Want to screw up a good law? Just try to make it a great one. That's what India did last November when it added a number of restrictions on who could bid for assets in a bankruptcy. The idea of the new regulations was to make it hard for errant owners to regain control of businesses without first settling their dues. But the morality was legal overkill; and that's now evident in the farce that the insolvency of Essar Steel India Ltd. has become, Bloomberg News reported in a commentary. Rather than helping creditors with the best possible recovery for the $8 billion that's trapped in a 10-million-tons-a-year metals business, the bidding war has disintegrated into a contest to prove rivals ineligible. It'll be unfortunate if India's next steel king is decided not on the wrestling mat -- but via walkovers. Rival investor groups led by VTB Capital and ArcelorMittal were the two contestants in the first round. But the creditors' committee deemed both buyers to be ineligible, and went for a second round of bids. Read more.
Banca Ifis SpA and Cabot Credit Management Plc are among four firms in talks to buy FBS, an Italian manager of more than 8 billion euros ($9.9 billion) of non-performing loans, people with knowledge of the matter said. The sale comes as NPL investors are snapping up Italian debt collectors to access Europe’s largest trove of troubled loans, Bloomberg News reported. An improving Italian economy and measures to simplify bankruptcy proceedings are increasing the prospects of recovery. Lazard, which is advising FBS on the disposal, is set to receive binding offers by April 23, and a winner will be chosen as soon as next week the people said, asking to not be identified because the matter is private. EOS Group and Tecnoinvestimenti SpA are the other possible buyers, they said. The Strocchi family, the majority owner of FBS, may retain 10 percent to 25 percent of the firm after the sale, one of the people said. A purchase may value the firm between 70 million euros and 100 million euros, one of the people said. Read more.
Sub-Saharan Africa is slipping into a new debt crisis, with 40 per cent of the region’s countries now at high risk of debt distress — double the proportion of five years ago, the Financial Times reported. With the number of countries already unable to service their debts doubling in the past year to eight, officials at the IMF are urging all African countries to raise taxes to provide more scope for paying interest, which has increased to levels last experienced at the start of the century. The officials caution that any debt relief required in future is set to be much more difficult than in the past because most recent lending has come from commercial sources less amenable to debt forgiveness than are national governments. Masood Ahmed, president of the Center for Global Development, a development think-tank, said the region’s increased debt had been facilitated by commercial lenders searching for higher-yielding assets. Read more. (Subscription required.)
Sweeping reforms to insolvency laws and regulations are set to benefit distressed companies that are attempting to negotiate a sale and avert going into administration, The Australian Financial Review reported. Local lawyers are of the view that draft regulations released this week by Minister for Revenue and Financial Services Kelly O'Dwyer are largely positive for lenders, struggling companies and the restructuring industry. "These reforms are the most significant since the Harmer reforms in the early 1990s," said King & Wood Mallesons head of restructuring and insolvency Tim Klineberg. "They are expected to change the negotiating dynamics as Australian companies approach distress, and in restructuring." The regulations are coupled with amendments to the Corporations Act which provide a "safe harbour" carve-out for a director's personal liability for insolvent trading. The amendments also cover so called "ipso facto" suspension and termination provisions in contracts. Read more.
Bowing to criticism from the Singapore Exchange and other investors, embattled Noble Group is removing a provision in its $3.4 billion debt restructuring proposal that penalized shareholders voting against the plan, Reuters reported. The debt-for-equity swap is crucial for the survival of the Singapore-listed company, which has sold billions of dollars of assets, taken hefty writedowns and cut hundreds of jobs over the past three years to slash debt. Noble has secured the backing of its creditors, but it also needs approval from a majority of its shareholders. “If more than half of the shareholders vote in favor of the restructuring, all shareholders, irrespective of their vote at the special general meeting, will receive the same treatment and will participate in the restructuring,” Chairman Paul Brough said in a letter addressed to shareholders and sent to SGX late on Wednesday. Read more.
The Republic of Congo’s plan to restructure its debt won’t affect holders of its Eurobonds, Prime Minister Clement Mouamba said. Yields on the notes fell for the first time in four days, Bloomberg News reported. The oil-producing central African nation owes creditors at least $9.14 billion and sought support from the International Monetary Fund last year. A three-year program to help stabilize the country’s “unsustainable external debt” is expected to be agreed soon, Mouamba said in a statement emailed from the capital, Brazzaville. The restructuring of Congo’s debt “will be carried out according to the principles commonly accepted in this field by the international community” and will exclude creditors who have a “privileged creditor status,” Mouamba said. “No new effort will therefore be required from the holders of the Eurobond,” he said. Read more.
A pair of investors in Delta Drone were fined a combined 600,000 euros ($520,000) for selling shares when they had non-public information in 2014 about the company’s financial difficulties, Bloomberg News reported. The Autorite des Marches Financiers fined company co-founder Frederic Serre -- who’s been involved in a series of startups -- 200,000 euros on Tuesday for having sold a chunk of shares in the civil drone manufacturer after being told by the chief executive officer the firm might become insolvent. Another 400,000-euro civil penalty was issued against Pierre Tourrette, a Delta Drone investor who also received that information ahead of the public. “Serre committed an insider violation on the Delta Drone security even as he was president of the executive board,” the AMF’s enforcement committee said in its fining decision. The AMF also highlighted that Tourrette should have known that knowledge about Delta Drone’s tense financial situation was insider information given that he’d previously been on the company’s supervisory board. Read more.
To many economists, the solution to India’s bad-loan crisis appears as obvious as the problem: Privatize state-owned banks, which have racked up billions more in soured loans and performed much worse than their private-sector counterparts. Yet, unless the government first strengthens its ability to supervise all banks, public and private, selling some of them off will be slim guarantee against another crisis, a Bloomberg View reported. One can understand the urge to privatize. A long-mooted bankruptcy law finally passed last year allows any single creditor to initiate the bankruptcy process. This has disrupted the earlier cozy system, whereby banks hid the full extent of their soured loans and the Reserve Bank of India, which oversees the sector, looked the other way. As bad loans tumbled out of the closet, it quickly became clear that banks didn’t have nearly enough equity capital. The government has proposed a $32 billion recapitalization package. Saddled with this enormous bill, taxpayers rightly want some assurance that their money isn’t going to waste. Read more.
Two Chinese groups have renewed their interest in buying a majority stake in National Insurance, Greece’s largest insurer, after a €718m sale agreed with Calamos-Exin, a US-Dutch partnership, collapsed last month, the Financial Times reported. Fosun Investment and Gonbao Investment, the second- and third-ranked bidders, “have returned to the reopened sale process” said one source close to the situation. National Bank of Greece, the country’s second-largest lender, offered its wholly-owned insurance subsidiary for sale as part of a restructuring plan agreed with Greece’s bailout creditors, the EU and the International Monetary Fund. The bank undertook to dispose of non-core assets and focus on domestic banking in line with benchmarks set by creditors. Chicago-based Calamos Investments, with more than $20bn under management, teamed up with Exin Partners of the Netherlands, an investment group that specialises in insurance and asset management to bid for National. Read more. (Subscription required.)
Administrators for Beaufort Securities, the disgraced UK broker that was closed down by regulators in March, have said it could cost as much as £100m to return the cash and assets held by the company, currently valued at £550m, to its thousands of private investor clients, the Financial Times reported. The administrative cost of carrying out insolvency proceedings for Beaufort Securities will be “in the tens of millions of pounds”, according to Russell Downs, a joint administrator and partner at PwC, which was brought in by the Financial Conduct Authority after it shut Beaufort just hours before the US Department of Justice brought criminal charges. In the worst-case scenario — in which the process stretches out over four years — the costs could rise to £100m, he said. This would include among other things, PwC’s fees, the cost of legal advisers to PwC, and of keeping on several staff from Beaufort to help with the process. Of the 15,000 investors that used the broker, those with the largest portfolios will probably bear more of the cost, he added. Read more. (Subscription required.)
The world’s $164tn debt pile is bigger than at the height of the financial crisis a decade ago, the IMF has warned, sounding the alarm on excessive global borrowing, the Financial Times reported. The fund said the private and public sectors urgently needed to cut debt levels to improve the resilience of the global economy and provide greater firefighting capability if things went wrong. “Fiscal stimulus to support demand is no longer the priority,” the IMF said on Wednesday in a report published at its spring meetings in Washington. The world’s $164tn debt pile is bigger than at the height of the financial crisis a decade ago, the IMF has warned, sounding the alarm on excessive global borrowing. The fund said the private and public sectors urgently needed to cut debt levels to improve the resilience of the global economy and provide greater firefighting capability if things went wrong. “Fiscal stimulus to support demand is no longer the priority,” the IMF said on Wednesday in a report published at its spring meetings in Washington. Half of the $164tn was accounted for by three countries: the US, Japan and China. Read more. (Subscription required.)
Offshore oil driller Seadrill plans to emerge from Chapter 11 bankruptcy in late June or early July to catch the rising wave of rig market activity, its chief executive told said on Wednesday. The company won U.S. court approval on Tuesday for its multi-billion dollar debt restructuring plan after reaching a deal with more than 40 banks, unsecured creditors and shipyards, Reuters reported. “The confirmation is the most significant milestone in the process, and now we need to implement the plan over 60 to 90 days. Obviously, we would like to do it as fast as possible,” CEO Anton Dibowitz told Reuters. Seadrill plans to expand relations with Schlumberger, the world’s largest oil services firm, and other suppliers to the global oil and gas industry, although the company had no immediate consolidation plans, he added. Seadrill is already cooperating with Schlumberger in India to offer integrated drilling services. “Equally, we are in discussions with all major oil service companies, and if there are opportunities that makes sense for both of us, we will certainly entertain that,” Dibowitz said. Read more.
The least corrupt countries in Europe are home to its most dangerous bond market. Debt issued in Nordic nations requires no credit rating or due diligence, Bloomberg News reported. Companies can claim more or less what they like when selling new debt, according to Norway’s financial-market regulator. Investors are re-learning the oldest maxim in the book -- buyer beware -- with the 350 million euros ($433 million) of junk bonds sold in August by Lebara Group BV, a Netherlands-based provider of international mobile-phone cards. “In Nordic high yield you can easily think you’re buying a Ferrari and it turns out it’s not,” said Evgeny Artemenkov, a high-yield money manager at Saastopankki in Helsinki, which bought some of the notes. “The bond was issued using different numbers from what should have been used.” Read more.
Two Saudi Arabian-linked banks have become the first lenders with ties to the kingdom to sign a debt settlement plan with Ahmad Hamad al-Gosaibi and Brothers (AHAB), the company's chief executive said, opening the way for the conglomerate to try to push through a multibillion-dollar deal with creditors, the International New York Times reported on a Reuters story. Since AHAB defaulted on about 22 billion riyals ($5.9 billion) of debt in 2009, Saudi banks and those with links to the kingdom have refused to join other creditors in a debt settlement deal, arguing the terms on offer were not satisfactory. But in the last few weeks, Bahrain-based Gulf International Bank (GIB), 97 percent owned by Saudi Arabia's Public Investment Fund, and Alawwal Bank, Saudi Arabia's oldest lender and 40 percent owned by Royal Bank of Scotland, have signed the deal with AHAB, sources familiar with the process said. Read more. (Subscription required.)
Italian banking stocks rallied and bonds rose on Tuesday after the country's biggest lender, Intesa Sanpaolo, agreed a bad loan sale at favourable conditions, which investors say could help other lenders achieve better terms and boost lending, the International New York Times reported on a Reuters story. Italian banks still hold some 285 billion euros ($353 billion) in troubled loans four years after a deep recession that had pushed that figure up to 360 billion euros, curbing lending to businesses and raising fears of a big bank failure. But progress has been made and Intesa's deal demonstrates that appetite for non-performing loans (NPLs) is solid as Italy emerges from years of economic malaise and underperformance versus its European peers. Read more. (Subscription required.)
The Financial Services Compensation Scheme has declared mortgage broker Blevins Franks Mortgage Services in default. Blevins Franks was a trading name of Mortgage Partner Services Limited of Regents Park Road, London. The firm has also traded as Blackstone Franks Mortgage Services Limited. The FSCS says the firm went into default in March and that consumers can get their money back as a result of dealing with a failed firm. Read more. (Subscription required.)
Vedanta Ltd said on Tuesday it got approval from India's designated court for bankruptcy cases to acquire Electrosteel Steels Ltd. Electrosteel is the first to get approval from the National Company Law Tribunal (NCLT), among a dozen of the country's biggest loan defaulters which were pushed to bankruptcy proceedings last year, the International New York Times reported on a Reuters story. A Vedanta Ltd unit will buy debt-ridden Electrosteel for 18.05 billion rupees ($274.96 million) and provide additional funds worth 35.15 billion rupees, the company said in a statement. Vedanta Ltd, the Indian unit of diversified mining group Vedanta Resources Plc, will hold about 90 percent of Electrosteel and the rest by Electrosteel's shareholders and financial creditors. The funds will be used by Electrosteel to fully settle debts owed to existing financial creditors, by payment of 53.20 billion rupees. Read more. (Subscription required.)
The European Central Bank will probably announce the stress-test results for Greece’s four largest banks on May 4 or May 5, leaving more than three months to sort out any problems before the country’s latest bailout program expires, according to a European Union official familiar with the plan, Bloomberg News reported. The Greek government has nearly 20 billion euros ($24.7 billion) of bailout cash left to shore up banks before the program ends in August. If the banks don’t need the money, it can be used to tackle other needs, such as debt-relief measures. And confidence is growing that Piraeus Bank, National Bank of Greece, Alpha Bank and Eurobank Ergasias will pass the exam. The stress-test results will show that the four banks have sufficient capital even under the exam’s adverse scenario, according to two Greek officials with knowledge of the matter. Read more.
Noble Group improved the terms of its controversial $3.4 billion debt restructuring deal and won the support of its biggest shareholder as the commodity trader seeks to complete the vital transaction, Reuters reported. Singapore-listed Noble’s debt-for-equity swap has already won the backing of more than 83 percent of the holders of its senior debt but it also needs a majority of its shareholders to approve the restructuring. “The revised structure granting shareholders 15 percent equity in New Noble has my full support,” Noble founder Richard Elman said in Noble’s statement on Monday. Elman resigned from the company’s board last month, citing differences with creditors and the board. Noble said Elman, who founded the company more than 30 years ago and holds nearly 18 percent of its shares, would be appointed as an executive director on the new company’s board. Noble says the debt-for-equity swap is crucial for its survival, after it sold billions of dollars of assets, took hefty writedowns and cut hundreds of jobs over the past three years. Read more.
Chinese prosecutors indicted the country’s former chief insurance regulator on charges of abusing his power and taking bribes, a year after he was fired amid concerns the industry’s sizzling expansion had saddled the financial system with risk, The Wall Street Journal reported. Xiang Junbo, whose firing last April underscored the severity of a shake-up in China’s financial sector, faces charges that also include using his positions to promote the interests of others, according to a statement from the nation’s top prosecutors office Monday. Specifics of the allegations against Mr. Xiang, 61 years old, weren’t released, and he hasn’t commented publicly or through a lawyer since his ouster and subsequent notices from Chinese authorities that he was under investigation. China’s insurance industry grew quickly after Mr. Xiang became its chief regulator in 2011. He was a proponent of allowing insurers to expand by harnessing technology including the internet for marketing. Insurers began offering nontraditional policies that were more like savings accounts or high-yield investments. Read more. (Subscription required.)