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.
Sunday, February 14, 2010
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.
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Troops under attack in Marja, a Taliban stronghold in Helmand Province, on Sunday. More Photos »
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Afghan Attack Gives Marines a Taste of War (February 14, 2010)
A Test for the Meaning of Victory in Afghanistan (February 14, 2010)
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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.
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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.
Saturday, February 13, 2010
Wall Street Helped to Mask Debts Shaking Europe
Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.
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Gary D. Cohn, president of Goldman Sachs, went to Athens to pitch complex products to defer debt. Such deals let Greece continue deficit spending, like a consumer with a second mortgage.
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Rising Obligations
Weekend Business: Floyd Norris on Greece and the Euro Crisis.
Related
Greek Statistician Is Caught in Limelight (February 14, 2010)
Europe Commits to Action on Greek Debt (February 12, 2010)
Greece’s Woes May Give Pause to Euro Zone Candidates (February 12, 2010)
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As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.
Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November — three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting.
The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.
It had worked before. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.
Athens did not pursue the latest Goldman proposal, but with Greece groaning under the weight of its debts and with its richer neighbors vowing to come to its aid, the deals over the last decade are raising questions about Wall Street’s role in the world’s latest financial drama.
As in the American subprime crisis and the implosion of the American International Group, financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.
In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books. Greece, for example, traded away the rights to airport fees and lottery proceeds in years to come.
Critics say that such deals, because they are not recorded as loans, mislead investors and regulators about the depth of a country’s liabilities.
Some of the Greek deals were named after figures in Greek mythology. One of them, for instance, was called Aeolos, after the god of the winds.
The crisis in Greece poses the most significant challenge yet to Europe’s common currency, the euro, and the Continent’s goal of economic unity. The country is, in the argot of banking, too big to be allowed to fail. Greece owes the world $300 billion, and major banks are on the hook for much of that debt. A default would reverberate around the globe.
A spokeswoman for the Greek finance ministry said the government had met with many banks in recent months and had not committed to any bank’s offers. All debt financings “are conducted in an effort of transparency,” she said. Goldman and JPMorgan declined to comment.
While Wall Street’s handiwork in Europe has received little attention on this side of the Atlantic, it has been sharply criticized in Greece and in magazines like Der Spiegel in Germany.
“Politicians want to pass the ball forward, and if a banker can show them a way to pass a problem to the future, they will fall for it,” said Gikas A. Hardouvelis, an economist and former government official who helped write a recent report on Greece’s accounting policies.
Wall Street did not create Europe’s debt problem. But bankers enabled Greece and others to borrow beyond their means, in deals that were perfectly legal. Few rules govern how nations can borrow the money they need for expenses like the military and health care. The market for sovereign debt — the Wall Street term for loans to governments — is as unfettered as it is vast.
“If a government wants to cheat, it can cheat,” said Garry Schinasi, a veteran of the International Monetary Fund’s capital markets surveillance unit, which monitors vulnerability in global capital markets.
Banks eagerly exploited what was, for them, a highly lucrative symbiosis with free-spending governments. While Greece did not take advantage of Goldman’s proposal in November 2009, it had paid the bank about $300 million in fees for arranging the 2001 transaction, according to several bankers familiar with the deal.
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Gary D. Cohn, president of Goldman Sachs, went to Athens to pitch complex products to defer debt. Such deals let Greece continue deficit spending, like a consumer with a second mortgage.
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Weekend Business: Floyd Norris on Greece and the Euro Crisis.
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Greek Statistician Is Caught in Limelight (February 14, 2010)
Europe Commits to Action on Greek Debt (February 12, 2010)
Greece’s Woes May Give Pause to Euro Zone Candidates (February 12, 2010)
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As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.
Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November — three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting.
The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.
It had worked before. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.
Athens did not pursue the latest Goldman proposal, but with Greece groaning under the weight of its debts and with its richer neighbors vowing to come to its aid, the deals over the last decade are raising questions about Wall Street’s role in the world’s latest financial drama.
As in the American subprime crisis and the implosion of the American International Group, financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.
In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books. Greece, for example, traded away the rights to airport fees and lottery proceeds in years to come.
Critics say that such deals, because they are not recorded as loans, mislead investors and regulators about the depth of a country’s liabilities.
Some of the Greek deals were named after figures in Greek mythology. One of them, for instance, was called Aeolos, after the god of the winds.
The crisis in Greece poses the most significant challenge yet to Europe’s common currency, the euro, and the Continent’s goal of economic unity. The country is, in the argot of banking, too big to be allowed to fail. Greece owes the world $300 billion, and major banks are on the hook for much of that debt. A default would reverberate around the globe.
A spokeswoman for the Greek finance ministry said the government had met with many banks in recent months and had not committed to any bank’s offers. All debt financings “are conducted in an effort of transparency,” she said. Goldman and JPMorgan declined to comment.
While Wall Street’s handiwork in Europe has received little attention on this side of the Atlantic, it has been sharply criticized in Greece and in magazines like Der Spiegel in Germany.
“Politicians want to pass the ball forward, and if a banker can show them a way to pass a problem to the future, they will fall for it,” said Gikas A. Hardouvelis, an economist and former government official who helped write a recent report on Greece’s accounting policies.
Wall Street did not create Europe’s debt problem. But bankers enabled Greece and others to borrow beyond their means, in deals that were perfectly legal. Few rules govern how nations can borrow the money they need for expenses like the military and health care. The market for sovereign debt — the Wall Street term for loans to governments — is as unfettered as it is vast.
“If a government wants to cheat, it can cheat,” said Garry Schinasi, a veteran of the International Monetary Fund’s capital markets surveillance unit, which monitors vulnerability in global capital markets.
Banks eagerly exploited what was, for them, a highly lucrative symbiosis with free-spending governments. While Greece did not take advantage of Goldman’s proposal in November 2009, it had paid the bank about $300 million in fees for arranging the 2001 transaction, according to several bankers familiar with the deal.
Explosion Kills 9 in Pune; India Says Terror Attack
Feb. 14 (Bloomberg) -- Nine people were killed when a bomb ripped through a bakery popular with international visitors in the Indian city of Pune, in what officials called the biggest terrorist strike in the nation since the 2008 Mumbai attacks.
“Six bodies have been identified,” police official R. Shalake said in a telephone interview from Pune, situated approximately 100 kilometers (62 miles) southeast of India’s financial hub of Mumbai. “There are three unknown bodies. At least 53 people have been injured,” Shalake said.
Television channels showed tables and chairs strewn across the pavement outside the bakery, with billboards ripped from their mountings. The blast occurred at 7:30 p.m. local time yesterday, Home Secretary Gopal K. Pillai said at a New Delhi news conference.
Home Minister Palaniappan Chidambaram said it was “the biggest terror incident in 14 months,” in remarks carried by Indian television channels late yesterday. “All the information available now points to a plot to explode a device at a place frequented by foreigners and locals,” he said.
Both he and Pillai said forensic investigations must be completed before it will be possible to say who was behind the bombing. “I don’t think any particular community was targeted. There is no failure of intelligence and it was an insidious attack. This is not an overt terror attack,” Chidambaram said.
Major Bombing
“The explosion sounded like a Katyusha” rocket, said Betzalel Kupchik, a rabbi at the Chabad House, a Jewish center, across the street from the bakery. The place was “probably targeted because you have a lot of foreigners coming there,” Kupchik said.
The Pune attack is the first major bombing in India since the November 2008 assault on Mumbai that killed 166 people. India blamed the Mumbai attack on the Pakistan-based Lashkar-e- Taiba group and scrapped five years of peace talks with its neighbor. The latest incident may threaten plans to revive negotiations between the two nuclear-armed countries. Foreign secretaries of India and Pakistan are scheduled to meet Feb. 25.
A spiritual center, located near the bakery and also frequented by foreigners, was among five places surveyed by David Coleman Headley, a Chicago man indicted by the U.S. for scouting targets before the Mumbai attacks, Pillai told reporters. Headley has pleaded not guilty to the charges.
Patrols, Training
After the Mumbai attack, Chidambaram created a federal investigation agency, strengthened patrols of coastal areas and improved training for anti-terrorism police as part of a national security overhaul.
Pillai said Dec. 9 that India remains vulnerable to terror attacks even after the revamp. Ports, power plants, nuclear installations, oil refineries and information technology firms are particularly vulnerable as groups based in India and abroad try to “wreck India’s economy,” he said.
Rebel groups in the disputed Himalayan region of Kashmir have been fighting for independence from India or a union with Pakistan since 1989. The country also faces insurgencies in some northeastern states, while Maoist guerillas have attacked economic infrastructure and security forces in southern and eastern parts of the country.
“Six bodies have been identified,” police official R. Shalake said in a telephone interview from Pune, situated approximately 100 kilometers (62 miles) southeast of India’s financial hub of Mumbai. “There are three unknown bodies. At least 53 people have been injured,” Shalake said.
Television channels showed tables and chairs strewn across the pavement outside the bakery, with billboards ripped from their mountings. The blast occurred at 7:30 p.m. local time yesterday, Home Secretary Gopal K. Pillai said at a New Delhi news conference.
Home Minister Palaniappan Chidambaram said it was “the biggest terror incident in 14 months,” in remarks carried by Indian television channels late yesterday. “All the information available now points to a plot to explode a device at a place frequented by foreigners and locals,” he said.
Both he and Pillai said forensic investigations must be completed before it will be possible to say who was behind the bombing. “I don’t think any particular community was targeted. There is no failure of intelligence and it was an insidious attack. This is not an overt terror attack,” Chidambaram said.
Major Bombing
“The explosion sounded like a Katyusha” rocket, said Betzalel Kupchik, a rabbi at the Chabad House, a Jewish center, across the street from the bakery. The place was “probably targeted because you have a lot of foreigners coming there,” Kupchik said.
The Pune attack is the first major bombing in India since the November 2008 assault on Mumbai that killed 166 people. India blamed the Mumbai attack on the Pakistan-based Lashkar-e- Taiba group and scrapped five years of peace talks with its neighbor. The latest incident may threaten plans to revive negotiations between the two nuclear-armed countries. Foreign secretaries of India and Pakistan are scheduled to meet Feb. 25.
A spiritual center, located near the bakery and also frequented by foreigners, was among five places surveyed by David Coleman Headley, a Chicago man indicted by the U.S. for scouting targets before the Mumbai attacks, Pillai told reporters. Headley has pleaded not guilty to the charges.
Patrols, Training
After the Mumbai attack, Chidambaram created a federal investigation agency, strengthened patrols of coastal areas and improved training for anti-terrorism police as part of a national security overhaul.
Pillai said Dec. 9 that India remains vulnerable to terror attacks even after the revamp. Ports, power plants, nuclear installations, oil refineries and information technology firms are particularly vulnerable as groups based in India and abroad try to “wreck India’s economy,” he said.
Rebel groups in the disputed Himalayan region of Kashmir have been fighting for independence from India or a union with Pakistan since 1989. The country also faces insurgencies in some northeastern states, while Maoist guerillas have attacked economic infrastructure and security forces in southern and eastern parts of the country.
Eight die in India’s first big attack since Mumbai
In India’s first terrorist attack since terrorists besieged Mumbai in 2008, a bomb on Saturday evening ripped through a restaurant in Pune, near India’s financial capital, killing at least eight people, reportedly including foreigners, and wounding 33 others.
Indian television reports said between one and four foreigners were among the dead in the blast, which rocked the German Bakery, a cafe popular with tourists staying at the nearby Osho ashram, one of India’s most famous communes, which hosts followers of the teachings of the late Osho Rajneesh, a spiritual guru.
EDITOR’S CHOICE
In depth: India - Jul-12
Mumbai plotter ‘could be an Indian’ - Feb-04
The explosion comes only a day after India and Pakistan agreed to resume high-level peace talks on February 25, which have been suspended since the Mumbai terrorist attacks.
“I was sitting in my living room when a strong blast shattered my windows,” said Niharika Arora, who lives across from the German Bakery, where the bomb was planted. “It is clearly an attack as the bakery is in a strategic spot close to Osho ashram.”
The bakery is also close to Pune’s Chabad House Jewish prayer and community centre.
Osho was one of the potential targets allegedly surveyed by David Coleman Headley, an American accused by US authorities of scouting targets for the Pakistan-based Islamic militant group, Lashkar-e-Taiba, ahead of the Mumbai attacks in 2008.
“Pune was one of the places reportedly visited by him for allegedly collecting target information for the LeT,” said B. Raman, director, Institute of Topical Studies, in Chennai.
Mr Headley has been detained in the US on accusations of helping to plot the Mumbai attacks, in which a group of 10 terrorists killed 166 people in a commando-style assault on three luxury hotels, a tourist cafe – Leopold’s, a railway station and another Jewish centre.
“It’s the Leopold’s of Pune,” said Charu Shree Roy, a film student at the nearby Film and Television Institute of India in Pune, referring to the German Bakery. “A lot of Osho people go there.”
No one has claimed responsibility for the Pune attack, police said.
“There was an abandoned bag which seems to have contained some IED [improvised explosive device],” senior police official Rajendra Sonawane told reporters.
The explosion at German Bakery occurred in the evening, when the restaurant was packed with tourists and foreigners. ”Four women foreigners were killed. Their nationality is not known.” Dilip Band, a senior police official, told India’s CNN-IBN television.
Debris was strewn around the bakery. The impact of the blast knocked the bakery’s sign off, blew out windows and left a large crater inside the restaurant.
”It [the bomb] was under one of the tables ... We transferred lots of people to the ambulances ... there is no German bakery any more,” one foreigner, short of breath and resting against a wall, told local CNN-IBN television.
Indian television reports said between one and four foreigners were among the dead in the blast, which rocked the German Bakery, a cafe popular with tourists staying at the nearby Osho ashram, one of India’s most famous communes, which hosts followers of the teachings of the late Osho Rajneesh, a spiritual guru.
EDITOR’S CHOICE
In depth: India - Jul-12
Mumbai plotter ‘could be an Indian’ - Feb-04
The explosion comes only a day after India and Pakistan agreed to resume high-level peace talks on February 25, which have been suspended since the Mumbai terrorist attacks.
“I was sitting in my living room when a strong blast shattered my windows,” said Niharika Arora, who lives across from the German Bakery, where the bomb was planted. “It is clearly an attack as the bakery is in a strategic spot close to Osho ashram.”
The bakery is also close to Pune’s Chabad House Jewish prayer and community centre.
Osho was one of the potential targets allegedly surveyed by David Coleman Headley, an American accused by US authorities of scouting targets for the Pakistan-based Islamic militant group, Lashkar-e-Taiba, ahead of the Mumbai attacks in 2008.
“Pune was one of the places reportedly visited by him for allegedly collecting target information for the LeT,” said B. Raman, director, Institute of Topical Studies, in Chennai.
Mr Headley has been detained in the US on accusations of helping to plot the Mumbai attacks, in which a group of 10 terrorists killed 166 people in a commando-style assault on three luxury hotels, a tourist cafe – Leopold’s, a railway station and another Jewish centre.
“It’s the Leopold’s of Pune,” said Charu Shree Roy, a film student at the nearby Film and Television Institute of India in Pune, referring to the German Bakery. “A lot of Osho people go there.”
No one has claimed responsibility for the Pune attack, police said.
“There was an abandoned bag which seems to have contained some IED [improvised explosive device],” senior police official Rajendra Sonawane told reporters.
The explosion at German Bakery occurred in the evening, when the restaurant was packed with tourists and foreigners. ”Four women foreigners were killed. Their nationality is not known.” Dilip Band, a senior police official, told India’s CNN-IBN television.
Debris was strewn around the bakery. The impact of the blast knocked the bakery’s sign off, blew out windows and left a large crater inside the restaurant.
”It [the bomb] was under one of the tables ... We transferred lots of people to the ambulances ... there is no German bakery any more,” one foreigner, short of breath and resting against a wall, told local CNN-IBN television.
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