Danske Bank to sell Denmark's first Additional Tier 1 bond

By Aimee Donnellan

Wed Feb 26, 2014 10:35am EST

LONDON, Feb 26 (IFR) - Danske Bank is preparing to sell Denmark's first Additional Tier 1 bond and has hired Bank of America Merrill Lynch, BNP Paribas, Danske Bank, Goldman Sachs, HSBC and JP Morgan to act as lead managers.

The Danish lender will meet with investors starting Monday March 3rd to discuss the euro-denominated bond, which will be perpetual but callable after six years. The loss-absorbing offering will temporarily write-down if the bank's Common Equity Tier 1 ratio falls below 7%.

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Spanish owner of TV character Pocoyo enters administration

MADRID Wed Feb 26, 2014 1:23pm EST

MADRID Feb 26 (Reuters) - Spanish entertainment company Zinkia, owner of the children's TV character Pocoyo, entered administration on Wednesday, the latest Spanish company to seek protection from creditors in an economic slowdown.

Despite reaching agreement on refinancing with bondholders, banks and commercial creditors, Zinkia did not manage to renegotiate the terms of a 2.5 million euro ($3.4 million) loan with a private lender, the company said in a statement.

"Zinkia continues to negotiate with different creditors and potential investors in order to find a solution which will allow it to come out of administration as quickly as possible with the least damage to its brands," the company said in a statement.

Zinkia's shares were suspended from trade by the Spanish stock market regulator after the announcement. Shares have fallen by over a third this year so far.

The company gave a profit warning earlier this year saying it expected 2013 core earnings to come in 97 percent less than previously estimated.

Pocoyo, a small boy with a blue hat whose best friend is a pink elephant, has been broadcast around the world from the United States to Australia to Russia. The British version is voiced by actor Stephen Fry.

Zinkia, which floated on the Madrid stock exchange in 2009, tried to place 7.8 million euros of bonds with an 11 percent coupon last year but the market regulator warned potential investors the company did not have enough funds to pay its debts.

Nearly 9,000 Spanish firms went into administration in 2013, 10 percent more than those registered in the previous year and a record high as companies battled tight credit conditions, late payments from suppliers and falling demand.

Credit rating agency Axesor estimates that nearly 30,000 companies have filed for insolvency proceedings since the beginning of Spain's sharp economic downturn five years ago.

The economy has tentatively emerged from recession, but companies say that it is still hard to get loans from banks and domestic demand is still low as Spaniards fret about keeping their jobs amid one of the highest rates of unemployment in Europe. ($1 = 0.7317 euros) (Reporting By Sonya Dowsett; Editing by Elaine Hardcastle)

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Detroit mayor promises more jobs, less blight for bankrupt city

By Rachel Jackson

DETROIT Wed Feb 26, 2014 10:31pm EST

DETROIT Feb 26 (Reuters) - Nearly two months into his tenure as Detroit mayor, Mike Duggan outlined a plan for adding jobs and removing abandoned buildings in the bankrupt city during his first state of the city address Wednesday night.

The mayor's speech came just days after a state-appointed emergency manager filed his roadmap in federal court for dealing with the city's debt and investing in its future.

Duggan, seeking to find an agenda of his own while operating in the shadow of Emergency Manager Kevyn Orr, is doing what he can with the bankrupt city's limited resources to make headway on some of its most visible problems: decreasing urban blight and creating safe neighborhoods.

"These problems are not unsolvable," he said.

And he said that his promise to make a difference in the city in his first six months in office has already produced real change.

The new mayor traced the city's problems down to jobs, outlining plans to attract and grow more businesses and get people to work through an improved and expanded bus service or by making car ownership less expensive through city-sponsored auto insurance.

"In my mind, everything starts with a job," he said.

Duggan also took aim at the abandoned buildings on 18.5 percent of the city's 377,000 parcels of land by tapping unused insurance money for targeted demolitions and filing lawsuits against owners of abandoned properties.

The mayor reached out to Detroit's 9,000 city workers, noting they continue to do their job despite pay cuts and the prospect of reductions in their pensions.

"The greatest experts in how we improve our service are not the consultants we hire. It's the men and women doing the job every day," Duggan said.

The debt adjustment plan, which was crafted by Orr and a team of consultants and filed in U.S. Bankruptcy Court last Friday, calls for reductions in retiree pensions that could be as much as 10 percent for public safety workers and 34 percent for general city workers.

"As you might expect, the plan of adjustment made everyone unhappy," Duggan said. "I know the challenges are going to be difficult in court, but I join with the majority of Detroiters in saying...that every effort will be made to honor the pensions of the men and women (in the city)."

Orr, who controls Detroit's finances, reached a deal in December allowing Duggan to run most of the city's day-to-day business. Orr has been pushing for fast-track treatment of the city's historic bankruptcy case filed in July as his 18-month appointment as emergency manager ends in seven months.

"When the emergency manager's term expires on Oct. 1, there is no question that the city of Detroit will return to democracy," Duggan said.

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June trial planned for Detroit debt adjustment plan -judge

Mon Feb 24, 2014 3:41pm EST

Feb 24 (Reuters) - Retirees, unions and others opposed to Detroit's financial restructuring plan will have a chance to argue their case at a trial starting in mid-June, according to an order on Monday by the judge overseeing the case.

Detroit and its creditors have until Friday to file objections to U.S. Bankruptcy Judge Steven Rhodes' scheduling order in the largest municipal bankruptcy in U.S. history. The order gives creditors until March 28 to file their objections to the plan.

A hearing on legal arguments to restructure $18 billion in debt is scheduled for April 28. The trial on factual issues will begin on June 16 and could extend until June 27.

The plan Detroit filed with the U.S. Bankruptcy Court on Friday would result in cuts to city worker pensions and even deeper cuts to holders of certain Detroit bonds that were lumped into the city's nearly $12 billion pile of unsecured debt.

Retirees and pension funds argued the proposed cuts were too deep, while bond insurers complained that bondholders were being treated unfairly.

Rhodes made it clear in his order that he expects all the parties to continue court-ordered, confidential mediation to resolve disputes over the treatment of claims in the city's plan.

The tenure of the Michigan state appointed emergency manager, Kevyn Orr, ends in September. Orr has asked the court to speed up the case.

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Detroit's debt adjustment plan hostile to bondholders -Fitch

Mon Feb 24, 2014 4:25pm EST

Feb 24 (Reuters) - Detroit's plan to deal with its $18 billion of debt and emerge from municipal bankruptcy would set a troubling precedent for the U.S. municipal bond market, Fitch Ratings said on Monday.

Under the plan Detroit filed in U.S. bankruptcy court on Friday, owners of certain general obligation (GO) bonds would take an 80 percent haircut on their investments.

The city's two pension funds, meanwhile, would see higher recovery rates, aided by pledges worth about $830 million from philanthropic foundations, the Detroit Institute of Art and Michigan Governor Rick Snyder, who still must win legislative approval for the state's $350 million share.

"Fitch considers Detroit's plan of adjustment to be hostile to GO bondholders," the rating agency said in a statement. "If this priority of creditors is upheld, Fitch expects that this disregard for the rights of bondholders will factor into higher borrowing costs for local issuers, and ultimately for local property taxpayers, in Michigan."

The rating agency took particular issue with the treatment of voter-approved unlimited tax GO bonds as unsecured. Insurance companies that guaranteed debt service payments on those bonds have sued the city over this treatment.

Judge Steven Rhodes, who is overseeing Detroit's bankruptcy case, said last week he would rule on the matter in two to three weeks but urged the insurers and the city to settle their dispute before that.

Fitch said it was also troubled by the lawsuit Detroit filed last month aimed at invalidating $1.45 billion of certificates of participation (COPS) it sold in 2005 and 2006 to raise money for its pension payments.

"The plan includes reducing COPs recovery to zero while remaining silent on whether or not the pension system, which benefited from the sale of the COPs, would return any of the borrowed assets," Fitch said.

Moody's Investors Service, another major U.S. ratings agency, issued a separate report Monday that noted Detroit workers and retirees fared better in the plan than bondholders.

Moody's also said the blueprint, which is subject to bankruptcy court approval, would make "significant changes" to the terms of outstanding water and sewer bonds, including the ability to call all of the debt without having to pay any premium or penalty.

One option cited in Detroit's plan would have the city issue new bonds in the same outstanding principal amount but with lower interest rates.

Standard & Poor's Ratings Services said on Friday it will review the plan to determine if its treatment of water and sewer debt affects the BB-minus rating on the bonds.

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Austrian govt backs review of Hypo nationalisation

By Michael Shields

VIENNA Tue Feb 25, 2014 7:24am EST

VIENNA Feb 25 (Reuters) - The heads of Austria's two ruling parties on Tuesday backed the idea of letting a commission of experts look into the 2009 emergency nationalisation of lender Hypo Alpe Adria, a step that could head off a parliamentary investigation of the deal.

The takeover of Hypo from Bavarian state bank BayernLB and other owners staved off a collapse that would have sent shock waves across the region a year after Wall Street bank Lehman Brothers went down.

But Hypo's mounting costs have made it a huge headache for the ruling Social Democrats and conservative People's Party. Taxpayers have provided 4.8 billion euros ($6.6 billion) in aid since 2008 and face a bill for up to 4 billion more.

Opposition parties have called for an investigative panel to look into the whole affair, which the coalition partners which have been in power since 2006 want to avoid.

A proposal by central bank Governor Ewald Nowotny for a "council of wise people" now may offer a compromise solution.

Chancellor Werner Faymann told reporters after a cabinet meeting that such an expert panel could shed light on the rescue and put it in an international context.

"This cannot deflect from who caused this - the FPO in Carinthia," he added, referring to the Freedom Party in Hypo's home province led by the far-right firebrand Joerg Haider before he died in a 2008 car crash.

More than 20 billion euros in Hypo debt guarantees provided by Carinthia fuelled the bank's breakneck expansion at home and in the Balkans that pushed it to the edge of bankruptcy.

Realisation that Carinthia could not honour the guarantees - still worth 12.5 billion - should Hypo go bust was a prime reason Austria had to take over the bank.

TOXIC ASSETS

The FPO says other parties also backed the guarantees and that the federal government let Hypo's woes fester too long.

Faymann and conservative leader Michael Spindelegger, the finance minister, said the focus now had to be on how to wind down Hypo in a way that protects taxpayers as much as possible.

The government is looking at creating a "bad bank" that could absorb toxic assets from Hypo, which would ease its chronic need for fresh capital but also push state debt to around 80 percent of gross domestic product.

But despite warnings from Nowotny and the FMA markets watchdog, the government has not ruled out letting Hypo go bust or asking creditors including holders of Carinthia-backed bonds to help share the costs. ($1 = 0.7285 euros) (Reporting by Michael Shields; Editing by Sophie Hares)

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Detroit sues retirement funds to void pension debt

Fri Jan 31, 2014 6:02pm EST

Jan 31 (Reuters) - Detroit on Friday sued its two retirement systems in U.S. Bankruptcy Court, seeking to invalidate $1.45 billion of debt sold in 2005 and 2006 to fund public worker pensions, according to a court filing.

The lawsuit contends contracts the city entered into for the debt sale were illegal under Michigan law and that all other contracts connected to the debt are also void.

Those other contracts would include the city's deals with investment banks to hedge interest rate risk on some of the pension debt. The deals soured as interest rates dropped along with Detroit's credit ratings. The money owed to the banks was a key element that drove Detroit to file for municipal bankruptcy in July.

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Montana Catholic diocese files for bankruptcy in abuse settlement

By Laura Zuckerman

Fri Jan 31, 2014 6:44pm EST

Jan 31 (Reuters) - A Montana Roman Catholic diocese filed for bankruptcy on Friday as part of a proposed $17.5 million settlement with hundreds of adults alleging childhood sexual abuse by its priests, nuns and lay workers, a church spokesman said.

The Helena diocese, serving an estimated 44,500 Catholics in 57 parishes and 38 missions in western Montana, is the eleventh U.S. diocese to file for Chapter 11 bankruptcy reorganization since 2004 because of liabilities linked to child abuse cases.

Under the proposed agreement, the church would pay $15 million to settle claims brought by 362 victims in two lawsuits filed in 2011. It also would set aside an additional $2.5 million for future claims and to cover legal costs, said Helena diocese spokesman Dan Bartleson.

"We don't really have any reserves," Bartleson said, adding that bankruptcy protection would help facilitate the payouts to abuse survivors. The agreement must still be approved by a federal bankruptcy court and by victims.

Attorneys representing the majority of claimants said the move brought the church closer to accepting responsibility for abuse that spanned three decades beginning in the 1940s and affected both young children and young adults.

"It's an important step in the process of accountability by the church and one part in the long process of healing for the sex abuse survivors who have come forward," said Dan Fasy, an attorney with one of four firms representing plaintiffs.

Child sex abuse litigation has cost the U.S. Catholic Church some $3 billion in settlements in the two decades since the ongoing scandal erupted with a series of child molestation cases uncovered in Boston in 1992.

Unlike dioceses elsewhere, the Helena diocese opted to ensure compensation for victims even as it sought bankruptcy protection, Bartleson said.

The $15 million to be paid to victims will be underwritten by diocesan insurance carriers while the church will provide at least $2.5 million for future claims and litigation. That will further deplete the coffers of a diocese whose financial strains recently caused it to lay off roughly 3 percent of its workforce of 200, Bartleson said.

Fasy said the sexual abuse suffered by his clients at the hands of priests, sisters and lay people associated with the diocese took place on church property, at parochial schools, during church-sponsored outings and at homes of victims by visiting clergy.

Helena Bishop George Leo Thomas said none of those "credibly" accused were now active in the ministry and most were deceased.

"I express my profound sorrow and sincere apologies to anyone who was abused by a priest, a sister, or a lay church worker," he said in a statement.

The settlement does not include the Ursuline Sisters, also defendants in the case against the Helena diocese, Bartleson said. Claims against the sisters are tied to Native Americans who allege they were abused decades ago as students in Montana schools overseen by the order. (Editing by Cynthia Johnston and Tom Brown)

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UPDATE 2-Detroit files lawsuit seeking to void pension debt

Fri Jan 31, 2014 9:43pm EST

By Karen Pierog

Jan 31 (Reuters) - Detroit on Friday filed a lawsuit in U.S. bankruptcy court seeking to invalidate $1.44 billion of debt sold to fund public worker pensions - a move that also could void the ill-fated interest-rate swaps contracts that were a factor leading Detroit into bankruptcy.

The lawsuit contends the city and its retirement systems violated Michigan law when they set up "sham" service corporations and funding trusts to facilitate the debt sales in 2005 and 2006. All other contracts or obligations connected to the debt are also void, the lawsuit claims.

Detroit in its lawsuit said the pension debt was "nothing more" than a borrowing by the city, and it violated borrowing limits imposed on Detroit by the state of Michigan.

In the suit, Detroit asked bankruptcy judge Steven Rhodes to issue a judgment declaring the city is not obligated to continue making payments on the so-called pension certificates of participation (COPs). The COPs were issued during the term of former Mayor Kwame Kilpatrick, now in prison on federal corruption charges.

"This deal was bad for the city from its onset despite reassurances it would adequately resolve the city's pension issues," Kevyn Orr, Detroit's state-appointed emergency manager, said in a statement. "We have tried without success, to negotiate a resolution to this dispute and to allow the city and its taxpayers to move forward and unwind these illegal transactions."

A ruling in the city's favor could invalidate the interest-rate swap contracts Detroit reached with investment banks UBS AG and Merrill Lynch Capital Services, a unit of Bank of America Corp. The swaps were meant to hedge interest-rate risk arising on variable-rate COPs, and Detroit in the lawsuit claims any contract arising from the COPs would be invalid from the start since "all other obligations incurred by the city in connection with the COPs transactions are unenforceable and void."

Bill Nowling, Orr's spokesman, said Detroit still is negotiating with Merrill Lynch and UBS to end the city's swap agreements. The swap deals, valued at $400 million in 2011, soured as interest rates dropped along with Detroit's credit ratings. The money owed to the banks was a key element that drove Detroit to file for municipal bankruptcy in July.

Earlier this month, Rhodes rejected a deal the city reached with the firms to end the swaps at a 43 percent discount of $165 million plus up to $4.2 million in costs.

Rhodes in his ruling said Detroit could succeed with legal challenges to the validity of the swaps, noting that the city probably did not have a right under Michigan law to pledge casino tax revenue as collateral to secure the swaps.

Orr has been trying to free the up to $180 million in annual casino revenue so that it could be used to help revitalize the city.

UBS and Bank of America declined to comment.

Steve Spencer, financial adviser to Financial Guaranty Insurance Co, one of the bond insurers, said the COPs issue was a strategic and lower-cost way for the city to pay down its unfunded pension liability in 2005.

"It's inaccurate and irresponsible to group the COPs with some of the 'bad' deals the city previously entered into under the past administration," he added.

Bruce Babiarz, spokesman for Detroit's Police and Fire Retirement System, said the pension funds support the city's legal assault on the COPs deals. "Let's be clear, this lawsuit is not against the retirement systems or pension funds, but service companies and trusts that were created by the city to complete the COPs transactions," he said in a statement.

The city names "service corporations" associated with its general retirement system as well as its police and fire retirement systems among defendants in the suit.

Detroit defaulted on a $39.7 million June payment on the pension COPs after Orr labeled that debt as unsecured, along with some of the city's general obligation bonds. Bond insurance provided payments on some of the pension debt.

A proposed debt adjustment plan Orr sent to creditors this week cited the interest rate swaps as a disputed claim that is not part of the settlement.

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