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Argentina credit story grows murkier as talks collapse

Written By Unknown on Kamis, 31 Juli 2014 | 16.47

By Paul Kilby

Wed Jul 30, 2014 7:04pm EDT

NEW YORK, July 30 (IFR) - Argentina's murky credit story grew even more complicated Wednesday as the US mediator said the country was headed to default after last-ditch talks with holdout creditors failed.

With years of negotiations appearing to come to nought, Economy Minister Axel Kicillof said the country could not obey a US court order to pay the holdouts in full.

Just hours after S&P downgraded the country to selective default, mediator Daniel Pollack also said Argentina would "imminently" be in default on its obligations.

"The ordinary Argentine citizen will be the real and ultimate victim," said Pollack, after the talks failed to placate the holdouts demanding full payment on their bond holdings.

He said it was "not a mere technical condition but rather a real and painful event that will hurt real people".

Repeatedly calling the holdouts "vulture funds", however, Kicillof rejected the notion that the country was in default and said it had offered the funds the same deal put to other creditors when Argentina restructured its debt in 2005 and 2010.

That offer was not accepted by the funds, which have seen Argentina fight all the way to the US Supreme Court against a ruling by Judge Thomas Griesa that the country must make holdouts whole when it makes its next bond payment.

Failure to make that coupon payment today - after the end of a 30-day grace period - effectively left Argentina in technical default.

Coming late in the day, the latest twists and turns had little immediate impact on Argentine bond prices, which in fact rallied throughout the day on hopes of a breakthrough.

Analysts are largely expecting a knee-jerk reaction to any default news, but it is unclear how much the pendulum will swing back. Up until now, there has been a floor under Argentina bond prices, largely thanks to the assumption that the government would quickly seek ways to pay exchange bondholders.

Griesa has blocked that US$539m payment in the absence of a payment to the holdouts as well, and the Supreme Court declined to hear Argentina's appeal.

Standard & Poor's said it had downgraded the sovereign to selective default because the payment had not been made.

But the agency also affirmed Argentina's local currency rating at CCC+, arguing that "potential disruptions to interest payments on Argentina's external debt are not likely to further erode its ability to service its debt issued in its local currency and under its local law".

Kicillof said he would return home later Wednesday.

Argentina has repeatedly insisted that paying the holdouts in full would be too expensive - and would trigger so-called RUFO clause in the restructured debt that could leave the country open to new waves of claims against it.

Due to cross-default language in the documents, the restructured bond holders could accelerate demands for payment if 25% in each series agree to do so.

But most analysts see that as an unlikely and perhaps even counterproductive course of action. (Reporting by Paul Kilby and the IFR team; Additional reporting by Reuters News; Editing by Marc Carnegie)

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UPDATE 3-BES seeks capital as key staff suspended after massive losses

Wed Jul 30, 2014 9:58pm EDT

* BES loses 3.6 bln euros, says will raise capital quickly

* BES warns of possible illegal activity at bank

* Bank continued to lend to family firms as woes mounted

* Bank of Portugal suspends BES risk, compliance, audit staff

* PwC to monitor bank until new internal auditors in place (Adds link to factbox on developments contributing to the losses)

By Laura Noonan and Andrei Khalip

LONDON/LISBON, July 30 (Reuters) - Laws may have been broken at Portugal's Banco Espirito Santo during a catastrophic six months that saw it lose 3.6 billion euros ($4.8 billion), the bank's new management said on Wednesday, as they vowed to raise new cash to bolster finances and to investigate the losses.

The Bank of Portugal announced hours later that BES's top risk management, compliance, supervision and audit officials had been suspended over suspected "harmful management" that may have contributed to the bank's massive losses. The regulator also barred ESFG, the holding company of the bank's founding family, from exercising any voting rights from its 20 percent stake in the bank.

The bank's losses - which prompted it to say it would immediately begin a process to raise more capital - came as BES's new management team sought to draw a line under a torrid few months dominated by fears about the bank's exposure to the troubled business empire of the Espirito Santo family.

Instead, the team, which was appointed on July 14, had to give fresh details of irregularities they had discovered in the way the bank dealt with family companies in the recent past.

IRREGULARITIES

The revelations included the fact that 120 million euros was loaned to a family company in June without passing through the bank's related party lending controls that are in place to approve such transactions.

The bank also said it had to take 856 million euros of provisions after it discovered two letters issued by the bank in favour of creditors of a family holding company, ESI, which were not registered in the bank's accounting records at the end of June.

In total, 2.1 billion euros of provisions were taken because of the bank's exposure to the Espirito Santo Group, which lost control of the bank in June but remains its largest shareholder with a 20 percent stake. Another 590 million euros hit was taken to cover repayment of debt issued by Espirito Santo Group companies to BES clients.

The bank also booked losses of 198.2 million euros for its troubled Angola unit and noted that it could lose its majority stake in the bank if it does not participate in the "substantial reinforcement of its equity" that it needs.

The Bank of Portugal said "forensic auditing" they ordered at BES will establish whether the bank's former chief executive, chief financial officer and other top executives that have stepped down bear individual responsibility for the losses. "In case illegal practices are confirmed ... possible consequences of criminal nature may follow," the regulator added.

"Regardless of this assessment of individual responsibilities, the acts harmful to BES interests are incompatible with officials in charge of auditing, compliance, risk management and supervision bodies remaining in their positions."

Senior officials at consultancy PwC will lead a "supervision commission" at BES until shareholders name new internal auditing officials, the Bank of Portugal said.

In its results statement, the bank said it would do all it could to ensure that it was reimbursed for any losses caused as a result of any potential illegal behaviour. The bank's former chief executive, Ricardo Espirito Santo Salgado, could not immediately be reached for comment.

BACK FOR MORE

The bank vowed to swiftly raise capital since the losses pushed BES's capital ratio to just 5 percent at the end of June, below the minimum 7 percent level required by regulators.

Bank of Portugal stressed that there was no immediate threat to the bank. "All the necessary conditions are in place for the bank to continue its activities and for the full protection of the rights of depositors," it said.

BES said it would raise enough money to give it a cushion above what it is legally required to hold, but did not immediately say how much cash it would seek. It said it would call a shareholders' meeting to approve the recapitalisation plans "within a reasonable time frame".

"Over the course of the past few weeks, both shareholders and potential investors have shown interest in participating in a capitalization plan, some of them willing to take relevant stakes in the Bank," said Vitor Bento, the bank's chief executive.

The central bank said it would prefer if capital were raised from private sources, but that the country does have funds for a public bailout if needed.

BES last raised capital on June 10, selling 1 billion euros of shares to existing investors. A month later, as fears mounted about its exposure to the ailing Espirito Santo empire, BES said it had enough capital to withstand any losses on its 1.2 billion euros of lending to family companies.

Since then, three of the family's holding companies have applied for creditor protection in Luxembourg.

An investor who has been examining BES's situation said it could raise more private cash even though shareholders who put in money in June have seen their investments plummet by about 50 percent.

"To raise more capital, the market needs to get reassurance that the potential leakage points are known and there's not another possible source," he said.

The bank is also preparing a strategic restructuring plan that Bento said could lead to the sale of some of its international offshoots.

"Whilst this has been a difficult time for all stakeholders, we are now focused on taking the necessary steps for the future and to place the bank on a sustainable financial footing for the future," he added.

($1 = 0.7465 Euros) (Reporting by Laura Noonan and Andrei Khalip; Additional reporting by Sergio Goncalves in Lisbon; Editing by Andrew Hay and Mohammad Zargham)

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UPDATE-Argentina 2033 bond stable after talks to avoid default collapse

Thu Jul 31, 2014 4:40am EDT

LONDON, July 31 (IFR) - The price of the restructured bond on which Argentina missed an interest payment, leading the country into a technical default, was stable in early London trading.

Argentina's Discount due 2033 notes were bid at a price of 95 as of 0800BST Thursday, according to Exotix, marginally higher than at the US close.

However, Stuart Culverhouse, head of research at Exotix, warned that "not too much should be read into this".

He added: "New York trading will drive [the price action]."

On Wednesday, the sovereign suffered its second default in 13 years, after failing to reach an agreement with holdout creditors, which prevented it from making the interest payment to holders of its restructured bond.

Reuters reported that Argentina's one-year CDS was quoted 21bp wider at the European open, according to Markit, at 4,708bp, though its five-year CDS was quoted 400bp tighter at 1,444bp, signalling investors believe a resolution will eventually be found.

"Argentina may end up in default for a short period, but as long as people are talking, it may not have such a big impact," said Culverhouse.

Just hours after S&P downgraded the country to selective default, mediator Daniel Pollack said Argentina would "imminently" be in default on its obligations.

"The ordinary Argentine citizen will be the real and ultimate victim," said Pollack, after the talks failed to placate the holdouts demanding full payment on their bond holdings.

Economy Minister Axel Kicillof said the country could not obey a US court order to pay the holdouts in full. (Reporting by Sudip Roy and Abhinav Ramnarayan (additional reporting by Carolyn Cohn); editing by Helene Durand and Philip Wright)

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Start of key Detroit bankruptcy hearing delayed by one week

Written By Unknown on Rabu, 30 Juli 2014 | 16.47

July 29 Tue Jul 29, 2014 4:38pm EDT

July 29 (Reuters) - The start of a critical hearing on Detroit's plan to adjust $18 billion of debt and exit bankruptcy will be delayed by one week to Aug. 21, a federal judge ruled on Tuesday.

U.S. Bankruptcy Court Judge Steven Rhodes rejected a request by city creditor Syncora Guarantee Inc to postpone the hearing until Sept. 29, but said in his order that the bond insurer had demonstrated the need for a limited delay. (Reporting By Karen Pierog and Lisa Lambert)


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UPDATE 1-Critical Detroit bankruptcy hearing delayed by one week

Tue Jul 29, 2014 5:25pm EDT

(Add details of new hearing schedule, background on Syncora's request, Detroit's plan)

July 29 (Reuters) - The start of a critical hearing on Detroit's plan to adjust $18 billion of debt and exit bankruptcy will be delayed by one week to Aug. 21, a federal judge ruled on Tuesday.

U.S. Bankruptcy Court Judge Steven Rhodes rejected a request by city creditor Syncora Guarantee Inc to postpone the hearing until Sept. 29, but said in his order that the bond insurer had demonstrated the need for a limited delay.

Syncora, which has $400 million at stake in the case, mainly from insuring Detroit's debt, maintained that a 45-delay was justified because full documentation of Detroit's settlements with some creditors was lacking. Syncora said its ability to prepare for the hearing was "significantly prejudiced" without the documents.

The company also noted in a court filing on Monday that the city had just filed a revised plan on Friday containing "significant changes" that could have a materially adverse effect on Syncora's potential recovery in the case.

The fifth revision of Detroit's plan removes any settlement over $1.4 billion on certificates of participation sold in 2005 and 2006 to boost funding for the city's two retirement systems. Syncora and Financial Guaranty Insurance Co are on the hook for paying off the debt, which they insured, and the two have emerged as the major hold-outs in the case.

Detroit has asked the bankruptcy court to void the pension debt. The newest version of the plan sets up a litigation trust that would reward certain creditors with bigger recoveries should the debt be invalidated.

Rhodes' schedule still envisions a hearing that could extend until Sept. 23, the same end date he included in a previous order that had the hearing starting on Aug. 14. Last week, the judge suggested that the 98 hours each he allotted to the plan's supporters and opponents could be shortened given recent settlements between Detroit and some of its creditors. (Reporting by Karen Pierog and Lisa Lambert. Editing by Andre Grenon)

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Messy situation as Argentina debt default looms

By Chris Spink

Tue Jul 29, 2014 6:05pm EDT

LONDON, July 29 (IFR) - Argentina will find itself in its second default of the 2000s on Thursday unless a last-minute deal is reached with holdout creditors who have rejected a debt restructuring deal.

The long-running battle between the government and the holdouts finally comes to a head at midnight Wednesday in New York, when a 30-day grace period - for a belated bond interest payment due back in June - expires.

US Judge Thomas Griesa, a key player in the dispute over the US law bonds, appointed a mediator for talks earlier this month. But Argentina and the creditors did not meet face to face.

"We are not happy that it has come to this," a source close to the holdouts told IFR on Tuesday. "We have always maintained that this can easily be resolved."

Over nearly a decade, however - since Argentina's first debt restructuring in 2005 - the country repeatedly said it would never make whole what it deemed the "vulture funds" that make up the bulk of the holdout creditors.

Many of the holdouts bought Argentine bonds at a fraction of face value as the country plunged into a financial crisis around the start of the 2000s - and they want the bonds paid in full.

But the majority of bondholders at the time accepted a 2005 debt restructuring for 25 cents on the dollar. Argentina insists that a clause in the bonds would leave it open to legal claims from those who took the deal and had not been offered the same full payment terms.

As those who accepted the exchange accounted for more than 93% of Argentina's then-bondholders, having to make them whole as well would be tremendously expensive for the country.

The source close to the holdouts insisted the argument about the clause, which expires at the end of this year, was largely without merit.

ORDER IN THE COURT

Griesa in 2012 ordered Argentina to pay the holdouts in full, a total of US$1.33bn, the next time it made an interest payment to the holders of the restructured bonds.

The US Supreme Court rejected Argentina's final appeal against that ruling on June 16 this year - just two weeks before the country was to make the June 30 payment to the exchange bondholders.

Argentina has delivered the necessary money to its trustee banks - including Bank of New York Mellon (BNY) - to pay those bondholders.

But Griesa blocked the payments from going through and warned against any attempt to subvert his ruling. The banks, wary of being found in contempt of court, have complied.

In yet another plot twist, however, the judge said Monday he would allow holders of exchange bonds in US dollars issued under Argentine law to be paid with impunity on this occasion.

He said he would allow it this time because of a technicality - the bonds in question bore the same securities identification number as other bonds Argentina issued in restitution to Spanish oil company Repsol, whose stake in Argentine energy company YPF the government nationalised in 2012.

HOLDING PATTERN

Sources close to the situation said that, if a deal is not struck in time, BNY would notify bondholders on Thursday morning that their payments would not be delivered.

Even if an eleventh-hour agreement is reached, it is understood that it would take two days for BNY to pay bondholders via clearing houses, putting any eventual payment outside of the grace period.

At that point, cross-default clauses included in the restructuring documents would put around half, or US$29bn, of Argentina's exchanged bonds in default, lawyers familiar with the dispute told IFR.

"At least 25% of holders of each series of notes can vote to accelerate [payment on their own bond holdings]," one of lawyers said.

"The timing of that vote is uncertain, but it will all run through BNY."

Judge Griesa himself ordered a stay of his own 2012 ruling while the Supreme Court considered Argentina's appeal, in order to allow the country to keep paying its other obligations.

The holdouts - led by NML Capital, a subsidiary of Elliott Management, and Aurelius Capital - could in theory accept another stay so that Argentina could pay its exchange bondholders and possibly avert the default.

But that permission is highly unlikely to be granted, given that the two sides appear not to have got closer to a deal even after the mediator was appointed.

This hasn't prevented last-ditch attempts by some exchange bondholders, who reportedly called on Griesa on Tuesday to issue a stay - and prevent any technical default.

Some holders of the exchange bonds have even said they would waive the so-called RUFO (Rights Upon Future Offers) clause if it would help the negotiations.

But one restructuring adviser said Tuesday that a default looked to be an "ever-increasing certainty".

THE ENDGAME?

If no further stay is allowed, and Argentina still refuses to pay the holdouts in full, then the country looks headed to default - at least as long as the banks comply with Griesa's order.

"Exchange bondholders will ostensibly have to make a choice to push ahead with litigation due to lack of payment," the source close to the holdouts said.

"The people who lose here are the current exchange bondholders, who would have to start their own process of litigation or decide what course to take."

If the event of a default, Argentina may attempt to make another offer to swap the exchange bonds into local Argentine law instruments in order to keep receiving payments. That offer could also be extended to other holdouts.

It is uncertain if such a proposal would be acceptable to NML, Aurelius and related plaintiffs. Any malcontents could simply point to Griesa's original ruling - and demand 100% of their claims.

Some in the market think Argentina will come to an agreement with the holdouts next year anyway, after the expiration of the RUFO clause.

But for now at least, the holdouts show no sign of backing down - and even Argentina's second default since 2001 would have little immediate effect on their position.

"Nothing really changes," the source told IFR. "Our discovery, our injunction and our case all will continue as they had always been." (Reporting by Chris Spink in London; Additional reporting by Paul Kilby, Joan Magee and Davide Scigliuzzo in New York; Editing by Marc Carnegie and Natalie Harrison)

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KKR to invest in troubled sand maker Preferred Sands

Written By Unknown on Senin, 28 Juli 2014 | 16.47

NEW YORK, July 25 Fri Jul 25, 2014 12:48pm EDT

NEW YORK, July 25 (Reuters) - Private equity firm KKR & Co LP said on Friday its special situations fund would lead an investment of more than $680 million in Preferred Sands, keeping one of North America's largest producers of sand for oil and gas producers in business.

The deal underscores how private equity firms have diversified beyond buying and selling companies to investing in all levels of a company's capital structure. KKR's special situations fund focuses on investing in companies in distress.

Headquartered in Radnor, Pennsylvania, privately held Preferred Sands produces and distributes frac sand and proppant materials used predominately in oil and gas shale drilling. Its network of mines have the capacity to produce more than 9 billion pounds of sand every year.

Preferred Sands tapped restructuring advisors last September after it failed to make timely payments on its bank loans, according to Moody's Investors Service Inc. The ratings service has attributed the company's woes to competition in the frac sand industry, its lack of high-quality sand reserves, and a less developed logistical network relative to its major rivals.

"We believe Preferred Sands has an enviable position in the marketplace, and this is an investment in the team, the technology, and the future of a growing platform," Harlan Cherniak, a member of KKR's special situations team, said in a statement.

KKR said it had agreed to refinance the company through equity and debt of more than $680 million. A new first lien credit facility has been underwritten by KKR's capital markets arm and investment bank Jefferies Group LLC.

KKR finished raising a $2 billion global special situations fund in January after launching it in 2012. It said this week that fund is now fully invested, boasting gross returns over the last 12 months of 41 percent.

KKR also said it raised $1 billion in the second quarter for two special managed accounts to be invested in special situations. It added that it is preparing to raise its second global special situations fund.

The Preferred Sands deal is expected to close on July 31. (Reporting by Greg Roumeliotis in New York; Editing by Richard Chang)

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Detroit revs up for approval of bankruptcy plan

By Lisa Lambert and Karen Pierog

July 25 Fri Jul 25, 2014 2:56pm EDT

July 25 (Reuters) - Detroit could be on the fast track to complete the final, crucial phase of its historic bankruptcy case, as settlements with key creditors line up and city workers and retirees demonstrate overwhelming support for cost-saving retirement benefit changes.

While a small, hard-core group of creditors continues to hold out for a better deal, the support among workers and retirees may help push through the city's plan to adjust $18 billion of debt and exit the biggest Chapter 9 municipal bankruptcy in U.S. history. It has moved the possibility of a "cram down," where a bankruptcy plan is imposed on objecting creditors, to center stage.

"To be candid, I've always thought at the end of the day what choice does Judge (Steven) Rhodes have but to confirm this plan?" said Randye Soref, a senior partner at law firm Polsinelli in Los Angeles. "What happens if he doesn't? What's the alternative?"

Rhodes posted a schedule in federal court last month that starts the proceedings on Aug. 14, with as many as 28 hearing days stretching until Sept. 23. On Monday, though, he raised the idea of shortening the confirmation hearing just before voting results showed city workers and retirees approved the adjustment plan.

Detroit filed for bankruptcy in July 2013 after decades of dwindling population and a declining manufacturing base left the city of approximately 688,000 struggling to pay its bills.

Because of the desire by city officials and many key creditors to move Detroit toward exiting bankruptcy soon, the holdout parties may face an uphill battle.

"It's been a long stream of settlements and that's what Chapter 9 is designed to do, is broker all these things up front," said Soref.

Several classes of city creditors support the plan, including thousands of current and retired city workers, who would see cuts to their retirement benefits, according to vote results released on Tuesday.

That support could enable Rhodes to "cram down," that is, impose the plan on hold-out creditors, which include some bond insurers and bondholders and two miscellaneous classes of creditors known as a "convenience class," if he determines the plan is fair and feasible.

Carole Neville, an attorney at law firm Dentons, who is representing a court-appointed retirees committee in the case, said she had never seen a so-called convenience class of creditors reject a bankruptcy plan before.

"I think it adds some additional legal obstacles," Neville said, noting the creditor class, which includes city vendors, unions and tort claims against Detroit, could argue along with other hold-out creditors that the plan does not meet cram-down requirements.

Melissa Jacoby, a professor at the University of North Carolina law school, said that without more settlements a cram down is the only way Detroit's plan could be confirmed.

Cram downs are more typical in corporate bankruptcies, and Detroit's case would set a precedent for forcing settlement terms on hold-out municipal creditors.

In a report on Friday, Moody's Investors Service said a potential risk to the cram down is whether the city's proposed treatment among the unsecured creditors could be considered discriminatory, given the differential treatment among the pensioners and owners of the city's general obligation and pension debt.

SETTLEMENTS REACHED

Since the hearing schedule was posted, Detroit has reached settlements over the treatment of about $163.5 million of limited-tax general obligation bonds and over collective bargaining issues with its police union. Those deals joined previous settlements with the city's two retirement systems and other major creditors.

"In my last order I did say if parties settled that may be cause to reduce the hours each side is allotted," Rhodes said at a Monday status hearing.

The judge last month assigned 98 hours each to the plan's supporters and its opponents.

Syncora Guarantee Inc and another bond insurer, Financial Guaranty Insurance Co, have vowed to fight their "unfair" treatment under the plan, particularly compared to Detroit retirees, whose pension cuts would be mitigated by money from foundations, the Detroit Institute of Arts and the state of Michigan.

Syncora continues to press for boosting the city's proposed minimal recovery on the bond insurer's $400 million exposure, which is mainly on city pension debt.

Rhodes on Wednesday temporarily set aside Syncora's request to delay the confirmation hearing's start date to Sept. 29. The bond insurer cited a lack of full documentation of Detroit's settlements with some creditors, saying its ability to prepare for the hearing is "significantly prejudiced" without the documents.

Lawyers for the city contended a delay is unnecessary and potentially costly.

Detroit will likely file a revised plan in court on Friday, a city spokesman said. That plan may flesh out details from recent settlements.

Jacoby said the big question will be if the plan unfairly discriminates.

"That will depend on both the legal standard the court adopts and the presentation of issues," she said. "Those are still live issues in the case and the voting hasn't affected it." (Reporting By Karen Pierog and Lisa Lambert; Editing by David Gaffen and James Dalgleish)

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Detroit's revised bankruptcy plan sheds light on bonds, monitor

By Karen Pierog and Lisa Lambert

July 25 Fri Jul 25, 2014 5:16pm EDT

July 25 (Reuters) - Detroit released a revised debt adjustment plan on Friday that details the role of a post-bankruptcy monitor and sets up a reserve fund to possibly enhance recoveries for certain creditors.

The fifth revision of the plan filed in U.S. Bankruptcy Court creates a litigation trust related to Detroit's lawsuit seeking to void $1.45 billion of pension certificates of participation (COPs) sold in 2005 and 2006.

Should Detroit prevail in the suit, money the city would have had to use to pay off the debt would instead be divvied up, with 65 percent going to the voluntary employees' beneficiary associations (VEBAs) set up for city retiree healthcare costs and 20 percent going to limited-tax general obligation bondholders. A class of miscellaneous claims would receive the remaining 15 percent.

U.S. Bankruptcy Judge Steven Rhodes, who has yet to take up substantive issues in the COPs lawsuit, plans to start a confirmation hearing on Detroit's plan Aug. 14.

Syncora Guarantee Inc and Financial Guaranty Insurance Co, which insure payments on the COPs, have not settled with the city and face proposed minimal recoveries as a result.

The revised plan to deal with the city's $18 billion of debt sets a pecking order for unsecured bond claims with unlimited-tax general obligation bonds getting the biggest recovery at 74 percent. Under that deal, recoveries for claims involving limited-tax GO bonds (LTGO) and the pension COPs must be lower.

Ambac Assurance Corp, a LTGO creditor, said earlier on Friday that if Detroit fails to void the COPs, its recovery would remain at 34 percent, and if there is a COPs settlement it may get a partially increased recovery.

Before the recently finalized settlement, Ambac and fellow LTGO creditor BlackRock Financial Management had voted against the bankruptcy plan, according to ballot results on Monday. After the settlement, they both officially sought to change their votes to accept the plan.

PLENTY OF MONITORING

The revised plan also gave a glimpse into what life could look like after the city exits the largest municipal bankruptcy in U.S. history with a court-appointed monitor.

The document describes an individual whose "sole role and responsibility will be to evaluate the city's ongoing compliance with the plan and the confirmation order and to report to the bankruptcy court on such matter on a periodic basis in writing."

That will include filing quarterly reports on distributions, reserves, the status of bond settlements and litigation, the state of the exit financing, payments under debt instruments, and the carrying out of the "grand bargain" meant to protect the city's art collection while easing pension cuts for Detroit retirees.

The reports will also include the health of the retirement systems and pension funding levels. The bankruptcy court would be able to call conferences and request additional reports.

Under state law, the city will also have a financial review commission.

The plan monitor will be an officer of the court with immunity from lawsuits and can subpoena information, according to the filing.

The plan emphasizes that the monitor shall be a neutral party who has not been appointed or elected to Detroit or Michigan's governments.

The preferred candidate would have finance experience with municipalities with at least $250 million in annual revenues. The monitor should also have experience in complex financial and operational restructurings. (Reporting by Karen Pierog in Chicago and Lisa Lambert in Washington; Editing by David Gaffen and Lisa Shumaker)

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KKR to invest in troubled sand maker Preferred Sands

Written By Unknown on Minggu, 27 Juli 2014 | 16.47

NEW YORK, July 25 Fri Jul 25, 2014 12:48pm EDT

NEW YORK, July 25 (Reuters) - Private equity firm KKR & Co LP said on Friday its special situations fund would lead an investment of more than $680 million in Preferred Sands, keeping one of North America's largest producers of sand for oil and gas producers in business.

The deal underscores how private equity firms have diversified beyond buying and selling companies to investing in all levels of a company's capital structure. KKR's special situations fund focuses on investing in companies in distress.

Headquartered in Radnor, Pennsylvania, privately held Preferred Sands produces and distributes frac sand and proppant materials used predominately in oil and gas shale drilling. Its network of mines have the capacity to produce more than 9 billion pounds of sand every year.

Preferred Sands tapped restructuring advisors last September after it failed to make timely payments on its bank loans, according to Moody's Investors Service Inc. The ratings service has attributed the company's woes to competition in the frac sand industry, its lack of high-quality sand reserves, and a less developed logistical network relative to its major rivals.

"We believe Preferred Sands has an enviable position in the marketplace, and this is an investment in the team, the technology, and the future of a growing platform," Harlan Cherniak, a member of KKR's special situations team, said in a statement.

KKR said it had agreed to refinance the company through equity and debt of more than $680 million. A new first lien credit facility has been underwritten by KKR's capital markets arm and investment bank Jefferies Group LLC.

KKR finished raising a $2 billion global special situations fund in January after launching it in 2012. It said this week that fund is now fully invested, boasting gross returns over the last 12 months of 41 percent.

KKR also said it raised $1 billion in the second quarter for two special managed accounts to be invested in special situations. It added that it is preparing to raise its second global special situations fund.

The Preferred Sands deal is expected to close on July 31. (Reporting by Greg Roumeliotis in New York; Editing by Richard Chang)

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Detroit revs up for approval of bankruptcy plan

By Lisa Lambert and Karen Pierog

July 25 Fri Jul 25, 2014 2:56pm EDT

July 25 (Reuters) - Detroit could be on the fast track to complete the final, crucial phase of its historic bankruptcy case, as settlements with key creditors line up and city workers and retirees demonstrate overwhelming support for cost-saving retirement benefit changes.

While a small, hard-core group of creditors continues to hold out for a better deal, the support among workers and retirees may help push through the city's plan to adjust $18 billion of debt and exit the biggest Chapter 9 municipal bankruptcy in U.S. history. It has moved the possibility of a "cram down," where a bankruptcy plan is imposed on objecting creditors, to center stage.

"To be candid, I've always thought at the end of the day what choice does Judge (Steven) Rhodes have but to confirm this plan?" said Randye Soref, a senior partner at law firm Polsinelli in Los Angeles. "What happens if he doesn't? What's the alternative?"

Rhodes posted a schedule in federal court last month that starts the proceedings on Aug. 14, with as many as 28 hearing days stretching until Sept. 23. On Monday, though, he raised the idea of shortening the confirmation hearing just before voting results showed city workers and retirees approved the adjustment plan.

Detroit filed for bankruptcy in July 2013 after decades of dwindling population and a declining manufacturing base left the city of approximately 688,000 struggling to pay its bills.

Because of the desire by city officials and many key creditors to move Detroit toward exiting bankruptcy soon, the holdout parties may face an uphill battle.

"It's been a long stream of settlements and that's what Chapter 9 is designed to do, is broker all these things up front," said Soref.

Several classes of city creditors support the plan, including thousands of current and retired city workers, who would see cuts to their retirement benefits, according to vote results released on Tuesday.

That support could enable Rhodes to "cram down," that is, impose the plan on hold-out creditors, which include some bond insurers and bondholders and two miscellaneous classes of creditors known as a "convenience class," if he determines the plan is fair and feasible.

Carole Neville, an attorney at law firm Dentons, who is representing a court-appointed retirees committee in the case, said she had never seen a so-called convenience class of creditors reject a bankruptcy plan before.

"I think it adds some additional legal obstacles," Neville said, noting the creditor class, which includes city vendors, unions and tort claims against Detroit, could argue along with other hold-out creditors that the plan does not meet cram-down requirements.

Melissa Jacoby, a professor at the University of North Carolina law school, said that without more settlements a cram down is the only way Detroit's plan could be confirmed.

Cram downs are more typical in corporate bankruptcies, and Detroit's case would set a precedent for forcing settlement terms on hold-out municipal creditors.

In a report on Friday, Moody's Investors Service said a potential risk to the cram down is whether the city's proposed treatment among the unsecured creditors could be considered discriminatory, given the differential treatment among the pensioners and owners of the city's general obligation and pension debt.

SETTLEMENTS REACHED

Since the hearing schedule was posted, Detroit has reached settlements over the treatment of about $163.5 million of limited-tax general obligation bonds and over collective bargaining issues with its police union. Those deals joined previous settlements with the city's two retirement systems and other major creditors.

"In my last order I did say if parties settled that may be cause to reduce the hours each side is allotted," Rhodes said at a Monday status hearing.

The judge last month assigned 98 hours each to the plan's supporters and its opponents.

Syncora Guarantee Inc and another bond insurer, Financial Guaranty Insurance Co, have vowed to fight their "unfair" treatment under the plan, particularly compared to Detroit retirees, whose pension cuts would be mitigated by money from foundations, the Detroit Institute of Arts and the state of Michigan.

Syncora continues to press for boosting the city's proposed minimal recovery on the bond insurer's $400 million exposure, which is mainly on city pension debt.

Rhodes on Wednesday temporarily set aside Syncora's request to delay the confirmation hearing's start date to Sept. 29. The bond insurer cited a lack of full documentation of Detroit's settlements with some creditors, saying its ability to prepare for the hearing is "significantly prejudiced" without the documents.

Lawyers for the city contended a delay is unnecessary and potentially costly.

Detroit will likely file a revised plan in court on Friday, a city spokesman said. That plan may flesh out details from recent settlements.

Jacoby said the big question will be if the plan unfairly discriminates.

"That will depend on both the legal standard the court adopts and the presentation of issues," she said. "Those are still live issues in the case and the voting hasn't affected it." (Reporting By Karen Pierog and Lisa Lambert; Editing by David Gaffen and James Dalgleish)

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Detroit's revised bankruptcy plan sheds light on bonds, monitor

By Karen Pierog and Lisa Lambert

July 25 Fri Jul 25, 2014 5:16pm EDT

July 25 (Reuters) - Detroit released a revised debt adjustment plan on Friday that details the role of a post-bankruptcy monitor and sets up a reserve fund to possibly enhance recoveries for certain creditors.

The fifth revision of the plan filed in U.S. Bankruptcy Court creates a litigation trust related to Detroit's lawsuit seeking to void $1.45 billion of pension certificates of participation (COPs) sold in 2005 and 2006.

Should Detroit prevail in the suit, money the city would have had to use to pay off the debt would instead be divvied up, with 65 percent going to the voluntary employees' beneficiary associations (VEBAs) set up for city retiree healthcare costs and 20 percent going to limited-tax general obligation bondholders. A class of miscellaneous claims would receive the remaining 15 percent.

U.S. Bankruptcy Judge Steven Rhodes, who has yet to take up substantive issues in the COPs lawsuit, plans to start a confirmation hearing on Detroit's plan Aug. 14.

Syncora Guarantee Inc and Financial Guaranty Insurance Co, which insure payments on the COPs, have not settled with the city and face proposed minimal recoveries as a result.

The revised plan to deal with the city's $18 billion of debt sets a pecking order for unsecured bond claims with unlimited-tax general obligation bonds getting the biggest recovery at 74 percent. Under that deal, recoveries for claims involving limited-tax GO bonds (LTGO) and the pension COPs must be lower.

Ambac Assurance Corp, a LTGO creditor, said earlier on Friday that if Detroit fails to void the COPs, its recovery would remain at 34 percent, and if there is a COPs settlement it may get a partially increased recovery.

Before the recently finalized settlement, Ambac and fellow LTGO creditor BlackRock Financial Management had voted against the bankruptcy plan, according to ballot results on Monday. After the settlement, they both officially sought to change their votes to accept the plan.

PLENTY OF MONITORING

The revised plan also gave a glimpse into what life could look like after the city exits the largest municipal bankruptcy in U.S. history with a court-appointed monitor.

The document describes an individual whose "sole role and responsibility will be to evaluate the city's ongoing compliance with the plan and the confirmation order and to report to the bankruptcy court on such matter on a periodic basis in writing."

That will include filing quarterly reports on distributions, reserves, the status of bond settlements and litigation, the state of the exit financing, payments under debt instruments, and the carrying out of the "grand bargain" meant to protect the city's art collection while easing pension cuts for Detroit retirees.

The reports will also include the health of the retirement systems and pension funding levels. The bankruptcy court would be able to call conferences and request additional reports.

Under state law, the city will also have a financial review commission.

The plan monitor will be an officer of the court with immunity from lawsuits and can subpoena information, according to the filing.

The plan emphasizes that the monitor shall be a neutral party who has not been appointed or elected to Detroit or Michigan's governments.

The preferred candidate would have finance experience with municipalities with at least $250 million in annual revenues. The monitor should also have experience in complex financial and operational restructurings. (Reporting by Karen Pierog in Chicago and Lisa Lambert in Washington; Editing by David Gaffen and Lisa Shumaker)

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KKR to invest in troubled sand maker Preferred Sands

Written By Unknown on Sabtu, 26 Juli 2014 | 16.48

NEW YORK, July 25 Fri Jul 25, 2014 12:48pm EDT

NEW YORK, July 25 (Reuters) - Private equity firm KKR & Co LP said on Friday its special situations fund would lead an investment of more than $680 million in Preferred Sands, keeping one of North America's largest producers of sand for oil and gas producers in business.

The deal underscores how private equity firms have diversified beyond buying and selling companies to investing in all levels of a company's capital structure. KKR's special situations fund focuses on investing in companies in distress.

Headquartered in Radnor, Pennsylvania, privately held Preferred Sands produces and distributes frac sand and proppant materials used predominately in oil and gas shale drilling. Its network of mines have the capacity to produce more than 9 billion pounds of sand every year.

Preferred Sands tapped restructuring advisors last September after it failed to make timely payments on its bank loans, according to Moody's Investors Service Inc. The ratings service has attributed the company's woes to competition in the frac sand industry, its lack of high-quality sand reserves, and a less developed logistical network relative to its major rivals.

"We believe Preferred Sands has an enviable position in the marketplace, and this is an investment in the team, the technology, and the future of a growing platform," Harlan Cherniak, a member of KKR's special situations team, said in a statement.

KKR said it had agreed to refinance the company through equity and debt of more than $680 million. A new first lien credit facility has been underwritten by KKR's capital markets arm and investment bank Jefferies Group LLC.

KKR finished raising a $2 billion global special situations fund in January after launching it in 2012. It said this week that fund is now fully invested, boasting gross returns over the last 12 months of 41 percent.

KKR also said it raised $1 billion in the second quarter for two special managed accounts to be invested in special situations. It added that it is preparing to raise its second global special situations fund.

The Preferred Sands deal is expected to close on July 31. (Reporting by Greg Roumeliotis in New York; Editing by Richard Chang)

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Detroit revs up for approval of bankruptcy plan

By Lisa Lambert and Karen Pierog

July 25 Fri Jul 25, 2014 2:56pm EDT

July 25 (Reuters) - Detroit could be on the fast track to complete the final, crucial phase of its historic bankruptcy case, as settlements with key creditors line up and city workers and retirees demonstrate overwhelming support for cost-saving retirement benefit changes.

While a small, hard-core group of creditors continues to hold out for a better deal, the support among workers and retirees may help push through the city's plan to adjust $18 billion of debt and exit the biggest Chapter 9 municipal bankruptcy in U.S. history. It has moved the possibility of a "cram down," where a bankruptcy plan is imposed on objecting creditors, to center stage.

"To be candid, I've always thought at the end of the day what choice does Judge (Steven) Rhodes have but to confirm this plan?" said Randye Soref, a senior partner at law firm Polsinelli in Los Angeles. "What happens if he doesn't? What's the alternative?"

Rhodes posted a schedule in federal court last month that starts the proceedings on Aug. 14, with as many as 28 hearing days stretching until Sept. 23. On Monday, though, he raised the idea of shortening the confirmation hearing just before voting results showed city workers and retirees approved the adjustment plan.

Detroit filed for bankruptcy in July 2013 after decades of dwindling population and a declining manufacturing base left the city of approximately 688,000 struggling to pay its bills.

Because of the desire by city officials and many key creditors to move Detroit toward exiting bankruptcy soon, the holdout parties may face an uphill battle.

"It's been a long stream of settlements and that's what Chapter 9 is designed to do, is broker all these things up front," said Soref.

Several classes of city creditors support the plan, including thousands of current and retired city workers, who would see cuts to their retirement benefits, according to vote results released on Tuesday.

That support could enable Rhodes to "cram down," that is, impose the plan on hold-out creditors, which include some bond insurers and bondholders and two miscellaneous classes of creditors known as a "convenience class," if he determines the plan is fair and feasible.

Carole Neville, an attorney at law firm Dentons, who is representing a court-appointed retirees committee in the case, said she had never seen a so-called convenience class of creditors reject a bankruptcy plan before.

"I think it adds some additional legal obstacles," Neville said, noting the creditor class, which includes city vendors, unions and tort claims against Detroit, could argue along with other hold-out creditors that the plan does not meet cram-down requirements.

Melissa Jacoby, a professor at the University of North Carolina law school, said that without more settlements a cram down is the only way Detroit's plan could be confirmed.

Cram downs are more typical in corporate bankruptcies, and Detroit's case would set a precedent for forcing settlement terms on hold-out municipal creditors.

In a report on Friday, Moody's Investors Service said a potential risk to the cram down is whether the city's proposed treatment among the unsecured creditors could be considered discriminatory, given the differential treatment among the pensioners and owners of the city's general obligation and pension debt.

SETTLEMENTS REACHED

Since the hearing schedule was posted, Detroit has reached settlements over the treatment of about $163.5 million of limited-tax general obligation bonds and over collective bargaining issues with its police union. Those deals joined previous settlements with the city's two retirement systems and other major creditors.

"In my last order I did say if parties settled that may be cause to reduce the hours each side is allotted," Rhodes said at a Monday status hearing.

The judge last month assigned 98 hours each to the plan's supporters and its opponents.

Syncora Guarantee Inc and another bond insurer, Financial Guaranty Insurance Co, have vowed to fight their "unfair" treatment under the plan, particularly compared to Detroit retirees, whose pension cuts would be mitigated by money from foundations, the Detroit Institute of Arts and the state of Michigan.

Syncora continues to press for boosting the city's proposed minimal recovery on the bond insurer's $400 million exposure, which is mainly on city pension debt.

Rhodes on Wednesday temporarily set aside Syncora's request to delay the confirmation hearing's start date to Sept. 29. The bond insurer cited a lack of full documentation of Detroit's settlements with some creditors, saying its ability to prepare for the hearing is "significantly prejudiced" without the documents.

Lawyers for the city contended a delay is unnecessary and potentially costly.

Detroit will likely file a revised plan in court on Friday, a city spokesman said. That plan may flesh out details from recent settlements.

Jacoby said the big question will be if the plan unfairly discriminates.

"That will depend on both the legal standard the court adopts and the presentation of issues," she said. "Those are still live issues in the case and the voting hasn't affected it." (Reporting By Karen Pierog and Lisa Lambert; Editing by David Gaffen and James Dalgleish)

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Detroit's revised bankruptcy plan sheds light on bonds, monitor

By Karen Pierog and Lisa Lambert

July 25 Fri Jul 25, 2014 5:16pm EDT

July 25 (Reuters) - Detroit released a revised debt adjustment plan on Friday that details the role of a post-bankruptcy monitor and sets up a reserve fund to possibly enhance recoveries for certain creditors.

The fifth revision of the plan filed in U.S. Bankruptcy Court creates a litigation trust related to Detroit's lawsuit seeking to void $1.45 billion of pension certificates of participation (COPs) sold in 2005 and 2006.

Should Detroit prevail in the suit, money the city would have had to use to pay off the debt would instead be divvied up, with 65 percent going to the voluntary employees' beneficiary associations (VEBAs) set up for city retiree healthcare costs and 20 percent going to limited-tax general obligation bondholders. A class of miscellaneous claims would receive the remaining 15 percent.

U.S. Bankruptcy Judge Steven Rhodes, who has yet to take up substantive issues in the COPs lawsuit, plans to start a confirmation hearing on Detroit's plan Aug. 14.

Syncora Guarantee Inc and Financial Guaranty Insurance Co, which insure payments on the COPs, have not settled with the city and face proposed minimal recoveries as a result.

The revised plan to deal with the city's $18 billion of debt sets a pecking order for unsecured bond claims with unlimited-tax general obligation bonds getting the biggest recovery at 74 percent. Under that deal, recoveries for claims involving limited-tax GO bonds (LTGO) and the pension COPs must be lower.

Ambac Assurance Corp, a LTGO creditor, said earlier on Friday that if Detroit fails to void the COPs, its recovery would remain at 34 percent, and if there is a COPs settlement it may get a partially increased recovery.

Before the recently finalized settlement, Ambac and fellow LTGO creditor BlackRock Financial Management had voted against the bankruptcy plan, according to ballot results on Monday. After the settlement, they both officially sought to change their votes to accept the plan.

PLENTY OF MONITORING

The revised plan also gave a glimpse into what life could look like after the city exits the largest municipal bankruptcy in U.S. history with a court-appointed monitor.

The document describes an individual whose "sole role and responsibility will be to evaluate the city's ongoing compliance with the plan and the confirmation order and to report to the bankruptcy court on such matter on a periodic basis in writing."

That will include filing quarterly reports on distributions, reserves, the status of bond settlements and litigation, the state of the exit financing, payments under debt instruments, and the carrying out of the "grand bargain" meant to protect the city's art collection while easing pension cuts for Detroit retirees.

The reports will also include the health of the retirement systems and pension funding levels. The bankruptcy court would be able to call conferences and request additional reports.

Under state law, the city will also have a financial review commission.

The plan monitor will be an officer of the court with immunity from lawsuits and can subpoena information, according to the filing.

The plan emphasizes that the monitor shall be a neutral party who has not been appointed or elected to Detroit or Michigan's governments.

The preferred candidate would have finance experience with municipalities with at least $250 million in annual revenues. The monitor should also have experience in complex financial and operational restructurings. (Reporting by Karen Pierog in Chicago and Lisa Lambert in Washington; Editing by David Gaffen and Lisa Shumaker)

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'Risk-free' rating raises questions for Indian bank capital

Written By Unknown on Jumat, 25 Juli 2014 | 16.47

Fri Jul 25, 2014 3:23am EDT

* Bank of India launches first Tier 1 bond from state-run lender

* Top domestic rating shows limits of Basel III in India

* Bonds likely to be bought by funds linked to other banks

By Manju Dalal

SINGAPORE, July 25 (IFR) - A landmark capital raising from India's state-owned banking sector has reignited a debate over the application of Basel III standards in the country's local financial market.

Bank of India launched a Basel III-compliant Additional Tier 1 bond on Friday that secured a surprising Triple A rating from a domestic agency - a grade typically reserved for risk-free securities.

The offering of a minimum Rs12.5bn (US$207m) in perpetual non-call 10-year bonds may have been structured and rated to appeal mainly to other Indian banks, however, adding to the uncertainty over the depth of demand for the new-style securities.

Basel III capital rules are designed to force subordinated creditors to absorb losses if the issuing bank runs into trouble. Often referred to as "bail-in bonds", the securities may be converted to equity or written down to zero, depending on local regulations and how the deals are structured.

Global rating agencies typically knock at least four notches off a bank's senior credit rating to signal the potential risks in these bonds. Yet Brickworks, a domestic agency, has rated BoI's bonds AAA, the highest possible rating and the same as BoI's senior credit rating.

STATE SUPPORT

The high rating gives lenders such as BoI a better chance of attracting investors to the new product, but it also points to a deep-seated belief in the Indian markets that the government will not allow any state-owned bank to fail.

India regularly injects capital into its public sector banks (including US$2.2bn in the last fiscal year), and has a long history of state-orchestrated bank rescues.

While banking regulators have publicly embraced Basel III rules designed to limit such bail-outs, few local investors expect they will risk a systemic crisis by declaring a state-run bank to be no longer viable.

"If the senior bonds and AT1s under Basel III rules get similarly rated in the local markets then it clearly indicates the limitation of Basel III regulations," said an analyst at a global rating agency.

A senior official at another state-run bank said he was surprised by the rating.

"It is good news for the state-owned banks to get their Tier 1s rated at Triple A," he said, before asking: "What should be the rating for our senior bonds? Triple A plus?"

SMALL INVESTOR POOL

A high rating on the Basel III bonds may make the securities palatable to certain investors. Pension funds, provident funds and insurance companies often are the key buyers of bank capital bonds, although the bonds are considered "high-risk" investments and these investors cannot buy them if they are rated below Double A plus.

BoI may place most of its AT1 bonds with state-owned bank provident funds, which would be investing in the bonds mainly as a show of support as they also may need to raise bank capital soon. According to RBI's initial estimates, Indian banks need to raise about Rs1.9trn of AT1 securities by March 2018.

If BoI does, in fact, sell the bonds to such a narrow, and self-serving, base, it raises questions about the ability to create a true domestic market for Basel III bonds in India.

"With a Triple A rating and a double-digit yield, the BoI bonds might certainly look enticing for the PFs, but is the deal creating the right market? I really doubt it," said a debt capital markets specialist at a foreign bank.

Investors are demanding a higher yield relative to BoI's senior and Tier 2 bonds. That suggests they see the AT1 securities as more risky, regardless of the top rating.

BoI is indicating its new-style bonds will have an 11% coupon, which is an 180bp pick up over the bank's Basel-III compliant Tier 2 securities.

In September, BoI sold Rs10bn of Triple A rated Tier 2 Basel III-compliant 10-year bonds at a 9.80% yield. The yields on those bonds have fallen to about 9.20% in secondary trading.

Such a high yield on a high-rated BoI bond might prove attractive, but many investors believe the new issue is still under-priced.

"For the issuer, these bonds are a 10-year paper but for investors it's a perpetual risk," an investor said. "Because of the permanent write-off feature there is no protection of even the principal amount. I strongly feel the deal was priced more on what the issuer was comfortable with rather than on its risk factors."

OFFSHORE OPTIONS

Indeed, BoI faced some resistance before agreeing to boost the yield 50bp to 11%, sources aware of the pricing said. The Basel III perpetual bonds are structured to write down to zero, rather than convert to equity, if the bank is declared to be not viable.

Still, market participants believe the deal may complicate efforts to determine the right price for senior bonds in the future.

"Since the pricing of bank bonds in India is not reflecting the true risk, it is not creating the right yield curve," said a Mumbai-based DCM banker. "This is totally detrimental to the industry."

BoI may also tap the offshore market for additional capital, a route state-owned IDBI Bank is likely to take. IDBI discussed a potential US$300m Basel III-compliant AT1 offering with overseas investors in non-deal roadshows held earlier this month.

BoI had planned to sell a US dollar-denominated US$400m AT1 bond in January, and had even mandated seven arrangers. The bank was considering sell the bonds with an aggressive 8.5% yield, but it faced resistance from investors who could earn a similar return on much higher-rated European issues, sources said.

Axis Bank, Darashaw, ICICI Bank and Trust Capital are equally underwriting BoI's AT1 bond. The size of the deal, which remains open until August 8, could double if BoI exercises a greenshoe of Rs12.50bn. (Reporting by Manju Dalal)

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Virgin Money to sell £160m Additional Tier 1 bond

By Aimee Donnellan

Fri Jul 25, 2014 3:57am EDT

LONDON, July 25 (IFR) - Virgin Money is poised to sell a £160m Additional Tier 1 bond, according to a market source.

The transaction will be perpetual but callable after five years and will be sold via sole bookrunner Bank of America Merrill Lynch. (Reporting by Aimee Donnellan; editing by Alex Chambers)


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UPDATE 1-Virgin Money to debut in bond market with AT1

Fri Jul 25, 2014 4:59am EDT

(Adds background and quotes)

By Aimee Donnellan

LONDON, July 25 (IFR) - Virgin Money is poised to enter the debt capital markets for the first time ahead of a long rumoured IPO, and is looking to raise £160m in deeply subordinated debt, according to a market source.

The UK lender is seeking to bolster its balance sheet with an unrated Additional Tier 1 bond which will sit just above the Virgin Money's equity.

UK financials institutions have been among the biggest users of the Additional Tier 1 market in 2014, taking advantage of the strong market backdrop to raise junior debt at competitive levels.

Bank of America Merrill Lynch is arranging the transaction, according to the source. Officials at the US bank were unavailable for comment.

"Virgin Money like all of Europe's banks needs to raise capital but this is a quite a surprise to the market," said a syndicate banker.

"Looking at the size of the deal I wouldn't be surprised if they just had one buyer," said another syndicate banker.

Banks across Europe are seeking to boost their balance sheets to meet tough new regulatory requirements via Additional Tier 1 issuance which is cheaper to raise than equity.

Under the terms of the perpetual non-call five-year deal, bondholders can be converted into equity if the group's Common Equity Tier 1 ratio falls below 7% on a fully loaded basis.

According to Virgin Money's 2013 results released in March of this year, the bank has a Common Equity Tier 1 ratio of 15.3% and leverage ratio 3.7%, on a Basel III basis.

Virgin Money in March reported its first profit since it acquired failed lender Northern Rock in 2012 and has been rumoured to be looking at a potential IPO.

The banking arm of Richard Branson's Virgin group made an underlying profit of £53.4m in 2013. The strong growth stemmed from its take over of Northern Rock, the group said in trading update.

Virgin Money, which agreed to buy nationalised Northern Rock for an initial fee of £747m in November 2011, must pay more to Britain's finance ministry if it floats the business before November 2016, under the terms of that deal.

The bank was Britain's third-biggest net mortgage lender last year behind Barclays and Nationwide. (Reporting by Aimee Donnellan; editing by Alex Chambers, Helene Durand)

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PRESS DIGEST- British Business - July 23

Written By Unknown on Rabu, 23 Juli 2014 | 16.47

July 23 Tue Jul 22, 2014 8:09pm EDT

July 23 (Reuters) - The following are the top stories on the business pages of British newspapers. Reuters has not verified these stories and does not vouch for their accuracy.

The Times

RBS IN THE DOCK OVER CLAIMS IT MISLED MPS

(thetim.es/1pCr8jw)

Royal Bank of Scotland has been heavily criticised for misleading MPs over its contentious division for struggling businesses.

WEIR'S NOT FINISHED WITH ITS PLANS FOR EXPANSION

(thetim.es/UqRKdb)

Weir Group, which tried and failed to tie up with Metso, has since been weighing whether to bid for Outotec , another Helsinki-listed company in much the same market of producing industrial pumps for the mining industry.

The Guardian

MEDIACITY LEADS TO SALFORD BECOMING THE UK'S PROPERTY HOT SPOT

(bit.ly/1o7GKgZ)

Property values in the Greater Manchester city of Salford have risen faster than in any other town in Britain since the start of 2014, as the area continues to benefit from the relocation of the BBC and other broadcasters to the waterfront MediaCity development.

EU REPORT FINDS NO EVIDENCE TO SUPPORT SWEEPING IMMIGRATION REFORMS

(bit.ly/1nkxfKx)

A government review looking into freedom of movement across the EU has not recommended any sweeping reforms to immigration rules in a report likely to disappoint Conservative Eurosceptics.

The Telegraph

EUROPE BRACED FOR ANY GAS CRISIS AS RUSSIA SANCTIONS ESCALATE

(bit.ly/UqRLOs)

Europe has enough spare capacity in liquefied natural gas to meet a large part of the region's needs if Russia retaliates against the latest EU sanctions by restricting gas supplies.

ESPIRITO SANTO HOLDING FIRM PLACED IN RECEIVERSHIP

(bit.ly/1rq7fz8)

The Espirito Santo family's holding company has been placed in receivership. Luxembourg's district court said it had agreed to a request from Espirito Santo International that it be placed under "controlled management".

Sky News

UK PREPARES FOR EU RULING ON ENERGY STATE AID

(bit.ly/1sMCfeK)

The European Commission is likely to announce its ruling after several months examining a form of subsidy guaranteeing long-term prices to companies for supplying renewable energy sources.

BANKS FACE 1.5 BLN STG HIT FROM PPI CLAIMS DELUGE

(bit.ly/1rn55At)

Britain's largest high street banks will announce next week that they are setting aside more than 1 billion pound ($1.71 billion)in additional provisions to compensate customers who were mis-sold payment protection insurance.

The Independent

PAUL FISHER: "THE BANK DELIVERED THE RECOVERY"

(ind.pn/1rIk4nK)

Paul Fisher, who has left the Bank of England's Monetary Policy Committee after five years, defends decisions made at the height of the crisis in an interview.

ROYAL MAIL FRETS OVER AMAZON THREAT TO PARCELS BUSINESS

(ind.pn/1rIk4nK)

Shares in Royal Mail today touched their lowest level since October's privatisation as it delivered the gloomy news that revenues at its crucial parcel division are being threatened by strong competition from Amazon.

($1 = 0.5860 British Pounds) (Compiled by Aashika Jain in Bangalore; Editing by Lisa Shumaker)

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UPDATE 4-U.S. judge orders Argentina, creditors to meet until deal reached

Tue Jul 22, 2014 6:50pm EDT

By Nate Raymond and Joseph Ax

NEW YORK, July 22 (Reuters) - A U.S. judge ordered Argentina and investors who did not participate in the country's past debt restructurings to meet "continuously" with a court-appointed mediator until a settlement is reached, warning of the threat of a new default.

U.S. District Judge Thomas Griesa in New York told Argentina and lawyers for investors who declined to restructure their bonds after the country defaulted on about $100 billion in 2002 that time was running out to reach a deal and avert a fresh default.

"That is about the worst thing I can envision. I don't want that to happen," the judge said.

Jonathan Blackman, a lawyer for Argentina, Latin America's No. 3 economy, said even with around-the-clock talks, it would be "unlikely, if not impossible, to result in settlement."

"It simply can't be done by the end of the month," he said.

Griesa ordered the parties to meet with Daniel Pollack, a New York lawyer appointed to oversee settlement talks, "continuously until a settlement is reached." Pollack scheduled a meeting Wednesday at 10 a.m. EDT (1400 GMT).

Pollack, who was appointed June 23 as a mediator, has been holding meetings with the parties, publicly acknowledging talking twice with Argentine officials.

The Argentine economy ministry did not respond to requests for comment after the hearing.

The presidency of Argentina said in a statement that "Judge Griesa ... resolved absolutely nothing on any of the issues which had been brought before him."

The statement made no reference to Griesa's order that both sides meet with the mediator and did not say whether or not government officials would attend.

A lead holdout creditor, Elliott Management's NML Capital Ltd, said in a statement it was prepared to meet with Pollack to resolve the dispute.

"We are confident this matter could be resolved quickly if Argentina would join us in settlement discussions," NML said.

Argentine over-the-counter dollar-denominated bonds slid following the hearing, before recovering some of the losses. The bid price on the Discount bond was down 1.1 percent on a day earlier at $86.65 at 1725 local time (2025 GMT) while the Par bond was 0.8 percent lower at $50.80.

"Clearly Argentina is running out of time," said Ignacio Labaqui, an analyst for consultancy Medley Global Advisors. "Today is the first time I have seen the market believing that Argentina might default. It's up to Argentina to decide what it will do."

Argentina has been pushed to the brink of a fresh debt default by U.S. court decisions that it pay $1.33 billion plus interest to bondholders who did not participate in debt swaps in 2005 and 2010. The holdouts are led by NML and Aurelius Capital Management.

The country argues paying the holdouts would open it up to as much as $15 billion in claims from other investors and further strain its financial condition.

At Tuesday's hearing, Argentina renewed its request that the judge stay enforcement of his orders. Griesa said the step was not necessary, as there are "ways to do something to avoid default."

A lawyer for Aurelius, Edward Friedman, meanwhile urged him to reconsider part of a decision last month allowing Citigroup Inc to process payments Argentina made for bonds governed by the country's local laws. Friedman said payments should not be allowed on U.S. dollar-denominated bonds.

Bank of New York Mellon Corp asked the judge to allow it to hold onto $539 million Argentina deposited last month for a payment to the restructured bondholders. Griesa previously ordered the sum returned, saying it violated his orders.

Griesa on Tuesday issued no ruling on the Citigroup issue, and told BNY Mellon and the holdouts to see if they could reach an agreement. (Additional reporting by Sarah Marsh and Richard Lough in Buenos Aires; Writing by David Gaffen; Editing by Gunna Dickson and Grant McCool)

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UPDATE 5-U.S. judge orders Argentina, creditors to meet until deal reached

Tue Jul 22, 2014 9:48pm EDT

(Adds in eighth paragraph that Argentina is sending a delegation to New York)

By Nate Raymond and Joseph Ax

NEW YORK, July 22 (Reuters) - A U.S. judge ordered Argentina and investors who did not participate in the country's past debt restructurings to meet "continuously" with a court-appointed mediator until a settlement is reached, warning of the threat of a new default.

U.S. District Judge Thomas Griesa in New York told Argentina and lawyers for investors who declined to restructure their bonds after the country defaulted on about $100 billion in 2002 that time was running out to reach a deal and avert a fresh default.

"That is about the worst thing I can envision. I don't want that to happen," the judge said.

Jonathan Blackman, a lawyer for Argentina, Latin America's No. 3 economy, said even with around-the-clock talks, it would be "unlikely, if not impossible, to result in settlement."

"It simply can't be done by the end of the month," he said.

Griesa ordered the parties to meet with Daniel Pollack, a New York lawyer appointed to oversee settlement talks, "continuously until a settlement is reached." Pollack scheduled a meeting Wednesday at 10 a.m. EDT (1400 GMT).

Pollack, who was appointed June 23 as a mediator, has been holding meetings with the parties, publicly acknowledging talking twice with Argentine officials.

Argentina is sending a delegation to meet with Pollack, but a government source said Economy Minister Axel Kicillof would not be among the group.

The presidency of Argentina said in a statement that "Judge Griesa ... resolved absolutely nothing on any of the issues which had been brought before him."

A lead holdout creditor, Elliott Management's NML Capital Ltd, said in a statement it was prepared to meet with Pollack to resolve the dispute.

"We are confident this matter could be resolved quickly if Argentina would join us in settlement discussions," NML said.

Argentine over-the-counter dollar-denominated bonds slid following the hearing, before recovering some of the losses. The bid price on the Discount bond was down 1.1 percent on a day earlier at $86.65 at 1725 local time (2025 GMT) while the Par bond was 0.8 percent lower at $50.80.

"Clearly Argentina is running out of time," said Ignacio Labaqui, an analyst for consultancy Medley Global Advisors. "Today is the first time I have seen the market believing that Argentina might default. It's up to Argentina to decide what it will do."

Argentina has been pushed to the brink of a fresh debt default by U.S. court decisions that it pay $1.33 billion plus interest to bondholders who did not participate in debt swaps in 2005 and 2010. The holdouts are led by NML and Aurelius Capital Management.

The country argues paying the holdouts would open it up to as much as $15 billion in claims from other investors and further strain its financial condition.

At Tuesday's hearing, Argentina renewed its request that the judge stay enforcement of his orders. Griesa said the step was not necessary, as there are "ways to do something to avoid default."

A lawyer for Aurelius, Edward Friedman, meanwhile urged him to reconsider part of a decision last month allowing Citigroup Inc to process payments Argentina made for bonds governed by the country's local laws. Friedman said payments should not be allowed on U.S. dollar-denominated bonds.

Bank of New York Mellon Corp asked the judge to allow it to hold onto $539 million Argentina deposited last month for a payment to the restructured bondholders. Griesa previously ordered the sum returned, saying it violated his orders.

Griesa on Tuesday issued no ruling on the Citigroup issue, and told BNY Mellon and the holdouts to see if they could reach an agreement. (Additional reporting by Richard Lough, Eliana Raszewski and Sarah March in Buenos Aires; Writing by David Gaffen; Editing by Gunna Dickson, Grant McCool and Ken Wills)

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PRESS DIGEST- Wall Street Journal - July 22

Written By Unknown on Selasa, 22 Juli 2014 | 16.47

July 22 Tue Jul 22, 2014 1:38am EDT

July 22 (Reuters) - The following are the top stories in the Wall Street Journal. Reuters has not verified these stories and does not vouch for their accuracy.

* Separatists in Ukraine released the bodies of victims in the downing of Malaysia Airlines Flight 17 and agreed to hand over the aircraft's data recorders, allowing the focus to tighten on establishing who brought the jetliner down. (on.wsj.com/Uoe1bR)

* Workers and retirees approved pension cuts in Detroit's bankruptcy, the city said Monday, a crucial step to emerging from the largest municipal insolvency in U.S. history. The city disclosed results from two months of balloting, which ended July 11. (on.wsj.com/1wTrViJ)

* European ministers are expected to approve sanctions that will target Russian oligarchs in response to the suspected downing of a Malaysian jetliner by Moscow-backed rebels in eastern Ukraine. (on.wsj.com/1nvUB1w)

* Apple Inc is preparing for its largest initial production run of iPhones this year, betting that larger-screen models will lure consumers now attracted to similar phones from Samsung Electronics Co. The company is asking suppliers to manufacture between 70 million and 80 million units, larger than the initial order last year of 50 million to 60 million versions of the iPhone 5S and 5C. (on.wsj.com/1qZBAm3)

* The U.S. owner of a meat supplier in Shanghai apologized and promised a swift response after McDonald's Corp and Yum Brands Inc suspended purchases in China in the wake of allegations it sold expired chicken and beef to restaurants. China's Food and Drug Administration halted on all business activities of Shanghai Husi and launched a nationwide investigation of the company. (on.wsj.com/1jSycdP)

* Washington's regulatory machine is altering Wall Street in fundamental ways, four years after the Dodd-Frank financial law became reality. Banks are selling off profitable business lines, pulling back from the short-term funding market, cutting ties with businesses that could attract extra regulatory scrutiny, and building up defenses to help weather future crises. (on.wsj.com/1ua2Eoi)

* Spending on mobile ads is expected to jump 83 percent this year, but given how much time Americans spend on their devices, mobile-ad spending could be much higher. (on.wsj.com/1loxQqs)

* The family trust that owns the Los Angeles Clippers is in danger of defaulting on loans if a planned sale of the NBA team doesn't go through, an executive testified Monday. (on.wsj.com/Wuj8sv)

* Allergan, which is trying to avoid being acquired by Valeant Pharmaceuticals International Inc, said it would cut 13 percent of its work force and reduce drug research, to boost its profits over the next six years. Valeant also had similar plans of restructuring, if it acquired Allergan. (on.wsj.com/WzRuuz)

* Netflix Inc said its second quarter earnings more than doubled as it added 1.7 million subscribers world-wide but cautioned that a more aggressive international expansion would hurt profits in third quarter. (on.wsj.com/1wTaZc1)

* Venezuela's auto industry, once the third largest in South America, is seizing up as manufacturers struggle to produce a few vehicles a day. Car makers like Ford Motor Co, Fiat Chrysler Automobiles, General Motors and Toyota Motor Corp, have cut output by more than 80 percent in the first six months of the year, due to lack of dollars to pay part suppliers. (on.wsj.com/1nv5BMM)

* Activist investor Jana Partners LLC has built a stake worth more than $1 billion in Apache Corp and is calling on the oil and gas producer to sell off its international holdings to drill exclusively on American soil. It also wants the company to exit some projects to free up cash flow. (on.wsj.com/UkTOUB)

* Crocs is trimming jobs and reducing the number of stores as the maker of colorful plastic clogs said it needs to get smaller to improve profitability. (on.wsj.com/1u9SQuJ) (Compiled by Rishika Sadam in Bangalore)

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