Six Nato troops have been killed in Afghanistan in the worst single-day loss for international forces since the launch of a big offensive to drive Taliban insurgents from the town of Marjah.
The deaths on Thursday, followed by the loss of another soldier on Friday, underscore the risks US, UK and Afghan troops face as they seek to clear what commanders describe as pockets of resistance by fighters digging in to resist one of the biggest operations launched by Nato in Afghanistan since 2001.
EDITOR’S CHOICE
Islamabad steps up terror arrests - Feb-18
Marjah’s real test will come after offensive - Feb-17
Marjah inroads slowed by new bombs - Feb-17
Marines help push insurgents out of Marjah - Feb-17
Top Taliban commander captured - Feb-16
Mastermind who holds vital intelligence - Feb-16
The seven casualties brought the death toll of international troops from the six-day operation to 12, an official for the Nato-led force in Afghanistan said.
More than a dozen civilians have also lost their lives in the operation. Provincial officials said several dozen insurgents had been killed.
Nick Carter, the British commander of Nato forces in southern Afghanistan, said late on Thursday via a video link to the Pentagon that the offensive was facing resistance in Marjah and might take another month to clear the area of Taliban fighters.
“In Marjah itself there remains stiff resistance from the insurgents,” Maj-Gen Carter told reporters. “It will be some days before we can be completely confident that Marjah is secure.”
Maj-Gen Carter said it could take another three months to determine how successful the operation had been.
It is the first big offensive launched since Barack Obama, US president, ordered an extra 30,000 troops to Afghanistan in December, and is seen as an important test of whether the latest troop surge can have a lasting impact on the Taliban.
Commanders have said the assault on Marjah is part of a wider plan to secure population centres in southern Afghanistan, the focal point for the insurgency, that will give the Afghan government time to start building the institutions needed to deny insurgents support.
The offensive has taken place alongside signs that the Taliban is facing growing pressure in Pakistan, where the movement’s second-in-command and military chief, Mullah Abdul Ghani Baradar, was arrested last week in a joint US-Pakistan operation. Pakistani security officials said on Thursday they had also arrested two Taliban “shadow governors” – appointed by the movement to set up parallel administrations in two Afghan provinces.
An important part of US strategy for stabilising the region is to encourage Pakistan to crack down on Afghan insurgents operating from its territory while Nato forces increase the military pressure on the movement in Afghanistan.
Saturday, February 20, 2010
Pakistan Air Strike Kills 30 Militants in Northwest
Pakistan security forces killed 30 militants during an air strike in the tribal region of South Waziristan near the Afghanistan border today, the military said.
The forces attacked militant hideouts in the Shawal mountains after receiving a tipoff, Pakistan’s military said in a statement on its Web site.
Pakistan’s army is engaged in an operation against the Taliban in South Waziristan that has forced rebels to flee to remote areas near the border with Afghanistan. Since October, 28,000 troops have fought insurgents, triggering suicide bombings and gun attacks in major Pakistani cities.
A police official was killed and six officers wounded in suicide attacks on two police stations in northwest Pakistan, Agence France-Presse reported, citing a the authorities.
In the first attack a gunfight broke out when two suicide bombers stormed a police station in Mansehra, station chief Waheed Khan told AFP. In a separate attack in the neighboring mountain town of Balakot, a suicide bomber killed station chief Khalil Khan and wounded three policemen, AFP reported, citing local police official Sabir Ullah.
At least 3,000 people were killed in terrorist attacks across the country last year, according to the Islamabad-based Pakistan Institute for Peace Studies.
The forces attacked militant hideouts in the Shawal mountains after receiving a tipoff, Pakistan’s military said in a statement on its Web site.
Pakistan’s army is engaged in an operation against the Taliban in South Waziristan that has forced rebels to flee to remote areas near the border with Afghanistan. Since October, 28,000 troops have fought insurgents, triggering suicide bombings and gun attacks in major Pakistani cities.
A police official was killed and six officers wounded in suicide attacks on two police stations in northwest Pakistan, Agence France-Presse reported, citing a the authorities.
In the first attack a gunfight broke out when two suicide bombers stormed a police station in Mansehra, station chief Waheed Khan told AFP. In a separate attack in the neighboring mountain town of Balakot, a suicide bomber killed station chief Khalil Khan and wounded three policemen, AFP reported, citing local police official Sabir Ullah.
At least 3,000 people were killed in terrorist attacks across the country last year, according to the Islamabad-based Pakistan Institute for Peace Studies.
In Turmoil, Sunni Party in Iraq Calls for Vote Boycott
BAGHDAD — The Sunni political party whose two most prominent leaders were disqualified from next month’s parliamentary elections in Iraq because of supposed ties to Saddam Hussein’s Baath Party called Saturday for a boycott of the vote, raising fears of worsening sectarian tensions in an already volatile campaign.
It remains to be seen how deeply the call for a boycott will resonate in Iraq’s Sunni heartland. Sunnis largely boycotted the country’s last election in 2005 and as a result were disproportionately underrepresented in Parliament.
Even the party’s leader, Saleh al-Mutlaq, questioned the usefulness of a boycott last week, and on Saturday at least some prominent Sunni leaders indicated they would not heed the call.
Mr. Mutlaq’s party belongs to a broader coalition, known as Iraqiya, that has made it clear that it has no intention of boycotting. The coalition includes secular Shiite and Sunni parties and is led by a former prime minister, Ayad Allawi.
It has emerged as a powerful challenger to the electoral bloc led by Prime Minister Nuri Kamal al-Maliki and another dominated by Shiite parties.
So far no other Sunni parties have indicated they would join a boycott. And in Kirkuk Province, officials of Mr. Mutlaq’s own party said Saturday that they would not boycott the election there.
Still, the call for a boycott further taints what many Iraqis — and the United States and United Nations — hoped would be an election that moved the country beyond its recent history of sectarian bitterness and bloodshed.
The action was prompted by the disqualification of hundreds of candidates, most of them Sunni, by a parliamentary commission last month.
In announcing its boycott, Mr. Mutlaq’s party, the National Dialogue Front, cited not only Mr. Mutlaq’s disqualification, but also a volatile security situation, the arrest or harassment of candidates and the influence of Iran on the country’s Shiite parties, a recurring suspicion among Sunnis.
One of the party’s candidates in Diyala Province, Najim al-Harbi, was arrested at his home on Feb. 7, part of what Mr. Maliki’s opponents have called a wave of intimidation against challengers.
The party’s statement on Saturday also cited recent statements by the top American military commander, Gen. Ray Odierno, and the ambassador, Christopher R. Hill, that the leaders of the commission disqualifying candidates had close ties to Iran.
“The National Dialogue Front cannot continue in a political process run by a foreign agenda,” the statement said.
Mr. Mutlaq, a former agronomist and a member of Parliament since 2006, has a strong following in Sunni strongholds. His campaign posters could still be seen Saturday on the road from Baghdad to Baquba, the capital of Diyala, whose population is a mix of Sunnis, Shiites and Kurds.
Mr. Mutlaq was expelled by the Baath Party in 1977, but he emerged after the American invasion as a powerful voice for Sunni sentiments. He has become increasingly critical of his disqualification, which he appealed unsuccessfully, but he has stopped short of calling for a boycott.
“We have experienced the bitter taste of boycott before,” he said last week. He could not be reached Saturday to clarify his position and that of his party.
In Diyala, a prominent tribal leader in Baquba, Sheik Sadoon al-Dulaimi, said a boycott would only allow “non-patriotic parties” to gain control of the new Parliament.
“It will take us back to what happened in 2005,” he said.
Marc Santora and an Iraqi employee of The New York Times contributed reporting from Baquba, Iraq.
It remains to be seen how deeply the call for a boycott will resonate in Iraq’s Sunni heartland. Sunnis largely boycotted the country’s last election in 2005 and as a result were disproportionately underrepresented in Parliament.
Even the party’s leader, Saleh al-Mutlaq, questioned the usefulness of a boycott last week, and on Saturday at least some prominent Sunni leaders indicated they would not heed the call.
Mr. Mutlaq’s party belongs to a broader coalition, known as Iraqiya, that has made it clear that it has no intention of boycotting. The coalition includes secular Shiite and Sunni parties and is led by a former prime minister, Ayad Allawi.
It has emerged as a powerful challenger to the electoral bloc led by Prime Minister Nuri Kamal al-Maliki and another dominated by Shiite parties.
So far no other Sunni parties have indicated they would join a boycott. And in Kirkuk Province, officials of Mr. Mutlaq’s own party said Saturday that they would not boycott the election there.
Still, the call for a boycott further taints what many Iraqis — and the United States and United Nations — hoped would be an election that moved the country beyond its recent history of sectarian bitterness and bloodshed.
The action was prompted by the disqualification of hundreds of candidates, most of them Sunni, by a parliamentary commission last month.
In announcing its boycott, Mr. Mutlaq’s party, the National Dialogue Front, cited not only Mr. Mutlaq’s disqualification, but also a volatile security situation, the arrest or harassment of candidates and the influence of Iran on the country’s Shiite parties, a recurring suspicion among Sunnis.
One of the party’s candidates in Diyala Province, Najim al-Harbi, was arrested at his home on Feb. 7, part of what Mr. Maliki’s opponents have called a wave of intimidation against challengers.
The party’s statement on Saturday also cited recent statements by the top American military commander, Gen. Ray Odierno, and the ambassador, Christopher R. Hill, that the leaders of the commission disqualifying candidates had close ties to Iran.
“The National Dialogue Front cannot continue in a political process run by a foreign agenda,” the statement said.
Mr. Mutlaq, a former agronomist and a member of Parliament since 2006, has a strong following in Sunni strongholds. His campaign posters could still be seen Saturday on the road from Baghdad to Baquba, the capital of Diyala, whose population is a mix of Sunnis, Shiites and Kurds.
Mr. Mutlaq was expelled by the Baath Party in 1977, but he emerged after the American invasion as a powerful voice for Sunni sentiments. He has become increasingly critical of his disqualification, which he appealed unsuccessfully, but he has stopped short of calling for a boycott.
“We have experienced the bitter taste of boycott before,” he said last week. He could not be reached Saturday to clarify his position and that of his party.
In Diyala, a prominent tribal leader in Baquba, Sheik Sadoon al-Dulaimi, said a boycott would only allow “non-patriotic parties” to gain control of the new Parliament.
“It will take us back to what happened in 2005,” he said.
Marc Santora and an Iraqi employee of The New York Times contributed reporting from Baquba, Iraq.
Friday, February 19, 2010
Japan’s Bonds Fall on Weaker Yen, Fed’s Discount Rate Increase
Feb. 20 (Bloomberg) -- Japan’s bonds fell, pushing up 10- year yields from a three-week low, as the yen’s decline to the lowest level in a month boosted the profit outlook for exporters and damped demand for government debt.
Japan’s long-term bonds also dropped after the Federal Reserve raised its discount rate for the first time in three years as it took another step toward withdrawing its stimulus measures. Bonds also fell on speculation primary dealers will cut debt holdings before Japan sells 20-year bonds next week.
“Selling pressure should mount on bonds as the yen weakens following the Fed’s action,” said Tetsuya Miura, chief market analyst in Tokyo at Mizuho Securities Co., a unit of Japan’s second-largest banking group.
The yield on the 2.1 percent bond due December 2029 rose 1.5 basis points to 2.165 percent this week at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price dropped 0.206 yen to 99.098 yen.
Ten-year bond futures for March delivery rose 0.10 over the week to 139.47 on the Tokyo Stock Exchange.
The yen fell to as low as 92.09 per dollar in Tokyo yesterday, the weakest since Jan. 12, after the Fed raised its discount rate by a quarter point to 0.75 percent. The central bank said the move will encourage financial institutions to rely more on money markets rather than the central bank.
‘Rather Difficult’
“It’s getting rather difficult for investors to keep buying mid-term bonds with the dollar in an uptrend,” Chotaro Morita, head of fixed-income strategy research at Barclays Capital, wrote yesterday in a note to clients.
The Finance Ministry will sell 1.1 trillion yen ($11.97 billion) of 20-year bonds on Feb. 23. Primary dealers, companies required to bid at government debt sales, often reduce holdings of bonds before an auction in case prices decline before they can pass on the new securities to investors.
“Investors will try to secure a 2.2 percent coupon for next week’s 20-year auction,” said Akihiko Inoue, chief market analyst in Tokyo at Mizuho Investors Securities Co., a unit of Japan’s second-largest bank. “That should keep a lid on bonds.”
The decline in debt was tempered on speculation that deflation will boost the value of the fixed payments from government securities.
The Bank of Japan on Feb. 18 said deflation remained a “critical challenge,” as it left its benchmark interest rate on hold at 0.1 percent.
‘Firm Environment’
“Bonds are in a firm environment as investors focus on deepening deflation,” said Takafumi Yamawaki, a senior strategist in Tokyo at BNP Paribas Securities Japan Ltd., a unit of France’s largest bank. “Supply-demand conditions remain good for bonds.”
Japan’s gross domestic product deflator fell 3 percent in the fourth quarter from a year earlier, the Cabinet Office said Feb. 15. The deflator is used to calculate economic growth adjusted for price changes.
Five-year inflation bonds yield 1.01 percentage points more than similar-maturity regular notes, according to data compiled by Bloomberg. Inflation-adjusted securities typically yield less than regular bonds because their principal payment increases at the same rate as inflation.
Japan’s long-term bonds also dropped after the Federal Reserve raised its discount rate for the first time in three years as it took another step toward withdrawing its stimulus measures. Bonds also fell on speculation primary dealers will cut debt holdings before Japan sells 20-year bonds next week.
“Selling pressure should mount on bonds as the yen weakens following the Fed’s action,” said Tetsuya Miura, chief market analyst in Tokyo at Mizuho Securities Co., a unit of Japan’s second-largest banking group.
The yield on the 2.1 percent bond due December 2029 rose 1.5 basis points to 2.165 percent this week at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price dropped 0.206 yen to 99.098 yen.
Ten-year bond futures for March delivery rose 0.10 over the week to 139.47 on the Tokyo Stock Exchange.
The yen fell to as low as 92.09 per dollar in Tokyo yesterday, the weakest since Jan. 12, after the Fed raised its discount rate by a quarter point to 0.75 percent. The central bank said the move will encourage financial institutions to rely more on money markets rather than the central bank.
‘Rather Difficult’
“It’s getting rather difficult for investors to keep buying mid-term bonds with the dollar in an uptrend,” Chotaro Morita, head of fixed-income strategy research at Barclays Capital, wrote yesterday in a note to clients.
The Finance Ministry will sell 1.1 trillion yen ($11.97 billion) of 20-year bonds on Feb. 23. Primary dealers, companies required to bid at government debt sales, often reduce holdings of bonds before an auction in case prices decline before they can pass on the new securities to investors.
“Investors will try to secure a 2.2 percent coupon for next week’s 20-year auction,” said Akihiko Inoue, chief market analyst in Tokyo at Mizuho Investors Securities Co., a unit of Japan’s second-largest bank. “That should keep a lid on bonds.”
The decline in debt was tempered on speculation that deflation will boost the value of the fixed payments from government securities.
The Bank of Japan on Feb. 18 said deflation remained a “critical challenge,” as it left its benchmark interest rate on hold at 0.1 percent.
‘Firm Environment’
“Bonds are in a firm environment as investors focus on deepening deflation,” said Takafumi Yamawaki, a senior strategist in Tokyo at BNP Paribas Securities Japan Ltd., a unit of France’s largest bank. “Supply-demand conditions remain good for bonds.”
Japan’s gross domestic product deflator fell 3 percent in the fourth quarter from a year earlier, the Cabinet Office said Feb. 15. The deflator is used to calculate economic growth adjusted for price changes.
Five-year inflation bonds yield 1.01 percentage points more than similar-maturity regular notes, according to data compiled by Bloomberg. Inflation-adjusted securities typically yield less than regular bonds because their principal payment increases at the same rate as inflation.
Thursday, February 18, 2010
Obama-Dalai Lama Meeting Shows U.S., China Must Accept Rivalry
Feb. 19 (Bloomberg) -- President Barack Obama went into yesterday’s meeting with the Dalai Lama on notice that it would anger China’s leadership and add tension to an already strained relationship.
China reacted swiftly, saying, “the U.S. act grossly violated the norms governing international relations,” in a statement today by Ma Zhaoxu, a spokesman for China’s Foreign Ministry. The meeting ran counter to longstanding U.S. commitments to recognize China’s sovereignty over Tibet and refrain from supporting separatist forces, the statement said.
The rhetoric isn’t likely to fray economic ties secured by $366 billion of mutual trade and $755 billion in Chinese-held U.S. Treasury bills, according to analysts.
And the path to a more constructive overall relationship may lie in both sides dropping any pretense at friendship and acknowledging they are competitors as much as partners, said Yan Xuetong, director of the Institute of International Studies at Tsinghua University in Beijing.
“If China and the U.S. identified each other as rivals I don’t think they would be disappointed with each other,” Yan said. “Both sides pretend to be friends. Actually, they are not.”
During the 70-minute White House meeting today in the Map Room, Obama “stated his strong support for the preservation of Tibet’s unique religious, cultural and linguistic identity and the protection of human rights for Tibetans in the People’s Republic of China,” according to a statement from White House press secretary Robert Gibbs.
‘Genuine Concern’
The Tibetan spiritual leader said it was a “great honor” to meet with Obama and that they talked about his emphasis on the “promotion of human value.” He said after emerging from the White House that the president showed “genuine concern” about Tibet.
Speaking to reporters later in the day, the Dalai Lama said Tibet “should have meaningful autonomy so that we can preserve the Tibetan unique cultural heritage.”
He said he wasn’t frustrated about the pace of progress for autonomy in Tibet. Asked how Obama can help Tibet, the Dalai Lama said, “time will tell.”
Relations between the Obama administration and China have suffered recently as the U.S. announced a planned $6.4 billion arms sale to Taiwan, Google Inc. threatened to exit China on the grounds that user e-mail accounts were being hacked and China taxed American chicken imports after the U.S. imposed tariffs on Chinese tires.
The two countries also have differed on steps to halt global warming and nuclear programs in North Korea and Iran.
China’s Foreign Ministry on Feb. 4 rejected Obama’s call to strengthen the Chinese currency, saying that “accusations and pressure will not help solve the issue.”
‘Cruising Altitude’
All this since U.S. Ambassador to China Jon Huntsman told reporters during Obama’s November visit that the relationship was at “a cruising altitude that is higher than any other time in recent memory.”
Still, there is little chance that these differences will fundamentally damage the network of economic and political ties that China expert Orville Schell calls the “most important bilateral relationship” in the world today. He is director of the Asia Society’s Center on U.S.-China Relations in New York.
In a positive sign, the USS Nimitz aircraft carrier and four other U.S. warships yesterday anchored in Hong Kong, where more than 5,000 sailors will get shore leave.
In 2007, China prevented the USS Kitty Hawk from visiting the city, with Foreign Ministry spokesman Liu Jianchao saying China was angered that President George W. Bush met the Dalai Lama and presented him with the Congressional Gold Medal. Although China belatedly approved the port-call, the fleet had already turned back.
Ratchet Down
“I don’t see anything that could destabilize the relationship right now,” said Elizabeth Economy, director of Asia studies at the Council on Foreign Relations in New York. “Leaders on both sides will ratchet this back down at an appropriate time, but not right now, because a little chest-thumping serves domestic purposes.”
Neither nation can afford to sabotage the economic relationship, said Carl Lantz, an interest-rate strategist at Credit Suisse Group AG in New York.
“We are kind of joined at the hip economically,” Lantz said. “People refer to it as Chimerica, and in general it’s worked out relatively well, where they finance our borrowing and consumption and we buy their exports to finance their social stability.”
China’s holdings of U.S. Treasuries have increased more than 10-fold in the past decade, from $71.7 billion in 2000 to $755.4 billion in December.
Largest Creditor
China surpassed Japan as the largest creditor abroad to the U.S. in September 2008, although it fell back to second place in December when its Treasury holdings declined for the second consecutive month, the Treasury Department said on Feb. 16. China allowed its short-term Treasury bills to mature and replaced them with a smaller amount of longer-term notes and bonds, the Treasury data showed.
The December reduction in China’s holdings didn’t prompt a sell-off in U.S. bonds as investors focused instead on an overall increase in foreign holdings of U.S. Treasuries, which rose by a net $69.9 billion. The yield on the benchmark 10-year note fell three basis points, or 0.03 percentage point, to 3.66 percent on Feb. 16, according to BGCantor Market data.
The Obama administration is also convinced that the recent tensions won’t fundamentally change the countries’ relationship, said an administration official who asked not to be identified out of concern for Chinese sensitivities.
Trading Blows
That hasn’t stopped both sides from trading rhetorical blows.
China demanded last week that Obama cancel the meeting with the Dalai Lama, even though Obama informed Chinese President Hu Jintao during his Beijing visit that he planned to receive the Tibetan leader, according to the administration official.
The U.S. also told China in advance of the Taiwan arms sale, the official said.
‘Thorough Investigation’
Secretary of State Hillary Clinton said she expected China to conduct a “thorough investigation” of charges from Mountain View, California-based Google that hackers had entered e-mail accounts it hosted belonging to Chinese dissidents. Free access to information and protecting what she called the “basic rights” of Internet users is essential, Clinton said.
Such exchanges may paradoxically allow both countries to pursue their own agendas and work together on larger issues without fear of domestic backlash, said Robert Barnett, director of Modern Tibetan Studies at Columbia University in New York.
“We’re seeing a slightly more confident America, which is trying to communicate that distinction between interests and values,” Barnett said.
Visits by the exiled Tibetan spiritual leader are a perpetual irritant to China. It has opposed any outside pressure on how the country runs Tibet, which was brought under its rule after a military invasion in 1950.
The Dalai Lama has met with every U.S. president since George H.W. Bush in 1991. While China has exacted diplomatic punishment on leaders who met him -- it canceled a China-European Union summit after French President Nicolas Sarkozy met the Dalai Lama in 2008 -- trade relations have been little affected, said Schell.
China received the Dalai Lama’s envoys at the first talks on Tibet in 15 months, which ended Feb. 1. China’s top negotiator rejected calls for greater autonomy for the region, the Tibetan exile administration said.
Douglas Paal, vice-president of the Carnegie Endowment for International Peace in Washington, said the discussions probably were partly to prepare for the effect the Obama meeting could have on Chinese public opinion.
“More is imputed to these meetings than actually occurs,” said Paal, who was at the White House National Security Council from 1989 to 1993. “Presidents have to check the political box of seeing the Dalai Lama.”
China reacted swiftly, saying, “the U.S. act grossly violated the norms governing international relations,” in a statement today by Ma Zhaoxu, a spokesman for China’s Foreign Ministry. The meeting ran counter to longstanding U.S. commitments to recognize China’s sovereignty over Tibet and refrain from supporting separatist forces, the statement said.
The rhetoric isn’t likely to fray economic ties secured by $366 billion of mutual trade and $755 billion in Chinese-held U.S. Treasury bills, according to analysts.
And the path to a more constructive overall relationship may lie in both sides dropping any pretense at friendship and acknowledging they are competitors as much as partners, said Yan Xuetong, director of the Institute of International Studies at Tsinghua University in Beijing.
“If China and the U.S. identified each other as rivals I don’t think they would be disappointed with each other,” Yan said. “Both sides pretend to be friends. Actually, they are not.”
During the 70-minute White House meeting today in the Map Room, Obama “stated his strong support for the preservation of Tibet’s unique religious, cultural and linguistic identity and the protection of human rights for Tibetans in the People’s Republic of China,” according to a statement from White House press secretary Robert Gibbs.
‘Genuine Concern’
The Tibetan spiritual leader said it was a “great honor” to meet with Obama and that they talked about his emphasis on the “promotion of human value.” He said after emerging from the White House that the president showed “genuine concern” about Tibet.
Speaking to reporters later in the day, the Dalai Lama said Tibet “should have meaningful autonomy so that we can preserve the Tibetan unique cultural heritage.”
He said he wasn’t frustrated about the pace of progress for autonomy in Tibet. Asked how Obama can help Tibet, the Dalai Lama said, “time will tell.”
Relations between the Obama administration and China have suffered recently as the U.S. announced a planned $6.4 billion arms sale to Taiwan, Google Inc. threatened to exit China on the grounds that user e-mail accounts were being hacked and China taxed American chicken imports after the U.S. imposed tariffs on Chinese tires.
The two countries also have differed on steps to halt global warming and nuclear programs in North Korea and Iran.
China’s Foreign Ministry on Feb. 4 rejected Obama’s call to strengthen the Chinese currency, saying that “accusations and pressure will not help solve the issue.”
‘Cruising Altitude’
All this since U.S. Ambassador to China Jon Huntsman told reporters during Obama’s November visit that the relationship was at “a cruising altitude that is higher than any other time in recent memory.”
Still, there is little chance that these differences will fundamentally damage the network of economic and political ties that China expert Orville Schell calls the “most important bilateral relationship” in the world today. He is director of the Asia Society’s Center on U.S.-China Relations in New York.
In a positive sign, the USS Nimitz aircraft carrier and four other U.S. warships yesterday anchored in Hong Kong, where more than 5,000 sailors will get shore leave.
In 2007, China prevented the USS Kitty Hawk from visiting the city, with Foreign Ministry spokesman Liu Jianchao saying China was angered that President George W. Bush met the Dalai Lama and presented him with the Congressional Gold Medal. Although China belatedly approved the port-call, the fleet had already turned back.
Ratchet Down
“I don’t see anything that could destabilize the relationship right now,” said Elizabeth Economy, director of Asia studies at the Council on Foreign Relations in New York. “Leaders on both sides will ratchet this back down at an appropriate time, but not right now, because a little chest-thumping serves domestic purposes.”
Neither nation can afford to sabotage the economic relationship, said Carl Lantz, an interest-rate strategist at Credit Suisse Group AG in New York.
“We are kind of joined at the hip economically,” Lantz said. “People refer to it as Chimerica, and in general it’s worked out relatively well, where they finance our borrowing and consumption and we buy their exports to finance their social stability.”
China’s holdings of U.S. Treasuries have increased more than 10-fold in the past decade, from $71.7 billion in 2000 to $755.4 billion in December.
Largest Creditor
China surpassed Japan as the largest creditor abroad to the U.S. in September 2008, although it fell back to second place in December when its Treasury holdings declined for the second consecutive month, the Treasury Department said on Feb. 16. China allowed its short-term Treasury bills to mature and replaced them with a smaller amount of longer-term notes and bonds, the Treasury data showed.
The December reduction in China’s holdings didn’t prompt a sell-off in U.S. bonds as investors focused instead on an overall increase in foreign holdings of U.S. Treasuries, which rose by a net $69.9 billion. The yield on the benchmark 10-year note fell three basis points, or 0.03 percentage point, to 3.66 percent on Feb. 16, according to BGCantor Market data.
The Obama administration is also convinced that the recent tensions won’t fundamentally change the countries’ relationship, said an administration official who asked not to be identified out of concern for Chinese sensitivities.
Trading Blows
That hasn’t stopped both sides from trading rhetorical blows.
China demanded last week that Obama cancel the meeting with the Dalai Lama, even though Obama informed Chinese President Hu Jintao during his Beijing visit that he planned to receive the Tibetan leader, according to the administration official.
The U.S. also told China in advance of the Taiwan arms sale, the official said.
‘Thorough Investigation’
Secretary of State Hillary Clinton said she expected China to conduct a “thorough investigation” of charges from Mountain View, California-based Google that hackers had entered e-mail accounts it hosted belonging to Chinese dissidents. Free access to information and protecting what she called the “basic rights” of Internet users is essential, Clinton said.
Such exchanges may paradoxically allow both countries to pursue their own agendas and work together on larger issues without fear of domestic backlash, said Robert Barnett, director of Modern Tibetan Studies at Columbia University in New York.
“We’re seeing a slightly more confident America, which is trying to communicate that distinction between interests and values,” Barnett said.
Visits by the exiled Tibetan spiritual leader are a perpetual irritant to China. It has opposed any outside pressure on how the country runs Tibet, which was brought under its rule after a military invasion in 1950.
The Dalai Lama has met with every U.S. president since George H.W. Bush in 1991. While China has exacted diplomatic punishment on leaders who met him -- it canceled a China-European Union summit after French President Nicolas Sarkozy met the Dalai Lama in 2008 -- trade relations have been little affected, said Schell.
China received the Dalai Lama’s envoys at the first talks on Tibet in 15 months, which ended Feb. 1. China’s top negotiator rejected calls for greater autonomy for the region, the Tibetan exile administration said.
Douglas Paal, vice-president of the Carnegie Endowment for International Peace in Washington, said the discussions probably were partly to prepare for the effect the Obama meeting could have on Chinese public opinion.
“More is imputed to these meetings than actually occurs,” said Paal, who was at the White House National Security Council from 1989 to 1993. “Presidents have to check the political box of seeing the Dalai Lama.”
Indian Share Sales May Surge in 2010, Citigroup Says
Feb. 19 (Bloomberg) -- Indian equity and equity-linked offerings may jump by as much as a third this year as companies and the government tap a growing pool of domestic capital and the economy recovers, according to Citigroup Inc.
Indian companies may raise $25 billion to $30 billion in share sales in 2010, up from $22 billion last year, said Ravi Kapoor, head of capital markets and origination for South Asia at Citigroup.
“If liquidity keeps coming into the market the way it did last year and equity markets continue to perform, we could possibly cross over $30 billion in primary issuance,” Kapoor said in a Feb. 17 interview in Mumbai.
Two-thirds of the equity capital Indian companies raised last year was from domestic offerings, according to data compiled by Bloomberg. The pool of local capital has grown as insurance companies and mutual funds pour more money into the equity market, said Kapoor, whose bank was the top arranger of domestic stock sales in India in 2009.
The Sensitive Index rallied 81 percent in 2009, making it the third-best performing benchmark in Asia, as the economy weathered the global recession and stock purchases by foreign investors rose. The gauge has fallen 6.5 percent this year.
Real-estate companies, power generators, telecommunication tower operators and insurers may lead equity sales this year, Kapoor said. The government may sell stock worth $10 billion to $15 billion this year, he estimated.
Local Liquidity
The government will sell a 5 percent stake in Rural Electrification Corp., a state-owned lender for power projects, starting Feb. 19, and plans to offer an 8.4 percent stake in NMDC Ltd., India’s largest iron ore miner, next month.
Domestic investors have become an increasingly important source of funding for companies seeking acquisitions overseas, while foreign-currency credit markets remain subdued compared with before the global financial crisis, Kapoor said.
“Recent trends show that Indian corporates have been relying on local liquidity,” he said. “The Indian market understands the risks and the credit worthiness of Indian companies better.”
The International Monetary Fund said last month that banks may need to significantly increase their capital to support the credit recovery and help sustain economic growth. Restarting credit flows remains a “major challenge,” said Jose Vinals, director of the IMF’s monetary and capital markets department, at a briefing in Washington.
“From corporate India’s point of view, they’re in a very sweet spot to raise money between domestic and international capital offerings depending on their requirements,” Kapoor said.
Indian companies may raise $25 billion to $30 billion in share sales in 2010, up from $22 billion last year, said Ravi Kapoor, head of capital markets and origination for South Asia at Citigroup.
“If liquidity keeps coming into the market the way it did last year and equity markets continue to perform, we could possibly cross over $30 billion in primary issuance,” Kapoor said in a Feb. 17 interview in Mumbai.
Two-thirds of the equity capital Indian companies raised last year was from domestic offerings, according to data compiled by Bloomberg. The pool of local capital has grown as insurance companies and mutual funds pour more money into the equity market, said Kapoor, whose bank was the top arranger of domestic stock sales in India in 2009.
The Sensitive Index rallied 81 percent in 2009, making it the third-best performing benchmark in Asia, as the economy weathered the global recession and stock purchases by foreign investors rose. The gauge has fallen 6.5 percent this year.
Real-estate companies, power generators, telecommunication tower operators and insurers may lead equity sales this year, Kapoor said. The government may sell stock worth $10 billion to $15 billion this year, he estimated.
Local Liquidity
The government will sell a 5 percent stake in Rural Electrification Corp., a state-owned lender for power projects, starting Feb. 19, and plans to offer an 8.4 percent stake in NMDC Ltd., India’s largest iron ore miner, next month.
Domestic investors have become an increasingly important source of funding for companies seeking acquisitions overseas, while foreign-currency credit markets remain subdued compared with before the global financial crisis, Kapoor said.
“Recent trends show that Indian corporates have been relying on local liquidity,” he said. “The Indian market understands the risks and the credit worthiness of Indian companies better.”
The International Monetary Fund said last month that banks may need to significantly increase their capital to support the credit recovery and help sustain economic growth. Restarting credit flows remains a “major challenge,” said Jose Vinals, director of the IMF’s monetary and capital markets department, at a briefing in Washington.
“From corporate India’s point of view, they’re in a very sweet spot to raise money between domestic and international capital offerings depending on their requirements,” Kapoor said.
Wednesday, February 17, 2010
U.S. Agency Said to Open Inquiry on Toyota Corolla Steering
Feb. 18 (Bloomberg) -- Toyota Motor Corp. faces a U.S. defect investigation after complaints over power steering in the Corolla sedan, the world’s best-selling car, a person familiar with the matter said.
The National Highway Traffic Safety Administration inquiry, known as a preliminary evaluation, will cover about 500,000 vehicles from model years 2009 and 2010, said the person, who asked not to be identified because Toyota hadn’t been formally notified. The agency said Feb. 9 that it was reviewing reports on steering flaws in the Corolla, and according to its online database had received more than 80 complaints.
The agency’s move would come on top of record recalls at the world’s biggest automaker for brake and accelerator-pedal glitches. Toyota is recalling 437,000 hybrids, including the Prius, for brakes, and almost 8 million vehicles on five continents to repair defects linked to unintended acceleration.
“We are aware of complaints regarding 2009 and 2010 Corolla steering systems, are investigating the issue and will cooperate fully,” with NHTSA’s investigation, Cindy Knight, a Toyota spokeswoman, said in an e-mailed message.
Toyota is reviewing the power steering of the Corolla and will recall it if defects are found, Executive Vice President Shinichi Sasaki told reporters earlier yesterday.
At least three U.S. congressional committees plan hearings into how Toyota and the U.S. National Highway Traffic Safety Administration have handled sudden-acceleration complaints.
The Associated Press reported the Corolla steering inquiry earlier.
The National Highway Traffic Safety Administration inquiry, known as a preliminary evaluation, will cover about 500,000 vehicles from model years 2009 and 2010, said the person, who asked not to be identified because Toyota hadn’t been formally notified. The agency said Feb. 9 that it was reviewing reports on steering flaws in the Corolla, and according to its online database had received more than 80 complaints.
The agency’s move would come on top of record recalls at the world’s biggest automaker for brake and accelerator-pedal glitches. Toyota is recalling 437,000 hybrids, including the Prius, for brakes, and almost 8 million vehicles on five continents to repair defects linked to unintended acceleration.
“We are aware of complaints regarding 2009 and 2010 Corolla steering systems, are investigating the issue and will cooperate fully,” with NHTSA’s investigation, Cindy Knight, a Toyota spokeswoman, said in an e-mailed message.
Toyota is reviewing the power steering of the Corolla and will recall it if defects are found, Executive Vice President Shinichi Sasaki told reporters earlier yesterday.
At least three U.S. congressional committees plan hearings into how Toyota and the U.S. National Highway Traffic Safety Administration have handled sudden-acceleration complaints.
The Associated Press reported the Corolla steering inquiry earlier.
Bank of Japan May Resist Pressure to Escalate Deflation Fight
Feb. 18 (Bloomberg) -- The Bank of Japan will probably refrain from expanding its lending and asset-purchase programs today, preserving policy ammunition in case deflation deepens and the government increases pressure for more action.
Governor Masaaki Shirakawa and his colleagues will keep the loan facility for commercial banks and monthly purchases of government bonds unchanged, 14 of 16 economists surveyed by Bloomberg said. All of the analysts said the bank will maintain the benchmark interest rate unchanged at 0.1 percent.
A report this week showed a broad measure of prices fell the most in more than half a century even as economic growth accelerated last quarter. As concerns about public debt mount worldwide, Prime Minister Yukio Hatoyama’s government may find little room to maneuver fiscal spending and instead put more heat on the BOJ to prop up the economy ahead of a July election.
“We must be careful about the risk that investors will shift their focus to Japan’s public debt in coming months as their next target after Europe,” said Mari Iwashita, chief market economist at Nikko Cordial Securities Inc. in Tokyo. The government “will have no other choice but to depend on the BOJ if the yen suddenly strengthens and markets become volatile.”
The announcement is expected early afternoon in Tokyo, and Shirakawa will brief the press at 3:30 p.m.
Signs of political pressure are already surfacing. Finance Minister Naoto Kan said this week in parliament Japan should adopt a “policy target” of achieving 1 percent inflation and the government wants to work with the bank to spur prices.
Not Alone
Speaking at the same committee, Shirakawa said deflation can’t be beaten by the central bank alone, while adding that it will act “decisively” should financial markets become volatile. BOJ board members have stopped short of adopting inflation targeting, saying in December that their “understanding” of price stability is increases of up to 2 percent, with a median of 1 percent.
“Given the recent circumstances, we should assume calls on the BOJ to take action will definitely mount,” said Teizo Taya, a central bank board member for five years to 2004. “The bank’s next move is probably to expand the existing programs and inject more funds” into the banking system, said Taya, who is now an adviser at Daiwa Institute of Research in Tokyo.
The central bank introduced the 10 trillion yen ($111 billion) lending facility for commercial banks in December after the yen surged to a 14-year high of 84.83 against the dollar and Cabinet ministers including Kan urged it to do more to fight deflation. Two of the surveyed economists say the bank may raise the lending limit beyond 10 trillion yen today.
Weaker Yen
The Japanese currency has weakened more than 3 percent and the Nikkei 225 Stock Average has gained 7.7 percent since the Dec. 1 move.
Gross domestic product grew at an annual 4.6 percent pace in the three months ended Dec. 31, fueled by rising exports that prompted manufacturers from Panasonic Corp. to Nissan Motor Co. to raise their profit forecasts. Even so, the GDP deflator tumbled 3 percent, the biggest drop since records began in 1955, and the domestic demand deflator, a gauge that excludes imports, slid 2.9 percent.
“It’s highly probable that growth will decelerate temporarily” as the effect of fiscal stimulus wanes, said Tetsufumi Yamakawa, a former BOJ official and now chief Japan economist at Goldman Sachs Group Inc. “Even if the central bank stands pat this month, it will likely be compelled to ease monetary policy further by summer.”
Loan Program
The bank may consider extending the period of the loans to six months or a year from the current three months, Yamakawa said. Increasing the bank’s monthly government bond purchases from 1.8 trillion yen is another option, he said.
Shirakawa may be reluctant to increase sovereign debt purchases because that might encourage the government to issue more bonds, said Ryutaro Kono, chief economist at BNP Paribas.
“Given that the government has yet to compile a long-term fiscal rehabilitation plan, more bond buying may lead investors to conclude that the BOJ will monetize the debt,” Tokyo-based Kono said. “That’s a considerably tricky policy.”
Standard & Poor’s last month warned that it may cut Japan’s AA credit rating unless the country develops a plan to contain the debt, which is already the world’s largest and approaching 200 percent of GDP.
Credit-default swaps tied to Japan’s government bonds showed an increase in risk. The cost of protecting the debt from default for five years has doubled to 81.9 basis points since the Hatoyama administration started on Sept. 16, according to prices from CMA DataVision in New York.
Bank of Japan policy makers have started to call on the government to contain fiscal expansion. Board member Seiji Nakamura said on Feb. 4 that concerns about public debt in Europe shouldn’t be regarded as “a burning house on the other side of the river.”
Governor Masaaki Shirakawa and his colleagues will keep the loan facility for commercial banks and monthly purchases of government bonds unchanged, 14 of 16 economists surveyed by Bloomberg said. All of the analysts said the bank will maintain the benchmark interest rate unchanged at 0.1 percent.
A report this week showed a broad measure of prices fell the most in more than half a century even as economic growth accelerated last quarter. As concerns about public debt mount worldwide, Prime Minister Yukio Hatoyama’s government may find little room to maneuver fiscal spending and instead put more heat on the BOJ to prop up the economy ahead of a July election.
“We must be careful about the risk that investors will shift their focus to Japan’s public debt in coming months as their next target after Europe,” said Mari Iwashita, chief market economist at Nikko Cordial Securities Inc. in Tokyo. The government “will have no other choice but to depend on the BOJ if the yen suddenly strengthens and markets become volatile.”
The announcement is expected early afternoon in Tokyo, and Shirakawa will brief the press at 3:30 p.m.
Signs of political pressure are already surfacing. Finance Minister Naoto Kan said this week in parliament Japan should adopt a “policy target” of achieving 1 percent inflation and the government wants to work with the bank to spur prices.
Not Alone
Speaking at the same committee, Shirakawa said deflation can’t be beaten by the central bank alone, while adding that it will act “decisively” should financial markets become volatile. BOJ board members have stopped short of adopting inflation targeting, saying in December that their “understanding” of price stability is increases of up to 2 percent, with a median of 1 percent.
“Given the recent circumstances, we should assume calls on the BOJ to take action will definitely mount,” said Teizo Taya, a central bank board member for five years to 2004. “The bank’s next move is probably to expand the existing programs and inject more funds” into the banking system, said Taya, who is now an adviser at Daiwa Institute of Research in Tokyo.
The central bank introduced the 10 trillion yen ($111 billion) lending facility for commercial banks in December after the yen surged to a 14-year high of 84.83 against the dollar and Cabinet ministers including Kan urged it to do more to fight deflation. Two of the surveyed economists say the bank may raise the lending limit beyond 10 trillion yen today.
Weaker Yen
The Japanese currency has weakened more than 3 percent and the Nikkei 225 Stock Average has gained 7.7 percent since the Dec. 1 move.
Gross domestic product grew at an annual 4.6 percent pace in the three months ended Dec. 31, fueled by rising exports that prompted manufacturers from Panasonic Corp. to Nissan Motor Co. to raise their profit forecasts. Even so, the GDP deflator tumbled 3 percent, the biggest drop since records began in 1955, and the domestic demand deflator, a gauge that excludes imports, slid 2.9 percent.
“It’s highly probable that growth will decelerate temporarily” as the effect of fiscal stimulus wanes, said Tetsufumi Yamakawa, a former BOJ official and now chief Japan economist at Goldman Sachs Group Inc. “Even if the central bank stands pat this month, it will likely be compelled to ease monetary policy further by summer.”
Loan Program
The bank may consider extending the period of the loans to six months or a year from the current three months, Yamakawa said. Increasing the bank’s monthly government bond purchases from 1.8 trillion yen is another option, he said.
Shirakawa may be reluctant to increase sovereign debt purchases because that might encourage the government to issue more bonds, said Ryutaro Kono, chief economist at BNP Paribas.
“Given that the government has yet to compile a long-term fiscal rehabilitation plan, more bond buying may lead investors to conclude that the BOJ will monetize the debt,” Tokyo-based Kono said. “That’s a considerably tricky policy.”
Standard & Poor’s last month warned that it may cut Japan’s AA credit rating unless the country develops a plan to contain the debt, which is already the world’s largest and approaching 200 percent of GDP.
Credit-default swaps tied to Japan’s government bonds showed an increase in risk. The cost of protecting the debt from default for five years has doubled to 81.9 basis points since the Hatoyama administration started on Sept. 16, according to prices from CMA DataVision in New York.
Bank of Japan policy makers have started to call on the government to contain fiscal expansion. Board member Seiji Nakamura said on Feb. 4 that concerns about public debt in Europe shouldn’t be regarded as “a burning house on the other side of the river.”
Tuesday, February 16, 2010
Australia’s December Westpac Leading Economic Index Rose 0.5%
Feb. 17 (Bloomberg) -- An Australian index of leading economic indicators rose in December to the highest in more than a year as stocks and building approvals climbed.
The index, a gauge of future economic growth, rose 0.5 percent from November to 256.4, Westpac Banking Corp. and the Melbourne Institute said in Sydney today. The index expanded at an annualized rate of 6.2 percent.
Reserve Bank of Australia Governor Glenn Stevens unexpectedly kept borrowing costs unchanged this month for the first meeting in four, saying information about the impact on Australia’s economy of three increases last quarter is still limited.
“The leading index continues to point to a dramatic improvement in growth prospects,” said Matthew Hassan, senior economist at Westpac in Sydney.
Westpac’s leading index tracks eight gauges of activity, such as company profits and productivity, to give an indication of how the economy will perform over the next three to nine months.
The coincident index, a measure of the current state of the economy, rose 0.4 percent in December to 245.8 points.
The index, a gauge of future economic growth, rose 0.5 percent from November to 256.4, Westpac Banking Corp. and the Melbourne Institute said in Sydney today. The index expanded at an annualized rate of 6.2 percent.
Reserve Bank of Australia Governor Glenn Stevens unexpectedly kept borrowing costs unchanged this month for the first meeting in four, saying information about the impact on Australia’s economy of three increases last quarter is still limited.
“The leading index continues to point to a dramatic improvement in growth prospects,” said Matthew Hassan, senior economist at Westpac in Sydney.
Westpac’s leading index tracks eight gauges of activity, such as company profits and productivity, to give an indication of how the economy will perform over the next three to nine months.
The coincident index, a measure of the current state of the economy, rose 0.4 percent in December to 245.8 points.
Toyota Chief to Meet Press for Third Time After Recall Crisis
Feb. 17 (Bloomberg) -- Toyota Motor Corp. President Akio Toyoda will meet with reporters later today to address a recall of the Prius hybrid and discuss a new committee on quality control as he struggles to repair the company’s image.
Toyoda and Executive Vice President Shinichi Sasaki will speak for the third time in 12 days, spokesman Takanori Yokoi said yesterday by phone. Toyoda, the 53-year-old grandson of the company’s founder, will directly oversee the committee and its outside experts.
“He’s now trying to speak in his own words and has begun to show a commitment to prioritizing customers, but all this has come too late,” said Tatsuya Mizuno, director of Mizuno Credit Advisory in Tokyo. “The problem has become so big I don’t think his attitude alone will settle the issue.”
Toyoda is stepping up public appearances after criticism from U.S. lawmakers and Japan’s government that he was too slow to respond to a mounting recall crisis which began with the recall of 4.3 million U.S. vehicles in November.
Lost Value
The Toyota City-based company has lost over $31 billion in market value since Jan. 21 when it began taking back millions of autos for potentially sticky pedals linked to unintended acceleration. Toyota said U.S. January sales slid 16 percent as a recall put some of its most-popular models off limits, while General Motors Co. and Ford Motor Co. reported increases that beat analysts’ estimates.
The carmaker faces at least 49 lawsuits filed on behalf of customers in the U.S. and Canada seeking a range of damages in sudden-acceleration cases. It also faces at least 13 lawsuits brought by individuals claiming deaths or injuries.
The world’s largest carmaker has called back almost 8 million vehicles on five continents and 437,000 hybrids including the Prius, the top-selling vehicle in Japan. Toyoda’s first press conference came on Feb. 5 and he met the press again on Feb. 9 to announce fixes to the Prius.
Toyota is in an “extremely difficult situation” because of a perception in the U.S. that it may have tried to cover up the problems, Mizuno said. If Toyoda mishandles questioning at U.S. congressional hearings the damage could be irreversible, he said.
Toyoda was invited to a Feb. 24 hearing into the automaker’s handling of recalls by Representative Darrell Issa of California, the senior Republican on the House Oversight and Government Reform panel.
Toyoda said on Feb. 9 he would visit the U.S. and talk to U.S. authorities, dealers and suppliers. Toyota North America President Yoshimi Inaba “for now” has accepted the invitation to testify Feb. 24. Toyota spokesman Yokoi declined to confirm details of Toyoda’s visit to the U.S.
‘Proper Report’
Toyoda must provide a “proper report” on the recalls in the U.S. to avoid damaging relations between the two countries, Japan’s Transport Minister Seiji Maehara told reporters on Feb. 9. Maehara met with U.S. Ambassador John Roos the next day to discuss the issue.
Toyota’s delays in addressing problems with its vehicles have led to worldwide criticism of the company and Japan, Mizuho Fukushima, Japan’s Minister in charge of consumer affairs, has said.
In addition to recalls related to unintended acceleration and brake problems with the third-generation Prius, Toyota is recalling 8,000 Tacoma pickups and about 7,000 Camrys. U.S. safety officials are reviewing Toyota’s Corolla, the world’s best-selling car.
Toyota rose 0.8 percent to 3,380 yen at the close of trading in Tokyo yesterday. The stock has declined 19 percent since Jan. 21.
Toyota has been investigating reports that Prius owners driving at low speeds on bumpy or icy roads may experience moments where the car continues to coast for about a second after the brakes are applied, because of the anti-lock brake system. The carmaker said it received complaints about Prius brakes through dealers starting in the last few months of 2009.
Toyoda and Executive Vice President Shinichi Sasaki will speak for the third time in 12 days, spokesman Takanori Yokoi said yesterday by phone. Toyoda, the 53-year-old grandson of the company’s founder, will directly oversee the committee and its outside experts.
“He’s now trying to speak in his own words and has begun to show a commitment to prioritizing customers, but all this has come too late,” said Tatsuya Mizuno, director of Mizuno Credit Advisory in Tokyo. “The problem has become so big I don’t think his attitude alone will settle the issue.”
Toyoda is stepping up public appearances after criticism from U.S. lawmakers and Japan’s government that he was too slow to respond to a mounting recall crisis which began with the recall of 4.3 million U.S. vehicles in November.
Lost Value
The Toyota City-based company has lost over $31 billion in market value since Jan. 21 when it began taking back millions of autos for potentially sticky pedals linked to unintended acceleration. Toyota said U.S. January sales slid 16 percent as a recall put some of its most-popular models off limits, while General Motors Co. and Ford Motor Co. reported increases that beat analysts’ estimates.
The carmaker faces at least 49 lawsuits filed on behalf of customers in the U.S. and Canada seeking a range of damages in sudden-acceleration cases. It also faces at least 13 lawsuits brought by individuals claiming deaths or injuries.
The world’s largest carmaker has called back almost 8 million vehicles on five continents and 437,000 hybrids including the Prius, the top-selling vehicle in Japan. Toyoda’s first press conference came on Feb. 5 and he met the press again on Feb. 9 to announce fixes to the Prius.
Toyota is in an “extremely difficult situation” because of a perception in the U.S. that it may have tried to cover up the problems, Mizuno said. If Toyoda mishandles questioning at U.S. congressional hearings the damage could be irreversible, he said.
Toyoda was invited to a Feb. 24 hearing into the automaker’s handling of recalls by Representative Darrell Issa of California, the senior Republican on the House Oversight and Government Reform panel.
Toyoda said on Feb. 9 he would visit the U.S. and talk to U.S. authorities, dealers and suppliers. Toyota North America President Yoshimi Inaba “for now” has accepted the invitation to testify Feb. 24. Toyota spokesman Yokoi declined to confirm details of Toyoda’s visit to the U.S.
‘Proper Report’
Toyoda must provide a “proper report” on the recalls in the U.S. to avoid damaging relations between the two countries, Japan’s Transport Minister Seiji Maehara told reporters on Feb. 9. Maehara met with U.S. Ambassador John Roos the next day to discuss the issue.
Toyota’s delays in addressing problems with its vehicles have led to worldwide criticism of the company and Japan, Mizuho Fukushima, Japan’s Minister in charge of consumer affairs, has said.
In addition to recalls related to unintended acceleration and brake problems with the third-generation Prius, Toyota is recalling 8,000 Tacoma pickups and about 7,000 Camrys. U.S. safety officials are reviewing Toyota’s Corolla, the world’s best-selling car.
Toyota rose 0.8 percent to 3,380 yen at the close of trading in Tokyo yesterday. The stock has declined 19 percent since Jan. 21.
Toyota has been investigating reports that Prius owners driving at low speeds on bumpy or icy roads may experience moments where the car continues to coast for about a second after the brakes are applied, because of the anti-lock brake system. The carmaker said it received complaints about Prius brakes through dealers starting in the last few months of 2009.
Monday, February 15, 2010
Companies Pull Most Bond Sales Since ‘07 Crisis: Credit Markets
Feb. 16 (Bloomberg) -- Companies are pulling bond sales at the fastest pace since the credit markets seized up 2 1/2 years ago on concern that the inability of European governments to trim their budget deficits will threaten a global recovery.
At least 16 borrowers including Montreal-based airplane maker Bombardier Inc. and Italian betting company Snai SpA have postponed or withdrawn $7.3 billion of debt sales over the past month, according to data compiled by Bloomberg. That’s the most since more than 50 were canceled in the months after financial markets began to freeze in July 2007.
The extra yield investors demand to hold high-risk company bonds rather than the safest government debt has jumped almost 1 percentage point since Jan. 11, the biggest increase since March, according to Bank of America Merrill Lynch’s Global High- Yield Index. European finance ministers are meeting in Brussels amid mounting pressure to explain what steps they’ll take to help Greece reduce its swelling fiscal shortfall.
“Investors are concerned about Greece and the broader economy much more than they were a couple of months back,” said Jonathan Moore, an analyst at Evolution Securities Ltd. in London. “They understandably want to charge more, and most companies aren’t willing to pay that price.”
Spreads, Dubai
Spreads on high-yield, or junk, bonds soared 95 basis points since Jan. 11 to 713 yesterday, while the average extra yield on investment-grade debt widened 12 basis points to 171, or 1.71 percentage points, Merrill Lynch index data show.
High-yield bonds are ranked below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s. Markets in the U.S. were closed for the Presidents Day Holiday yesterday and much of Asia was shut for the Chinese New Year.
Elsewhere in credit markets, the cost to protect against a default by emirate Dubai rose to the highest since March on concern that investors will recoup less than anticipated in a $22 billion debt restructuring.
Credit-default swaps linked to the Mideast nation’s debt surged 22.5 basis points to 650 yesterday, the highest since March 20, according to CMA DataVision. That means it costs $650,000 a year to insure $10 million of bonds for five years.
Dubai and Dubai World, the state-owned company that owes the money, haven’t made an offer to creditors on a plan to restructure the debt, a spokeswoman for the Department of Finance said yesterday. That follows a report by Zawya Dow Jones on Feb. 14 that Dubai World may offer creditors 60 cents on the dollar after seven years to settle the debt.
Corporate Bond Risk
Credit-default swaps on corporate bonds in Europe also rose, signaling deterioration in investor perceptions of credit quality.
Contracts on the Markit iTraxx Crossover Index of 50 European companies with mostly high-yield credit ratings climbed as much as 17 basis points to 511, the highest in two months, JPMorgan Chase & Co. prices show. The Markit iTraxx Financial Index of default swaps tied to 25 banks and insurers increased as much as 1.5 basis points to 104.5, according to JPMorgan.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company or country fail to adhere to its debt agreements. A basis point is 0.01 percentage point and on a credit-default swap contract protecting 10 million euros of debt for five years is equivalent to 1,000 euros a year.
LBO Financings
Fitch Ratings said that European leveraged buyouts, high- risk deals that were used to finance acquisitions before the credit crisis, face a wave of defaults by 2013 when the bulk of the debt used to finance the takeovers comes due.
Debt payments for the companies will surge to an average 48 billion euros ($65 billion) annually between 2013 and 2016, from 6.5 billion euros this year, Fitch said yesterday.
Borrowers are increasingly sitting on the sidelines rather than risking selling bonds before the debt crisis affecting Greece and other south European countries is resolved. Sales slowed to $28.1 billion last week, 54 percent below the average over the previous 12 months, Bloomberg data show.
“Our sense is that there is a growing backlog of corporate bond issuance awaiting announcement when conditions are steadier,” Charles Stephens, a debt capital markets specialist at Matrix Corporate Capital LLP in London, wrote in a note to clients yesterday. “There’s a heavy refinancing schedule for the corporate sector in the period 2010-12, and the pressure to execute deals will intensify.”
Bombardier Pulled
Bombardier, the world’s third-largest commercial airplane maker, delayed a $1 billion offering of eight- and 10-year notes after investors demanded a higher yield than the company had anticipated, according to people familiar with the matter.
Bombardier marketed the sale from Feb. 8 to Feb. 11, and investors asked the company to pay a yield of about 8 percent to 8.25 percent, said the people, who declined to be identified.
Snai, Italy’s second-largest gaming and betting company, pulled a sale of junk bonds citing “market conditions” and a legal dispute with Bridgepoint Capital Ltd. Porcari, Italy-based Snai planned to raise 350 million euros through bonds to repay a 250 million-euro loan, refinance overdrafts and pay for government concessions, according to S&P.
Songa Offshore SE, the Norwegian owner of drilling rigs, postponed a $200 million sale of seven-year notes on Feb. 11, according to a person familiar with the transaction, who declined to be identified because the deal is private. The Oslo, Norway-based company may return to the market in March with a larger offer, the person said.
‘Unfavorable Conditions’
Kemet Corp., the Simpsonville, South Carolina-based maker of capacitors that are used to make electronic circuits, said on Feb. 11 it delayed a $275 million offering “as a result of unfavorable market conditions.” RCS & RDS SA, a Romanian telephone company, postponed a $200 million sale of seven-year bonds Feb. 12, according to a person with knowledge of the transaction.
Energy Transfer Equity LP, Regent Seven Seas Cruises UK Ltd, New World Resources NV, ITC^Deltacom Inc., Bank of India and BES Investimento do Brasil have also postponed or canceled planned bond sales this year.
“I see issuers waiting on the sidelines, hoping this is temporary, and will come back to the market when the tone improves,” said Kevin Mathews, head of high-yield portfolios at F&C Investments in London.
Greek Crisis
Credit-default swaps on Greek government bonds have soared to a record on concern the country won’t be able to rein in its deficit, which has grown to almost 13 percent of gross domestic product. Market turmoil has extended to Spain and Portugal, which are also struggling with holes in their budgets.
Contracts on Greece fell 5 basis points to 350 yesterday, after rising to an all-time high of 428 on Feb. 4, according to CMA prices. Portugal dropped 2.5 basis points to 192, Italy tightened 2 to 129 and credit swaps on Spain fell 2 basis points to 138, CMA prices show.
“If problems in Greece, Portugal and Spain continue, the uncertainty will lead to higher borrowing costs and weigh on sentiment, both of which will affect issuance” in the corporate market, said Vivek Tawadey, head of credit strategy at BNP Paribas in London.
Terra Boligkreditt AS, an unrated Norwegian financial company, will start meeting debt investors today for a potential bond issue, according to a banker with knowledge of the matter.
Retail Offering
Enel SpA is selling Italy’s biggest cross-border issue of company bonds targeted at individual investors. Italy’s largest utility, in which the government owns a 30 percent stake, plans to sell as much as 3 billion euros of debt to savers in France, Germany, Belgium and Luxembourg, as well as to Italians, it said in a filing Feb. 10.
Rome-based Enel is rated A2 by Moody’s, its sixth-highest investment-grade ranking, and one level lower at A- by S&P. The company is offering interest of 65 basis points to 125 basis points more than benchmark rates, according to the filing.
Vestas Wind Systems A/S, the world’s biggest maker of wind turbines which is unrated and based in Copenhagen, said it may sell bonds for the first time after meeting with fixed-income investors last week.
Italian utility Acea SpA hired banks to sell as much as 500 million euros of 10-year bonds. Acea, rated A or five levels above junk by S&P, is planning to meet with investors at the end of this month after the company’s board approves the deal, a banker familiar with the matter said.
At least 16 borrowers including Montreal-based airplane maker Bombardier Inc. and Italian betting company Snai SpA have postponed or withdrawn $7.3 billion of debt sales over the past month, according to data compiled by Bloomberg. That’s the most since more than 50 were canceled in the months after financial markets began to freeze in July 2007.
The extra yield investors demand to hold high-risk company bonds rather than the safest government debt has jumped almost 1 percentage point since Jan. 11, the biggest increase since March, according to Bank of America Merrill Lynch’s Global High- Yield Index. European finance ministers are meeting in Brussels amid mounting pressure to explain what steps they’ll take to help Greece reduce its swelling fiscal shortfall.
“Investors are concerned about Greece and the broader economy much more than they were a couple of months back,” said Jonathan Moore, an analyst at Evolution Securities Ltd. in London. “They understandably want to charge more, and most companies aren’t willing to pay that price.”
Spreads, Dubai
Spreads on high-yield, or junk, bonds soared 95 basis points since Jan. 11 to 713 yesterday, while the average extra yield on investment-grade debt widened 12 basis points to 171, or 1.71 percentage points, Merrill Lynch index data show.
High-yield bonds are ranked below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s. Markets in the U.S. were closed for the Presidents Day Holiday yesterday and much of Asia was shut for the Chinese New Year.
Elsewhere in credit markets, the cost to protect against a default by emirate Dubai rose to the highest since March on concern that investors will recoup less than anticipated in a $22 billion debt restructuring.
Credit-default swaps linked to the Mideast nation’s debt surged 22.5 basis points to 650 yesterday, the highest since March 20, according to CMA DataVision. That means it costs $650,000 a year to insure $10 million of bonds for five years.
Dubai and Dubai World, the state-owned company that owes the money, haven’t made an offer to creditors on a plan to restructure the debt, a spokeswoman for the Department of Finance said yesterday. That follows a report by Zawya Dow Jones on Feb. 14 that Dubai World may offer creditors 60 cents on the dollar after seven years to settle the debt.
Corporate Bond Risk
Credit-default swaps on corporate bonds in Europe also rose, signaling deterioration in investor perceptions of credit quality.
Contracts on the Markit iTraxx Crossover Index of 50 European companies with mostly high-yield credit ratings climbed as much as 17 basis points to 511, the highest in two months, JPMorgan Chase & Co. prices show. The Markit iTraxx Financial Index of default swaps tied to 25 banks and insurers increased as much as 1.5 basis points to 104.5, according to JPMorgan.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company or country fail to adhere to its debt agreements. A basis point is 0.01 percentage point and on a credit-default swap contract protecting 10 million euros of debt for five years is equivalent to 1,000 euros a year.
LBO Financings
Fitch Ratings said that European leveraged buyouts, high- risk deals that were used to finance acquisitions before the credit crisis, face a wave of defaults by 2013 when the bulk of the debt used to finance the takeovers comes due.
Debt payments for the companies will surge to an average 48 billion euros ($65 billion) annually between 2013 and 2016, from 6.5 billion euros this year, Fitch said yesterday.
Borrowers are increasingly sitting on the sidelines rather than risking selling bonds before the debt crisis affecting Greece and other south European countries is resolved. Sales slowed to $28.1 billion last week, 54 percent below the average over the previous 12 months, Bloomberg data show.
“Our sense is that there is a growing backlog of corporate bond issuance awaiting announcement when conditions are steadier,” Charles Stephens, a debt capital markets specialist at Matrix Corporate Capital LLP in London, wrote in a note to clients yesterday. “There’s a heavy refinancing schedule for the corporate sector in the period 2010-12, and the pressure to execute deals will intensify.”
Bombardier Pulled
Bombardier, the world’s third-largest commercial airplane maker, delayed a $1 billion offering of eight- and 10-year notes after investors demanded a higher yield than the company had anticipated, according to people familiar with the matter.
Bombardier marketed the sale from Feb. 8 to Feb. 11, and investors asked the company to pay a yield of about 8 percent to 8.25 percent, said the people, who declined to be identified.
Snai, Italy’s second-largest gaming and betting company, pulled a sale of junk bonds citing “market conditions” and a legal dispute with Bridgepoint Capital Ltd. Porcari, Italy-based Snai planned to raise 350 million euros through bonds to repay a 250 million-euro loan, refinance overdrafts and pay for government concessions, according to S&P.
Songa Offshore SE, the Norwegian owner of drilling rigs, postponed a $200 million sale of seven-year notes on Feb. 11, according to a person familiar with the transaction, who declined to be identified because the deal is private. The Oslo, Norway-based company may return to the market in March with a larger offer, the person said.
‘Unfavorable Conditions’
Kemet Corp., the Simpsonville, South Carolina-based maker of capacitors that are used to make electronic circuits, said on Feb. 11 it delayed a $275 million offering “as a result of unfavorable market conditions.” RCS & RDS SA, a Romanian telephone company, postponed a $200 million sale of seven-year bonds Feb. 12, according to a person with knowledge of the transaction.
Energy Transfer Equity LP, Regent Seven Seas Cruises UK Ltd, New World Resources NV, ITC^Deltacom Inc., Bank of India and BES Investimento do Brasil have also postponed or canceled planned bond sales this year.
“I see issuers waiting on the sidelines, hoping this is temporary, and will come back to the market when the tone improves,” said Kevin Mathews, head of high-yield portfolios at F&C Investments in London.
Greek Crisis
Credit-default swaps on Greek government bonds have soared to a record on concern the country won’t be able to rein in its deficit, which has grown to almost 13 percent of gross domestic product. Market turmoil has extended to Spain and Portugal, which are also struggling with holes in their budgets.
Contracts on Greece fell 5 basis points to 350 yesterday, after rising to an all-time high of 428 on Feb. 4, according to CMA prices. Portugal dropped 2.5 basis points to 192, Italy tightened 2 to 129 and credit swaps on Spain fell 2 basis points to 138, CMA prices show.
“If problems in Greece, Portugal and Spain continue, the uncertainty will lead to higher borrowing costs and weigh on sentiment, both of which will affect issuance” in the corporate market, said Vivek Tawadey, head of credit strategy at BNP Paribas in London.
Terra Boligkreditt AS, an unrated Norwegian financial company, will start meeting debt investors today for a potential bond issue, according to a banker with knowledge of the matter.
Retail Offering
Enel SpA is selling Italy’s biggest cross-border issue of company bonds targeted at individual investors. Italy’s largest utility, in which the government owns a 30 percent stake, plans to sell as much as 3 billion euros of debt to savers in France, Germany, Belgium and Luxembourg, as well as to Italians, it said in a filing Feb. 10.
Rome-based Enel is rated A2 by Moody’s, its sixth-highest investment-grade ranking, and one level lower at A- by S&P. The company is offering interest of 65 basis points to 125 basis points more than benchmark rates, according to the filing.
Vestas Wind Systems A/S, the world’s biggest maker of wind turbines which is unrated and based in Copenhagen, said it may sell bonds for the first time after meeting with fixed-income investors last week.
Italian utility Acea SpA hired banks to sell as much as 500 million euros of 10-year bonds. Acea, rated A or five levels above junk by S&P, is planning to meet with investors at the end of this month after the company’s board approves the deal, a banker familiar with the matter said.
Asian Stocks Rise as Earnings Point to Strengthening Recovery
Feb. 16 (Bloomberg) -- Asian stocks rose, led by financial companies, as improving earnings in Australia pointed to a strengthening global economic recovery.
Westpac Banking Corp., Australia’s second-biggest lender, jumped 4.5 percent in Sydney as first-quarter profit climbed. OneSteel Ltd. surged 6.2 percent in Sydney after the steelmaker said domestic demand is improving. BHP Billiton Ltd., the world’s largest mining company, climbed 1 percent in Sydney on higher metal prices. All Nippon Airways Co. gained 3.9 percent in Tokyo after Citigroup Inc. increased its investment rating.
“Despite the concerns, we continue to see robust earnings being reported globally,” said Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. “This should serve to buoy valuations and increase the attractiveness of stocks once greater certainty in the macro-economic outlook occurs.”
The MSCI Asia Pacific Index advanced 0.3 percent to 116.23 as of 09:34 a.m. in Tokyo. The gauge has dropped 8.3 percent from a 17-month high on Jan. 15 on speculation central banks will tighten monetary policy, and that Greece, Spain and Portugal will struggle to curb deficits.
Australia’s S&P/ASX 200 Index rose 1 percent and New Zealand’s NZX 50 Index advanced 0.6 percent in Wellington. Japan’s Nikkei 225 Stock Average gained 0.4 percent.
Westpac Banking Corp., Australia’s second-biggest lender, jumped 4.5 percent in Sydney as first-quarter profit climbed. OneSteel Ltd. surged 6.2 percent in Sydney after the steelmaker said domestic demand is improving. BHP Billiton Ltd., the world’s largest mining company, climbed 1 percent in Sydney on higher metal prices. All Nippon Airways Co. gained 3.9 percent in Tokyo after Citigroup Inc. increased its investment rating.
“Despite the concerns, we continue to see robust earnings being reported globally,” said Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. “This should serve to buoy valuations and increase the attractiveness of stocks once greater certainty in the macro-economic outlook occurs.”
The MSCI Asia Pacific Index advanced 0.3 percent to 116.23 as of 09:34 a.m. in Tokyo. The gauge has dropped 8.3 percent from a 17-month high on Jan. 15 on speculation central banks will tighten monetary policy, and that Greece, Spain and Portugal will struggle to curb deficits.
Australia’s S&P/ASX 200 Index rose 1 percent and New Zealand’s NZX 50 Index advanced 0.6 percent in Wellington. Japan’s Nikkei 225 Stock Average gained 0.4 percent.
Sunday, February 14, 2010
Greek Probe Uncovers ‘Long-Term Damage’ From Swaps Agreements
Feb. 15 (Bloomberg) -- A Greek government inquiry uncovered a series of swaps agreements with securities firms that may have allowed it to mask its growing debts.
Greece used the swaps to defer interest repayments by several years, according to a Feb. 1 report commissioned by the Finance Ministry in Athens. The document didn’t identify the securities firms Greece used. The government turned to Goldman Sachs Group Inc. in 2002 to obtain $1 billion through a swap agreement, Christoforos Sardelis, head of Greece’s Public Debt Management Agency between 1999 and 2004, said in an interview last week.
“While swaps should be strictly limited to those that lead to a permanent reduction in interest spending, some of these agreements have been made to move interest from the present year to the future, with long-term damage to the Greek state,” the Finance Ministry report said. The 106-page dossier is now being examined by lawmakers.
European Union leaders last week ordered Greece to get its deficit under control and vowed “determined” action to staunch the worst crisis in the euro’s 11-year history. Standard & Poor’s and Fitch Ratings are questioning Greece over its use of the swap agreements, said two people with direct knowledge of the situation, who declined to be identified because the talks are private.
“Greece used accounting tricks to hide its deficit and this is a huge problem,” Wolfgang Gerke, president of the Bavarian Center of Finance in Munich and Honorary Professor at the European Business School, said in an interview. “The rating agencies are doing the right thing, but it may be too little too late. The EU slept through this.”
Euro Criteria
Lucas van Praag, a spokesman for New York-based Goldman Sachs, the most profitable securities firm in Wall Street history, didn’t respond to e-mails seeking comment.
Greece, whose burgeoning budget deficit caused it to fail the criteria for joining the single European currency in 1999, joined the Euro in 2001. Member nations had to reduce their budget deficit to less than 3 percent of gross domestic product and trim national debt to less than 60 percent of GDP.
Greek Prime Minister George Papandreou, who came to power in October after defeating two-term incumbent Kostas Karamanlis, more than tripled the 2009 deficit estimate to 12.7 percent. Greek officials last month pledged to provide more reliable statistics after the EU complained of “severe irregularities” in the nation’s economic figures.
‘Political Interference’
The Finance Ministry report blamed “political interference” for the collapse of credibility in Greece’s statistics. There were “serious weaknesses” in data collection, especially with spending figures, as information often came from second-hand sources, the report found.
The Goldman Sachs transaction consisted of a cross-currency swap of about $10 billion of debt issued by Greece in dollars and yen, Sardelis said. That was swapped into euros using a historical exchange rate, a mechanism that implied a reduction in debt and generated about $1 billion of funding for that year, he said. Eurostat, the EU’s Luxembourg-based statistics office, and the rating companies were both aware of the plan, he said.
Officials for Eurostat couldn’t be reached for comment. Officials for Fitch, Moody’s and Standard & Poor’s didn’t return calls seeking comment outside regular office hours yesterday.
‘Deal Restructured’
Sardelis said the agreement was restructured “a couple” of times while he was still in office. He left in 2004 and joined Banca IMI, the investment-banking unit of Italy’s Intesa Sanpaolo SpA’s. He said the fees, or the spread that Goldman Sachs was paid on the contract, were “reasonable.” The New York-based firm made about $300 million from the agreement, the New York Times reported Feb. 14.
Goldman Sachs bankers including President Gary Cohn traveled to Athens in November to pitch a deal that would push debt from the country’s health-care services into the future, the newspaper reported, citing two people briefed on the meeting. Greece rejected the offer, the New York Times said.
The government met with major international banks over the last month in order to explore options and discuss their involvement in financing Greek national debt, said an official at the Greek finance ministry who declined to be identified. Debt-financing operations are conducted transparently in order to be fully Eurostat-compliant, the official said.
Goldman Earnings
Goldman Sachs reported net income of $13.4 billion in 2009’s fiscal year, outpacing the $11.6 billion profit in 2007, its next-best year. The shares doubled last year to $168.84.
S&P, Moody’s Investors Service and Fitch in December all cut Greece’s credit rating in December. The rating was lowered by one level to BBB+ from A- at S&P and the country’s debt was put on “credit-watch negative,” signaling the company may reduce it again. Fitch cut Greece’s rating one level to BBB+, from A-. Moody’s cut Greece to A2 from A1.
Greece used the swaps to defer interest repayments by several years, according to a Feb. 1 report commissioned by the Finance Ministry in Athens. The document didn’t identify the securities firms Greece used. The government turned to Goldman Sachs Group Inc. in 2002 to obtain $1 billion through a swap agreement, Christoforos Sardelis, head of Greece’s Public Debt Management Agency between 1999 and 2004, said in an interview last week.
“While swaps should be strictly limited to those that lead to a permanent reduction in interest spending, some of these agreements have been made to move interest from the present year to the future, with long-term damage to the Greek state,” the Finance Ministry report said. The 106-page dossier is now being examined by lawmakers.
European Union leaders last week ordered Greece to get its deficit under control and vowed “determined” action to staunch the worst crisis in the euro’s 11-year history. Standard & Poor’s and Fitch Ratings are questioning Greece over its use of the swap agreements, said two people with direct knowledge of the situation, who declined to be identified because the talks are private.
“Greece used accounting tricks to hide its deficit and this is a huge problem,” Wolfgang Gerke, president of the Bavarian Center of Finance in Munich and Honorary Professor at the European Business School, said in an interview. “The rating agencies are doing the right thing, but it may be too little too late. The EU slept through this.”
Euro Criteria
Lucas van Praag, a spokesman for New York-based Goldman Sachs, the most profitable securities firm in Wall Street history, didn’t respond to e-mails seeking comment.
Greece, whose burgeoning budget deficit caused it to fail the criteria for joining the single European currency in 1999, joined the Euro in 2001. Member nations had to reduce their budget deficit to less than 3 percent of gross domestic product and trim national debt to less than 60 percent of GDP.
Greek Prime Minister George Papandreou, who came to power in October after defeating two-term incumbent Kostas Karamanlis, more than tripled the 2009 deficit estimate to 12.7 percent. Greek officials last month pledged to provide more reliable statistics after the EU complained of “severe irregularities” in the nation’s economic figures.
‘Political Interference’
The Finance Ministry report blamed “political interference” for the collapse of credibility in Greece’s statistics. There were “serious weaknesses” in data collection, especially with spending figures, as information often came from second-hand sources, the report found.
The Goldman Sachs transaction consisted of a cross-currency swap of about $10 billion of debt issued by Greece in dollars and yen, Sardelis said. That was swapped into euros using a historical exchange rate, a mechanism that implied a reduction in debt and generated about $1 billion of funding for that year, he said. Eurostat, the EU’s Luxembourg-based statistics office, and the rating companies were both aware of the plan, he said.
Officials for Eurostat couldn’t be reached for comment. Officials for Fitch, Moody’s and Standard & Poor’s didn’t return calls seeking comment outside regular office hours yesterday.
‘Deal Restructured’
Sardelis said the agreement was restructured “a couple” of times while he was still in office. He left in 2004 and joined Banca IMI, the investment-banking unit of Italy’s Intesa Sanpaolo SpA’s. He said the fees, or the spread that Goldman Sachs was paid on the contract, were “reasonable.” The New York-based firm made about $300 million from the agreement, the New York Times reported Feb. 14.
Goldman Sachs bankers including President Gary Cohn traveled to Athens in November to pitch a deal that would push debt from the country’s health-care services into the future, the newspaper reported, citing two people briefed on the meeting. Greece rejected the offer, the New York Times said.
The government met with major international banks over the last month in order to explore options and discuss their involvement in financing Greek national debt, said an official at the Greek finance ministry who declined to be identified. Debt-financing operations are conducted transparently in order to be fully Eurostat-compliant, the official said.
Goldman Earnings
Goldman Sachs reported net income of $13.4 billion in 2009’s fiscal year, outpacing the $11.6 billion profit in 2007, its next-best year. The shares doubled last year to $168.84.
S&P, Moody’s Investors Service and Fitch in December all cut Greece’s credit rating in December. The rating was lowered by one level to BBB+ from A- at S&P and the country’s debt was put on “credit-watch negative,” signaling the company may reduce it again. Fitch cut Greece’s rating one level to BBB+, from A-. Moody’s cut Greece to A2 from A1.
Errant U.S. Rocket Strike Kills Civilians in Afghanistan
MARJA, Afghanistan — An errant American rocket strike on Sunday hit a compound crowded with Afghan civilians in the last Taliban stronghold in Helmand Province, killing at least 10 people, including 5 children, military officials said.
Skip to next paragraph
Enlarge This Image
Tyler Hicks/The New York Times
Troops under attack in Marja, a Taliban stronghold in Helmand Province, on Sunday. More Photos »
At War
Notes from Afghanistan, Pakistan, Iraq and other areas of conflict in the post-9/11 era.
Go to the Blog »
Multimedia
Taking Back MarjaMap
Taking Back Marja
Under Fire in MarjaSlide Show
Under Fire in Marja
Related
Afghan Attack Gives Marines a Taste of War (February 14, 2010)
A Test for the Meaning of Victory in Afghanistan (February 14, 2010)
At War: Wahabbi Fanatics Reported on the Afghan Frontier Today, February 13, ...1872
Avoiding such civilian deaths, which came on the second day of a major allied offensive around Marja, has been a cornerstone of the war strategy by the top American commander, Gen. Stanley A. McChrystal. He apologized to President Hamid Karzai, saying, “We deeply regret this tragic loss of life.”
The strike came after American Marines and Afghan soldiers had been taking intense small-arms fire from a mud-walled compound in the area, American officers said. The answering artillery barrage instead hit a building a few hundred yards way, striking with a roar and sending a huge cloud of dust and smoke into the air. As the wind pushed the plume away, a group of children rushed outside.
“The compound that was hit was not the one we were targeting,” said Capt. Joshua Biggers, the commander of Company K, Third Battalion, Sixth Marines, which had been engaged in a rolling gun battle with Taliban insurgents throughout the day.
It was unclear whether one or more rockets hit the building. Officers said the barrage had been fired from Camp Bastion, a large British and American base to the northeast, by a weapons system known as Himars, an acronym for High Mobility Artillery Rocket System. Its munitions are GPS-guided and advertised as being accurate enough to strike within a yard of their intended targets. General McChrystal said in a statement that he was suspending use of the weapon system “until a thorough review of this incident has been conducted.”
There were conflicting reports about the number of dead in the strike. Daoud Ahmadi, the spokesman for Helmand Province’s governor, said in a telephone interview that 10 people had been killed. But American soldiers in the area said 11 civilians had died, and the joint military command, known as the International Security Assistance Force, put the toll at 12.
Sunday was an intensive day of fighting around Marja, in an area of irrigated steppes and rural villages where a combined force of about 15,000 Afghan and foreign troops, led by American Marines, is now trying to break Taliban control.
As more troops continued streaming into the town of Marja itself, setting up checkpoints and outposts along the way, patrols and exhaustive house-to-house searches for insurgents and weapons intensified, military officials said.
For a second day, Afghan and NATO military officers also held a series of meetings with local Afghan leaders in Marja, said Flight Lt. Wendy Wheadon, a British officer and spokesman for the international security force.
A main thrust of the offensive has been to smooth the way for permanent government rule in the area, which has remained a durable Taliban stronghold in the years since the 2001 American invasion.
Despite the heavy fighting, reports of allied casualties have been low. The International Security Assistance Force issued a news release indicating that a non-American soldier was killed Sunday by a homemade bomb in southern Afghanistan, but did not specify whether that was a result of the Marja offensive.
A senior Afghan commander, Gen. Sher Mohammed Zazai, said that so far, there had been no deaths of Afghan troops, who make up the bulk of the combined force. One American Marine and one British Marine were reported killed on the first day.
The battle started before dawn on Saturday, when about 6,000 troops began being flown into Marja itself.
Among the vanguard were Company K and an accompanying Afghan Army platoon, which remained alone in their area of the Taliban stronghold for the second day, engaged in off-and-on gun battles from 8:30 a.m. until just before sunset.
Two of the American company’s Marines were wounded by gunfire on Sunday, including one shot in an arm and another through his left shoulder shortly before the Himars rocket strike. No Afghan soldiers with the company had been wounded by nightfall.
The Marines had positioned themselves on Saturday night in one outpost and two small smaller patrol bases. The first shots from the Taliban began minutes after patrols left two of the positions on Sunday morning. Gunfire, along with occasional shoulder-fired rockets and mortars, boomed throughout the day, as the Taliban surrounded the company, probing and attacking from different directions as the hours passed.
Skip to next paragraph
Enlarge This Image
Tyler Hicks/The New York Times
Troops under attack in Marja, a Taliban stronghold in Helmand Province, on Sunday. More Photos »
At War
Notes from Afghanistan, Pakistan, Iraq and other areas of conflict in the post-9/11 era.
Go to the Blog »
Multimedia
Taking Back MarjaMap
Taking Back Marja
Under Fire in MarjaSlide Show
Under Fire in Marja
Related
Afghan Attack Gives Marines a Taste of War (February 14, 2010)
A Test for the Meaning of Victory in Afghanistan (February 14, 2010)
At War: Wahabbi Fanatics Reported on the Afghan Frontier Today, February 13, ...1872
Avoiding such civilian deaths, which came on the second day of a major allied offensive around Marja, has been a cornerstone of the war strategy by the top American commander, Gen. Stanley A. McChrystal. He apologized to President Hamid Karzai, saying, “We deeply regret this tragic loss of life.”
The strike came after American Marines and Afghan soldiers had been taking intense small-arms fire from a mud-walled compound in the area, American officers said. The answering artillery barrage instead hit a building a few hundred yards way, striking with a roar and sending a huge cloud of dust and smoke into the air. As the wind pushed the plume away, a group of children rushed outside.
“The compound that was hit was not the one we were targeting,” said Capt. Joshua Biggers, the commander of Company K, Third Battalion, Sixth Marines, which had been engaged in a rolling gun battle with Taliban insurgents throughout the day.
It was unclear whether one or more rockets hit the building. Officers said the barrage had been fired from Camp Bastion, a large British and American base to the northeast, by a weapons system known as Himars, an acronym for High Mobility Artillery Rocket System. Its munitions are GPS-guided and advertised as being accurate enough to strike within a yard of their intended targets. General McChrystal said in a statement that he was suspending use of the weapon system “until a thorough review of this incident has been conducted.”
There were conflicting reports about the number of dead in the strike. Daoud Ahmadi, the spokesman for Helmand Province’s governor, said in a telephone interview that 10 people had been killed. But American soldiers in the area said 11 civilians had died, and the joint military command, known as the International Security Assistance Force, put the toll at 12.
Sunday was an intensive day of fighting around Marja, in an area of irrigated steppes and rural villages where a combined force of about 15,000 Afghan and foreign troops, led by American Marines, is now trying to break Taliban control.
As more troops continued streaming into the town of Marja itself, setting up checkpoints and outposts along the way, patrols and exhaustive house-to-house searches for insurgents and weapons intensified, military officials said.
For a second day, Afghan and NATO military officers also held a series of meetings with local Afghan leaders in Marja, said Flight Lt. Wendy Wheadon, a British officer and spokesman for the international security force.
A main thrust of the offensive has been to smooth the way for permanent government rule in the area, which has remained a durable Taliban stronghold in the years since the 2001 American invasion.
Despite the heavy fighting, reports of allied casualties have been low. The International Security Assistance Force issued a news release indicating that a non-American soldier was killed Sunday by a homemade bomb in southern Afghanistan, but did not specify whether that was a result of the Marja offensive.
A senior Afghan commander, Gen. Sher Mohammed Zazai, said that so far, there had been no deaths of Afghan troops, who make up the bulk of the combined force. One American Marine and one British Marine were reported killed on the first day.
The battle started before dawn on Saturday, when about 6,000 troops began being flown into Marja itself.
Among the vanguard were Company K and an accompanying Afghan Army platoon, which remained alone in their area of the Taliban stronghold for the second day, engaged in off-and-on gun battles from 8:30 a.m. until just before sunset.
Two of the American company’s Marines were wounded by gunfire on Sunday, including one shot in an arm and another through his left shoulder shortly before the Himars rocket strike. No Afghan soldiers with the company had been wounded by nightfall.
The Marines had positioned themselves on Saturday night in one outpost and two small smaller patrol bases. The first shots from the Taliban began minutes after patrols left two of the positions on Sunday morning. Gunfire, along with occasional shoulder-fired rockets and mortars, boomed throughout the day, as the Taliban surrounded the company, probing and attacking from different directions as the hours passed.
Europe Junk Bonds Shrug Off Greece to Beat U.S.: Credit Markets
Feb. 15 (Bloomberg) -- High-yield, high-risk corporate bonds in Europe are beating their U.S. counterparts in a sign investors expect Greece’s deficit crisis will be contained.
Junk bonds in Europe including hybrid securities issued by ABN Amro Bank NV and Spain’s Banco de Valencia SA have returned 2.26 percent this year, compared with a loss of 0.36 percent in the U.S., according to Bank of America Merrill Lynch index data. Even after the gains the securities still yield more than what investors can get in the U.S., offering a cushion against a slowing economy.
European lenders pledged support for Greece last week while it grapples with Europe’s biggest budget deficit as a percentage of gross domestic product, with German Chancellor Angela Merkel and her counterparts offering “determined and coordinated action.” London-based Barclays Capital, the most accurate forecaster in a 2009 Bloomberg News survey, said Feb. 12 that “spillover” to larger countries is unlikely.
“Greece is seen as more of a concern for the banks and investment-grade than for high yield,” said Martin Fridson, chief executive officer of New York-based money-management firm Fridson Investment Advisors. Fridson, who began his career as a corporate bond trader in 1976 and specializes in speculative- grade debt, said the gains are being bolstered by a “big influx” of money from countries including the U.S.
Yield Premiums
Elsewhere in credit markets, the extra yield investors demand to own company bonds instead of government debt widened 2 basis points last week to 171 basis points, while overall yields rose to 4.13 percent from 4.05 percent a day earlier, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index.
Sales of corporate bonds totaled $28.1 billion last week, or 54 percent below the average over the previous 52 weeks, according to data compiled by Bloomberg.
Globally, the number of “weakest links,” or borrowers rated B- and below with a “negative” outlook totaled 213 last week, unchanged from January and down from 265 a year ago, according to Standard & Poor’s. Their combined debt totals $197.5 billion. High-yield bonds are ranked below Baa3 by Moody’s Investors Service and BBB- by S&P.
No companies in Europe have defaulted this year, compared with 12 in the U.S., S&P said. BlackRock Inc., the world’s biggest asset manager, boosted its holdings of Greek bonds as it bets the European Union won’t allow the nation to default.
‘Too Much’ Worry
“They won’t allow a Lehman-type crisis,” said Michael Krautzberger, co-head of European fixed-income who helps oversee BlackRock’s $3.35 trillion of assets from London. “The market has worried too much about an imminent government default in Europe that will not happen because of the solidarity.”
European leaders are working on measures such as establishing a lending facility for Greece, with each country making a contribution according to its size, an EU official said last week on condition of anonymity. They stopped short of providing taxpayers’ money or diluting their demands for the country to cut its budget shortfall.
Greece, representing 2.7 percent of the euro region’s $13 trillion economy, posted a budget deficit of 12.7 percent of GDP in 2009, the highest in the euro’s 11-year history and more than four times the EU’s 3 percent limit.
The nation’s “fiscal situation is serious,” but it’s “not the final death knell” for Europe and “spillover to bigger countries such as Spain and Italy is preventable,” Barclays analysts including Julian Callow in London wrote in a research note Feb. 12.
U.K. Leads
Junk bonds issued by borrowers in the U.K., Europe’s second-largest economy, are leading the gains. They returned 3.6 percent, while debt sold by Spanish companies handed investors 1.13 percent, Merrill Lynch data show. Even high-yield notes issued by Greek companies rallied 2.08 percent this year.
Credit derivatives show the junk bonds may be poised to fall after the cost to protect the securities from default rose to a two-month high on Feb. 12.
The Markit iTraxx Crossover Index of credit-default swaps on 50 European companies climbed 19 basis points on Feb. 12 to 495, according to JPMorgan Chase & Co. The cost of protecting bank bonds from default also rose, as the Markit iTraxx Financial Index of 25 banks and insurers jumped 6 basis points to 103, or 1.03 percentage points.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point on a contract protecting 10 million euros ($13.6 million) of debt from default for five years equals to 1,000 euros a year.
Bond Default
Defaults in Europe have been below expectations, according to Moody’s. The 12-month default rate fell to 9.6 percent in January from 10.3 percent the previous month, Moody’s said in a report Feb. 9. A year ago, the New York-based ratings company was predicting European defaults would peak at 19.6 percent in the final quarter of 2009.
Junk bonds and credit-default swaps are diverging because “99 percent of people you speak to don’t believe Greece is going to default, but people are still buying protection,” said Neil Murray, who oversees about 25 billion pounds ($39 billion) of corporate bonds as head of credit at Scottish Widows Investment Partnership in Edinburgh.
Investors demand an average 9.64 percent to own junk bonds in Europe, compared with 9.44 percent in the U.S., the smallest gap since January 2008, Merrill Lynch indexes show. The difference has shrunk from 1.27 percentage points at the end of 2009 and 8 percentage points in May.
Bond Bargains
“We still think you can buy reasonably good names at, say, 9 percent,” said Andrew Sutherland, who oversees 23 billion pounds of company bonds as head of credit at Standard Life Investments in Edinburgh.
European junk bonds in Europe rallied 77 percent in 2009, compared with 58 percent in the U.S., as credit and equity markets worldwide recovered from the worst financial and economic crisis since the 1930s.
The relative lack of new junk bonds issued in Europe also contributed to the outperformance, Fridson said. Companies have sold 5.58 billion euros of the debt in Europe this year, compared with a record $26.5 billion in the U.S., according to data compiled by Bloomberg.
This week, Vestas Wind Systems A/S, an unrated, Copenhagen- based company which is the world’s biggest maker of wind turbines, may sell bonds for the first time after meeting with fixed-income investors last week. Italian utility Acea SpA, which is rated A, or five levels above junk by S&P, hired banks to sell as much as 500 million euros of 10-year bonds, a banker involved in the deal said.
Junk bonds in Europe including hybrid securities issued by ABN Amro Bank NV and Spain’s Banco de Valencia SA have returned 2.26 percent this year, compared with a loss of 0.36 percent in the U.S., according to Bank of America Merrill Lynch index data. Even after the gains the securities still yield more than what investors can get in the U.S., offering a cushion against a slowing economy.
European lenders pledged support for Greece last week while it grapples with Europe’s biggest budget deficit as a percentage of gross domestic product, with German Chancellor Angela Merkel and her counterparts offering “determined and coordinated action.” London-based Barclays Capital, the most accurate forecaster in a 2009 Bloomberg News survey, said Feb. 12 that “spillover” to larger countries is unlikely.
“Greece is seen as more of a concern for the banks and investment-grade than for high yield,” said Martin Fridson, chief executive officer of New York-based money-management firm Fridson Investment Advisors. Fridson, who began his career as a corporate bond trader in 1976 and specializes in speculative- grade debt, said the gains are being bolstered by a “big influx” of money from countries including the U.S.
Yield Premiums
Elsewhere in credit markets, the extra yield investors demand to own company bonds instead of government debt widened 2 basis points last week to 171 basis points, while overall yields rose to 4.13 percent from 4.05 percent a day earlier, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index.
Sales of corporate bonds totaled $28.1 billion last week, or 54 percent below the average over the previous 52 weeks, according to data compiled by Bloomberg.
Globally, the number of “weakest links,” or borrowers rated B- and below with a “negative” outlook totaled 213 last week, unchanged from January and down from 265 a year ago, according to Standard & Poor’s. Their combined debt totals $197.5 billion. High-yield bonds are ranked below Baa3 by Moody’s Investors Service and BBB- by S&P.
No companies in Europe have defaulted this year, compared with 12 in the U.S., S&P said. BlackRock Inc., the world’s biggest asset manager, boosted its holdings of Greek bonds as it bets the European Union won’t allow the nation to default.
‘Too Much’ Worry
“They won’t allow a Lehman-type crisis,” said Michael Krautzberger, co-head of European fixed-income who helps oversee BlackRock’s $3.35 trillion of assets from London. “The market has worried too much about an imminent government default in Europe that will not happen because of the solidarity.”
European leaders are working on measures such as establishing a lending facility for Greece, with each country making a contribution according to its size, an EU official said last week on condition of anonymity. They stopped short of providing taxpayers’ money or diluting their demands for the country to cut its budget shortfall.
Greece, representing 2.7 percent of the euro region’s $13 trillion economy, posted a budget deficit of 12.7 percent of GDP in 2009, the highest in the euro’s 11-year history and more than four times the EU’s 3 percent limit.
The nation’s “fiscal situation is serious,” but it’s “not the final death knell” for Europe and “spillover to bigger countries such as Spain and Italy is preventable,” Barclays analysts including Julian Callow in London wrote in a research note Feb. 12.
U.K. Leads
Junk bonds issued by borrowers in the U.K., Europe’s second-largest economy, are leading the gains. They returned 3.6 percent, while debt sold by Spanish companies handed investors 1.13 percent, Merrill Lynch data show. Even high-yield notes issued by Greek companies rallied 2.08 percent this year.
Credit derivatives show the junk bonds may be poised to fall after the cost to protect the securities from default rose to a two-month high on Feb. 12.
The Markit iTraxx Crossover Index of credit-default swaps on 50 European companies climbed 19 basis points on Feb. 12 to 495, according to JPMorgan Chase & Co. The cost of protecting bank bonds from default also rose, as the Markit iTraxx Financial Index of 25 banks and insurers jumped 6 basis points to 103, or 1.03 percentage points.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point on a contract protecting 10 million euros ($13.6 million) of debt from default for five years equals to 1,000 euros a year.
Bond Default
Defaults in Europe have been below expectations, according to Moody’s. The 12-month default rate fell to 9.6 percent in January from 10.3 percent the previous month, Moody’s said in a report Feb. 9. A year ago, the New York-based ratings company was predicting European defaults would peak at 19.6 percent in the final quarter of 2009.
Junk bonds and credit-default swaps are diverging because “99 percent of people you speak to don’t believe Greece is going to default, but people are still buying protection,” said Neil Murray, who oversees about 25 billion pounds ($39 billion) of corporate bonds as head of credit at Scottish Widows Investment Partnership in Edinburgh.
Investors demand an average 9.64 percent to own junk bonds in Europe, compared with 9.44 percent in the U.S., the smallest gap since January 2008, Merrill Lynch indexes show. The difference has shrunk from 1.27 percentage points at the end of 2009 and 8 percentage points in May.
Bond Bargains
“We still think you can buy reasonably good names at, say, 9 percent,” said Andrew Sutherland, who oversees 23 billion pounds of company bonds as head of credit at Standard Life Investments in Edinburgh.
European junk bonds in Europe rallied 77 percent in 2009, compared with 58 percent in the U.S., as credit and equity markets worldwide recovered from the worst financial and economic crisis since the 1930s.
The relative lack of new junk bonds issued in Europe also contributed to the outperformance, Fridson said. Companies have sold 5.58 billion euros of the debt in Europe this year, compared with a record $26.5 billion in the U.S., according to data compiled by Bloomberg.
This week, Vestas Wind Systems A/S, an unrated, Copenhagen- based company which is the world’s biggest maker of wind turbines, may sell bonds for the first time after meeting with fixed-income investors last week. Italian utility Acea SpA, which is rated A, or five levels above junk by S&P, hired banks to sell as much as 500 million euros of 10-year bonds, a banker involved in the deal said.
Bharti Airtel closes on Zain assets
Bharti Airtel is in exclusive negotiations to acquire the African assets of Zain, a Kuwaiti telecoms group in an all-cash deal which is valued at $10.7bn and would mark one of the biggest cross-border transactions in the Middle East.
The Zain board met on Sunday afternoon to agree the terms of the deal, which would involve Bharti paying $10bn for the assets now and $700m at a later date, people close to the situation said.
EDITOR’S CHOICE
Bharti founder closer to pan-African dream - Feb-14
Bharti plans alliance with Abu Dhabi Group - Jan-12
In depth: Mergers and acquisitions - Dec-28
Analysis: India: Potholes in the road - Feb-04
Lex: India on the offensive - Feb-14
Gulf offers few defensive stock options - Feb-10
The deal, which excludes Zain’s Sudan and Morocco operations, is subject to due diligence. Bharti has until the end of March to examine Zain’s books, the people said.
The Indian telecoms group’s offer has secured the backing of Zain’s two largest shareholders: the Kharafi family, which holds at least 11.47 per cent through a subsidiary, Al-Khair; and the Kuwait Investment Authority, the country’s sovereign wealth fund which owns 25 per cent.
Bharti’s move comes months after it abandoned a $23bn deal with MTN, South Africa’s biggest mobile telecoms group after failing to secure government approval for the transaction.
If successful, Bharti’s acquisition of Zain’s African assets will create one of the largest emerging markets operators with networks across 24 countries in Africa, the Middle East and India.
Kuwait’s stock market halted trading in Zain shares on Sunday pending a decision on an offer.
Last year, Zain rejected an informal offer from French media and telecoms company Vivendi .
Zain is being advised by UBS. Global Investment House of Kuwait and Standard Chartered are advising Bharti.
The Zain board met on Sunday afternoon to agree the terms of the deal, which would involve Bharti paying $10bn for the assets now and $700m at a later date, people close to the situation said.
EDITOR’S CHOICE
Bharti founder closer to pan-African dream - Feb-14
Bharti plans alliance with Abu Dhabi Group - Jan-12
In depth: Mergers and acquisitions - Dec-28
Analysis: India: Potholes in the road - Feb-04
Lex: India on the offensive - Feb-14
Gulf offers few defensive stock options - Feb-10
The deal, which excludes Zain’s Sudan and Morocco operations, is subject to due diligence. Bharti has until the end of March to examine Zain’s books, the people said.
The Indian telecoms group’s offer has secured the backing of Zain’s two largest shareholders: the Kharafi family, which holds at least 11.47 per cent through a subsidiary, Al-Khair; and the Kuwait Investment Authority, the country’s sovereign wealth fund which owns 25 per cent.
Bharti’s move comes months after it abandoned a $23bn deal with MTN, South Africa’s biggest mobile telecoms group after failing to secure government approval for the transaction.
If successful, Bharti’s acquisition of Zain’s African assets will create one of the largest emerging markets operators with networks across 24 countries in Africa, the Middle East and India.
Kuwait’s stock market halted trading in Zain shares on Sunday pending a decision on an offer.
Last year, Zain rejected an informal offer from French media and telecoms company Vivendi .
Zain is being advised by UBS. Global Investment House of Kuwait and Standard Chartered are advising Bharti.
Subscribe to:
Posts (Atom)
Posts
