April 2 Wed Apr 2, 2014 10:09am EDT
April 2 (Reuters) - A U.S. bankruptcy judge on Wednesday approved Detroit's plan to borrow $120 million from Barclays PLC to improve services in the cash-strapped city, according to newspaper reports.
The loan deal received previous approval from the Detroit City Council and Michigan's Local Emergency Financial Assistance Loan Board. (Reporting by Karen Pierog; Editing by James Dalgleish)
Wed Apr 2, 2014 3:11pm EDT
(Recasts with direct sourcing, adds quote from judge, background)
April 2 (Reuters) - A U.S. bankruptcy judge on Wednesday approved Detroit's plan to borrow $120 million from Barclays PLC to improve services in the cash-strapped city.
Judge Steven Rhodes, who is overseeing Detroit's historic bankruptcy case, overruled objections by city creditors who took issue with the timing and structure of the loan.
"This court has previously held the city is service-delivery insolvent," Rhodes said.
Detroit has said it plans to use some of the loan proceeds on public safety improvements.
The loan deal emerged early last month after a larger loan was rejected in part by the judge in January. The previous loan, backed largely by city casino tax revenue, included $165 million that Detroit wanted to use to pay two investment banks to end soured interest rate swap agreements that contributed to the city's filing of the biggest municipal bankruptcy in U.S. history in July. Those swaps were used to hedge interest rate risk on some Detroit pension debt.
In January, Rhodes ruled that the $165 million price tag was too high for the broke city.
On Thursday, the judge will hold a hearing on Detroit's latest plan to terminate the swaps at a deeply discounted cost of $85 million. Given the smaller amount of money and the fact it would be paid over time, the city has said it would no longer need to include it in the borrowing.
Under the $120 million loan, Detroit would no longer pledge the casino tax revenue, which is crucial to helping the city get back on its feet as it restructures its $18 billion of debt and other obligations. Instead, the city is pledging income tax revenue and the proceeds of asset sales, except for property of the Detroit Institute of Arts.
The loan deal received previous approval from the Detroit City Council and Michigan's Local Emergency Financial Assistance Loan Board. (Reporting by Karen Pierog; Editing by James Dalgleish and Dan Grebler)
By Joan Magee
Wed Apr 2, 2014 5:51pm EDT
NEW YORK, April 2 (IFR) - Ecuador could return to the international bond markets to raise up to USD1bn as soon as May or June, two investors said on Wednesday, including one with close ties to the sovereign.
The country, out of the market since defaulting on USD3.2bn of debt in December 2008, has hired Citigroup and Credit Suisse to meet investors in London and the States in the next few days.
While the meetings are officially not part of a new deal, the sovereign said last year it intends to be back in the debt capital markets in 2014.
"They wouldn't be ready for the April window, but I'd say this is more like May or June business," said the investor close to the issuer.
He said Ecuador is looking to raise as much as USD1bn, along with other market sources.
CLEARING THE DECKS
Since the default, Ecuador has bought back 91% of two bonds maturing in 2012 and 2030 at 35% of face value, leaving about USD288m outstanding.
Lazard, which was involved in some of the buybacks, has helped chip away at those, leaving around USD130m still in the market, according to one of the sources.
"The last chunk they bought back was well above reissue," said one distressed debt investor, giving a range of 43% to 45% of face value.
Lazard was not immediately available to comment.
But with that small an amount of remaining debt, investors are likely to be less concerned about potential litigation risks, the investor said.
"Market memory is pretty short. Primary market buyers don't look through documents with the same depth as distressed people either. I'd be surprised if an issue doesn't get done."
He added: "A couple of the big guys who held out on the initial deal may try to hold out for par, which would be a concern."
Ecuador, rated Caa1 by Moody's and B by both S&P and Fitch, has just one bond that trades, a deal maturing in 2015. It was seen Wednesday at 106.45 mid-market with a G-spread of 500bp and yield of 5.40%.
The country seems to be pulling out all the stops for the roadshow, sending out Finance Minister Fausto Herrera Nicolalde, Diego Martinez from the central bank and other top officials including Willam Vasconez Rubio, Paul Villareal, Daniel Falconi and Javier Lopez.
The Ecuadorean public credit office, Citi and Credit Suisse were not immediately available to comment. (Reporting by Joan Magee; Editing by Natalie Harrison and Paul Kilby)
April 1 Tue Apr 1, 2014 7:48pm EDT
April 1 (Reuters) - Momentive Performance Materials Inc said on Tuesday it may file for Chapter 11 bankruptcy and is in talks with stakeholders to restructure the debt of the silicone and quartz producer.
As of Sept. 30, the company had total liabilities of $4.14 billion, it said in a filing with the U.S. Securities and Exchanges Commission on Tuesday.
The unit of Apollo Global Management LLC said it was unable to file its annual report for the period ended Dec. 31, on March 31. (link.reuters.com/ryj28v)
In the filing, Momentive said Chapter 11 may be the most expeditious way to reorganize the company.
Momentive said it was "in active discussions with various stakeholders regarding alternatives to modify its capital structure and reduce the company's leverage."
Momentive was not immediately available for comment. (Reporting by Shubhankar Chakravorty in Bangalore; Editing by Richard Chang)
Tue Apr 1, 2014 8:10pm EDT
(Corrects filling date in second paragraph to Nov. 13 from Tuesday)
April 1 (Reuters) - Momentive Performance Materials Inc said on Tuesday it may file for Chapter 11 bankruptcy and is in talks with stakeholders to restructure the debt of the silicone and quartz producer.
As of Sept. 30, the company had total liabilities of $4.14 billion, it had said in a filing with the U.S. Securities and Exchanges Commission on Nov. 13.
The unit of Apollo Global Management LLC said on Tuesday it was unable to file its annual report for the period ended Dec. 31, on March 31. (link.reuters.com/ryj28v)
In the filing, Momentive said Chapter 11 may be the most expeditious way to reorganize the company.
Momentive said it was "in active discussions with various stakeholders regarding alternatives to modify its capital structure and reduce the company's leverage."
Momentive was not immediately available for comment. (Reporting by Shubhankar Chakravorty in Bangalore; Editing by Richard Chang)
April 2 Wed Apr 2, 2014 2:35am EDT
April 2 (Reuters) - A plan being discussed to reorganize Energy Future Holdings Corp will all but wipe out owners KKR & Co, TPG Capital and Goldman Sachs Capital Partners, Bloomberg reported, citing three people with direct knowledge of the negotiations.
The private-equity firms may accept as little as 1 percent of the equity in debt-laden Energy Future Holdings after it completes a Chapter 11 restructuring, the report said. (r.reuters.com/dum28v)
Energy Future was formed after KKR, TPG and the unit of Goldman Sach Group Inc led a record leveraged buyout of former TXU Corp in 2007.
Energy Future was expected to report that its auditor had determined it could not survive as a going concern, a finding that would have triggered a default on its loans and a likely bankruptcy filing.
However, the company said on Monday it has extended a deadline to file its annual report, giving it more time to negotiate with creditors as it seeks an agreement to reduce its crushing debt of more than $40 billion.
Sources close to the debt restructuring talks have told Reuters that the company is likely to be broken up in bankruptcy.
The proposal, which may still fall through, would also give full legal releases to KKR, TPG and Goldman Sachs, Bloomberg said.
Energy Future and the three private equity owners were not immediately available for comment outside regular U.S. business hours.
Energy Future owns 14 power plants, including five coal-fired plants. Its generation business, Luminant, and regulated distribution unit, Oncor, both rank among the largest in the United States. (Reporting by Supriya Kurane in Bangalore; Editing by Joyjeet Das)
March 31 Mon Mar 31, 2014 9:25pm EDT
March 31 (Reuters) - Some of Detroit's retirees and bondholders would fare a little worse under a revised plan the city filed in U.S. Bankruptcy Court on Monday to deal with its $18 billion of debt and other obligations.
Investors who bought Detroit bonds that the city has deemed to be unsecured would stand to recover only 15 percent of their investment, down from 20 percent in the initial plan Detroit filed in February. [ID: nL2N0LQ2N6] That would be a cut of 85 percent of their bonds' value.
At the same time, proposed cuts to pensions of some retired city workers grew in the revised plan. For police and fire retirees the potential cuts would rise to 6 percent from 4 percent in the previous plan in the case of a timely settlement, and to 14 percent from 10 percent if the plan is rejected and money pledged by foundations and the state of Michigan for retirees is not forthcoming.
The range of cuts to general city worker retirees remained the same at 26 percent with a settlement and 34 percent without.
The revised plan also lays out how voting by retirees on the plan would be construed as a timely settlement.
"If at least one half in number and two thirds in amount of holders of (Police and Fire Retirement System) pension claims and holders of (General Retirement System) pension claims separately vote in favor of the plan, then the holders of all such claims shall be deemed to have entered into a timely settlement with the city and the state," according to a revised disclosure statement the city also filed.
The amended plan also called for creating a separate class on impaired creditors, those with claims related to retiree health, dental, vision and death benefits. The claims would be treated the same as other non-pension unsecured classes of claims, according to the document.
Detroit also laid out its proposal to end costly interest-rate swap agreements with two investment banks at a deeply discounted cost of $85 million. That deal has yet to win approval of Judge Steven Rhodes, who is overseeing Detroit's historic bankruptcy case. He rejected two previously proposed deals as being too costly.
The city said it expects to file further changes before an April 14 hearing to approve the disclosure statement.
"The city looks to exit its historic bankruptcy by late summer as a fiscally solvent municipality that is better able to provide basic services to its residents," a statement issued by Detroit said.
Before the city's filing of a revised plan, bond insurer Syncora Guarantee Inc filed a motion to extend this week's deadline to file objections until April 14. That would push back a court hearing on any unresolved objections to Detroit's disclosure statement to April 28 from April 14, according to the motion.
Detroit's largest union, the American Federation of State, County and Municipal Employees Council 25; the city's two pension funds and other creditors supported the extension while the city condemned the move as a delay tactic.
A hearing on the motion is scheduled for Wednesday. (Reporting By Karen Pierog and Lisa Lambert; Editing by Mohammad Zargham)
HONG KONG, April 1 Mon Mar 31, 2014 10:09pm EDT
HONG KONG, April 1 (Reuters) - These are some of the leading stories in Hong Kong newspapers on Tuesday. Reuters has not verified these stories and does not vouch for their accuracy.
SOUTH CHINA MORNING POST
-- Pressure is growing on Hong Kong's pan-democrat lawmakers to join a trip to Shanghai after pro-government figures said they would find a way for them to have an exclusive meeting with Beijing officials. (link.reuters.com/vab28v)
-- Qianhai is planning to auction up to 15 parcels of land this year totalling 2.6 million square metres, a third of which will be sold only to Hong Kong companies as a way of attracting more investment from the city. (link.reuters.com/xab28v)
-- The Securities and Futures Commission has obtained a Hong Kong court order to appoint interim receivers to take over the management of decorative paper maker Qunxing Paper after its major subsidiary secretly started a bankruptcy proceeding on the mainland. (link.reuters.com/heb28v)
THE STANDARD
-- Local yuan deposits rose 3 percent month-on-month to a record 920.35 billion yuan ($148.01 billion) as of February, but the trend may not be sustained amid the recent volatility in the currency. Yuan deposits account for 12.3 percent of the total deposits in Hong Kong. (link.reuters.com/meb28v)
-- China Construction Bank plans to sell subordinated debt notes worth 20 billion yuan ($3.22 billion) to replenish capital and may also issue preference shares. (link.reuters.com/web28v)
-- The People's Insurance Company of China will continue to increase its exposure to fixed-income investments in the coming year, according to Vice Chairman Li Liangwen. (link.reuters.com/xeb28v)
HONG KONG ECONOMIC JOURNAL
-- Chinese gold producer Zijin Mining Group Co Ltd plans to produce 34 tonnes of gold this year, an increase of 7 percent from the previous year, according to Chairman Chen Jinghe, but slower than the 20 percent growth in 2013.
MING PAO DAILY NEWS
-- Five major developers -- Sun Hung Kai Properties , Henderson Land, New World Development , Cheung Kong and Sino Land -- sold 2,700 flats for HK$21.1 billion ($2.72 billion) in the first quarter of 2014, a decrease of 19 percent in terms of the number of flats sold and 30 percent in terms of value when compared with the fourth quarter of 2013.
For Chinese newspapers, see............... ($1 = 6.2180 Chinese Yuan) ($1 = 7.7571 Hong Kong Dollars) (Reporting by Donny Kwok; Editing by Subhranshu Sahu)
BRUSSELS, April 1 Tue Apr 1, 2014 4:18am EDT
BRUSSELS, April 1 (Reuters) - Nyrstar, the world's largest zinc smelting company, said on Tuesday it had agreed a loan deal with struggling Finnish miner Talvivaara in return for zinc ore.
Nyrstar said in a statement it would provide a loan of up to 20 million euros ($27.6 million) in several tranches, each advance linked to a delivery of zinc in concentrate from Talvivaara.
The new deal is structured to ensure Nyrstar continues to receive zinc while not increasing its net financial exposure to Talvivaara, Nyrstar said
Hurt by falling nickel prices and repeated production disruptions, Talvivaara sought a court-led reorganisation in November as it ran low on funds. It won court approval in December to renegotiate its debt, allowing it to continue mining and avoid the immediate risk of bankruptcy.
Nyrstar, Talvivaara's top creditor after paying 232 million euros in advance for zinc deliveries, said it continued to work with the Finnish firm along with others to find a potential investor or investors to help cover its funding gap.
If Talvivaara found a solution, Nyrstar said it would offer Talvivaara a "streaming holiday" -- exempting it for a time from delivering up to 80,000 tonnes from its initial supply agreement.
In the event of such a streaming holiday, Nyrstar would still purchase zinc ore from Talvivaara. It would also end the loan financing.
Nyrstar agreed in 2010 to acquire 1.25 million tonnes of zinc in concentrate from Talvivaara for a price of $335 million, with possible supplementary payments if the zinc price rose.
Nyrstar also said it would immediately be receiving about 10,000 tonnes of zinc in concentrate under its initial zinc streaming agreement. ($1 = 0.7256 Euros) (Reporting By Philip Blenkinsop; editing by Robert-Jan Bartunek)
By Laura Noonan
NICOSIA, March 30 Sun Mar 30, 2014 5:00am EDT
NICOSIA, March 30 (Reuters) - If John Hourican manages to drag Bank of Cyprus back from the brink of collapse, it would resurrect a financial institution, a national economy and his own career.
Deposed less than a year ago as Royal Bank of Scotland's head of investment banking, 43-year-old Hourican faces what is likely to be his defining legacy in trying to resuscitate the stricken Cypriot lender.
For now, the outcome is far from clear.
Hourican takes issue with the romanticised version of his decision to up sticks to Cyprus last November, six months after becoming the most high-profile victim at RBS of a rate-rigging scandal which the bank said the Irishman had no knowledge of.
"I think they (observers) read too much into motivation and into the planning of people's careers," said Hourican, who was paid 7.5 million pounds ($12 million) by RBS for 2011 and earned 141,000 euros for his first two months as Bank of Cyprus CEO. "I took the job because it was in front of me. I have never had a masterplan."
The fates of Bank of Cyprus and the Cypriot economy are intertwined. The island suffered the worst economic growth in the euro zone in 2013 and is expected to repeat that in 2014. The bank accounts for about 30 percent of the country's lending.
Europe is watching to see how Cypriot banks can recover after seizing funds of depositors to shore up capital, a precedent that informed a new EU-wide banking deal.
Russians, who were among the biggest losers in the deposit grab, remain wary of putting cash into the banks and are watching to see if their one-time haven can be restored.
But on the anniversary of its rescue, Bank of Cyprus is in a perilous state, with mounting loan losses, falling deposits and a still-fragile economy threatening its revival.
UPPING THEIR GAME
Over half of Bank of Cyprus's loan book is classed as non-performing, and while Hourican says there has been some recent stabilisation, the chief financial officer at rival Hellenic Bank, Antonis Rouvas, told Reuters he could not predict at what level the banking system's bad debts would stabilise.
They already make up than 40 percent of total lending across the sector, a tally unmatched in the euro zone and well above the 30 percent of neighbouring crisis-hit Greece.
Moves by local lawmakers could make things even worse. Marios Clerides, the chief executive of the Co-operative Central Bank (CCB), told Reuters his bank could need another bailout on top of the 1.5 billion euros it got in February if proposed new laws to protect private homes from repossession are enacted.
"You have to see the political environment we're working in," he said of banks' scant progress with non-performing loans. "The politicians want us to handle things with a velvety touch. The troika wants us to handle them aggressively. We are trying to handle them as best we can."
RBS's former deputy head of non-core operations, Euan Hamilton, is leading Bank of Cyprus's efforts to stem the tide of loan losses. Customers falling behind on their loans are now contacted by the bank as soon as they stop paying and independent experts review business plans of ailing customers before loans are restructured.
Bankers want the state to strengthen their hand by introducing new laws to help them foreclose on the assets pledged as security to back loans, a measure championed by the EC/IMF/ECB teams overseeing Cyprus's bailout.
"The objective is not to penalize householders, but banks need to have the tools to collect their money," Rouvas said.
Hourican and Rouvas are optimistic that lawmakers will come good, but others are not so sure. "People of influence have loans with the banks," said one experienced senior Cypriot banker, pointing to the unpredictability of parliament.
RESTORING TRUST
The most famously invoked parliamentary veto came last March, when politicians refused to sanction initial plans to seize deposits agreed between the government and EU leaders.
A year on, scars from the eventual deposit seizure are still raw, even for depositors at unaffected banks like CCB.
"We say 'we're well capitalised', but there is no trust," said Clerides. "We say that you are insured (for deposits under 100,000 euros). Their reaction is 'what guarantee can you give that they won't change the law?'."
Andreas Neocloueus, a Limassol lawyer who advises Russian clients, says he doesn't expect them to bring any more money into the island even if the political situation at home worsens. "They fear that the banking system is still sick," he said.
Capital controls, introduced to avoid mass withdrawals after the deposit grab, helped contain the fall in Bank of Cyprus's deposits in the last six months of 2013 to 2 billion euros.
"We've analysed the hell out of that," Hourican said on the subject of what would happen to his bank's 15 billion euros deposit book when the controls are fully lifted.
He expects restrictions within Cyprus to be eased over the coming months, but thinks restrictions on bringing money out of the country are likely to last another year. Between now and then, he must make Bank of Cyprus strong enough to withstand the hit.
BUILDING
The bank hired HSBC to review its business plan, including examining the feasibility of splitting itself into a good bank with healthy loans backed by deposits, and a bad bank with troubled loans backed by fresh funding. (ID:nL5N0MM34X]
"Although Cypriot banks have never been heavily reliant on the bond market, looking at what Greece's Piraeus has been able to achieve in recent weeks, I don't think it would be a surprise to see a Cypriot bank in the market," said Dierk Brandenburg, a senior bank credit analyst at Fidelity, referring to Piraeus's raising of 500 million euros on March 18.
Relisting shares, which were suspended in March 2013, is on the to-do list but Bank of Cyprus is likely to ask for an extension of the suspension when it runs out in July, Hourican said.
"A relisting of the stock for some of them (shareholders)would be an indication of progress. To me, there are other indications of progress we need to have in place first," he said, pointing to the bank's need to reduce its 10 billion euro reliance on last-resort central bank funding, tackle non-performing loans and sell non-core assets.
The bank is reforming how it lends, moving away from collateral-based lending to look at cash flow.
Hourican spent 16 years at RBS, where he overhauled the investment bank, cutting 10,000 staff and closing operations in 14 countries. A former colleague said he lost his job after RBS's investment banking arm fell out of political favour.
Hourican said he wants to "leave something lasting", but said he is not after a headstone that credits him with saving Bank of Cyprus.
"I am absolutely not that narcissistic," he said. ($1 = 0.6011 British pounds) (Additional reporting by Aimee Donnellan in London; editing by Tom Pfeiffer)
