Tag Archives: UK Businesses for Sale

US may default on its debt a half-month earlier than expected, new analysis shows

8 Jan

The government hit the $16.4 trillion statutory debt limit on Dec. 31 , but the Treasury Department is able to undertake a number of accounting schemes to delay when the government runs into funding problems.

The Treasury has said that the accounting schemes, known as “extraordinary measures,” ordinarily would forestall default for about the first two months of the year, though officials were clear that they could not pinpoint a precise date because of an unusual amount of uncertainty around federal finances.

“Our numbers show that we have less time to solve this problem than many realize,” Steve Bell, senior director of economic policy at the Bipartisan Policy Center, said in a statement. “It will be difficult for Treasury to get beyond the March 1 date in our judgment.”

The fast-approaching deadline to raise the debt limit is likely to be Washington’s next fiscal battleground. Republicans say they plan to use the occasion to demand deep federal spending cuts, with House Speaker John A. Boehner insisting on a dollar reduction in federal spending for every dollar increase in the nation’s borrowing limit.

But the White House says President Obama will not negotiate this point, since the debt ceiling represents a limit to obligations that Congress already has promised to pay.

“What he will not do — as he has made clear — is negotiate with Congress over Congress’s sole responsibility to pay the bills that Congress has already incurred,” White House Press Secretary Jay Carney said on Monday. “Nobody forced Congress to rack up the bills that it incurred. And it is an abdication of responsibility to say that we’re going to let the country default and cause global economic calamity simply because we’re not getting what we want in terms of our ideological agenda.”

The Bipartisan Policy Center’s debt-limit deadline is based on several assumptions, two of which conceivably could change the calendar.

One is that the confusion around end-of-year tax policy could lead to delays in the filing of taxes and refunds, throwing a curveball into projections about the nation’s finances.

The other is the overall pace of economic growth; faster growth tends to lift tax receipts.

If Congress does not raise the debt ceiling by the deadline, the White House has said that the nation likely would default. In a previous episode — in the summer of 2011 — officials determined that the best course would be to withhold all of a given day’s federal payments until enough money became available to pay them.

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47.3% in Spain Expect Worse for 2013

13 Dec

An opinion poll carried out by the Government agency CIS, revealed 47.3% of Spaniards believe 2013 will be worse than 2012, whilst 31,7% think it will be much of the same. Only 12.6% had any hopes that it might improve, as predicted by the despairing Prime Minister Rajoy.
54.7% described the present economic situation as ‘very bad’. In the list of the 10 worst problems for the country, unemployment and evictions were top, followed by the political parties, the problems with the health system, corruption, the banks and immigration.

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Spain: The crisis of the week:

13 Dec

On Monday the country risk rose to 430 points and the interest rate on 10 year public bonds reached 5.61%
The Fitch Agency has warned that the prospects for the Spanish banking sector will be ‘negative’ in the coming year, due to public debt and the privatisation of nationalised entities
Eurostat reports that Spain, together with Romania, Bulgaria and Greece, has the largest percentage of people at risk of poverty, with 22% of total population
In spite of the refinancing of the banks, agency Moody warns that the number of bad loans in the Spanish banking system will continue to increase in 2013, and prices for dwellings continue to fall.

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Spain faces cuts of €20 billion

13 Dec

Spain is facing EU subsidy cuts of €20 billion, which means that for the first time it will become a net contributor – that is, paying more in than it gets out.

The reduction, scheduled for the period 2014 to 2020, will reduce Spain’s GDP by 2%, further weakening the country’s already fragile economy.

The cuts will affect agricultural subsidies by 17% and ‘cohesion funds’, payments made to help balance disparities between the regions, by 30%.

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Spain’s Black Money Whitewash

13 Dec

As Hacienda, the Spanish tax authority, continues to chase ‘the little man’ with more enquiries, inspections, taxes and IVA, what news of those millonarios who keep their money in Offshore Tax Havens?

A fiscal amnesty put into place in June by the Government to bring back money stashed offshore with a flat 10% tax on the entire sum returned and reported was looking like a flop after only 6% of the estimated 2,500 million euros of the expected surge of money had in fact shown up by late October.

An estimated figure (when was it ever anything else?) of 71.7% of all money which eludes the Spanish Tax-man is said to come from grandes fortunas y corporaciones empresariales – the über-wealthy and large companies. Despite this, it is reported that Hacienda prefers to spend most of its energies on investigating the self-employed, small companies and ordinary private-sector employees.
According to the BBC, the world’s ‘super-rich’ were holding at least $21 trillion in ‘secret tax havens’ at the end of 2010. Where much of it is evidently going to stay.
The amnesty, which ran out on the final day of November, eventually collected 1,200 million euros of off-shore money – a miserly portion of the hoped-for sum.

The Minister for Hacienda y Administraciones Públicas, Cristóbal Montoro, in a final attempt to increase the amount, had reminded the wealthy in late November that crimes against the Public Purse are never ‘prescribed’ – which must have encouraged a few of Spain’s wealthier patrons of the Swiss banking system to roll over.
Thus, the fiscal amnesty which was to bring in untold millions from off-shore bank accounts, paying a measly 10% and no questions asked, was anything other than a success, with less than half the expected windfall collected.

An amusing article in a Spanish web-page called ‘Voxpopuli’ notes that Hacienda should have sent a photographer to Geneva airport in late November to record the long lines of people wearing dark glasses while carrying little more than a bulging briefcase and queuing up for their flights to Spain.
Now it seems that the civil servants who make up the staff of Hacienda were against the idea from the start and they have decided, despite guarantees to the contrary from the Department of the Treasury, to audit all those millonarios who, gritting their teeth as they reluctantly decided to do the right thing, sidled into the bank recently with a heavy suitcase. It hardly needs saying that this poor sportsmanship on the part of Hacienda will probably discourage others from stepping forward at a later amnistía fiscal.

A tax-man from Hacienda, writing on Monday in the ‘Nueva Tribuna’, suggests that a reorganisation of Hacienda and the Tesoro Público (in charge of the politics of the economy), allowing more focus on the Wealthy, would generate savings and weaken the ‘underground economy’ with an estimated increase in revenue to the State of over 6 billion euros.

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Eurozone crisis far from over, ECB, IMF warn

6 Dec

— The eurozone’s crisis is far from over and its members must consolidate their budgets and forge a banking union to put the bloc on a more stable economic footing, the leaders of the IMF and European Central Bank said on Friday.
Underlining the bloc’s woes, data showed both German retail sales and French consumer spending falling faster than expected as well as stubborn Spanish inflation that will likely lift the cost of state pension rises for an already hard-pressed budget.
Eurozone wide numbers showed another 173,000 people joining record jobless queues in October, while a dive in consumer price inflation offered only limited relief to households struggling with the recession.
Speaking in Paris, where the government is trying to dispel concerns raised by the IMF that France could be left behind as Italy and Spain reform at a faster pace, ECB President Mario Draghi said the eurozone’s three-year-old crisis was likely to stretch deep into next year.
“We have not yet emerged from the crisis,” Draghi told Europe 1 radio. “The recovery for most of the euro zone will certainly begin in the second half of 2013.”
“It’s true that budgetary consolidation entails a short-term contraction of economic activity, but this budgetary consolidation is inevitable,” Draghi said, speaking through a translator.
A Greek bankruptcy could lead to the break-up of the eurozone
German lawmakers approved the latest bailout for Greece on Friday by a large majority despite growing unease about the cost to taxpayers less than a year before federal elections.
The package, which aims to cut the Greek debt load to 124 of national output by 2020, coincides with increased speculation among German lawmakers and media that eurozone governments will eventually have to write off much of the Greek debt they hold.
Finance Minister Wolfgang Schaeuble said in the Bundestag debate that such speculation could undermine the Greek government’s reform drive.
“If we say the debts will be written off (Greece’s) willingness to make savings is correspondingly weakened. Such false speculation does not solve the problems,” he said. “A Greek bankruptcy could lead to the break-up of the eurozone.”
ECB policymakers hold their regular monthly policy meeting next week and are widely expected to leave interest rates on hold at a record low of 0.75%. Economists are divided on whether the central bank will cut next year.
Draghi has stressed the ECB is ready to help tackle the crisis by buying potentially unlimited amounts of sovereign debt under its new bond-buy plan but until Spain applies for aid, a prerequisite for the ECB to intervene, it cannot use the tool.
Resisting fresh ECB action, Bundesbank chief Jens Weidmann said on Thursday central bankers had done more than enough to fight the crisis and it was now up to governments to act by reforming their economies and making the banking sector solid.
BANKING UNION
Draghi, in Paris for a conference with top financial officials, said eurozone governments should push ahead quickly with implementing a banking union which must apply to all banks to avoid fragmenting the sector.
His position puts the ECB, which would take on the role of pan-European banking sector, at odds with Germany. Berlin has said that unified banking supervision under the aegis of the ECB should apply only to the bloc’s largest banks.
Joerg Asmussen, one of the ECB’s key negotiators for a closer integration of the eurozone and a former deputy German finance minister, said late on Thursday a new European banking supervisory body would not be ready to operate fully before 2014.
But International Monetary Fund head Christine Lagarde pressed for swift implementation of a banking union that would have powers to supervise all banks in the eurozone.
“Banking union seems to us to be the first priority,” Lagarde said during the meeting with top financial officials in Paris, adding that closer budgetary consolidation should be the next priority.
The economic situation in the eurozone remained fragile and governments should maintain a “reasonable” pace of budgetary consolidation to avoid crimping growth, she added.

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Spain’s Bad Bank Seen as Too Big to Work: Mortgages

6 Dec

Spain’s bad bank will struggle to sell the 90 billion euros ($117 billion) of toxic property assets it takes from other lenders because of its size and inability to help buyers finance purchases.
“When managing tens of thousands of assets scattered across the whole of Spain, big is not beautiful, it’s sheer chaos,” said Mikel Echavarren, chairman of Irea, a Madrid-based financial adviser. A large, “clumsy” bad bank will be at a “tremendous” disadvantage and will generate losses that Spaniards will have to pay for.
Spain’s efforts to sell as much as 90 billion euros ($117 billion) of toxic property assets it uses to create a bad bank from lenders that take state aid will be constrained by the size and inability to provide credit to potential buyers, adding to the risk of taxpayer losses.
The country has until the end of next month to establish the institution, a condition for receiving 100 billion euros of external aid for the financial system it requested in June. Premier Mariano Rajoy’s government seeks to purge about 180 billion euros of bad assets that the Bank of Spain says are on the balance sheets of lenders. The government has said the bank will be profitable and won’t cost taxpayers.
The bad bank will not take deposits and so won’t be able to provide financing to potential buyers of its assets, Antonio Carrascosa, director general of the state run FROB bank-rescue fund, said in an Oct. 18 interview at a Barcelona conference.
The aim is to place soured real estate loans and other assets in the vehicle for as long as 15 years in the hope that, once cleansed of bad property bets, banks can resume lending and reactivate an economy mired in its second recession since 2009. The bad bank will have to compete with healthier lenders that have set up units to sell their own problem assets and can provide credit, known as vendor financing, to potential buyers.
Financing Agreements
“It won’t be a bank and the only way it may be able to achieve sales with attractive mortgages is by reaching financing agreements with other banks, which will be competing to deleverage their own real estate,” said Fernando Acuna Ruiz, managing partner of Taurus Iberica Asset Management in Madrid.
Acuna, whose company oversees 60,000 foreclosed properties on behalf of 25 banks, said that while the structuring will be in place by December, it will be “mammoth,” with tens of thousands of assets and loans to service and transfer onto its books. “Integrated management won’t be up and running for 12 to 24 months after,” he said.
Known by its Spanish acronym SAREB, it will have as much as 90 billion euros of assets based on their transfer price, initially comprising land, developer loans and residential units that went bad after Spain’s decade-long real estate boom turned to bust, an Economy Ministry official who spoke on condition of anonymity told reporters on Oct. 17.
Transfer Valuations
The Bank of Spain has yet to fix transfer valuations for the assets based on the stress tests of Spanish lenders carried out by management consultants Oliver Wyman and published on Sept. 28. The 90 billion-euro number is based on transfer prices, so the original value of the assets is likely to be higher.
In comparison, Ireland’s National Asset Management Agency, set up in 2009, spent 32 billion euros on mortgages with a face value of 74 billion euros to cleanse its banking system.
Lenders that take state aid will have to transfer to the bad bank foreclosed property of more than 100,000 euros, real estate and builder loans of more than 250,000 euros and controlling stakes in property firms, according to the Economy Ministry official. A decree to regulate the entity should be passed on Nov. 16. It may be amplified in the future to include loans to consumers, small- and medium-sized enterprises and retail mortgages.
‘Consume Capital’
“It will need a legion of lawyers, notaries and debt servicers to ensure properties and loans have no legal issues and change title documents,” Echavarren said by telephone. “By the time they find out what and where the assets are, they won’t have any idea of what they have and what to do with it for at least a year.”
The vehicle won’t have the resources to manage assets, which are like “livestock that consume capital,” he said. Holding the assets cost money in taxes, maintenance and security and will generate losses for Spaniards.
Spain is considering giving tax breaks to the bad bank, two people familiar with the matter said. They asked not to be named because the information isn’t public.
A lack of financing options will also hamper the bank, Echavarren said. “A bad bank can try to compete by slashing prices but as a buyer if you can’t get a loan, and the bad bank won’t be able to provide them, you can’t buy full stop.”
The FROB, which will be a shareholder in the bad bank, is searching for investors to take at least 51 percent of the vehicle, an onerous task, according to analysts including Krista Davies at Fitch Ratings.
Skeptical Investors
“Equity investors in the private sector are likely to be skeptical of the benefits to be drawn from investing in a wind- down vehicle,” Davies wrote in an Oct. 22 report. “As SAREB purchases will take place during a period of uncertainty around economic development in Spain, there is likely to be only a small number of potential private investors in SAREB.”
Jaime Guardiola, chief executive officer of Banco Sabadell SA, told reporters today in Madrid that more details about the bad bank are needed before it can decide on a possible role for the vehicle. Banco Santander SA (SAN) Chief Executive Officer Alfredo Saenz said he has concerns over the transfer price of assets, though they are based on incomplete information.
Concerns about Spain’s creditworthiness have grown since the government, which is struggling to trim a 2011 deficit that was more than three times the EU limit, requested as much as 100 billion euros in European Union aid in June to shore up its lenders and its economy contracted for a fifth quarter.
Ratings Reviews
On Oct. 17 Spain avoided joining euro-region peers Cyprus, Portugal, Ireland and Greece as being rated below investment grade by Moody’s Investors Service as it concluded a review for a possible further downgrade of Spain initiated in June. Standard & Poor’s lowered Spain’s ratings to BBB- on Oct.10.
According to Carrascosa, the bad bank “cannot make losses in the short, mid or long term.” As well as reaching accords with banks participating in the vehicle, the bad bank will need to reach agreements with other “healthy” financial institutions to arrange vendor financing, he said.
It also hasn’t ruled out selling homes individually.
“We can’t set up offices all over Spain because it’s too big so we’ll try to sell packages of assets to institutional investors and not individual apartments,” he said. “If we have to set up agreements with real estate agents, we could do it. Flexibility and profitability are the two key words.”
Santander’s Success
The bad bank’s limitations stand in contrast to Santander, Spain’s largest lender. The company advertises homes on its Altamira real estate website for as little as 40,000 euros in Madrid and apartments complete with swimming pool and garage on the coast of Moncofar in Valencia for 65,100 euros. The lender offers 40 year mortgages with loan to values of as much as 100 percent.
The strategy is paying off. Proceeds from sales of homes on its balance sheet reached 1.3 billion euros in the second quarter — almost as much as the total for the whole of 2011, according to Saenz who said on July 26 that sales are taking place at discounts of as much as 45 percent. Santander has reduced its exposure to Spanish real estate to 26.5 billion euros from 42.5 billion euros in 2008, the bank said today in a results presentation.
Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s second-largest lender, last year created BBVA Real Estate to handle its 30 billion euros of property assets.
‘Market Prices’
“Our policy is to sell at market prices with 100 percent financing,” Ignacio San Martin, head of research at BBVA Real Estate, said on Oct. 19. The bank is selling more houses than last year, though said that for large institutional investors, the bank prefers buyers to provide their own financing. “That way we don’t hold the loan on our books or have to provision them.”
Sabadell, a Catalan lender, sold 708 million euros of properties via its Solvia real estate unit in the first nine months of the year, up from 433 million a year earlier. The company is aiming for sales of 1.19 billion euros this year, according to an earnings presentation by the lender today.
The strategy works well for healthy banks, according to Fernando Rodriguez de Acuna Martinez, a partner at Acuna & Asociados, a real estate consulting firm in Madrid. If nationalized banks that transfer assets to the bad bank were forced to provide vendor financing for sales, it would perpetuate the subprime lending that initially got them into trouble.
“As a nationalized bank, you’d be looking at an asset that came to you via way of default, so do you really want to be forced to finance its sale again to get it out of the bad bank?” he said during a telephone interview.
Acuna said the best discounts are on the worst assets, where demand comes only from people with a low credit rating.
“So they are subprime or less than subprime borrowers and if you give them credit, you are assuming bad risk again. It’s a vicious circle as you are financing the very assets and debtors that got you in trouble in the first place.”

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