Stockton taxpayers want bigger role in California city's bankruptcy case

By Jim Christie

SAN FRANCISCO, June 28 | Fri Jun 28, 2013 9:55pm EDT

SAN FRANCISCO, June 28 (Reuters) - A group of California taxpayers went to court on Friday to demand a greater role in how the city of Stockton would raise taxes to exit the bankruptcy it filed a year ago.

The group asked the U.S. Bankruptcy Court in Sacramento for official committee status so its members could see details on Stockton's plan for increasing its sales tax. If granted this status, the group could also participate in talks about the city's plan to adjust its debts.

Stockton officials aim to file their debt-adjustment plan with the bankruptcy court in September following a vote by the city council on a sales tax increase.

Stockton's city manager wants the council to hold a vote next month on putting a ballot measure to voters in November that would ask them to raise the city's sales tax to 9.0 percent from 8.25 percent.

If approved by voters, the increase would go into effect next April and raise revenue to help Stockton exit bankruptcy, put more money into public safety programs and hire more police officers to help tackle crime in a city that ranks among the 10 most dangerous U.S. cities.

According to a draft of the tax plan, the increase would raise about $219 million over 10 years for public safety spending.

Over the same time, about $112 million in proceeds would fund the city's exit from bankruptcy. The effort would get a larger share of revenue initially as police staffing ramps up.

The taxpayers group wants more details on how the revenue would be allocated and it is concerned Stockton's creditors could press for a bigger share, which would set back plans for hiring more police officers.

"Creditors will no doubt seek as large a recovery as possible leaving taxpayers with significantly reduced health, safety and welfare services," according to an exhibit attached to the taxpayers group's court filing.

A city of about 300,000 residents in California's Central Valley, Stockton is the biggest U.S. city to have filed for bankruptcy and is trying to impose steep losses on its bond insurers and bondholders to restructure it finances.

The U.S. municipal debt market is watching to see if the Stockton prevails or its so-called capital markets creditors can convince the bankruptcy court to have the city cut its pension spending as part of a plan to exit bankruptcy.

Stockton has refused to cut pensions, saying it is prohibited by state law, and that its employees have suffered several years of pay and job cuts while its retired workers are losing subsidized medical coverage.

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RPT-Brazilian banks BNDES, Caixa face biggest exposure to EBX woes, BofA says

Tue Jul 2, 2013 4:51pm EDT

* Exposure may be 'underestimated' due to poor disclosure

* BNDES appears most exposed bank in Brazil to Grupo EBX

By Guillermo Parra-Bernal

SAO PAULO, July 1 (Reuters) - Brazilian state-run lenders Caixa Econômica Federal and BNDES have the largest loan exposure to debt-laden Grupo EBX, Bank of America Merrill Lynch said on Monday, as markets assess risks stemming from years of hefty borrowing by billionaire Eike Batista's mining and energy conglomerate.

Although available data on loan exposure to the Rio de Janeiro-based group is limited, risk is concentrated at some of the nation's major banks, analysts led by Alessandro Arlant said in a note. Shares of EBX-controlled companies tanked on Monday after oil producer OGX Petróleo e Gas Participações SA declared several projects unfeasible.

The analysts concluded that exposure is concentrated in five Brazilian banks, chiefly state development lender BNDES and Caixa, the nation's largest mortgage lender. Private-sector lenders Banco Bradesco SA, Itaú Unibanco Holding SA and Grupo BTG Pactual SA are next on the list, Arlant and his team said.

While Arlant estimates the five banks' loan exposure to EBX at 9.42 billion reais ($4.2 billion), the number may be "underestimated" amid poor disclosure and difficulty knowing how much of that exposure is collateralized. In recent months, investors have balked at the group's complex structure, its appetite for debt and, in the case of banks, the existence of guarantees and undrawn, committed credit lines.

A spokeswoman for Bradesco declined to comment on the report. A spokeswoman for BNDES did not comment, saying that some contracts with clients are subject to banking secrecy rules. Calls made to Itaú, Caixa and BTG Pactual spokespeople were not immediately answered or returned.

COLLATERAL DAMAGE

For years, Batista put shares of some of the companies he controls through EBX as collateral in exchange for loans that he used to build oil platforms, develop wells, build ports and mine for iron ore. In recent months, Batista has reversed course and is currently selling assets and repaying debt to reduce requirements on some of that collateral.

At the end of last year, Batista's six publicly traded companies had a combined net debt of about 15 billion reais, according to Thomson Reuters data. That number, which almost tripled since 2010, only rose as the companies posted losses exceeding 1 billion reais last year.

According to the analysts, BNDES had by far the largest exposure to EBX at the end of March - a total 4.9 billion reais that represented 5.8 percent of the lender's regulatory capital. BNDES is the main source of long-term corporate loans in Brazil.

Brasilia-based Caixa had total exposure of 1.4 billion reais, or 3.4 percent of its regulatory capital, to EBX, mainly to embattled shipbuilder OSX Brasil SA, the note added. Bradesco had disbursed 1.25 billion reais, and Itaú a total 1.24 billion reais as of the end of the first quarter. This represents 1.3 percent and 1.4 percent of their regulatory capital, respectively.

In the case of BTG Pactual, the investment-banking giant controlled by billionaire André Esteves, exposure was estimated at 649 million reais, mostly to electricity generator MPX Energia SA, the note added. "However, given its smaller size relative to larger commercial banks, BTG had exposure of 4.3 percent of its total regulatory capital," Arlant and his team wrote in the report.

All but one of EBX's six traded companies has lost more than 90 percent of their value compared with record highs, and the bonds of OGX, EBX's flagship unit, are trading for about 20 cents on the dollar.

Batista, one of Brazil's most successful entrepreneurs during a decade-long commodities boom, saw his $30 billion fortune shrink to $10 billion this year.

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Poland - Factors to Watch on July 3

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Suntech strikes yet another deal with bondholders

June 28 | Fri Jun 28, 2013 9:19am EDT

June 28 (Reuters) - China-based solar panel maker Suntech Power Holdings Co Ltd, whose main unit is in insolvency proceedings, said it had struck a deal with a majority of its bondholders to defer payment on a $541 million loan until Aug. 30, the third time the company has reached such an agreement.

Suntech defaulted on a principal payment on the 3 percent convertible notes on March 15, prompting the company's Chinese lenders to drag its main manufacturing unit into insolvency proceedings.

Lenders holding the senior notes will nominate two additional members to Suntech's board and will help to identify strategic and financial investors to bring in new capital, the company said in a statement on Friday.

Suntech said it was also looking at converting all major debt claims held by the bondholders into equity.

The company reached a deal with 60 percent of the note holders in March to defer payments until May 15, when it announced that it had struck another deal with some lenders to defer obligations until June 28.

At the end of March 2012, Suntech had total debt of $2.2 billion, including loans from China Development Bank, and a $50 million convertible loan from the International Finance Corporation, the private sector arm of the World Bank.

Chinese creditors of the bankrupt unit, Wuxi Suntech, claimed at the start of the debt restructuring process in May that the subsidiary owed them $2.5 billion. The restructuring process is expected to go on for months.

The eastern Chinese city of Wuxi, where Suntech Power is headquartered, is trying to maintain the company's production capacity and save thousands of local jobs.

Suntech has said that its Chinese unit has been experiencing a gradual improvement in business after a court-appointed debt administrator pushed to recover accounts receivable and trimmed inventories.

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Reader's Digest publisher expects to emerge from bankruptcy by end-July

June 28 | Fri Jun 28, 2013 8:31pm EDT

June 28 (Reuters) - The publisher of the Reader's Digest magazine said it expects to emerge from bankruptcy by the end of July after the bankruptcy court for the Southern District of New York approved its reorganization plan.

The Reader's Digest Association Inc and its affiliates filed for Chapter 11 bankruptcy protection for the second time in less than four years in February, citing a greater-than-expected decline in the media industry.

"The court's confirmation of our restructuring plan is an important step for our company and sets the stage for our future as a much more focused company," Chief Executive Robert Guth said in a statement.

The publisher, which had earlier filed for bankruptcy in 2009, will see its debt reduced by more than 80 percent to about $100 million under the restructuring plan, the company said.

It will also convert about $465 million of secured notes to equity.

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Stockton taxpayers want bigger role in California city's bankruptcy case

By Jim Christie

SAN FRANCISCO, June 28 | Fri Jun 28, 2013 9:55pm EDT

SAN FRANCISCO, June 28 (Reuters) - A group of California taxpayers went to court on Friday to demand a greater role in how the city of Stockton would raise taxes to exit the bankruptcy it filed a year ago.

The group asked the U.S. Bankruptcy Court in Sacramento for official committee status so its members could see details on Stockton's plan for increasing its sales tax. If granted this status, the group could also participate in talks about the city's plan to adjust its debts.

Stockton officials aim to file their debt-adjustment plan with the bankruptcy court in September following a vote by the city council on a sales tax increase.

Stockton's city manager wants the council to hold a vote next month on putting a ballot measure to voters in November that would ask them to raise the city's sales tax to 9.0 percent from 8.25 percent.

If approved by voters, the increase would go into effect next April and raise revenue to help Stockton exit bankruptcy, put more money into public safety programs and hire more police officers to help tackle crime in a city that ranks among the 10 most dangerous U.S. cities.

According to a draft of the tax plan, the increase would raise about $219 million over 10 years for public safety spending.

Over the same time, about $112 million in proceeds would fund the city's exit from bankruptcy. The effort would get a larger share of revenue initially as police staffing ramps up.

The taxpayers group wants more details on how the revenue would be allocated and it is concerned Stockton's creditors could press for a bigger share, which would set back plans for hiring more police officers.

"Creditors will no doubt seek as large a recovery as possible leaving taxpayers with significantly reduced health, safety and welfare services," according to an exhibit attached to the taxpayers group's court filing.

A city of about 300,000 residents in California's Central Valley, Stockton is the biggest U.S. city to have filed for bankruptcy and is trying to impose steep losses on its bond insurers and bondholders to restructure it finances.

The U.S. municipal debt market is watching to see if the Stockton prevails or its so-called capital markets creditors can convince the bankruptcy court to have the city cut its pension spending as part of a plan to exit bankruptcy.

Stockton has refused to cut pensions, saying it is prohibited by state law, and that its employees have suffered several years of pay and job cuts while its retired workers are losing subsidized medical coverage.

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Suntech strikes yet another deal with bondholders

June 28 | Fri Jun 28, 2013 9:19am EDT

June 28 (Reuters) - China-based solar panel maker Suntech Power Holdings Co Ltd, whose main unit is in insolvency proceedings, said it had struck a deal with a majority of its bondholders to defer payment on a $541 million loan until Aug. 30, the third time the company has reached such an agreement.

Suntech defaulted on a principal payment on the 3 percent convertible notes on March 15, prompting the company's Chinese lenders to drag its main manufacturing unit into insolvency proceedings.

Lenders holding the senior notes will nominate two additional members to Suntech's board and will help to identify strategic and financial investors to bring in new capital, the company said in a statement on Friday.

Suntech said it was also looking at converting all major debt claims held by the bondholders into equity.

The company reached a deal with 60 percent of the note holders in March to defer payments until May 15, when it announced that it had struck another deal with some lenders to defer obligations until June 28.

At the end of March 2012, Suntech had total debt of $2.2 billion, including loans from China Development Bank, and a $50 million convertible loan from the International Finance Corporation, the private sector arm of the World Bank.

Chinese creditors of the bankrupt unit, Wuxi Suntech, claimed at the start of the debt restructuring process in May that the subsidiary owed them $2.5 billion. The restructuring process is expected to go on for months.

The eastern Chinese city of Wuxi, where Suntech Power is headquartered, is trying to maintain the company's production capacity and save thousands of local jobs.

Suntech has said that its Chinese unit has been experiencing a gradual improvement in business after a court-appointed debt administrator pushed to recover accounts receivable and trimmed inventories.

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Reader's Digest publisher expects to emerge from bankruptcy by end-July

June 28 | Fri Jun 28, 2013 8:31pm EDT

June 28 (Reuters) - The publisher of the Reader's Digest magazine said it expects to emerge from bankruptcy by the end of July after the bankruptcy court for the Southern District of New York approved its reorganization plan.

The Reader's Digest Association Inc and its affiliates filed for Chapter 11 bankruptcy protection for the second time in less than four years in February, citing a greater-than-expected decline in the media industry.

"The court's confirmation of our restructuring plan is an important step for our company and sets the stage for our future as a much more focused company," Chief Executive Robert Guth said in a statement.

The publisher, which had earlier filed for bankruptcy in 2009, will see its debt reduced by more than 80 percent to about $100 million under the restructuring plan, the company said.

It will also convert about $465 million of secured notes to equity.

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Stockton taxpayers want bigger role in California city's bankruptcy case

By Jim Christie

SAN FRANCISCO, June 28 | Fri Jun 28, 2013 9:55pm EDT

SAN FRANCISCO, June 28 (Reuters) - A group of California taxpayers went to court on Friday to demand a greater role in how the city of Stockton would raise taxes to exit the bankruptcy it filed a year ago.

The group asked the U.S. Bankruptcy Court in Sacramento for official committee status so its members could see details on Stockton's plan for increasing its sales tax. If granted this status, the group could also participate in talks about the city's plan to adjust its debts.

Stockton officials aim to file their debt-adjustment plan with the bankruptcy court in September following a vote by the city council on a sales tax increase.

Stockton's city manager wants the council to hold a vote next month on putting a ballot measure to voters in November that would ask them to raise the city's sales tax to 9.0 percent from 8.25 percent.

If approved by voters, the increase would go into effect next April and raise revenue to help Stockton exit bankruptcy, put more money into public safety programs and hire more police officers to help tackle crime in a city that ranks among the 10 most dangerous U.S. cities.

According to a draft of the tax plan, the increase would raise about $219 million over 10 years for public safety spending.

Over the same time, about $112 million in proceeds would fund the city's exit from bankruptcy. The effort would get a larger share of revenue initially as police staffing ramps up.

The taxpayers group wants more details on how the revenue would be allocated and it is concerned Stockton's creditors could press for a bigger share, which would set back plans for hiring more police officers.

"Creditors will no doubt seek as large a recovery as possible leaving taxpayers with significantly reduced health, safety and welfare services," according to an exhibit attached to the taxpayers group's court filing.

A city of about 300,000 residents in California's Central Valley, Stockton is the biggest U.S. city to have filed for bankruptcy and is trying to impose steep losses on its bond insurers and bondholders to restructure it finances.

The U.S. municipal debt market is watching to see if the Stockton prevails or its so-called capital markets creditors can convince the bankruptcy court to have the city cut its pension spending as part of a plan to exit bankruptcy.

Stockton has refused to cut pensions, saying it is prohibited by state law, and that its employees have suffered several years of pay and job cuts while its retired workers are losing subsidized medical coverage.

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Suntech strikes yet another deal with bondholders

June 28 | Fri Jun 28, 2013 9:19am EDT

June 28 (Reuters) - China-based solar panel maker Suntech Power Holdings Co Ltd, whose main unit is in insolvency proceedings, said it had struck a deal with a majority of its bondholders to defer payment on a $541 million loan until Aug. 30, the third time the company has reached such an agreement.

Suntech defaulted on a principal payment on the 3 percent convertible notes on March 15, prompting the company's Chinese lenders to drag its main manufacturing unit into insolvency proceedings.

Lenders holding the senior notes will nominate two additional members to Suntech's board and will help to identify strategic and financial investors to bring in new capital, the company said in a statement on Friday.

Suntech said it was also looking at converting all major debt claims held by the bondholders into equity.

The company reached a deal with 60 percent of the note holders in March to defer payments until May 15, when it announced that it had struck another deal with some lenders to defer obligations until June 28.

At the end of March 2012, Suntech had total debt of $2.2 billion, including loans from China Development Bank, and a $50 million convertible loan from the International Finance Corporation, the private sector arm of the World Bank.

Chinese creditors of the bankrupt unit, Wuxi Suntech, claimed at the start of the debt restructuring process in May that the subsidiary owed them $2.5 billion. The restructuring process is expected to go on for months.

The eastern Chinese city of Wuxi, where Suntech Power is headquartered, is trying to maintain the company's production capacity and save thousands of local jobs.

Suntech has said that its Chinese unit has been experiencing a gradual improvement in business after a court-appointed debt administrator pushed to recover accounts receivable and trimmed inventories.

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