DEBT FINANCING. U.S. judge rejects an HSBC settlement in Madoff case

NEW YORK (Reuters) - A Manhattan federal judge rejected HSBC Holdings Plc's proposed $62.5 million (39.2 million pounds) settlement with investors in an Irish fund that lost money in Bernard Madoff's Ponzi scheme.
In a ruling on Wednesday, U.S. District Judge Richard Berman said the accord announced June 7 "is not fair, reasonable or adequate -- even at this preliminary stage" to investors in Thema International Fund Plc.
HSBC (HSBA.L) said it had acted as a custodian to the fund, and provided administration and other services. It was sued in January 2009, one month after Madoff's fraud was uncovered.
Berman said the accord had several "obvious deficiencies." Among these were inadequate disclosure of legal costs, and the setting aside of a $10 million "reserve" for legal fees and expenses for investors to pursue claims against non-settling defendants outside the United States.
The judge said he would consider a revised accord, and "generally favors the voluntary settlement of matters before it, including the settlement of purported class actions."
"We are disappointed that the Court did not grant preliminary approval at this time," Frank Bottini, a lawyer for lead plaintiff Neville Seymour Davis, said in an email.
"We are optimistic that we can address the Court's concerns and that the settlement will eventually be approved," he said.
Rob Sherman, an HSBC spokesman, had no immediate comment.
HSBC in June estimated that Thema investors lost about $312 million. It also said various funds it serviced transferred a net $4.3 billion to Madoff's firm during the period it serviced those funds.
Irving Picard, the trustee seeking money for Madoff victims, accused HSBC in a separate lawsuit of ignoring "red flags" about Madoff's fraud.
A different federal judge, Jed Rakoff, in July voided about $6.6 billion of Picard's claims against HSBC, saying the trustee lacked authority to bring them.
Madoff, 73, pleaded guilty to running his Ponzi scheme in March 2009, and is serving a 150-year prison sentence.
The case is In re: Herald, Primeo, and Thema Securities Litigation, U.S. District Court, Southern District of New York, No. 09-00289.
(Reporting by Jonathan Stempel; Additional reporting by Saqib Iqbal Ahmed in Bangalore; Editing by Richard Chang)

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DEBT FINANCING. Exclusive: Abu Dhabi Investment Authority in private equity push

ZURICH/DUBAI (Reuters) - The Abu Dhabi Investment Authority, among the world's largest sovereign wealth funds, is ramping up its private equity activities after a relatively subdued period over the past two years, sources familiar with the fund's plans said.
Staffing within ADIA's private equity department will likely more than double from its current complement of around two dozen, sources said, although no specific allocation targets have been set.
"There are significant plans to increase private equity staffing, several industry executives have been approached in the last month," said one source who was approached.
The Abu Dhabi fund is also looking to significantly boost its investments in infrastructure as it is not satisfied with its current exposure, sources said.
ADIA -- whose assets range from Citigroup (C.N) bonds to a stake in London's Gatwick Airport -- does not disclose its net worth and declined to comment on the changes. The Sovereign Wealth Fund Institute estimates its value at $627 billion (398 billion pounds) and ranks it among the largest in the world.
ADIA is looking to raise its allocations to some of the world's largest private equity houses and has arranged meetings with many of them, several sources familiar with the matter said.
It is also adding broader geographic expertise in Asia, Africa, Latin America and Australia.
"Discussions are on with some leading players and some not so well known names about allocating more on the private equity side," another private equity source said, who like others declined to be named because of their ties to the fund.
The sovereign fund began investing in private equity in 1989. In its latest portfolio review published on Tuesday, 2 to 8 percent of its assets are invested in private equity.
Based on the range and estimated size of ADIA, its private equity allocation could range between $12.5 billion to $50 billion, but a source indicated that given the low level of activity, holdings were currently closer to the lower end of that range.
ADIA appointed private equity veteran James Kester as chief investment officer in November 2010 after a prolonged search. He replaced Georges Sudarskis, who had ratcheted up ADIA's portfolio considerably over 10 years before leaving to launch his own company.
The global private equity industry is estimated to be between $800 billion to more than $2 trillion, but as a number of funds are still struggling to deploy assets collected and committed before the financial crisis, many say it will be tough for the industry to digest a large influx of money from sovereign funds.
ADIA is also keen to put more money into ongoing programmes to develop local infrastructure, including transport networks, schools and hospitals, and diversified industries in order to break the emirate's reliance on increasingly volatile oil prices, this person said.
The fund's infrastructure investment allocation is among the smallest within total assets under management, with a targeted range between 1 to 5 percent.
"Historically investors in the Middle East have been comfortable with real assets and may now be more so, particularly after the whack many SWFs took in the financial crisis and resultant scrutiny in their home countries," said one expert who deals regularly with sovereign wealth funds.
BROADER TREND
Given historically low yields, ADIA appears to be looking at its government debt holdings and how to best structure the portfolio, in line with the thinking at most other large wealth managers.
Large sovereign funds have been willing to allocate more money to alternative investments like private equity in the recent past given low returns in conservative asset classes such as U.S. treasuries.
China Investment Corp (CIC), the country's $400 billion sovereign wealth fund, made $35.7 billion in fresh offshore investment last year, with a focus on infrastructure projects, private equity investment and real estate trusts (REITs).
Qatar Investment Authority (QIA), among the most aggressive of sovereign funds, raised its private equity allocation by $19 billion in 2010, a source familiar with the matter said.
"It is widely known that sovereign wealth funds want to add to private equity allocations, and for a variety of reasons," said one London-based private equity insider who manages SWF money.
"With inflation at 4-5 percent and Treasury yields almost negligible, they're losing money even if their currencies are pegged to the dollar."
ADIA returned 7.6 percent on an annualised basis over a 20-year period, as of December 31, 2010, it said in a review released Tuesday, in which it also raised concerns about global economic growth prospects.
Last month, ADIA restructured its external equities department, separating indexed funds from active funds as part of a more focused strategy.

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DEBT FINANCING. U.S. regulator defends suit against financial firms

WASHINGTON (Reuters) - The U.S. Federal Housing Finance Agency said on Tuesday it decided to file lawsuits against 17 financial institutions last week because the firms misrepresented the mortgages in securities filings.
"At the heart of the suits is FHFA's conclusion that the actual mortgages backing many of the securities had characteristics that differed in a material way from what had been represented in securities filings," the agency, which regulates mortgage firms Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB), said in a statement.
The lawsuits filed by FHFA on Friday accused lenders, including Bank of America Corp (BAC.N) and its Countrywide and Merrill Lynch units, of misrepresenting the checks they had done on mortgages before bundling them into securities. The claims rely on provisions of federal securities law.
The regulator is seeking unspecified damages against the banks on about $200 billion (125 billion pounds) in mortgage investments that were bought by Fannie and Freddie, mostly between 2005 and 2008.
FHFA said in its statement on Tuesday that the amount that might be recovered would be determined by the courts, and that it was "premature" to estimate recoverable damages.
However, it said the amount would be below $200 billion, since that figure represents the original amount of securities purchased, not the actual losses incurred.
The agency said the seller of the mortgage bonds has a "legal responsibility to accurately represent the characteristics of the loans backing the securities being sold."
Nearly all the banks that were sued last week declined to comment or were not immediately available for comment on Friday. Others called the charges unfounded.
"Fannie Mae and Freddie Mac are the epitome of a sophisticated investor, having issued trillions of dollars of mortgage-backed securities and purchased hundreds of billions of dollars more," said Mayura Hooper, a spokeswoman for defendant Deutsche Bank AG, in a statement.
FHFA said on Tuesday that the sophistication of Fannie and Freddie were not the issue.
"Under the securities laws at issue here, it does not matter how 'big' or 'sophisticated' a security purchaser is, the seller has a legal responsibility to accurately represent the characteristics of the loans backing the securities being sold," it said.
According to the lawsuits, the securities should have never been sold because the underlying mortgages did not meet investors' criteria.

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DEBT FINANCING. Equity fund slump spreads to Germany in August

LONDON (Reuters) - A sharp sell-off in European equities last month extended to funds invested in Germany, the continent's economic powerhouse and often seen as a relative safe haven, with German funds propping up the bottom of the table, Lipper data showed.
Worries Germany may have to pick up the tab for the euro zone debt crisis, alongside selling of the country's many cyclical stocks, meant three of the 10 worst-performers were German funds, according to the data, which tracks 3,000-plus equity funds registered for sale in Britain.
Jyske Invest's German Equities fund fell 19.66 percent, while the MainFirst -- Germany Fund dropped 18.85 and Fidelity Funds -- Germany lost 18.22 percent.
Reflecting the broad nature of the slump in European stock markets in August, the two worst performers were the RBC Global Continental Europe fund, down 22.40 percent, and GLG's UK Select Equity Fund, narrowly ahead with a 22.23 percent drop.
"Car companies, chemical companies and finance. That is basically the German market and if you look at the sector returns they will be the worst sectors in August. So, the market is hurting a bit because of that," Per Kongsgaard, manager of the Jyske Invest fund, told Reuters.
"If there is continued trouble in southern Europe, eventually the bill will go to Germany... and (it) will have to make cutbacks," Kongsgaard said.
The DAX has dropped around 24 percent in 2011, in line with a 25 percent drop in the pan-European Euro STOXX 50.
While funds invested in southern Europe have been hit hard for much of 2011 as the region grapples with a debt crisis, public spending cuts and anaemic growth, some European managers had hoped their portfolios would benefit from exposure to the perceived safety of northern Europe.
German exporters who sell to Asia are often viewed as companies with less to lose from Europe's debt crisis.
Oliver Maslowski, portfolio manager for the Julius Baer EF German Value Fund, which fell 16.11 percent in August, said the sell-off in German stocks was overdone and company earnings revisions had so far been small.
"People drew the conclusion that this situation looks exactly like 2008 ... We are pricing in a recession scenario but up until now most of the companies I talk to do not see such a scenario," he said, adding no investors redeemed money from his funds in August.
"If you believe in the Asian growth story but do not want direct exposure to the Asian markets you should buy Germany because you are buying Asia with a discount."
GOLD FUNDS BOUNCE BACK
In a tough month for most equity fund sectors, those focused on precious metal companies stood out as strong performers as an investor flight to safety sent the gold price to a record high.
Nine of the 10 best-performing funds in August invested in gold and precious metal equities, according to the Lipper data.
The RBS Market Access NYSE Arca Gold BUGS Index Fund was the biggest gainer, putting on 9.90 percent, while the Investec GSF Global Gold fund rose 7.60 percent and BlackRock's World Gold Fund, run by star manager Evy Hambro, grew 7.42 percent.

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DEBT FINANCING. EU watchdog to study "empty voting" at meetings

LONDON (Reuters) - European Union regulators followed their U.S. counterparts on Wednesday by looking into "empty voting", a tactic used by activist hedge funds and other investors to influence company meetings.
Empty voting refers to borrowing shares in order to vote in shareholder meetings, even though the holder has no economic interest at stake.
It could involve an investment bank who bought shares to hedge a derivatives position. The bank won't lose money if the shares fall in value but can still vote.
The European Securities and Markets Authority (ESMA), an EU regulator, launched a call for evidence asking for examples of empty voting at listed companies in the 27-nation bloc.
"On the basis of the information gathered, ESMA will assess whether there is need for further work in this area," the watchdog said in a statement.
Two member states, France and Portugal, have or are planning to address empty voting, but there are no EU rules.
The European Corporate Governance Forum of the EU's European Commission, regulators, issuers and investors, said last year that empty voting techniques increasingly exercise significant influence on listed companies and the key decisions shareholders can take.
"The Forum recommends the introduction of an assumption in company law that shareholders who take part in a general meeting own the corresponding economic interest in the voted shares," it said.
The U.S. Securities and Exchange Commission (SEC) launched a public consultation last year on proxy and empty voting.

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DEBT FINANCING. Terra Firma back in court over EMI deal

LONDON (Reuters) - Guy Hands' private equity firm Terra Firma has asked British courts for documents it could use to challenge the process by which it lost music group EMI to Citigroup, two people familiar with the matter said.
EMI sought insolvency protection in February -- weeks before a debt covenant test it was expected to fail -- and the administration process, undertaken by PricewaterhouseCoopers, handed the business to sole lender Citigroup (C.N).
Terra Firma has been trying unsuccessfully to get access from both Citigroup and PWC to documents providing a valuation of EMI at the time of the administration and detailing the process that led to Citigroup taking control, the people familiar with the situation said.
The firm asked for access to those details at a private hearing in a London court on Tuesday, the people said.
It will be for the court to decide later this year whether PWC has to disclose those details to Terra Firma.
Valuation exercises during administrations can be critical in deciding whether any equity value remains in a business and can hand power to creditors in such proceedings.
The seizure of EMI wiped out Terra Firma's 1.7 billion pound equity investment in the music group, home to artists including Katy Perry and Coldplay, and ended almost four years of troubled ownership for the private equity firm.
Terra Firma paid 4 billion pounds for EMI in 2007, one of the highest profile deals struck at the height of the buyouts boom. Citigroup provided 2.6 billion pounds of debt for the buyout.
The company's performance worsened and Terra Firma was forced to inject extra capital into the business.
However, one of the people said Terra Firma always met its interest payments and was looking for an explanation why Citigroup took control. Fresh legal action would complicate matters for Citigroup, which is examining a possible sale, recapitalisation or initial public offering of EMI.
Since that review started in June, the business has attracted widespread interest from rivals including Len Blavatnik's Access Industries, Sony Music Entertainment and Vivendi SA's (VIV.PA) Universal Music Group.
Citigroup is planning to indemnify bidders for EMI from any future damages claim from Guy Hands, the Financial Times reported late on Wednesday night, citing two people familiar with the auction.
Citigroup also still is facing legal proceedings from Terra Firma in U.S. courts.
Terra Firma lost the first round of a suit claiming that Citigroup and one of its leading bankers, David Wormsley, misled the firm when it bought EMI, but is appealing legal rulings made by the court.
Citigroup, PWC and Terra Firma declined to comment.
(Reporting by Simon Meads. Additional reporting by Abhiram Nandakumar in Bangalore; Editing by Will Waterman)

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DEBT FINANCING. Funds see Europe recession in next year - BoA Merrill

LONDON (Reuters) - Europe's sovereign debt and banking crisis is expected to push the region into recession over the next 12 months, and most investors do not expect higher U.S. interest rates until 2013, a survey showed on Tuesday.
The monthly survey taken by Bank of America Merrill Lynch from September 1 to 8 showed 55 percent of European fund managers see Europe suffering two quarters of negative gross domestic product growth.
That compares with only 14 percent in July.
"It's not very often you see such an explicit comment on just a single region, but that's what we've got this time," said Gary Baker, head of European equity strategy at BofA Merrill Lynch Global Research.
"The message coming from (the survey) is that unless you feel more confident about European banks then it's difficult to invest in Europe. The survey shows that sentiment on Europe is now so negative that contagion risk to the rest of the world has risen significantly."
Two-thirds of fund managers in the global survey, which gathered views from 286 panellists with $831 billion under management, said the euro zone sovereign debt crisis was the biggest risk.
Two-thirds of investors did not expect a U.S. Federal Reserve rate hike before 2013.
Sixty percent of global fund managers thought the U.S. central bank would step in with further quantitative easing if the U.S. benchmark S&P 500 equity index .SPX fell to 1,100 points or below.
The index closed at 1,162.27 points on Monday.
Cash holdings at 4.9 percent remained high, with more than one-third of investors overweight cash.
The growth slowdown has changed investors' view of oil.
"A net 14 percent of respondents view the commodity as overvalued, up from a net zero percent in August," BofA Merrill Lynch said.
The main investment conclusion from the global survey was to short -- a bet on lower prices in the future -- banks.
"Within equities, the story is not one of simple rotation into defensive sectors. Consumer staples, pharmaceuticals and utilities all benefited from the exodus from banks ... so did industrial and technology shares," BofA Merrill Lynch said.
Lack of confidence in equities is reflected in more positive sentiment towards bonds. Global asset allocators more than halved their underweight position in bonds in just two months -- to a net 21 percent now from a net 45 percent in July.
Real estate gained from the disillusionment with equities, while expectations of stronger Chinese growth faded.
A net 30 percent of regional fund managers expect the Chinese economy to weaken over the next 12 months from August's net 11 percent. This was reflected in a sharp decline in asset allocators' enthusiasm for Chinese equities.
"China is still crucial to the equation ... If the economic backdrop were to deteriorate further, emerging market stocks and the commodities complex look the most vulnerable," Baker said. "Up to this point the commodities complex has held up remarkably well."
(Editing by Hugh Lawson)

View the original article here


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DEBT FINANCING. Change of guard in the ETF industry?

LONDON (Reuters) - The European exchange-traded-fund (ETF) industry has shown some resilience in the face of questions about management practices raised by market observers like the Financial Stability Board (FSB) and regulatory bodies like the FSA in the UK.
The European ETF segment grew by 7.74 percent over the first seven month of 2011, with assets under management up by 17.20 billion euros (15 billion pounds) to reach 239.37 billion.
This has come as some critics have characterised ETFs as a systemic risk for financial markets, due to the use of swaps to replicate the underlying index. Another risk that has been highlighted was the liquidity of some securities accepted as collateral to secure the positions in derivatives and for security lending strategies. Also raised was the outstanding short volume in some ETFs.
But as the ETF industry is fully regulated by market authorities and uses typical techniques for derivatives and securities-lending strategies, the risks highlighted are already known. In addition, the assets under management of the global ETF industry are still less than ten percent of the total, and the issues might be better raised with respect to all funds, instead of pointing the finger at one market segment.
Despite publicity surrounding these issues, and in contrast to the expectations of some market observers, the industry has shown a pretty normal growth pattern in terms of newly-launched funds, with 167 new products hitting the market during the first half of 2011. Most of those were equity funds (102), with commodity funds a significant minority (22).
To see details of the new ETF launches click on the following links: r.reuters.com/jub63s and r.reuters.com/nub63s
There might be some shuffling of the pack, however. IShares is still the leader, way ahead of the other ETF promoters. But since July 2011 the second largest promoter in Europe is Deutsche Bank's db x-trackers, which has overtaken Societe Generale's Lyxor in terms of market share.
The race for second place in the European ETF industry has been touch-and-go for a while. Lyxor started reshuffling management and sales teams in the spring of 2010 but couldn't fend of Deutsche's push. Nevertheless, the difference in assets under management between Lyxor and db x-trackers is very small, so the race will continue in the future.
A healthy rivalry, you might say, and a sign of an industry displaying healthy growth patterns. And you can add to that mix the positive effect of new players like Ossiam entering the European market.
The industry still has a decent story to tell, even if ETF providers were caught unawares by the spotlight suddenly turned on their industry. And it's true that there might be some hurdles to jump now that regulators' gaze has fallen on ETFs: perhaps we'll see some restrictions in the use of securities as collateral; and a further effort to boost transparency.

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DEBT FINANCING. EXCLUSIVE Blackstone land Broadgate share sale

LONDON (Reuters) - Blackstone Group is expected to Broadgate sell its 50 percent stake on London development for up to 600 million pounds in the year 2012, possibly a thicker return on investment, crops, said two sources.
The US private-equity firm, one of the largest property investors in the world, is in the early stages of the anchoring of interest from selected global pension funds and at least a SWF, familiar with the matter, a source said.
Swiss Bank UBS (UBSN.)(VX) (UBS).(N), which said on Thursday, a trader had lost over $2 billion in unauthorized deals, is the largest tenant in Broadgate, the Blackstone together with the developer British land (owned by BLND.)(L).
When price reaches Blackstone of 600 million pounds for his part, it would value the entire Broadgate portfolio at approximately 3.1 billion pounds, including £ 1.9 billion debt.
Blackstone purchased its half share of the 30 acre site in London's city financial of British country in September 2009 for £ 77 million, while also on 987 million pounds of debt, which against the well secured.
It was not immediately clear how the debts, which would be dealt with in connection with Broadgate in every deal.
Oxford Properties, the property of part of Canada's Ontario municipal employees retirement system, the British is country joint venture partner on the Cheesegrater Tower in the financial district, city, is the first source said an offer, breed.
Other parties will include probed the first source said Norway's sovereign wealth funds, Malaysian pension fund EPF and South Korean NPS, pension.
No sales agent had, has been appointed for the sale of shares, and no formal sales process began, the first source said.
An opinion rejected Blackstone.
British land was not immediately available
for comment.
The site is British country greatest asset and in the annual report of 2011, the first-class real estate investment trust Broadgate at approximately 2.7 billion pounds, with debts of £ 1.9 billion.
Owner property looking best city increased to sell, as commercial real estate have 17.7 percent values 25 months in a row, and potentially choppy times property, which brokers said was.
Last week a billion pound-folio of four homes for sale, including the London-based of Deutsche Bank (DBKGn.DE) has the German Fund of KanAm. London's iconic Tower 42 skyscraper was for sale with a 290-million-pound prize on Wednesday to put up.
UBS is a 700,000 square foot office building in Broadgate building, after a bid by English Heritage to get building that will replace it was rejected in June by the Government.
The Broadgate development which Street adjacent to the railway station in Liverpool, was built from 1984 to 2008.
The Government green light for UBS control could start the sales process now asked a third source told Reuters.
Blackstone had $28 billion of fee property earning assets end of June. The portfolio includes Hilton hotels and UK holiday resort operator Center Parcs.

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DEBT FINANCING. In Hungary, the Jobless Go to Labor Camp

A labor brigade in Gyöngyöspata Bela Doka for Bloomberg Businessweek
By Carol Matlack and András Gergely
Wielding scythes and pitchforks, about 30 men and women hack through brambles on a hillside above the Hungarian village of Gyöngyöspata. With the nearest road more than a half mile away, workers have to hike in with food and water for the day. For bathroom and lunch breaks, they duck into a thicket that offers the only shade in the 98F heat. “It’s degrading to work in these conditions,” says Károly Lakatos, a 38-year-old father of three who was laid off earlier this year from his forklift-operator job in an auto parts factory. When his unemployment benefits ran out, the government assigned him to a brigade clearing land owned by the village.
If Prime Minister Viktor Orbán has his way, hundreds of thousands of Hungarians will soon join similar squads. Under a plan approved by Parliament in July, by 2012 some 300,000 people will be working in community service jobs—doing everything from picking up trash to building stadiums—instead of drawing welfare or unemployment benefits. Hungary will no longer “give benefits to those capable of work, when there is much work to be done,” Orbán said in June. The effort is part of the ruling Fidesz Party’s 2010 election pledge to create 1 million jobs over the next decade.
No question, Hungary needs jobs. Only 54.6 percent of the working-age population is employed, the lowest rate in the European Union, according to EU data. An anemic economy, forecast to grow 2 percent in 2011, is part of the problem. But the real culprit is the sprawling welfare state created after the fall of communism. To help workers who lost jobs in state-run industries, the government established generous early retirement, disability, and parental leave programs. Those benefits are still in place. According to the EU’s Eurostat agency, in 2008 Hungary spent $5,200 per capita on social protection, vs. $4,088 in Slovakia and $3,706 in Poland. “There are people in this work program who’ve never had a proper job in their lives,” says Oszkár Juhász, the mayor of Gyöngyöspata, which is an hour’s drive northeast of Budapest.
Under the new law, jobless benefits will be cut off after 90 days, down from nine months, and eligibility for other welfare payouts will be curtailed. People taken off the dole are being offered jobs paying $303 a month, twice the basic welfare payment but less than the standard $415 minimum wage. Those who refuse will receive no government aid.
The opposition Socialist Party says the program “is based on fear and force, just like in a previous era of terror”—an allusion to the hundreds of thousands of Hungarians who were conscripted for Nazi and Soviet work camps. By launching the program in Gyöngyöspata, where members of the town’s Roma ethnic minority clashed with nationalist vigilantes earlier this year, the government gave the impression that it is trying “to keep the Roma under control,” says Péter Juhász of the Hungarian Civil Liberties Union. “We live in fear that the black uniforms [worn by the vigilantes] will return,” says Irén Rácz, a 57-year-old Roma assigned to the Gyöngyöspata brigade.
Roma make up about 6 percent of Hungary’s population and as much as 12 percent of those receiving welfare and unemployment benefits, according to the Budapest Institute. In Gyöngyöspata, 36 of the 40 people working in the program are Roma. Hungary’s Interior Ministry, which administers the program, says it is paying special attention to Roma because they are discriminated against and “underskilled” compared with other workers. “There is little chance that they can find work in the private sector without development programs,” the ministry said in a written response to questions from Bloomberg Businessweek.

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DEBT FINANCING. European Stocks Fall, Insiders Buy

As Europe’s sovereign debt crisis worsens, executives are showing faith in their own companies, purchasing more stock in them than at any time since the worst period of the 2008 financial meltdown.

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DEBT FINANCING. French Towns Suffer as the Swiss Franc Soars

The Swiss National Bank has said it will aim to keep the value of the franc from rising above 1.2 to the euro Alamy
By Hélène Fouquet
Saint Cast, a sleepy French coastal town in Brittany with 19th-century mansions and a mile-long white, sandy beach, restructured €3.6 million ($5.1 million) of debt in July 2007. The lender, a unit of Belgian bank Dexia, offered what seemed like a good deal: an interest rate of 3.99 percent—as long as the value of the Swiss franc, then trading at 1.6 to the euro, did not rise above 1.44.
It turned out to be a bad bet. As worries about the European debt crisis sent the Swiss franc climbing against the euro, Saint Cast’s interest rate has jumped to 15.25 percent. “There is something abnormal for a little pensioners’ seaside town to be embroiled in a European sovereign debt crisis and for my taxpayers to worry about the currency market,” says Jean Fernandez, 71, a former math teacher who serves as the town’s mayor.
The governments of Saint Cast and other French towns seeking to lower borrowing costs entered into contracts they didn’t always understand. Saint-Tropez has €24 million in debt pegged mainly to the Swiss franc. Argenteuil, a town on the outskirts of Paris where Claude Monet and Alfred Sisley painted, has €40 million of franc-pegged loans and €30 million of debt linked to the dollar-yen rate. The town raised local taxes by 20 percent from March 2008 to March 2010. It now has four full-time employees dealing with the loans from Dexia. “It’s not a rich city,” says Joël Fournié, a financial adviser to Argenteuil. “We are very, very far from Switzerland or a trading floor.”
French Prime Minister François Fillon urged local governments in December 2009 and again in June 2010 to stop using currency-indexed loans. The government is “bringing support to the authorities hit by the problem,” says Valérie Pécresse, a government spokeswoman.
After Fillon’s remarks in 2010, Dexia, which owns the biggest share of French local debt, said it stopped selling Swiss-franc products such as the “dual” loans it marketed to Saint Cast. Interest rates on Dexia’s currency-indexed loans spiked for “a very small number of clients who had their” rates reset after the franc soared, says Jean-Luc Guitard, director of Dexia France. He declined to comment on terms of specific contracts.
The Swiss franc, seen as a haven during global turmoil, began strengthening in early 2010, with the pace picking up in November. It traded at 1.21 by the date of Saint Cast’s annual interest rate adjustment in June, then surged to a record high of 1.03 in August. The Swiss National Bank said on Sept. 6 that it would spend “unlimited” quantities of cash to keep the franc from trading below 1.20. Since the announcement it has traded at about that level. If it stays there, Saint Cast’s interest rate will rise to 15.57 percent the next time it adjusts. “I cannot see how the SNB can rein in their currency in the long term,” says Fernandez. “And that’s now my problem.”
The bottom line: Lured by low rates, French towns took out loans tied to the Swiss franc. As the value of the currency climbed, so did the interest rates.
Fouquet is a reporter for Bloomberg News.

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DEBT FINANCING. Exit the Euro Zone? Think Before You Leap

“The euro area is a community that shares the same destiny” —ECB chief Jean-Claude Trichet Chris Ratcliffe/Bloomberg; Trichet quote: Aachener Zeitung, May 27, 2011
By Carol Matlack and Jeff Black
“Everything must be done to keep the euro zone together.” That was Chancellor Angela Merkel speaking on German radio on Sept. 13 as she denied reports that Germany was preparing for Greece’s exit from the monetary union.
That the leader of Europe’s biggest economy must dampen speculation of a breakup shows the rising unease about the common currency. Two years ago most politicians and investors believed firmly that the euro area was indivisible. As the finances of Greece, Portugal, Ireland, Spain, and Italy have fallen into crisis, that has changed. It’s still unlikely that any member state will bolt or be banished. Greek Prime Minister George Papandreou, for one, vows to keep Greece in the euro zone. Still, a growing number of policymakers and analysts are talking seriously about an exit.
In Greece, the issue is enmeshed with a possible default on its sovereign debt. Yields on credit default swaps on its short-term debt are at 98 percent, a sign that investors consider default inevitable. “If the Greeks don’t make it despite all of their efforts, you can’t rule out” their leaving the currency union, Horst Seehofer, chairman of Germany’s CSU party, a coalition partner of Merkel’s ruling CDU, said on Sept. 11.
Any country that dropped out of the euro would regain control over its monetary policy. Its central bank could set interest rates and would not be controlled by the European Central Bank in Frankfurt. It could reinstate and devalue its own currency, making exports more competitive. An exit would probably lead to sovereign debt restructuring or default, since the country couldn’t repay all its euro-denominated debt with a cheaper currency. Economists reckon that a reintroduced Greek drachma, for example, would be worth only half as much as a euro. Yet Greece seems likely to default anyway, so what’s the difference?
In reality, leaving could be a lot messier. The treaties that created the euro provide no opt-out mechanism. Legally, an exit would require a unanimous vote by euro member states to change the treaties, says Peter Becker, a researcher at the German Institute for International and Security Affairs. Expelling a country against its will is effectively impossible. A voluntary exit could be negotiated, but could take months.
What spooks Merkel and other leaders is that a Greek exit could unleash a chain reaction of departures from the euro by other weaker members. Also, an inside-the-euro default by Greece would be less complicated and costly than a default outside the zone, because the ECB and other European bodies could help reach a deal with creditors.
Quitting the euro looks even scarier for the Greeks. Their economy would shrink by at least 40 percent after an exit, predicts Stephane Deo, chief European economist at UBS. The banks and stock market would collapse, government and businesses would be frozen out of global credit markets, and corporate balance sheets and individual savings would be reset in a devalued currency. Devaluation wouldn’t help exports much, Deo wrote in a Sept. 6 note: Other countries would likely raise tariffs to protect, say, Spanish olive oil against cheaper Greek oil. Social turmoil would probably increase. “Greece is going to go decades back” if it leaves the euro, says Vassilis Korkidis, president of the National Confederation of Hellenic Commerce, “This is going to be a disaster.”
Greece spent many decades under foreign rule or domestic dictatorship, including a junta that imprisoned Papandreou’s father and exiled his family. The political class sees membership in the European Union and euro as a sign of how far Greece has come, and as a guarantee against slipping back. With Turkey growing powerful, Greece doesn’t want to be cut loose from its economic and political moorings. Moreover, Greece experienced devaluation and inflation in the 1980s that “not only failed to improve competitiveness but also eroded the value of people’s savings,” says Miranda Xafa, a senior investment strategist at Geneva-based IJ Partners and ex-board member for Greece at the International Monetary Fund.
So if no one wants an exit, how could it happen? Willem Buiter, chief economist for Citigroup in London, offers a scenario in a Sept. 13 report: As Greece resists EU, ECB, and IMF demands for more austerity, the exasperated troika cuts off funding. Greek banks can no longer post Greek debt as collateral for loans from various EU agencies. With no funding available from the euro area, writes Buiter, “Greece could blunder into exiting.”
The default feared by investors would then occur. European banks—which according to the Bank for International Settlements hold a total of $128.8 billion in Greek debt, including $42.9 billion in public debt—would take a hit. Investors would push up the cost of government borrowing in Ireland, Portugal, Spain, and Italy, and funding for those countries’ banks would dry up, predicts Nick Kounis, head of macro research at ABN Amro Bank. “You’d wonder,” he says, “if the euro zone would fall apart.”
The bottom line: The costs to Greece, not to mention the entire EU, would be enormous if the Greeks were to leave the euro zone.
With Simon Kennedy and Tom Stoukas
Matlack is a Paris correspondent for Bloomberg Businessweek. Black is a reporter for Bloomberg News.

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DEBT FINANCING. EU Credit Markets, Bail-In, Container Shipping

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at
July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)

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DEBT FINANCING. Europe Rules Out Stimulus, Skips Bank Aid

September 16, 2011, 6:22 PM EDT By James G. Neuger and Rebecca Christie
Sept. 17 (Bloomberg) -- European finance ministers ruled out efforts to spur the faltering economy and showed no signs of taking up a proposal by U.S. Treasury Secretary Timothy Geithner to increase the firepower of the debt crisis rescue fund.
Inviting Geithner to a euro meeting for the first time, the European finance chiefs said the 18-month debt crisis leaves no room for tax cuts or extra spending to spur an economy on the brink of stagnation.
“We have slightly different views from time to time with our U.S. colleagues when it comes to fiscal-stimulus packages,” Luxembourg Prime Minister Jean-Claude Juncker told reporters after chairing the meeting yesterday in Wroclaw, Poland. “We don’t see any room for maneuver in the euro area which could allow us to launch new fiscal stimulus packages. That will not be possible.”
Europe’s economy will barely grow in the second half of 2011, a casualty of the debt buildup that 256 billion euros ($353 billion) in aid for Greece, Ireland and Portugal has failed to extinguish.
Geithner made little headway with a call for Europe to boost the capacity of the 440 billion-euro rescue fund, known as the European Financial Stability Facility, by enabling it to tap the European Central Bank.
‘Non-Member’
Juncker said there was no discussion of expanding the fund today -- at least not while the American guest was in the room.
“We are not discussing the increase or the expansion of the EFSF with a non-member of the euro area,” he said. German Finance Minister Wolfgang Schaeuble spoke of a “very intensive but friendly discussion” and Austrian Finance Minister Maria Fekter found it “peculiar” to be lectured by the U.S., a country with higher aggregate debt than the euro area.
Instead, the ministers recommitted to a July 21 decision to empower the fund to buy bonds in the primary and secondary market, offer precautionary credit lines and create a bank- recapitalization facility. The target for completing national approvals of the new powers slipped to mid-October.
Geithner preached the lessons of the emergency banking support provided by the Treasury and Federal Reserve in reaction to the collapse of Lehman Brothers Holdings Inc., mixing it with criticism of Europe’s crisis-management coordination.
‘Permanent Message’
Europe projects an image of “ongoing conflict” between national governments and the central bank, hampering efforts to put the economy on a sounder footing, Geithner said at a banking conference in between euro meetings.
“Your financial challenges in Europe are eminently in your capacity to manage financially, you just have to choose to do it,” he said.
Echoes of that appeal came from ECB President Jean-Claude Trichet, six weeks from the end of an eight-year term as the overseer of euro interest rates.
“Our permanent message is of course to be ahead of the curve,” Trichet told reporters. “All that I heard goes in this direction. But the problems are not words, the problems are deeds.”
The ECB was in the forefront again this week, joining other major central banks in offering dollar loans to ease a liquidity crunch that had confronted European banks with the highest costs for obtaining the U.S. currency in almost three years.
Finance chiefs stuck by the view that commercial banks have enough capital to ride out the turbulence that has driven the bonds of Greece, the epicenter of the crisis, to less than half their nominal value.
‘Substantial Improvement’
Trichet hailed an accord between governments and the European Parliament that will tighten the euro area’s economic management and make it easier to impose sanctions on countries that overstep the budget-deficit limit of 3 percent of gross domestic product.
The new rules, to take effect by Jan. 1, mark a “substantial improvement,” Trichet said.
The debt overhang is taking its toll on the wider economy, the European Commission says. It cut its growth forecast this week to 0.2 percent for the third quarter and 0.1 percent in the fourth, down from projections of 0.4 percent for both periods.
“Recovery is stalling in the second half of the year, but we do not forecast a return to recession,” European Union Economic and Monetary Commissioner Olli Rehn said. “Uncertainty and stress in financial markets is now having negative ramifications in the real economy and is hampering our growth prospects.”
Greek Aid
Greece is now looking to the ministers’ next meeting, on Oct. 3, for a decision on the release of an 8 billion-euro aid installment. The loan would be disbursed by mid-October, enabling the government to pay its bills through the end of the year.
The fate of future Greek loans remains tied up by a demand by Finland, one of Europe’s six AAA rated countries, that it receive collateral, potentially in the form of real estate or shares in nationalized Greek banks.
While a final agreement eluded them, the ministers agreed on the principle that collateral must carry a cost, with the goal of limiting its use to Finland.
“There is unity that collateral, first of all, must be open to all and, second, must cost something,” Austria’s Fekter said.
On personnel matters, the officials set a Sept. 27 deadline for nominations to replace Germany’s Juergen Stark on the ECB’s Executive Board. Stark, an opponent of the bank’s bond-purchase program, said last week he will quit before his term ends in May 2014.
The only candidate so far is German Deputy Finance Minister Joerg Asmussen.
--With assistance from Angeline Benoit, Monika Rozlal, Mark Deen, Gregory Viscusi, Jonathan Stearns,Jim Brunsden, Rainer Buergin and Christian Vits in Wroclaw, Poland. Editors: James Hertling, Patrick G. Henry
To contact the reporters on this story: James G. Neuger in Wroclaw, Poland at jneuger@bloomberg.net; Rebecca Christie in Wroclaw, Poland at rchristie4@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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DEBT FINANCING. Euro Strengthens on ECB Lending Offer, Merkel, Sarkozy Backing

Sept. 17 (Bloomberg) -- The euro rose against the dollar for the first time in three weeks after the European Central Bank said it will lend dollars to euro-area banks, tempering liquidity concern amid the region’s sovereign debt crisis.
The 17-nation currency pared its five-day gain yesterday as finance ministers from euro-zone nations meeting in Poland failed to inspire confidence in measures to control debt problems. Canada’s dollar rose against all of its most-traded counterparts on speculation the nation’s fiscal condition will attract investors during market turmoil. The Dollar Index fell before a Federal Reserve meeting next week where officials may announce further economic stimulus.
“The swap agreement between the ECB and other central banks helped to alleviate some concerns about funding at European banks, that’s been a positive,” said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage. ‘The finance ministers’ meeting has been a little bit of a disappointment and that’s weighting on the euro.”
The euro strengthened 1 percent to $1.3796, from $1.3656 Sept. 9. It reached a seven-month low of $1.3495 Sept. 12. The shared currency was little changed at 105.95 yen. The dollar dropped 1 percent to 76.80 per yen, from 77.61.
The Dollar Index, which measures the greenback against the currencies of six major U.S. trading partners, weakened 0.8 percent to 76.547, from 77.192 last week.
Bank Lending
The euro rose the most in a month Sept. 15 after the ECB said it will coordinate with Fed and other central banks to offer three separate three-month loans to ensure euro-area banks have enough of the U.S. currency through the end of the year. The common currency gained earlier this week after French President Nicolas Sarkozy and German Chancellor Angela Merkel said Greece should remain in the union and Greece reaffirmed commitment to its budget plan.
The euro pared gains yesterday as European finance ministers meeting in Wroclaw, Poland, ruled out efforts to prop up the region’s economy and raised issues of collateral demanded to take part in another Greek bailout.
Futures traders increased bets that the euro will fall against the dollar to the most in more than a year.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- the so-called net shorts -- was 54,459 on Sept. 13, the most since July 2010, according to the Commodity Futures Trading Commission.
Risk Trades
“Risk aversion and the euro is reacting to the continuing disagreements among the euro area on what needs to be done and these appear to be quite large,” said Aroop Chatterjee, a currency strategist in New York at Barclays Plc. “It’s all incremental at this stage and there does not seem to be a credible silver bullet out there.”
The yen rose toward a post-World War II high against the dollar as demand for refuge increased and as the Swiss National Bank-imposed ceiling on the franc leaves Japan’s currency as one of the few haven assets.
The yen reached 76.56 per dollar Sept. 15, within 1 yen of 75.95, the record-high reached Aug. 19.
Bank of Japan board member Ryuzo Miyao said the central bank is ready to take “appropriate” action as needed to support the economy amid worries that the yen will stay strong.
‘Taking Root’
“An area of concern is that the strong yen is taking root,” Miyao said Sept. 14. If the dollar and euro remain weak against the yen on sovereign-debt worries, “concern about the hollowing-out of domestic industries will increase,” he said.
Japan last intervened in the currency market, selling yen to try to curb its climb, on Aug. 4, when it touched 76.97 to the dollar.
The Swiss National Bank last week imposed a ceiling on the franc at 1.20 per euro, the first time such a limit was set since 1978, in an effort to protect the nation’s exporters. The franc had rallied 13 percent against the single currency this year before the ceiling was announced.
The franc was little changed this week against the euro at 1.2086. It rose 0.9 percent to 87.56 centimes per dollar.
Canada’s dollar strengthened for the first week in three versus the greenback, rising along with the yen and franc, as investors sought haven assets to protect from euro zone problems. Canada has a smaller budget-deficit ratio, lower jobless rate and faster growth than most of its Group of Seven peers.
Loonie Strength
The loonie, as Canada’s dollar is known for the image of the aquatic bird on the C$1 coin, rose 1.9 percent to 97.81 cents per U.S. dollar, from 99.67.
The British pound fell for a fourth week against the dollar on speculation a deteriorating economic outlook will spur the Bank of England to introduce additional monetary stimulus. The pound dropped 0.6 percent to $1.5791, from $1.5883 last week.
The dollar fell as reports showed a stagnant U.S. economy. U.S. retail sales were unchanged in August, following a 0.3 percent gain for July that was smaller than previously estimated, Commerce Department figures showed.
Other reports showed more Americans than projected filed claims for jobless benefits, consumer prices rose more than forecast and New York-area manufacturing contracted more than estimated.
“The whole question is whether the Fed is going to introduce another round of quantitative easing, whether that is going to kill the dollar,” said Kathy Lien, director of currency research with online trading firm GFT Forex in New York.
The Federal Open Market Committee may decide to replace holdings of shorter-term Treasuries with longer maturities at its two-day policy meeting starting Sept. 20 in an effort to keep borrowing costs low and support the economy.
--With assistance from Chris Fournier in Halifax, Nova Scotia. Editors: Paul Cox, Dave Liedtka
To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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DEBT FINANCING. Billionaire Cisneros to Buy Spanish Assets

Sept. 16 (Bloomberg) -- Venezuelan billionaire Gustavo Cisneros said he’s looking to buy Spanish companies as the European debt crisis drives down asset valuations.
Cisneros, the chairman of Cisneros Group of Companies, said he’s considering purchasing exporters, manufacturers and media companies in Spain, where he sees “immense opportunities.”
“I’ve been wanting to do a lot of things in Spain for a long time, but the price has been too high,” Cisneros, 66, said yesterday at the Bloomberg Markets 50 Summit in New York tied to the magazine’s ranking of the most influential leaders in global markets, finance, business and government. As the crisis deepened, Cisneros said he decided to “look at Spain again. It’s a natural market for us. These are good companies, especially companies that export to Latin America.”
Spain’s IBEX 35 Index of stocks dropped 22 percent in the past 12 months as concerns mounted that Europe’s sovereign debt crisis was cutting off banks’ access to wholesale capital markets. Spain, the euro region’s fourth-largest economy, has a 21 percent unemployment rate and posted a budget deficit equal to 9.2 percent of gross domestic product last year, the region’s highest after Greece and Ireland.
“Spain is going to be fine. We know Spain quite a bit and we can relate to the culture very well,” Cisneros said. “Media obviously in Spain for us would be a natural, but I don’t discard manufacturing companies. I’m not interested in banking.”
The Cisneros Group, which took in $1.5 billion of revenue in 2010 and has its headquarters in Miami, provides Univision, the leading Spanish-language broadcaster in the U.S., with 40 percent of its content.
Chinese Investment
Cisneros said Chinese companies are outdoing U.S. competitors in partnering with Latin American firms as leaders in the world’s fastest growing major emerging economy seek to expand their presence in the region.
China is making inroads into Latin America’s agricultural, infrastructure and mining industries because its foreign policy has emphasized economic cooperation and outreach to the region. It’s more difficult to get U.S. companies “excited about going” to Latin America, he said.
“China has a foreign policy which is directed toward cooperation with business, and the government has directed that toward investment in Latin America,” Cisneros said. “In the United States, the private sector forgot about Latin America investment.”
Joint Ventures
Cisneros is setting up joint ventures with Chinese banks to carry out investment in Latin American commodities industries. China accounts for 9 percent of foreign direct investment in Latin America, trailing only the U.S. and Holland, according to the United Nations’ Economic Commission for Latin America and the Caribbean.
Cisneros, who first traveled to China in the 1980s, is expanding into deals with the Chinese after shedding beverage and consumer-goods companies and America Online Latin America since the early 1990s to focus on his Venevision television network.
Cisneros inherited the company from his father in 1970 and took over a fortune built by expanding Venevision and representing U.S. brands such as Studebaker, PepsiCo and Burger King in Venezuela. Cisneros and his family are worth $4.2 billion, according to Forbes magazine. The 58-year-old company employs about 8,000 workers.

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DEBT FINANCING. Britain Tries for a Second Industrial Revolution

GM's van plant in Luton, England, is operating flat out Frantzesco Kangaris/Bloomberg
By Jennifer Ryan and Stanley Reed
Mark Stein, manager of General Motors’ Vauxhall van plant in Luton, 29 miles north of London, starts presentations with an aerial photo of the site in 1965. It shows a vast complex of buildings that employed more than 35,000 workers. He points to a small red circle in the picture. That’s where GM’s current factory is. It employs 1,500.
Making stuff has dwindled from nearly 40 percent of Britain’s gross domestic product in the late 1950s to not much more than 10 percent now. What remains survives for a reason. GM’s Luton factory this year will produce 70,000 Vauxhall Vivaro vans and other vehicles, more than 60 percent for export. Manufacturing productivity grew 4.4 percent in the first quarter.
Prime Minister David Cameron has latched on to manufacturing as a cure for Britain’s economic hangover and its 7.9 percent jobless rate. “If you’re trying to make the economy grow long term on a sustainable basis, manufacturing is where we need to be,’’ says Vince Cable, U.K. Business Secretary. “One of the main growth sectors of the economy in recent years has been banking. For reasons that are blindingly obvious, that’s not going to be so important in future.’’
Starting a new Industrial Revolution will be hard. Government efforts to cut red tape produce plenty of their own. “If you were to write on a board how many agencies and support schemes there are, you would be amazed,” says Bill Parfitt, GM U.K.’s chairman.
Economists and some manufacturing executives also say that boosting manufacturing may be unwise. British manufacturing as a share of GDP is smaller than Germany’s 20 percent, yet it is similar to the U.S. and France, which have big service sectors. Britain may have reached an equilibrium between the two sectors. “I don’t think any economist believes that growth in the next five to 20 years will be driven by manufacturing,” says Jonathan Portes, director of the National Institute of Economic and Social Research.
British manufacturing lacks Germany’s advantages. Germany has long had industrial apprenticeships for young adults: Cable is trying to launch an apprenticeship program in Britain as well. In Germany, robust midsize companies supply big companies and export on their own. In contrast, consider the state of GM’s supply chain in Britain. Only 10 percent of the value of parts used at its main U.K. plant at Ellesmere Port are made domestically. The pound’s 25 percent drop since 2007 against a basket of currencies drives up the cost of imported parts even as it makes exports cheaper.
U.K. producers do excel at making goods where technology counts for more than the cost of labor, says Lee Hopley, chief economist at the Engineering Employers’ Federation. Revenue for Vitec, a high-tech maker of gear for the broadcast, military, and photographic markets, grew in the first half to $282 million from $250 million. “We do make some products in China,’’ says Chief Executive Officer Stephen Bird. “But my intention is that we will continue to manufacture in both the U.K. and Italy because we have great engineers.” A secret to survival is “not competing with cheap Chinese goods,” says Mark Henderson, CEO of MSE UK, which makes blood centrifuges.
Yet after a promising post-recession start, U.K. manufacturing shrank 0.5 percent in the quarter ended in June. The trade gap in June for goods was £8.9 billion ($14.5 billion). Business Secretary Cable says the weaker pound will help the U.K. gain share even in markets where growth is slow, and commercial diplomacy will sell more goods to developing countries. “The problem always has been that our export markets, particularly the euro zone and the U.S., are facing challenges of their own,” says Jonathan Loynes, chief European economist at Capital Economics in London. “The idea that we were going to get a helpfully timed export boom was always a bit optimistic.”
The bottom line: Cameron’s plan to boost manufacturing must grapple with weak export markets and an undernourished supplier network.
Ryan is a reporter for Bloomberg News. Reed is a reporter-at-large for Bloomberg News and Bloomberg Businessweek.

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DEBT FINANCING. Angola and Brazil Are Buying Portuguese Companies

Four centuries ago, seafaring Portugal was at the height of its economic power, thanks in no small part to its exploitation of Brazil and Angola. The Portuguese were voracious consumers of Angolan slaves, arming Africans with guns and shackles to capture members of rival tribes. The slaves ended up working and dying on the plantations and in the mines of Brazil and the Portuguese-owned islands off Africa.
Today, Portugal is a ward of the International Monetary Fund and the European Union. Brazil is the world’s seventh-biggest economy (Portugal, at last count, was No. 38) and Angola, Sub-Saharan Africa’s second-biggest oil producer, is one of the fastest-growing nations on earth. Now Portugal, the erstwhile imperialist, may be acquired in bits and pieces by its former colonies.
“You’d never have imagined this from Third World countries,” says Walter Molano, an emerging markets analyst with BCP Securities in Connecticut. “Brazil and Angola were always natural resource-rich. But now that they’re independent sovereigns with stronger currencies, they’re rich enough to invest in their colonizers.”
Last year, Angola had $50 billion in exports, most of it crude oil. The country’s capital, Luanda, is a boomtown, with hotel rooms scarce and drivers getting up to $1,000 a day to navigate foreign businessmen through all the congestion.
As Brazil and Angola were rising, Portugal was overextending itself financially. In May 2011 the IMF and euro zone leaders approved a €78 billion ($107 billion) bailout, which called for Portugal to raise at least €5 billion by selling off state assets.
So Angola’s Banco BIC is buying Portugal’s nationalized Banco Português de Negócios for a fraction of its €180 million asking price. An Angolan company has bought Portugal’s biggest furniture maker. In July, shortly after he met with Portugal’s foreign affairs minister, Angola Minister of State Carlos Feijó told reporters that the government was exploring other possible deals. Portugal says it intends to sell shares in electricity providers EDP-Energias de Portugal and REN-Redes Energéticas Nacionais.
In early September, former Brazilian President Luiz Inácio Lula da Silva urged companies back in Brazil to invest in Portugal, and cited the possible acquisitions of airline TAP Portugal and a naval shipyard as examples of the deals to be had. Already, a top Brazilian cement maker and steelmaker have clashed over control of Cimentos de Portugal.
“Bottom fishing during and after financial crises is nothing new,” says Jerry Haar, a professor at the business school of Florida International University in Miami who tracks foreign investment. “What is new is the increasing participation of emerging markets in the game. Where language and cross-cultural affinity are involved, all the more so.” So do not be surprised to see Colombia and Peru, equipped with their strong currencies, shopping in Spain.
The bottom line: Portugal needs to raise €5 billion by privatizing companies. The buyers may well prove to be companies from its old colonies.
Bloomberg Businessweek Senior Writer Farzad covers Wall Street and international finance.

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DEBT FINANCING. University education is increasing on average 4.3%.

The average tuition at the Canadian universities rose nearly 40 percent above the rate of inflation, by 4.3 percent for full-time students in Bachelor's programs this year, Statistics Canada reported Friday.
The average tuition was $5,366 for the academic year 2011 / 2012, compared with $5.146 a year earlier, and that was a
4.0 Percent increase from 2009 / 10.
From July 2010 to the same month last year, the consumer price index was 2.7 per cent.
Tuition increased in all provinces except Newfoundland and Labrador, where they have frozen since 2003 / 2004.
New Brunswick and Nova Scotia had frozen the tuition for the last three years.
3.7 Percent the cost of the diploma degrees rose to a national average of $5.599. diploma instruction was in every province except Newfoundland and Labrador, with a range from 0.1% in Alberta to 5.5 percent in Ontario.
Students in Ontario paid the highest average fees at $7.578, followed by students in Nova Scotia, who paid an average of $7.326 and British Columbia at $7.303.
The most expensive degrees were the executive master of business administration at the $37.501 and the regular MBA program, at $21.528.
Fees of $16.024 paid the highest average bachelor students in dentistry, followed by students in medical $11.345 and $9.806.
4.3% More paid international students at a national average of $17.571, a 5.2 percent in the year before with Ontario recorded the largest increase to 6.1 percent.
Additional mandatory charges for Canadian students increased 5.5%, a national average of $820.
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DEBT FINANCING. UBS rogue trader was charged with

Alleged renegade trader accused Swiss banks lose huge UBS over $2 billion in illicit trade fraud and accounting fraud, was indicted Friday and told a London Court are displayed.
London police said that 31-year-old Kweku Adoboli would appear at a court in the British capital on Friday.
"He remains in police custody and the city of London magistrates appear this afternoon," said the Police Department in a statement. An investigation, the financial market authority's financial services authority, the serious fraud Office and the Crown Prosecution Service was further said.
Kweku Adoboli leaves the city of London Magistrates Court in London on Friday. He was charged with fraud, after Swiss Bank UBS said that it had lost over $2 billion in illicit trade. Luke MacGregor/Reuters
Law firm Kingsley Napley, Nick Leeson represented - the dealer, the British Bank Barings in 1995, after he not authorized about $1.4 billion losses trade brought - said that it had hired Adoboli represent.
UBS faced pressure to explain how not the executives, the 2-billion dollar loss of fish, and how the monitoring systems by not in a position, which identify alleged unauthorized transactions had been in the Switzerland.
Adoboli, born in Ghana, at UBS on a share desktop, known as Delta a and worked with Exchange traded funds active - the different types of shares, or were, as for example precious metals track.
Some commentators and politicians called for to take senior manager at UBS, responsibility for the loss.
"Until UBS has explained in detail, as such a significant loss due to unauthorized trading happen could and as the problem can be solved, adversely affected confidence, will remain," said Andreas Venditti, analyst with the Zurich Cantonal Bank.
UBS shares on Friday again suffered the losses the previous day. Investors have the opportunity to buy shares cheap, send their price to 3.3 percent on the Zurich stock exchange by early afternoon. 10 Percent had shares the day before after the Bank said a lone staff had caused the massive loss, fell.
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DEBT FINANCING. U.S. recession fears grow

New data on the U.S. economy released Thursday added to fears Canada’s biggest export market may be headed into recession.
The number of Americans making claims for first-time jobless benefits climbed to the highest level in three months last week, the Labor Department reported Thursday.
Filings rose 11,000 to 428,000. The four-week average, a less volatile measure, rose for the fourth straight week to 419,500, the highest level in eight weeks.
Applications need to fall below 375,000 to show that hiring is increasing enough to lower the unemployment rate. They haven't been below that level since February.
Separately, the department reported that U.S. consumers paid more for a range of goods and services last month with the Consumer Price Index rising 0.4 per cent following a 0.5 per cent increase in July.
Excluding volatile food and energy costs, core prices increased 0.2 per cent. Prices for food, energy apartment rents, and clothing all increased.
A third report from the Federal Reserve said manufacturing was mostly weak outside of strong auto production. Factory output rose 0.5 per cent in August, after increasing 0.6 per cent in July.
“U.S. economic growth has come to a virtual standstill,” according to Mark Zandi, a chief economist with Moody’s Analytics. Zandi said in a news release that he gives 40 per cent odds of a U.S. recession in the next six to 12 months.
“Real GDP during the first half of the year increased at a nearly one per cent annualized rate and job growth decelerated from close to 200,000 per month at the start of the year to barely positive this summer,” Zandi said.
“This is not sustainable. Unless spirits improve soon, businesses will ramp up layoffs, consumers will pull back and the economy will fall into another recession,” he added.
Zandi cited a rising number of corporate layoff announcements and a flattening in retail sales.
“That big decline in confidence over the summer is showing up in the 'real' economic data, which is worrying,” BMO Capital Markets senior economist Jennifer Lee said in a commentary.
With files from The Associated Press Accessibility Links

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DEBT FINANCING. Some BlackBerry users were affected by a failure

A day at research in motion stock was punished by investors, so the company that some customers were technical problems with their BlackBerry devices.
Messenger services reported problems with e-Mail and BlackBerry customers.
"Some Canada & LatAm-BBM problems inform customers," tweeted RIM. "Look at our support teams." "We apologize for any inconvenience."
Customers of Rogers Communications, Bell Mobility and WIND Mobile has also been reported that will be affected.
SaskTel published also a note on his Facebook page, the customer of the error.
The problem was shares RIM sold heavily Friday, a day after the company weaker results in the second quarter. The stock was clock from 20 percent to the TSX in late afternoon trade, to $6.05 to $23.35.
The company said 15 percent on last year slipped its revenues, while the net profit was 58 percent.
The company adjusted results missed expectations of 10 cents per share analysts.
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DEBT FINANCING. Rogers asked to fix game throttling problem

Rogers acknowledged in a Sept. 2 letter that games and other applications could be unintentionally slowed down under some circumstances by equipment used to prioritize certain types of internet traffic over others. Danny Moloshok/Reuters
The CRTC has asked Rogers to "address and resolve" a problem that may result in online video games being unintentionally slowed down on its network.
Rogers should file a plan by Sept. 27 for resolving the problem, Canada's telecommunications regulator said in a letter sent by email Friday to Ken Thomson, Rogers's director and counsel for copyright and broadband law.
Following a complaint from the Canadian Gamers Organization, a group representing people who play video games online, Rogers acknowledged that equipment on its network used to slow down some kinds of internet traffic in order to prioritize time-sensitive applications such as internet voice calling and video streaming might affect other applications if:
Other peer-to-peer applications are running at the same time;The game or application was misclassified by network traffic management systems, as in the case of World of Warcraft; andAll the applications classified as peer-to-peer traffic have a combined bandwidth of 80 kilobits per second or more – the threshold that trips the network traffic management system.
Based on that information, the CRTC said, it seems the equipment "could potentially continue to misclassify time-sensitive traffic such as other online games." It added that "Rogers should address and resolve this misclassification problem."
The CRTC letter, signed by John Traversey, executive director of communications, noted that the use of internet traffic management that causes "noticeable degradation" of time-sensitive internet traffic amounts to controlling the content, and therefore requires "prior Commission approval."
When asked to comment on the letter, Rogers said it had corrected an issue with the World of Warcraft game, which it admitted in March was being throttled, but said "it was not aware of any problems with any other online games."
"We have a process in place to ensure our internet traffic management works as it should," the company added. It said it tests games if it becomes aware of a problem and encourages customers to contact the company if they are having issues.
"Gamers are some of our best customers," Rogers said. "We want them to be satisfied customers."
The Canadian Gamers Association sent an email to the CRTC Friday asking it to ensure that "any solutions presented here to fix the problem also be implemented on other ISPs as well."
Jason Koblovsky, the group's co-founder, said both Shaw and Bell internet customers may be experiencing similar slowdowns while playing games.
Rogers reported earlier this year that it had fixed the problem with World of Warcraft. However, in August, the Canadian Gamers Organization told the CRTC that the game Call of Duty: Black Ops also seemed to be slowed down on a Rogers connection. That prompted the CRTC to ask Rogers for more information and the revelation that other games could be affected.
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DEBT FINANCING. RIM shares fall on weaker earnings

RIM-3-month chart

Shares of research in motion decreased on Friday, a day after a financial results disappointing.
RIM, concluded from $5.90, or 20 percent to $23.50 on the Toronto Stock Exchange Friday.
After the end of regular trading on Thursday, RIM said its second quarter results for the three months Aug. 31, after taking into account the cost of slashing 2,000 jobs from its workforce and as sales slipped on lower than expected sales of smartphones and tablets 58 percent to 329 million US$ or dropped 63 cents per share.
Compared with a profit of $797 million, or $1.46 per share on revenue of $4.62 billion a year ago.
Adjusted net income was 80 cents per share. 90 Cents United States compared with analysts estimates compiled by Thomson Reuters.
Sales dropped 15 percent to just under $4,2 billion 4.6 billions of dollars.
RIM shipped 10.6 million BlackBerrys, less than the expectations of analysts from between 11 to 12 million. It the 200,000 BlackBerry textbook tablets, which delivered also below analysts forecasts.
Co-CEO Mike Lazaridis said updated versions of the BlackBerry bold, torch and curve were only on sale for a few weeks of the quarter, and he expects to get more sales.
RIM projected revenue in the current quarter 5.3 to 5.6 billion $ and earnings per share in the range of $1.20 to $1.40. The company is to be expected, earnings per share for the full year at the lower end of the range it announced by between $5.25 and $6 per share.
In the course of the earnings report several analysts cut their price targets on the RIM shares.
However, not every analyst is down on the company.
"We believe that the stock will recover, growing evidence that the new equipment by sale in United States and international markets," said BMO Capital Markets analyst Tim long.
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DEBT FINANCING. Mutual fund sales plummet in August

The sale of mutual funds plummeted in August as Canadians held off on investing in them due to the turmoil in the stock market.
The Investment Funds Institute of Canada reported Thursday that sales exceeded redemptions by $205 million last month, a 64 per cent drop from net sales of $566 million in July.
Net sales fell 33 per cent from $306 million a year earlier.
Investors moved into bond funds, with sales rising to $1.26 billion from $99.8 million in July.
S&P/TSX composite index 3-month chart
Stock fund sales tumbled sharply, the industry organization said, reporting $1.6 billion in redemptions compared with $964 million in redemptions in July.
Investors also pulled cash out of money market funds with $4.5 million in net redemptions compared with $36.4 million in net sales in July.
Balanced fund net sales sank to $479 million in August from $1.29 billion the previous month, IFIC said.
Total funds under management for August were $778.6 billion, down two per cent from July.
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DEBT FINANCING. IMF chief warns global recovery in danger

The head of the International Monetary Fund repeated Thursday her warning that the global economy is in a "dangerous new phase," and called for coordinated action by governments in the face of a slowing global economy and a deepening European debt crisis.
IMF managing director Christine Lagarde also called on European countries to get their spending under control and for banks in the region to ensure they have enough cash on their balance sheets for emergencies.
Her comments came after the European Central Bank unveiled plans to lend American dollars to banks in three operations to be conducted in October, November and December.
The ECB said it would collaborate with the U.S. Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank in the lending operations.
The move was widely seen as a sign that the banks aren’t providing short-term lending to each other because of fears about the quality of their loans to debt-burdened countries such as Greece, Ireland, Portugal, Spain and Italy.
The program will likely prevent a panic for the next few months, but it's only a first step, said Mark McCormick, a currency strategist at Brown Brothers Harriman.
"You're warding off contagion and crisis, but it's not going to solve the problem, which is too much debt," McCormick said, but added it was smart for the central banks to address the problem early.
In her speech in Washington, Lagarde also pointed to the problem of high debt, not only across the world economic system and especially among governments and banks in Europe, but also in U.S. households.

'It's not going to solve the problem, which is too much debt.'—Mark McCormick, currency strategist, Brown Brothers Harriman

The uncertainty about their ability to meet their obligations slows economic recovery, a problem made worse by policy indecision by political leaders, she said.
Lagarde evoked memories of the financial crisis in 2008, and called on the heads of the major European economies to provide leadership.
“Exactly three years after the collapse of Lehman Brothers, the economic skies look troubled and turbulent as global activity slows and downside risks increase,” Lagarde said.
“Without collective resolve, the confidence that the world so badly needs will not return.”
Her warning came as the European Commission reduced its outlook for growth in the region in the second half of the year but predicted that it would avoid an outright recession.
Still, EU economic affairs commissioner Olli Rehn said the economy was likely to come to a "virtual standstill," dragged down by the region's massive debt burden.
The EC kept its growth prediction for 2011 at 1.6 per cent, but said activity would slow to 0.2 per cent in the third quarter and just 0.1 per cent in the last three months of the year.
And the Greek finance minister, Evangelos Venizelos, warned that the country must brace for a fourth year of recession, amid new data showing unemployment had hit a new high of 16.3 per cent. He said the Greek economy will contract 5.3 per cent this year.
Eurozone finance ministers will meet in Wroclaw, Poland, beginning on Friday to discuss how to deal with the debt crisis.
U.S. Treasury Secretary Timothy Geithner will take part on Saturday and is expected to plead for more decisive measures to prevent a Greek default that could threaten Europe's banks and even spread to the global financial system.
Lagarde said she welcomes U.S. President Barack Obama's job creation plan given what she called an unemployment crisis in the United States.
Lagarde will preside at her first annual meeting of the 187-nation lending institution next week.
The former French finance minister became director on July 5 after taking over from Dominique Strauss-Kahn, who resigned in May to fight attempted rape charges. The charges were later dismissed.
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DEBT FINANCING. Greek bailout loan decision pushed to October

Partner will delay until October its decision on a stack of bailout loans needed to Athens said from a disastrous bankruptcy, the head of the Finance Ministers of the euro zone group Friday payout Greece international rescue.
The announcement at the meeting in Wroclaw, Poland, was yet another example of Europe's last on the nearly two years to solve the crisis of too much government debt in some countries.
US Treasury Secretary Timothy Geithner had the amenities-a first for the finances of U.S. boss - dominated by the increasingly like the United States the global impact of the crisis of the euro area is always connected.
But participants appeared unable, in any front advance.
The European financial chiefs ruled out, the more tax incentives to its lackluster economy is growing again, left the to say there is no room for extra spending large debts. Another sticking point of support for Greece, for a second rescue mission now will, together, a Finnish demand was not solved after collateral either.
The next installment of € 8 billion (11 billion$) of Greece first bailout is a review of the finances of the country. The payment was originally planned for the end of September, and the Greek Government has said that without the new loans it forces of money in the next month she is running to stop, pay public salaries and finally on its massive debt default.
Officials from the euro zone and the IMF have delayed your opinion to Greece a clear plan, but how it will cut its deficits to targets agreed in the bailout program, Jean-Claude Juncker said, is the Prime Minister of Luxembourg, also the regular meeting of Finance Ministers of the eurozone.
Juncker said "the renewed commitment of Greece" for his strict programme welcomed officials and said, "in October to the next tranche would decide."
A delegation from the euro area, the IMF and the European Central Bank unexpectedly left Athens on Sept. 2, delay the long billion ($ 152 billion) bailout agreed expected confirmation that Greece was the terms and conditions for the euro110 in May 2010.
The country's fight to keep a lid on its spending and raise enough revenue rose also uncertainty about a second euro109 billion aid package in July agreed it became clear that the first group of money were not enough.
Fears that Greece had received no more bailout money and standard Greek bond prices lot, weighed on the euro exchange rate with the dollar and roiled stock markets.
Austria's Finance Minister Maria Fekter, traditionally a hard-line on sticking to the bailout conditions, who said she was "very optimistic that the next tranche of Greece can be paid."
She warned of a Greek default, what she "very expensive." said would still be excluded not there as a possibility in the future.
"Should come to a situation where this type (the rescue loans) suddenly more expensive than the alternative, we have to think about the alternative" Fekter said. "But at the moment still not the case."
Friday announcement was a complete insurance received Greece money and hopes for tangible progress on another obstacle were quickly thwarts said Finnish Finance Minister Jutta Urpilainen, gave way to a solution for their country demand it guarantees, to secure their help in the second bailout.
The small Nordic country demand gave rise to similar requests from several other countries, including Austria and the Netherlands.
Meet all the requirements for collateral can shave hundreds of millions of euros from the sum of the total bailout, hurt Greece perspectives and in the meantime other eurozone Nations to finance the guarantees.

"If collateral is provided, this will be done at a price," Juncker said on, where discussions were conducted without further details.
The meeting on Friday comes after several turbulent weeks in global financial markets, triggered by concerns about the impact of potential Greek default value, as well as mounting evidence of a slowdown of the global economy. Some banks in the eurozone have difficulties were to short-term financing in US dollars as other lenders on their exposure of the debt of struggling countries like Greece, Spain, or Italy provide.
The financing of expenditure pushed the US Federal Reserve, the European Central Bank and three other major central banks, banks access to dollars lighter on Thursday, in the hope that the they credit of seizure until, how it can end three years ago after the collapse of us Investment Bank Lehman Brothers.
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DEBT FINANCING. Ford plant closure mourned by St. Thomas, Ontario

Ford plant worker Dennis McGee thought he had "died and gone to heaven" when he collected his first paycheque of $325 in 1978, but now McGee and hundreds of other employees are bidding farewell to the employer that has been the economic backbone of the southwestern Ontario community of St. Thomas for 44 years.
The last sedan rolls off the assembly line Thursday, throwing McGee and the last of the about 1,100 employees out of work at the factory that had 3,600 workers a decade ago. The closure was announced in 2009, as the North American auto industry was taking a battering, but hope prevailed that it would be avoided as auto bailout packages in the midst of the recent recession helped revive North American automakers.
McGee, for one, still has dependents, and is grappling with the forced retirement as the final sedan rolls out of the 2.6-million-square-foot factory where the Lincoln Town Car, Crown Victoria other vehicles have been built.
"My first paycheque I had rent money — $195 plus I had about $130 left over —and I thought I'd died and gone to heaven," he says. "I still got kids in university and I gotta figure out how I'm gonna pay for that.
"It's tough, it's emotional, there's a sense of numbness," McGee adds. "I met a lot of good people over the years and to see it shutting down, breaks my heart, it really does."
Heather Jackson Chapman, mayor of the community of about 35,000, says the plant isn't the only business casualty in the community, which is in for some tough times.
More than 3,000 manufacturing jobs have disappeared in the past three years, and St. Thomas now has one of the highest unemployment rates in the country.
"We're never going to see the big plants again that employ 2,000 at a time with the high-paying jobs we became accustomed to — it's just the new reality."
To help the Ford workers, the union and the automaker have worked out compensation packages that allow for early retirements and a limited number of transfers to other Ford factories.
The about 800 remaining employees who need to find new work get a severance package as well as three years of job-search and retraining assistance through a centre set up by the Canadian Auto Workers union. A Ford spokesman says the company remains committed to Ontario, having recently invested in its engine plant in Windsor and its assembly plant in Oakville.
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DEBT FINANCING. Flaherty urges more private innovation expenditure

Finance Minister Jim Flaherty called for Canada's private sector more money in research and development to pumps.
"Frankly, we have unacceptably low support for R & D and innovation in many parts of the Canadian private sector" said in his prepared remarks Flaherty a Friday speech to the Perimeter Institute in Waterloo, Ontario
"Everyone in this room - and most out of it in the today's Canada - white, that the global economy, the we now compete increasingly with new ideas and knowledge-based industries," he said.
"Despite this global reality, Canada lags other Nations in total expenditure on R & D." "At the same time R & D has reduced actually specifically issues in Canada since 2006."
He said that between 2006 and 2009, R & D expenditure of public authorities, universities and private non-profit groups increased, but for Canadian companies adjusted for inflation.
Failure to invest in innovation will leave a laggard in the digital economy in the country, he said.
"With great difficulty, both economically and socially, reactive instead of proactive we will." And our company continues to lag in productivity compared to their competitors in other countries.
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DEBT FINANCING. Ex PQ leader joins Questerre Energy

Canada's shale gas industry is turning to another Quebec political heavyweight to bolster its case for further exploration.
Alberta-based Questerre Energy has appointed former Parti Québécois leader André Boisclair as an advisor to its board.
The company was running shale gas exploration projects in Quebec when the province's Liberal government, under growing public pressure, announced a two-year moratorium on new developments.
Boisclair's "knowledge of Quebec culture" makes him a valuable advisor on "socio-political considerations" in the province, Questerre Energy said in a news release.
Boisclair said that Quebec's energy independence remains a priority for him, noting the moratorium offers time to engage in a "constructive dialogue" about shale gas.
Boisclair served as Quebec environment minister under PQ premier Bernard Landry a decade ago.
Opposition to the controversial energy source is based largely on concerns about groundwater contamination during extraction.
The extraction process known as "fracking" can lead to underground leaks.
Another ex PQ leader is already heavily involved in the shale gas industry.
As president of the Quebec Oil and Gas Association, former premier Lucien Bouchard is entrusted with selling skeptical Quebecers on the merits of shale gas exploitation.
Boisclair and Bouchard's involvement in shale gas is a betrayal to the sovereignty movement, according to one elected official in Quebec City.
Québec solidaire MNA Amir Khadir said it's sad to see public figures with clout and "knowledge of the workings of government" serving corporate interests.
Their work on behalf of shale gas interests contributes to general cynicism among voters, Khadir said, especially given Quebec's ongoing struggle with corruption allegations.
Quebec's Lower Saint-Lawrence region is rich in shale deposits.
An earlier version of this story identified André Boisclair as a former premier of Quebec. Boisclair was never premier. He served as PQ leader from 2005 to 2007. Sept. 16, 2011/ 10:00 a.m. ETAccessibility Links

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DEBT FINANCING. Air Canada flight attendants serve strike notice

Flight attendants have informed their strike Air Canada and off the job already could be Wednesday.
The communication provided a federal mediator call Friday night, and provides the clock is ticking for a showdown between 6,000 flight attendants and Air Canada (TSX: AC.)(A).
It is still possible, that can achieve an agreement both sides, avoiding a strike or lock-out Canada's largest airline.
The flight attendants are represented by a branch of the Canadian Union of public servants that are in the legal strike location about 12: 00 pm Wednesday.
They were also 72 hours of their intention to strike, informed even though Friday announcement this requirement has been met.
"Negotiations are under way, and we still hope an agreement with Air Canada," Jeff Taylor, President of Air Canada component of the Canadian Union of public employees.
Earlier in the day, Federal Republic of labor Minister Lisa Raitt said in an e-Mail, which both sides to a meeting in Ottawa would call them, if no deal was reached until the weekend.
"I had a conference call with parties Wednesday night." My message was that we should have a deal can be ratified by members. And if they don't get then I asked a business it, a process, to find them. And if after the weekend progress still does not, I want them them face to face see Monday. "
Raitt added to the e-Mail, that she believes "both parties understand the impact, a work stoppage on the economy and is working hard to a business."
Headquartered in Montreal is Canada's largest air carrier, which is about the country and has large continental and international routes.
With an overwhelming majority of the members of the Union, their Union give a strike mandate, less than a month after making a previous tentative agreement their negotiators rejected.
The flight attendants, 31, negotiate without a contract since March mediator with the support of the Federal Republic.
Industry analysts believe that the Government will quickly introduce back to-work laws, a strike occurs, especially as a strike by flight attendants a greater impact on the airline would have represented that the three day strike in June by customer service agents, by the Canadian Auto workers,
A negotiated solution reached the CAW Union and Air Canada legislation that would have sent to the social partners to arbitration according to Raitt.
The public know if interruptions while the CAW strike, but the Government said that the strike threatened the economy.
The economic situation made worse because, with suggestions that Canada could be the first G7 country sliding into a recession after negative growth in the second quarter.
Air Canada has yet to reveal not their contingency plans for a strike, but said that it would work a partial schedule with the help of its codeshare partners.
On the Toronto Stock Exchange, Air Canada shares hit a 52-week low on Friday, but later won to close five cents, to $1.62.
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DEBT FINANCING. Home prices show August increase

Canadians paid 7.7 per cent more for sales of existing homes in August than they did in the same month last year, a real estate group said Thursday.
In its monthly report, the Canadian Real Estate Association said the average sale price for an existing home rose to $349,916 last month from $324,992 in August 2010.
CREA president Gary Morse said the market remained on a "firm footing in August when compared to volatile financial markets."
CREA said the national average price has actually moderated compared to earlier this year, with Vancouver's sales activity — and more recently Toronto's — exerting less influence on the average. Vancouver and Toronto's share of provincial and national sales activity reached "unusually elevated" levels earlier this year, but has since pulled back into normal seasonal variations, the group said.
“Once again, economic and financial market headwinds outside Canada are keeping interest rates lower for longer,” said CREA chief economist Gregory Klump. “Those headwinds will likely persist until, and indeed after, fiscal quagmires in the U.S. and Europe are resolved. In the meantime, the Bank of Canada will have ample reason to delay raising interest rates further, which is supportive for the Canadian housing market.”
Nationally, overall year-over-year sales for August were up 15.8 per cent, the largest year-over-year increase since last April, CREA said, but added that the big increase was mainly due to weak activity in 2010.
Between July 2011 and August 2011, sales eased by a seasonally adjusted 0.5 per cent.
The real estate group also said that a record 70 per cent of all local markets across the country are considered to be in balance. CREA says a market is considered to be in balance when the seasonally adjusted ratio of sales to new listings is between 40 and 60 per cent. Below 40 per cent is considered a buyers' market, while over 60 per cent is considered a sellers' market .
CREA also said the number of months of inventory on the market stood at 6.2 months at the end of August on a national basis. That was relatively unchanged from the 6.1 months seen at the end of July. National inventory figures have been stable at about six months since April. Inventory — a gauge of market health — refers to how long it would take to sell of the current supply of houses on the market at the current rate of sales.
Economists said housing markets remain healthy for now despite tumbling consumer confidence and weak global growth.
"Extremely low interest rates appear to be just the medicine as Canadians continue to borrow, and a number of the banks lowered their five-year fixed rates again in recent days, which could continue to lend support," BMO Financial Group economist Robert Kavcic wrote in a commentary.
However, some observers said the market is eventually headed for a drop.
Fannie Fong of TD Economics said a peak-to-trough drop of roughly 10 per cent for both home sales and prices is expected, though that change isn't expected until the Bank of Canada begins hiking interest rates in earnest in early 2013.

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DEBT FINANCING. Book: Treasury Secretary Ignored Obama Directive

A new book offering an insider's account of the White House's response to the financial crisis says that U.S. Treasury Secretary Tim Geithner ignored an order from President Barack Obama calling for reconstruction of major banks.
According to Pulitzer Prize-winning author Ron Suskind, the incident is just one of several in which Obama struggled with a divided group of advisers, some of whom he didn't initially consider for their high-profile roles.
Suskind interviewed more than 200 people, including Obama, Geithner and other top officials for Confidence Men: Wall Street, Washington, and The Education of A President, which will be released Sept. 20. The Associated Press purchased a copy on Thursday.
The book states Geithner and the Treasury Department ignored a March 2009 order to consider dissolving banking giant Citigroup while continuing stress tests on banks, which were burdened with toxic mortgage assets.
In the book, Obama does not deny Suskind's account, but does not reveal what he told Geithner when he found out. "Agitated may be too strong a word," Suskind quotes Obama as saying. Obama says later in the book that he was trying to be decisive but "the speed with which the bureaucracy could exercise my decision was slower than I wanted."
Geithner says in the book that he did not recall that Obama was mad at him about the Citigroup decision and rejected allegations contained in White House documents that his department had been slow to enact the president's plans.
"I don't slow walk the president on anything," Geithner told Suskind.
"The Citbank incident, and others like it, reflected a more pernicious and personal dilemma emerging from inside the administration: that the young president's authority was being systematically undermined or hedged by his seasoned advisers," Suskind writes.
Suskind states that Obama accepts the blame for mismanagement in his administration while noting that restructuring the financial system was complicated and could have resulted in deeper financial harm. One of the major complaints about Obama's administration is that it was too easy on major financial institutions, including Citi. The president had wanted Treasury officials to focus on a proposal to dissolve the bank, but no plan was ever created, the book states.
In a February 2011 interview with Suskind, Obama acknowledges another ongoing criticism: that he is too focused on policy and not on telling a larger story, one the public could relate to. Obama is quoted as saying he was elected in part because "he had connected our current predicaments with the broader arc of American history," but that such a "narrative thread" had been lost. Obama observes that he and fellow Democrats Bill Clinton and Jimmy Carter "all have sort of the disease of being policy wonks."
Suskind's book supports other accounts of disagreement among advisers over how large a stimulus was necessary to revive the economy and how aggressively to deal with financial institutions that had become "too big to fail."
Larry Summers, the former White House economic adviser, is quoted as lamenting that he and others felt "home alone" and that mistakes made under Obama would not have happened under President Clinton, for whom Summers also served. Interviewed by Suskind, Summers initially denied making such comments, then acknowledged them, saying he was frustrated at having "five issues" of major importance to deal with at once and not "five times as many" officials to handle them.
The book says one of Obama's top advisers, former chief of staff Rahm Emanuel, was not the president's first choice for the position. According to Suskind, Emanuel's name was not even on the initial short list, which included White House aide Pete Rouse.
An investigative reporter, Suskind won a Pulitzer Prize in 1995 while working for the Wall Street Journal.
His other books include The Way of the World (2008), which focused on national security, and The Price of Loyalty (2004). That best-seller was an account of the Bush administration and its first treasury secretary, Paul O'Neill, that includes what became a widely cited remark by then-Vice President Dick Cheney: "Reagan proved that deficits don't matter."
Suskind's 1998 book, A Hope Unseen, grew out of the series of articles that won him a Pulitzer for feature writing.
Other recent books about the Obama administration include Bob Woodward's Obama's Wars, which focused on foreign policy, and Jonathan Alter's The Promise, which covered his first year in office.
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