Daily Insolvency News Headlines

Lehman Brothers Holdings Inc. on Thursday renewed its bid to have a federal judge revisit Barclays Plc's purchase of its U.S. operations days after the investment bank collapsed into bankruptcy, claiming the British banking giant secretly pocketed billions of dollars in assets without telling the court, Dow Jones Daily Bankruptcy Review reported. Lehman says Barclays Plc earned a "windfall" of over $11 billion when it bought Lehman's broker-dealer business in September 2008, a gain Lehman says was the result an undisclosed "asset grab" that wasn't disclosed to the bankruptcy judge who approved the sale. In a filing Thursday in U.S. Bankruptcy Court in Manhattan, Lehman says Judge James Peck on Sept. 19 approved the sale of some $70 billion "book value" of securities, which would offset a similar amount of liabilities. But Lehman says the "negotiated" sale price for the assets had nothing to do with "book value" and contained an embedded $5 billion gain for Barclays that wasn't disclosed. "The embedded gain was known only to a small group of Lehman employees who were planning to join Barclays as soon as the sale transaction closed," Lehman said in court papers. But it wasn't known to the Lehman board - who were told the deal was a "wash" - that approved the sale. Meanwhile, Barclays' board was told it would generate substantial gain on day one. Lehman wants Peck to modify the sale order, forcing Barclays to return the excess value of the assets to Lehman's bankruptcy estate. Barclays has denied Lehman's secret windfall claims, arguing it was "no secret" and "publicly announced" that the deal was structured so the bank would see an immediate gain the moment the deal closed. It also says it's still owed more than $3 billion from the deal. A key element in the dispute is the so-called clarification letter, which finalized the types of assets Barclays was acquiring. Lehman says the letter was never presented to the court, and yet it resulted in "material changes" to the deal that transferred billions of dollars in additional assets to Barclays.

Greek Prime Minister George Papandreou is racing to secure an explicit pledge of European aid and cut his country’s borrowing costs as €20 billion ($27 billion) of debt comes due in the next two months, Bloomberg reported. With investors still demanding Greece pay 3 percentage points more than Germany on its 10-year debt, Papandreou says Greece can’t afford to hold out much longer at current market rates. His government still needs to raise another €10 billion to repay bonds maturing on April 20 and May 19. Papandreou’s appeal to the European Union to help him steer interest rates lower is being stymied by a deepening split among the bloc’s leaders. While French President Nicolas Sarkozy said the euro region would rescue Greece if necessary, German Chancellor Angela Merkel’s government yesterday signaled it’s ready to turn its back and force Papandreou to seek International Monetary Fund assistance. Read more.

Germany hasn't ruled out International Monetary Fund aid for Greece, a spokesman said Friday, Dow Jones reported. Ulrich Wilhelm, Chancellor Angela Merkel's main spokesman, told reporters Friday that because Greece hasn't requested aid from Germany or the European Union, there's no basis for making a decision. "It's an open question," Wilhelm said, adding that whether and how to provide aid for Greece would be "decided quickly" if Greece were to make such a request. "The government has not ruled out financial aid from the IMF," Wilhelm said. Greek Prime Minister George Papandreou said in Brussels Thursday that he wants guarantees of financial support to come out of an EU summit in Brussels set for next Thursday and Friday. He said he might turn to the IMF for help if Europe isn't more forthcoming. Euro-zone countries have so far made vague pledges to help Greece if it can't borrow enough funds from bond markets to cover its debts due in April and May. Read more. (Subscription required.)

Bank of England Deputy Governor for Financial Stability Paul Tucker said Friday that top policymakers need to face up to tough questions on how insolvency and resolution laws are applied to internationally active companies--an issue which has been ignored for far too long, Nasdaq reported on a Dow Jones story. In a speech in Brussels, Tucker stressed that while coordination of national special resolution regimes would be helpful, they aren't sufficient to deal with troubles at large complex financial institutions, since the tools can't be applied extraterritorially. Officials must decide whether they want international collaboration in the resolution of cross-border banking groups, he said. "I believe that top-level policymakers have to choose what kind of regime they want. This issue needs to be elevated above the level of middle-ranking technocrats where, through no great fault of their own, it has wallowed for too long," Tucker said. Read more.

Criminal charges have been laid against four directors of Capital + Merchant Finance – one day after the Serious Fraud Office launched an investigation into the failed finance company, The National Business Review reported. The Securities Commission has been investigating Capital + Merchant since it went into receivership in November 2007, owing $167 million to about 7000 investors. The company’s receivers Grant Thornton have said it is unlikely any of these funds will be recovered. The Commission alleges investors were mislead by Capital + Merchant Finance’s August 2006 prospectus and advertisements, which misrepresented the investment risks, especially in relation to related party lending, insurance cover and liquidity. It says the current four directors made similar untrue statements about liquidity and cashflow in the registered prospectus and investment statement dated 10 September 2007. Read more.

A senior Chinese trade official warned that any further appreciation of the Chinese currency risked driving exporters out of business, underscoring the domestic political pressures on Beijing amid growing international calls for China to let the yuan rise, The Wall Street Journal reported. Vice Commerce Minister Zhong Shan, in an exclusive interview Thursday ahead of a visit to the U.S., said that the profit margin on many Chinese export goods was less than 2%. Most exporters absorbed the appreciation in the value of the yuan that followed its revaluation in 2005 by boosting innovation and cutting costs, but many were forced to close, he said. A further rise in the currency's value would endanger more exporters' survival, which China can't afford, he said. U.S. lawmakers and business groups rejected Mr. Zhong's argument, and said China needed to address concerns over its currency if it wanted to avoid further irritating bilateral tensions. Mr. Zhong talked about a potential tipping-point effect to describe the fragile situation of many exporters. "Water doesn't boil if it is heated to 99 degree Celsius. But it will boil if it is heated by one more degree," he said. Likewise, "a further rise in the yuan by a very small magnitude might cause fundamental changes" to exporters in China, he said. Read more. (Subscription required.)

Hong Kong bankruptcy petitions in February fell 54.9 percent from a year earlier, government data showed on Friday, indicating the economy is on course for a recovery, Reuters reported. Bankruptcy petitions were down 16.8 percent in February to the previous month, but monthly figures are not seasonally adjusted. Petitions totalled 677 in February, down from 1,500 a year earlier. Bankruptcies reached a six-year high of 1,872 in March 2009, as the economy was hit hard by the global financial crisis. It pulled out of recession in the second quarter. Read more.

UAE banks are likely to keep a tight lid on lending in coming years, even if the sector manages to avoid an immediate hit from the Dubai World debt restructuring, analysts say. The state-owned conglomerate, which is grappling with $26 billion in debt, is in the final stages of preparing a debt restructuring plan to put to its 97 creditors. Analysts have voiced concerns that domestic lending would dry up if banks are forced to take big losses on Dubai World-related debt. The IMF estimated banks across the region would have to raise $10 billion in funds if they were forced to absorb a 50 percent loss, or "haircut", on their Dubai World loans. The UAE banking sector, already crippled by large-scale defaults in Saudi Arabia and the Dubai property bubble, is struggling to reach pre-financial crisis profit levels. Read more.

A Manuwatu dairy farmer who was convicted for obstructing an animal welfare officer has had his company placed into receivership after apparently over-extending on debt, The National Business Review reported. PricewaterhouseCoopers partners Maurice Noone and John Fisk have been appointed as receivers of Robert McVitty’s company McVitty Properties and Patoka Dairies, in which McVitty Properties holds a majority stake. Mr Noone said the company appears to have over extended itself, and has not be able to secure the necessary funding to fund current operations and current debt levels. Read more.

Chancellor Angela Merkel of Germany, adopting a harsher tone toward Greece than the one expressed by some other European leaders, said Wednesday that Europe needed better rules to police its members, and she tacitly endorsed a proposal to eject wayward countries from the group of countries that use the euro, The New York Times reported. Speaking before a session of Parliament in Berlin, Mrs. Merkel referred to a proposal made last week by Wolfgang Schäuble, the German finance minister. As she described the proposal, “It would even be possible to exclude a country from the euro zone when over the long term it no longer fulfills the conditions.” “Otherwise, we can’t work together,” Mrs. Merkel said, though she stopped short of explicitly endorsing the idea. This week, finance ministers for the 16 countries in the euro zone promised loans, if necessary, to help Greece overcome its debt problems. The ministers have not yet agreed about how to structure the aid, and Mrs. Merkel’s statement on Wednesday seemed to suggest that European leaders were interpreting the aid promise in different ways. Read more.