The Star Online: Business
The Star Online: Business |
- Lehman bankruptcy payout plan gains momentum
- Europe again steps back from brink in debt crisis
- Italy eyes asset sales worth $52 billion: Treasury
| Lehman bankruptcy payout plan gains momentum Posted: 29 Sep 2011 06:00 PM PDT NEW YORK (Reuters) - With more than $140 billion worth of claimholders now supporting its proposed bankruptcy exit plan, Lehman Brothers Holdings Inc's prospects for getting the plan approved by the end of the year are brightening. Three months ago, the fallen investment bank was in a battle for control of its bankruptcy with creditors who had their own ideas for how assets should be allocated. But after a string of successful negotiations with those creditors, including Wednesday's accord with Bank of America Corp and its Merrill Lynch unit, many of Lehman's largest creditors now support a plan that will give creditors $65 billion, on average roughly one-fifth what they are owed. "It certainly looks like they're moving in the direction of a largely consensual confirmation hearing," said Stephen Lubben, a professor at Seton Hall University School of Law. That is not to say confirmation will be a breeze, Lubben said. Lehman, the largest Chapter 11 debtor in history, may still be in for a "laborious" hearing, he said. "But if you're taking the big creditors off the table, the hope is you'll only have to deal with a handful of objections from smaller ones," he said. A Lehman spokeswoman on Thursday said about 50 large creditors with $140 billion of claims now support its plan. Bank of America and Merrill agreed to support the plan and reduce their derivatives claims against Lehman by $7.5 billion -- about $4 billion in underlying claims and another $3.5 billion in guarantee claims. Lehman touted the deal in the context of its larger effort to resolve disputes with big bank derivative counterparties. "When we set out to create the derivatives settlement framework, we were hopeful that we could successfully bring the big banks to the table ... and avoid litigation," Daniel Ehrmann, Lehman's co-head of derivatives, said in a statement. "This motion today ... brings the total banks with which we have settled to 10 of 13," Ehrmann said. Among the other creditors who back Lehman's plan are bondholders led by hedge fund Paulson & Co, and other large banks with derivatives claims, such as Morgan Stanley and Goldman Sachs Group Inc . If enough creditors vote to approve Lehman's reorganization plan in a November 4 ballot, it will go before a bankruptcy court for a confirmation hearing beginning December 6. Court confirmation could allow it to exit bankruptcy and begin payouts in the first quarter of 2012. Lubben said the bank has every incentive to emerge from bankruptcy as soon as it can. "If the plan is confirmed and creditors appeal, there's a better chance those appeals will be denied if the plan has already been implemented and distributions have begun," he said. Lehman's $639 billion bankruptcy in 2008 was a major catalyst of the financial crisis. Its thousands of creditors have asserted well over $300 billion in total claims. The case is In re Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555. |
| Europe again steps back from brink in debt crisis Posted: 29 Sep 2011 05:58 PM PDT BERLIN (Reuters) - Following a now-familiar script, Europe again averted disaster in its debt crisis when German lawmakers rallied behind Chancellor Angela Merkel to approve a stronger euro zone bailout fund on Thursday. But bigger challenges loom for the euro zone now. Financial markets are already anticipating a likely Greek default and demanding more far-reaching measures to prevent the crisis that began in Athens from spreading far beyond Europe and its banks. The Bundestag (lower house) overwhelmingly approved new powers for the 440-billion-euro EFSF fund to make precautionary loans, help recapitalize banks and buy distressed countries' bonds in the secondary market. Despite a rebellion by 15 backbench Euroskeptics, Merkel won 315 votes from her own center-right coalition, enough to avoid the humiliation of having to rely on the opposition Social Democrats and Greens to pass the plan. "The result of the vote is a strong signal for Europe. The broad majority in parliament clearly shows that Germany is committed to the euro and to protecting our currency," said Hermann Groehe, general secretary of her Christian Democratic party. The measure was part of a July 21 agreement by euro zone leaders meant to solve the crisis by providing a second bailout for debt-stricken Greece, partly funded by private sector bondholders, and providing more firepower to prevent contagion engulfing bigger EU economies Spain and Italy. But that deal failed to stop Italian and Spanish borrowing costs soaring, forcing the European Central Bank to intervene in August to buy their bonds, and may yet unravel in Greece, which has fallen behind again on its deficit reduction targets, pushing it closer to default. "There is a growing realization, even among the more reticent, that the July 21 package is yesterday's war, and we need to go further," a senior EU official said, speaking on condition of anonymity. The euro and European shares ticked up and safe-haven German bonds fell after the closely-watched vote in Europe's pivotal power, where public opposition to further bailouts is rife. But analysts said financial markets and outside powers still want a more comprehensive response from European Union policymakers to the debt crisis. U.S. President Barack Obama kept up a drum beat of criticism of the EU's crisis management, saying on Wednesday: "In Europe, we haven't seen them deal with their financial system and banking system as effectively as they need to. EU officials are already working on ways of leveraging up the rescue fund, but kept those legally and politically fraught options under wraps ahead of the German vote to avoid antagonizing waverers in the Bundestag. Underscoring the sensitivity, German Economy Minister Philipp Roesler, leader of the liberal Free Democrats, junior partners in Merkel's coalition, said on a visit to Brussels after the vote that Berlin does not want to leverage the bailout fund. The European Commission welcomed German approval of the EFSF boost and said it was confident the ratification process would be complete throughout the 17-nation currency area by mid-October. Elsewhere in Europe, there was a sense of relief. French President Nicolas Sarkozy telephoned Merkel to congratulate her and invited Greek Prime Minister George Papandreou to talks in Paris on Friday to discuss Greece's precarious debt situation. Papandreou met Merkel in Berlin on Tuesday. Cyprus also back the EFSF's new powers on Thursday, taking the number of states that have approved to 12. Of the remainder only Slovakia's endorsement looks politically tricky. PAIN IN SPAIN, ITALY Despite the German vote, developments in Spain and Italy highlighted the stark challenges still facing the euro zone in coping with the sovereign debt crisis. Spain's ruling Socialists abruptly shelved plans to boost public coffers by selling part of the state lottery for up to 9 billion euros ($12 billion), in the face of tough market conditions, political opposition and banks' funding concerns. The backtracking, a day before book building was supposed to begin on the public offering of 30 percent of Loterias, was a blow a few weeks before a November 20 election, which opinion polls show the center-right People's Party sweeping. Banks involved in the sale, Santander and BBVA, saw the Loterias flotation as a direct rival to their efforts to bolster their capital by enticing Spaniards to withdraw deposits to invest in lottery shares. Italy meanwhile had to pay the highest yield on a 10-year bond since the introduction of the euro in 1999 at an auction on Thursday, the first long-term sale since Standard & Poor's cut the country's sovereign credit rating. Rome's funding costs remain under pressure despite ECB bond-buying and a pick-up in risk appetite due to expectations of a stronger euro rescue fund. Analysts say the government's tentative crisis response has harmed investor confidence. Italy sold 7.86 billion euros of long-term bonds, moving closer to an overall issuance target of 430 billion euros for the year, but the 10-year yield rose to 5.86 percent at the auction, up from 5.22 percent a month ago. "That's eye-watering yield levels," said David Schnautz, a rate strategist at Commerzbank. In Athens, senior officials of the troika of European Commission, ECB and International Monetary Fund resumed talks aimed at checking that Greece has met the terms of its bailout program after adopting new austerity measures. The Greek Finance Ministry called the climate "positive and creative". The government will run out of money to pay salaries and pensions in October unless it receives the next 8 billion euro installment of emergency loans. It pushed an unpopular new property tax through parliament this week despite public anger. Anti-austerity protesters blocked the entrances to several ministries before the start of the talks. Around 200 finance ministry employees gathered in front of their ministry, shouting: "Take your bailout and leave." "The occupations are carried out today when the troika returns to our country and as we face new barbaric measures which were decided and are being decided for further wage reductions ... new tax hikes and mass layoffs," public sector ADEDY said in a statement. |
| Italy eyes asset sales worth $52 billion: Treasury Posted: 29 Sep 2011 05:56 PM PDT ROME (Reuters) - Italy could raise 35-40 billion euros ($47-$52 billion) from sales of real estate and other state-owned assets to cut its public debt, the Treasury said on Thursday. Real estate sales could be worth between 25 billion and 30 billion euros, and the sale of carbon emission permits could raise 10 billion euros, it said in a statement. Italy, which has been sucked into the euro zone debt crisis, is struggling to convince markets and ratings agencies that it can reduce its huge public debt equal to around 120 percent of gross domestic product. On Thursday it opened a seminar on state assets intended to assess their total value and how they can contribute to improving the country's strained public finances. "Today a big structural reform gets underway to reduce the debt and to help the country's modernization and growth," Economy Minister Giulio Tremonti said. The Treasury said measures to increase annual income from the management of its assets could reduce the budget deficit by 9.8 billion euros by 2020. It estimated total state assets were worth 1.815 trillion euros, just marginally below the size of the public debt. However, successive governments have talked for years about the possibility of raising countless billions of euros from selling assets from all sorts of assets from barracks to beaches, but with few practical results. On a more modest scale, the Industry Ministry announced on Thursday that the auction to sell Italy's fourth generation mobile frequencies, which closed on Thursday, had raised almost 3.5 billion euros. Most of the money has already been accounted for in the national budget. |
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