an ordinance to suspend initiation of fresh insolvency proceedings against defaults arising on or after March 25 for a period of one year.

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McLaren is worried it may soon run out of money. Although the famous British team has signed up Daniel Ricciardo for 2021, McLaren has now said in a filing at London's High Court that it needs a ruling "to ensure that the Group can continue as a going concern into 2021,” Grandprix.com reported. The company has already laid off a quarter of its workforce, and now it is suing to have the security in its factory and historic F1 car collection released in order to raise over $300 million in loans.

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South Africa’s public enterprises ministry on Wednesday urged creditors to back a restructuring plan for South African Airways (SAA), saying it was the only way to rescue the loss-making airline, Reuters reported. Creditors are due to vote on the plan on Thursday, but one of the creditors - private airline Airlink - is in court on Wednesday trying to prevent the vote from happening. State-owned SAA’s administrators published the proposal last week after repeated delays and months of wrangling.

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Lufthansa has drawn up a plan to avoid insolvency should a shareholder vote on Thursday fail to approve a $10 billion government bailout, a company source told Reuters on Wednesday, Reuters reported. The German government could still get a 20% stake, as originally envisaged. But under the new plan this would happen in two steps, without the need for shareholders’ approval, the source said. Germany’s flagship airline has been hit hard by the COVID-19 pandemic and what promises to be a protracted travel slump, and has sought a state rescue to avoid insolvency.

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