PALM BEACH, Fla. — For the companies that promise relief to Americans confronting swelling credit card balances, these are days of lucrative opportunity.
So lucrative, that an industry trade association, the United States Organizations for Bankruptcy Alternatives, recently convened here, in the oceanfront confines of the Four Seasons Resort, to forge deals and plot strategy.
At a well-lubricated evening reception, a steel drum band played Bob Marley songs as hostesses in skimpy dresses draped leis around the necks of arriving entrepreneurs, some with deep tans.
The debt settlement industry can afford some extravagance. The long recession has delivered an abundance of customers — debt-saturated Americans, suffering lost jobs and income, sliding toward bankruptcy. The settlement companies typically harvest fees reaching 15 to 20 percent of the credit card balances carried by their customers, and they tend to collect upfront, regardless of whether a customer’s debt is actually reduced.
State attorneys general from New York to California and consumer watchdogs like the Better Business Bureau say the industry’s proceeds come at the direct expense of financially troubled Americans who are being fleeced of their last dollars with dubious promises.
Consumers rarely emerge from debt settlement programs with their credit card balances eliminated, these critics say, and many wind up worse off, with severely damaged credit, ceaseless threats from collection agents and lawsuits from creditors.
In the Kansas City area, Linda Robertson, 58, rues the day she bought the pitch from a debt settlement company advertising on the radio, promising to spare her from bankruptcy and eliminate her debts. She wound up sending nearly $4,000 into a special account established under the company’s guidance before a credit card company sued her, prompting her to drop out of the program.
By then, her account had only $1,470 remaining: The debt settlement company had collected the rest in fees. She is now filing for bankruptcy.
“They take advantage of vulnerable people,” she said. “When you’re desperate and you’re trying to get out of debt, they take advantage of you.” Debt settlement has swollen to some 2,000 firms, from a niche of perhaps a dozen companies a decade ago, according to trade associations and the Federal Trade Commission, which is completing new rules aimed at curbing abuses within the industry.
Last year, within the industry’s two leading trade associations — the United States Organizations for Bankruptcy Alternatives and the Association of Settlement Companies — some 250 companies collectively had more than 425,000 customers, who had enrolled roughly $11.7 billion in credit card balances in their programs.
As the industry has grown, so have allegations of unfair practices. Since 2004, at least 21 states have brought at least 128 enforcement actions against debt relief companies, according to the National Association of Attorneys General. Consumer complaints received by states more than doubled between 2007 and 2009, according to comments filed with the Federal Trade Commission.
“The industry’s not legitimate,” said Norman Googel, assistant attorney general in West Virginia, which has prosecuted debt settlement companies. “They’re targeting a group of people who are already drowning in debt. We’re talking about middle-class and lower middle-class people who had incomes, but they were using credit cards to survive.”
The industry counters that a few rogue operators have unfairly tarnished the reputations of well-intentioned debt settlement companies that provide a crucial service: liberating Americans from impossible credit card burdens.
With the unemployment rate near double digits and 6.7 million people out of work for six months or longer, many have relied on credit cards. By the middle of last year, 6.5 percent of all accounts were at least 30 days past due, up from less than 4 percent in 2005, according to Moody’s Economy.com.
Yet a 2005 alteration spurred by the financial industry made it harder for Americans to discharge credit card debts through bankruptcy, generating demand for alternatives like debt settlement.
The Arrangement
The industry casts itself as a victim of a smear campaign orchestrated by the giant banks that dominate the credit card trade and aim to hang on to the spoils: interest rates of 20 percent or more and exorbitant late fees.
“We’re the little guys in this,” said John Ansbach, the chief lobbyist for the United States Organizations for Bankruptcy Alternatives, better known as Usoba (pronounced you-SO-buh). “We exist to advocate for consumers. Two and a half billion dollars of unsecured debt has been settled by this industry, so how can you take the position that it has no value?”
But consumer watchdogs and state authorities argue that debt settlement companies generally fail to deliver.
In the typical arrangement, the companies direct consumers to set up special accounts and stock them with monthly deposits while skipping their credit card payments. Once balances reach sufficient size, negotiators strike lump-sum settlements with credit card companies that can cut debts in half. The programs generally last two to three years.
Friday, June 18, 2010
Japan Bonds Rise on Kan’s Debt Reduction Plan, Global Slowdown
June 19 (Bloomberg) -- Japan’s 10-year bonds completed a second weekly gain after Prime Minister Naoto Kan vowed to reduce the world’s largest public debt and said he will consider increasing the consumption tax.
Benchmark bonds rose for a second day yesterday before reports next week economists said will show German business confidence declined and U.S. new home sales dropped, signaling the global economic recovery is losing momentum. Ten-year yields fell to the lowest in a week as credit-default swaps for Japanese government bonds dropped for a second week.
“The fiscal consolidation plan helped soothe the anxiety about swelling debt,” said Yuichi Kodama, chief economist in Tokyo at Meiji Yasuda Life Insurance Co., Japan’s third-largest life insurer. “Kan’s stance marked a clear contrast to his predecessor who pushed for a big spending policy.”
The yield on the 10-year bond dropped three basis points this week to 1.20 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1.3 percent security due June 2020 rose 0.269 yen to 100.892 yen. The yield dropped to 1.195 percent yesterday, the lowest since June 10.
Ten-year bond futures for September delivery climbed 0.27 this week to 140.61 on the Tokyo Stock Exchange.
‘Rehabilitate’ Finances
“Unless we work on fiscal rehabilitation, an international organization such as the International Monetary Fund could control our fiscal management,” Kan said on June 17. “We must rehabilitate our finances with our own power without relying on other countries.”
The prime minister said he would consider the opposition Liberal Democratic Party’s proposal to raise the consumption tax to 10 percent. The earliest Japan could increase the tax would be the fall of 2012, DPJ Policy Chief Koichiro Genba said on June 17.
“If a tax increase was implemented before Japan can regain the economic strength to achieve autonomous recovery, it would pose serious risks to the economy,” said Seiji Shiraishi, chief economist for Japan at HSBC Holdings Plc. in Tokyo. “The tax plan will support the debt market not only from a viewpoint of supply and demand conditions but also from the economic fundamentals perspective.”
Japan’s government also pledged to cut taxes on businesses and nurture the environment and health care industries as part of plans to defeat deflation and end two decades of stagnation.
Corporate Tax Cut
The government pledged in its medium-term economic plan yesterday to bring the corporate tax rate down to a level “commensurate” with other leading nations. That rate is “about 25 percent,” Yosuke Kondo, parliamentary secretary for the Trade Ministry, said. Firms in Tokyo pay a levy, including local taxes, of 40.7 percent.
Japan’s bonds also rose on speculation Europe’s lingering debt crisis is slowing the global recovery, boosting demand for the safety of debt.
The Ifo institute’s German business climate index fell to 101.1 in June from 101.5 the previous month, according to a Bloomberg survey before the June 22 report. Purchases of new U.S. homes slid 14.6 percent in May, according to a separate survey before a June 23 release.
“The slew of economic data is beginning to show signs of a slowdown, weighing on risk sentiment,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest banking group. “Bonds may continue to fare well.”
The cost to protect Japanese government debt from default fell six basis points this week to 89.775, according to prices from CMA DataVision.
‘Risk Premium’
“The risk premium investors demand to hold Japanese debt is likely to decline” on news of the government’s financial plans, said Kazuhiko Sano, chief strategist in Tokyo at Citigroup Global Markets Japan Inc., a unit of New York-based Citigroup Inc. “The market had not prepared for an early increase in the consumption-tax rate.”
Credit-default swap indexes are benchmarks for protecting debt against default and traders use them to speculate on credit quality. An increase suggests deteriorating perceptions of creditworthiness and a drop shows improvement.
Benchmark bonds rose for a second day yesterday before reports next week economists said will show German business confidence declined and U.S. new home sales dropped, signaling the global economic recovery is losing momentum. Ten-year yields fell to the lowest in a week as credit-default swaps for Japanese government bonds dropped for a second week.
“The fiscal consolidation plan helped soothe the anxiety about swelling debt,” said Yuichi Kodama, chief economist in Tokyo at Meiji Yasuda Life Insurance Co., Japan’s third-largest life insurer. “Kan’s stance marked a clear contrast to his predecessor who pushed for a big spending policy.”
The yield on the 10-year bond dropped three basis points this week to 1.20 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1.3 percent security due June 2020 rose 0.269 yen to 100.892 yen. The yield dropped to 1.195 percent yesterday, the lowest since June 10.
Ten-year bond futures for September delivery climbed 0.27 this week to 140.61 on the Tokyo Stock Exchange.
‘Rehabilitate’ Finances
“Unless we work on fiscal rehabilitation, an international organization such as the International Monetary Fund could control our fiscal management,” Kan said on June 17. “We must rehabilitate our finances with our own power without relying on other countries.”
The prime minister said he would consider the opposition Liberal Democratic Party’s proposal to raise the consumption tax to 10 percent. The earliest Japan could increase the tax would be the fall of 2012, DPJ Policy Chief Koichiro Genba said on June 17.
“If a tax increase was implemented before Japan can regain the economic strength to achieve autonomous recovery, it would pose serious risks to the economy,” said Seiji Shiraishi, chief economist for Japan at HSBC Holdings Plc. in Tokyo. “The tax plan will support the debt market not only from a viewpoint of supply and demand conditions but also from the economic fundamentals perspective.”
Japan’s government also pledged to cut taxes on businesses and nurture the environment and health care industries as part of plans to defeat deflation and end two decades of stagnation.
Corporate Tax Cut
The government pledged in its medium-term economic plan yesterday to bring the corporate tax rate down to a level “commensurate” with other leading nations. That rate is “about 25 percent,” Yosuke Kondo, parliamentary secretary for the Trade Ministry, said. Firms in Tokyo pay a levy, including local taxes, of 40.7 percent.
Japan’s bonds also rose on speculation Europe’s lingering debt crisis is slowing the global recovery, boosting demand for the safety of debt.
The Ifo institute’s German business climate index fell to 101.1 in June from 101.5 the previous month, according to a Bloomberg survey before the June 22 report. Purchases of new U.S. homes slid 14.6 percent in May, according to a separate survey before a June 23 release.
“The slew of economic data is beginning to show signs of a slowdown, weighing on risk sentiment,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest banking group. “Bonds may continue to fare well.”
The cost to protect Japanese government debt from default fell six basis points this week to 89.775, according to prices from CMA DataVision.
‘Risk Premium’
“The risk premium investors demand to hold Japanese debt is likely to decline” on news of the government’s financial plans, said Kazuhiko Sano, chief strategist in Tokyo at Citigroup Global Markets Japan Inc., a unit of New York-based Citigroup Inc. “The market had not prepared for an early increase in the consumption-tax rate.”
Credit-default swap indexes are benchmarks for protecting debt against default and traders use them to speculate on credit quality. An increase suggests deteriorating perceptions of creditworthiness and a drop shows improvement.
Thursday, June 17, 2010
HDFC Asset Dealer Barred by India Regulator for Illicit Trades
June 18 (Bloomberg) -- India’s market regulator said it banned a dealer at HDFC Asset Management Co. for so-called front running that led to estimated losses of 23.8 million rupees ($513,928) at the country’s second-biggest money manager.
Nilesh Kapadia, an assistant vice president at the Mumbai- based fund, has been barred from trading after findings showed 38 cases where Kapadia and his accomplices placed orders before the fund, leading to “illegitimate” gains of 19.9 million rupees, the Securities & Exchange Board of India said in a statement on its website.
Kapadia, an employee with HDFC Asset since June 2000, was tipping off his friend Rajiv Ramniklal Sanghvi before placing the orders for the fund. Chandrakant P. Mehta and his daughter- in-law Dipti Paras Mehta, in turn, traded on the tips received from Kapadia and Sanghvi, the regulator said.
Milind Barve, managing director at HDFC Asset Management, didn’t immediately respond to an e-mailed query on the order. The fund had about 1 trillion rupees in shares and bonds on May 31.
The regulator said trading and telephone records provided evidence of front running, a practice in which a trader executes orders for his own account, taking advantage of prior knowledge of a transaction expected to influence the price of a security.
The regulator ordered Kapadia and HDFC Asset to jointly deposit the estimated losses to the trustees of the mutual fund. Sanghvi and the Mehtas have been given 15 days to deposit the gains with the National Stock Exchange, which will hold the amount in an escrow account, according to the statement.
HDFC Asset has been told to probe Kapadia’s transactions and submit a report within six months, the regulator said.
Stocks that were front run include Reliance Industries Ltd., India’s most valuable company, State Bank of India, the nation’s largest lender, and Bharti Airtel Ltd., the biggest mobile-phone service provider, the regulator said.
The Securities & Exchange Board in May 2009 barred a fund manager at Passport Capital LCC, a San Fransico-based hedge fund for tipping off two people in advance of his trades.
Nilesh Kapadia, an assistant vice president at the Mumbai- based fund, has been barred from trading after findings showed 38 cases where Kapadia and his accomplices placed orders before the fund, leading to “illegitimate” gains of 19.9 million rupees, the Securities & Exchange Board of India said in a statement on its website.
Kapadia, an employee with HDFC Asset since June 2000, was tipping off his friend Rajiv Ramniklal Sanghvi before placing the orders for the fund. Chandrakant P. Mehta and his daughter- in-law Dipti Paras Mehta, in turn, traded on the tips received from Kapadia and Sanghvi, the regulator said.
Milind Barve, managing director at HDFC Asset Management, didn’t immediately respond to an e-mailed query on the order. The fund had about 1 trillion rupees in shares and bonds on May 31.
The regulator said trading and telephone records provided evidence of front running, a practice in which a trader executes orders for his own account, taking advantage of prior knowledge of a transaction expected to influence the price of a security.
The regulator ordered Kapadia and HDFC Asset to jointly deposit the estimated losses to the trustees of the mutual fund. Sanghvi and the Mehtas have been given 15 days to deposit the gains with the National Stock Exchange, which will hold the amount in an escrow account, according to the statement.
HDFC Asset has been told to probe Kapadia’s transactions and submit a report within six months, the regulator said.
Stocks that were front run include Reliance Industries Ltd., India’s most valuable company, State Bank of India, the nation’s largest lender, and Bharti Airtel Ltd., the biggest mobile-phone service provider, the regulator said.
The Securities & Exchange Board in May 2009 barred a fund manager at Passport Capital LCC, a San Fransico-based hedge fund for tipping off two people in advance of his trades.
Mukesh Ambani May Unveil Reliance Expansion, End Feud With Anil
June 18 (Bloomberg) -- Billionaire Mukesh Ambani may unveil plans to invest in power and communications in India amid speculation that Asia’s richest man is also likely to formally end a five-year-old feud with his younger brother.
Anil Ambani may attend the annual shareholder meeting of Reliance Industries Ltd., controlled by Mukesh, for the first time since the world’s wealthiest brothers split the empire founded by their father, the Hindustan Times reported yesterday, citing an unidentified person close to the family.
The shareholder meeting takes place in Mumbai today, exactly five years to the day the Ambanis split India’s second- biggest group and squabbled as their business interests clashed. Indian newspapers have speculated about a rapprochement since the brothers scrapped a non-competition accord last month, removing curbs on investments by their companies.
A reconciliation would be “a positive signal for all shareholders,” said Walter Rossini, who helps manage about $1.2 billion of emerging market stocks, including Reliance Industries shares, at Aletti Gestielle Sgr Spa in Milan. “They realize that together they are much more effective and can grab a much larger share of the cake,” he said by telephone yesterday.
Last week the brothers and their families holidayed in South Africa’s Kruger National Park, where Mukesh and Anil discussed ways to develop synergies between their businesses, Press Trust of India reported June 13, citing unidentified persons familiar with the details.
Manoj Warrier, a spokesman for Reliance Industries, declined to comment on the reports and Anil Ambani didn’t respond to an e-mail seeking comments.
Accord Scrapped
Reliance, which accounts for about 14 percent of the benchmark stock index, rose 1.3 percent to 1,071.40 rupees in Mumbai yesterday. The stock has lagged behind the Sensex in four of the 10 years ended June 15, according to Bloomberg data.
Reliance on June 11, less than a month after the accord between the brothers was scrapped, acquired an Internet services company for $1 billion. Anil’s Reliance Communications Ltd. said it dropped out of the bidding for Internet services permits after securing third-generation mobile-phone licenses in an earlier auction.
Fund manager Deven Choksey, chief executive officer of Mumbai-based KR Choksey Shares & Securities, said more initiatives may be outlined by Mukesh in his annual speech to shareholders today.
Under an agreement reached on June 18, 2005, Mukesh, 53, kept the petrochemicals, oil and gas units and Anil, 51, got the power, telecommunications, financial services and entertainment units.
‘Two Giants’
The removal of the non-competition pact may translate into “these two giants effectively beginning to collaborate,” said Rajeev Kohli, professor of marketing at Columbia Business School in New York. “Given the needs of the country at present, there is a great opportunity if it’s in the right sectors of the economy,” such as infrastructure development or energy, he said by telephone.
The Mumbai-based company’s first foray in commercial electricity generation may come as early as next month when Reliance plans to bid in a government auction to build at least one power plant in India, two company officials said on June 16.
The operator of the world’s biggest refining complex and India’s largest natural gas field had outstanding debt of about 625 billion rupees ($13.4 billion) and cash and equivalents of 218.7 billion rupees as of March 31, the company said in April. Reliance is in talks with banks to borrow $1 billion, two people with direct knowledge of the matter said June 4.
Even as Mukesh Ambani diversifies his business, investors expect Reliance to continue to buy oil and gas assets overseas and fulfill its ambition of becoming a global energy company.
Acquisitions
The company bought shale gas assets in the U.S. from Atlas Energy Inc. for $1.7 billion in April after failing to purchase LyondellBasell Industries AF in a deal that would have valued the bankrupt chemicals maker at $14.5 billion, and losing a bid for oil sands assets in Canada owned by Value Creations Inc.
Reliance is considering buying a stake in shale gas assets owned by Pioneer Natural Resources Co. in the U.S., two people with knowledge of the matter said June 10.
“They can become a significant global player and there is nothing to hold them back,” said Seth Freeman, chief executive officer at San Francisco-based EM Capital Management LLC, which owns Reliance shares. “They have the financial wherewithal to do that and energy would be the way they expand overseas.”
Anil Ambani may attend the annual shareholder meeting of Reliance Industries Ltd., controlled by Mukesh, for the first time since the world’s wealthiest brothers split the empire founded by their father, the Hindustan Times reported yesterday, citing an unidentified person close to the family.
The shareholder meeting takes place in Mumbai today, exactly five years to the day the Ambanis split India’s second- biggest group and squabbled as their business interests clashed. Indian newspapers have speculated about a rapprochement since the brothers scrapped a non-competition accord last month, removing curbs on investments by their companies.
A reconciliation would be “a positive signal for all shareholders,” said Walter Rossini, who helps manage about $1.2 billion of emerging market stocks, including Reliance Industries shares, at Aletti Gestielle Sgr Spa in Milan. “They realize that together they are much more effective and can grab a much larger share of the cake,” he said by telephone yesterday.
Last week the brothers and their families holidayed in South Africa’s Kruger National Park, where Mukesh and Anil discussed ways to develop synergies between their businesses, Press Trust of India reported June 13, citing unidentified persons familiar with the details.
Manoj Warrier, a spokesman for Reliance Industries, declined to comment on the reports and Anil Ambani didn’t respond to an e-mail seeking comments.
Accord Scrapped
Reliance, which accounts for about 14 percent of the benchmark stock index, rose 1.3 percent to 1,071.40 rupees in Mumbai yesterday. The stock has lagged behind the Sensex in four of the 10 years ended June 15, according to Bloomberg data.
Reliance on June 11, less than a month after the accord between the brothers was scrapped, acquired an Internet services company for $1 billion. Anil’s Reliance Communications Ltd. said it dropped out of the bidding for Internet services permits after securing third-generation mobile-phone licenses in an earlier auction.
Fund manager Deven Choksey, chief executive officer of Mumbai-based KR Choksey Shares & Securities, said more initiatives may be outlined by Mukesh in his annual speech to shareholders today.
Under an agreement reached on June 18, 2005, Mukesh, 53, kept the petrochemicals, oil and gas units and Anil, 51, got the power, telecommunications, financial services and entertainment units.
‘Two Giants’
The removal of the non-competition pact may translate into “these two giants effectively beginning to collaborate,” said Rajeev Kohli, professor of marketing at Columbia Business School in New York. “Given the needs of the country at present, there is a great opportunity if it’s in the right sectors of the economy,” such as infrastructure development or energy, he said by telephone.
The Mumbai-based company’s first foray in commercial electricity generation may come as early as next month when Reliance plans to bid in a government auction to build at least one power plant in India, two company officials said on June 16.
The operator of the world’s biggest refining complex and India’s largest natural gas field had outstanding debt of about 625 billion rupees ($13.4 billion) and cash and equivalents of 218.7 billion rupees as of March 31, the company said in April. Reliance is in talks with banks to borrow $1 billion, two people with direct knowledge of the matter said June 4.
Even as Mukesh Ambani diversifies his business, investors expect Reliance to continue to buy oil and gas assets overseas and fulfill its ambition of becoming a global energy company.
Acquisitions
The company bought shale gas assets in the U.S. from Atlas Energy Inc. for $1.7 billion in April after failing to purchase LyondellBasell Industries AF in a deal that would have valued the bankrupt chemicals maker at $14.5 billion, and losing a bid for oil sands assets in Canada owned by Value Creations Inc.
Reliance is considering buying a stake in shale gas assets owned by Pioneer Natural Resources Co. in the U.S., two people with knowledge of the matter said June 10.
“They can become a significant global player and there is nothing to hold them back,” said Seth Freeman, chief executive officer at San Francisco-based EM Capital Management LLC, which owns Reliance shares. “They have the financial wherewithal to do that and energy would be the way they expand overseas.”
Drilling Moratorium Means Hard Times for Gulf Rig Workers
In addition to the fishermen and hoteliers whose livelihoods have been devastated by BP’s hemorrhaging undersea oil well, another group of Gulf Coast residents is beginning to suffer: the tens of thousands of workers like Ronald Brown who run the equipment or serve in support roles on deepwater oil rigs in the Gulf of Mexico.
He works aboard the Ocean Monarch, which was idled along with 32 other oil rigs when the Obama administration ordered a six-month moratorium on all deepwater drilling after the April 20 Deepwater Horizon disaster. The rig’s owner is now seeking customers in other parts of the world. If the rig moves, Mr. Brown and his fellow motormen, roughnecks and roustabouts will be left behind, jobless, with few alternatives that would pay anything close to the $3,500 to $4,000 a month typical for such jobs.
On Wednesday, President Obama and BP announced that the company had voluntarily agreed to create a $100 million fund to compensate such rig workers. That’s a modest sum, critics say, given the potential economic losses. Each rig job supports roughly four additional jobs for cooks, supply-ship operators and others servicing the industry. Together, they represent total monthly wages of at least $165 million, according to estimates by a Louisiana oil industry group.
Still, Mr. Brown is grateful for any assistance. “Every little bit is going to help until we figure out where else to go,” he said. “But I’m not looking forward to unemployment, and I don’t know how quickly we’ll be able to get some of it.”
In an address to the nation Tuesday night, Mr. Obama apologized for the effect on oil workers who had nothing to do with the BP accident. “I know this creates difficulty for the people who work on these rigs,” he said. “But for the sake of their safety, and for the sake of the entire region, we need to know the facts before we allow deepwater drilling to continue.”
The full economic impact of the drilling moratorium is still unclear, since many of the layoffs are just beginning and no one knows how long the ban will last.
The Louisiana Mid-Continent Oil and Gas Association has warned that many of the affected rigs will seek to drill in other countries, imperiling roughly 800 to 1,400 jobs per rig, including third-party support personnel.
The securities firm Raymond James & Associates predicts that the moratorium could last well into 2011, directly jeopardizing 50,000 jobs and potentially gutting blue-collar communities that rely heavily on the economic activity that comes with deepwater work. “Just as the demise of auto plants and steel mills in the Upper Midwest devastated entire towns, an extended drilling ban could eventually have a similar effect in the Gulf Coast,” the company said in a report Monday.
Lawrence R. Dickerson, the chief executive of Diamond Offshore Drilling, which owns the Ocean Monarch and five other deepwater rigs in the gulf, was less pessimistic, suggesting that 15,000 to 20,000 rig and associated service jobs were at risk. He predicted that some deepwater rigs would remain in the area awaiting a resumption of drilling, but that all would be forced to cut staff as the moratorium continued.
Three Diamond rigs are already prospecting for jobs in the Mediterranean and West Africa. Should they leave, they would take less than half of their crew with them, Mr. Dickerson said.
The halt in drilling in waters deeper than 500 feet came in response to the still-unchecked gusher of oil that followed the Deepwater Horizon explosion, which killed 11 workers. The goal was to give the government time to review the rules and oversight of such wells, and the shutdown was welcomed by many Americans who have watched the environmental disaster unfold.
But like fishing and tourism, deepwater drilling is also crucial to the Gulf economy.
At a Congressional hearing last week, Senator Mary Landrieu, a Democrat from Louisiana, confronted Interior Secretary Ken Salazar with a list of local companies that serviced and depended on offshore energy development. She said that a temporary drill ban, even if it only lasted a few months, could affect as many as 330,000 people in Louisiana alone. That would “potentially wreak economic havoc on this region that exceeds the havoc wreaked by the spill itself,” she said.
Until two weeks ago, the Ocean Monarch — a mammoth, $300 million semi-submersible not unlike the Deepwater Horizon owned by Transocean — was poised to drill a well in 4,000 feet of water at a spot more than 100 miles offshore. About 115 workers from a variety of companies were onboard.
After the moratorium, Cobalt International Energy, the company that had hired the Monarch and spent $60 million preparing to drill the well, said it was looking to dissolve the contract.
Those negotiations continue, but when two New York Times reporters visited the rig last week, it was squatting in just 50 feet of water 27 miles off the coast of Louisiana. On the deck, 75-foot segments of riser pipe were stacked in tidy rows two stories high, and the rig’s manifest listed just 77 crew members aboard.
At a meeting with the crew, Mr. Dickerson talked about the uncertain future. “You know, if we can’t go back to work for a minimum six months or longer, it’s awfully hard to leave rigs sitting here,” he said.
Once a rig moves, it tends to stay put, fulfilling multiyear contracts. Lower-level jobs are normally filled using the host country’s work force.
After the meeting with Mr. Dickerson, a handful of rig workers — burly men in oil-stained T-shirts and overalls — shared their gnawing fear that the jobs that paid their modest mortgages, doctor bills and children’s tuitions were about to disappear.
Louis Alvarez, a motorman and 21-year veteran with Diamond Offshore, said that a layoff could hinder plans that he and his wife had made to send their son to college in the fall. “It’s a shame that I have to tell my 18-year-old son that he might have to help his daddy buy groceries,” he said.
Mr. Brown, the shakerhand, began to cry when he said that his wife, Athena, was now looking for a job.
A broad-shouldered, broad-faced man, Mr. Brown, 29, is paid roughly $22 an hour to work the rig’s standard two-week-on, two-week-off cycle, supplemented by occasional overtime. That’s enough to support Athena and their three children: 5-year-old Shiloh, 3-year-old Maelah, and 1-year-old Bennett, who wears a brace to help correct club feet.
The job prospects around their home in Magee, Miss., a dilapidated town of about 4,000, are few. Tyson Foods and Polk’s Meat Products have plants in the area, but would be unlikely to match a rig worker’s paycheck.
In an interview at their home, Mrs. Brown said that someday, the country might find a low-cost alternative to oil.
“But we don’t have an option right now,” she said. “For us to stop drilling in the gulf is like ending our lives as far as the way we live. It’s really that scary.”
He works aboard the Ocean Monarch, which was idled along with 32 other oil rigs when the Obama administration ordered a six-month moratorium on all deepwater drilling after the April 20 Deepwater Horizon disaster. The rig’s owner is now seeking customers in other parts of the world. If the rig moves, Mr. Brown and his fellow motormen, roughnecks and roustabouts will be left behind, jobless, with few alternatives that would pay anything close to the $3,500 to $4,000 a month typical for such jobs.
On Wednesday, President Obama and BP announced that the company had voluntarily agreed to create a $100 million fund to compensate such rig workers. That’s a modest sum, critics say, given the potential economic losses. Each rig job supports roughly four additional jobs for cooks, supply-ship operators and others servicing the industry. Together, they represent total monthly wages of at least $165 million, according to estimates by a Louisiana oil industry group.
Still, Mr. Brown is grateful for any assistance. “Every little bit is going to help until we figure out where else to go,” he said. “But I’m not looking forward to unemployment, and I don’t know how quickly we’ll be able to get some of it.”
In an address to the nation Tuesday night, Mr. Obama apologized for the effect on oil workers who had nothing to do with the BP accident. “I know this creates difficulty for the people who work on these rigs,” he said. “But for the sake of their safety, and for the sake of the entire region, we need to know the facts before we allow deepwater drilling to continue.”
The full economic impact of the drilling moratorium is still unclear, since many of the layoffs are just beginning and no one knows how long the ban will last.
The Louisiana Mid-Continent Oil and Gas Association has warned that many of the affected rigs will seek to drill in other countries, imperiling roughly 800 to 1,400 jobs per rig, including third-party support personnel.
The securities firm Raymond James & Associates predicts that the moratorium could last well into 2011, directly jeopardizing 50,000 jobs and potentially gutting blue-collar communities that rely heavily on the economic activity that comes with deepwater work. “Just as the demise of auto plants and steel mills in the Upper Midwest devastated entire towns, an extended drilling ban could eventually have a similar effect in the Gulf Coast,” the company said in a report Monday.
Lawrence R. Dickerson, the chief executive of Diamond Offshore Drilling, which owns the Ocean Monarch and five other deepwater rigs in the gulf, was less pessimistic, suggesting that 15,000 to 20,000 rig and associated service jobs were at risk. He predicted that some deepwater rigs would remain in the area awaiting a resumption of drilling, but that all would be forced to cut staff as the moratorium continued.
Three Diamond rigs are already prospecting for jobs in the Mediterranean and West Africa. Should they leave, they would take less than half of their crew with them, Mr. Dickerson said.
The halt in drilling in waters deeper than 500 feet came in response to the still-unchecked gusher of oil that followed the Deepwater Horizon explosion, which killed 11 workers. The goal was to give the government time to review the rules and oversight of such wells, and the shutdown was welcomed by many Americans who have watched the environmental disaster unfold.
But like fishing and tourism, deepwater drilling is also crucial to the Gulf economy.
At a Congressional hearing last week, Senator Mary Landrieu, a Democrat from Louisiana, confronted Interior Secretary Ken Salazar with a list of local companies that serviced and depended on offshore energy development. She said that a temporary drill ban, even if it only lasted a few months, could affect as many as 330,000 people in Louisiana alone. That would “potentially wreak economic havoc on this region that exceeds the havoc wreaked by the spill itself,” she said.
Until two weeks ago, the Ocean Monarch — a mammoth, $300 million semi-submersible not unlike the Deepwater Horizon owned by Transocean — was poised to drill a well in 4,000 feet of water at a spot more than 100 miles offshore. About 115 workers from a variety of companies were onboard.
After the moratorium, Cobalt International Energy, the company that had hired the Monarch and spent $60 million preparing to drill the well, said it was looking to dissolve the contract.
Those negotiations continue, but when two New York Times reporters visited the rig last week, it was squatting in just 50 feet of water 27 miles off the coast of Louisiana. On the deck, 75-foot segments of riser pipe were stacked in tidy rows two stories high, and the rig’s manifest listed just 77 crew members aboard.
At a meeting with the crew, Mr. Dickerson talked about the uncertain future. “You know, if we can’t go back to work for a minimum six months or longer, it’s awfully hard to leave rigs sitting here,” he said.
Once a rig moves, it tends to stay put, fulfilling multiyear contracts. Lower-level jobs are normally filled using the host country’s work force.
After the meeting with Mr. Dickerson, a handful of rig workers — burly men in oil-stained T-shirts and overalls — shared their gnawing fear that the jobs that paid their modest mortgages, doctor bills and children’s tuitions were about to disappear.
Louis Alvarez, a motorman and 21-year veteran with Diamond Offshore, said that a layoff could hinder plans that he and his wife had made to send their son to college in the fall. “It’s a shame that I have to tell my 18-year-old son that he might have to help his daddy buy groceries,” he said.
Mr. Brown, the shakerhand, began to cry when he said that his wife, Athena, was now looking for a job.
A broad-shouldered, broad-faced man, Mr. Brown, 29, is paid roughly $22 an hour to work the rig’s standard two-week-on, two-week-off cycle, supplemented by occasional overtime. That’s enough to support Athena and their three children: 5-year-old Shiloh, 3-year-old Maelah, and 1-year-old Bennett, who wears a brace to help correct club feet.
The job prospects around their home in Magee, Miss., a dilapidated town of about 4,000, are few. Tyson Foods and Polk’s Meat Products have plants in the area, but would be unlikely to match a rig worker’s paycheck.
In an interview at their home, Mrs. Brown said that someday, the country might find a low-cost alternative to oil.
“But we don’t have an option right now,” she said. “For us to stop drilling in the gulf is like ending our lives as far as the way we live. It’s really that scary.”
Robust earnings spice up Indian stocks
Indian stocks completed their longest string of gains for 10 months on Thursday while Hong Kong equities enjoyed their best winning streak for more than a year on hopes that Asian markets may have found support after May’s heavy sell-off.
But renewed sovereign debt fears among the European peripheral nations limited gains across the region with the FTSE Asia-Pacific inching forward just 0.01 per cent to 221.59.
“We’re much happier over here in Asia, but we don’t live in our own world,” said Nicholas Yeo of Aberdeen Asset Management. “What happens in the west will affect Asia.”
Robust earnings expectations drove Mumbai’s BSE Sensex 0.9 per cent higher to 17,616.69, its highest close since the end of April and its seventh successive session of gains.
“The market will remain very volatile but India is doing well,” said DK Aggarwal of SMC Wealth Management Services. “Investors are buying selectively.”
Reliance Communications, India’s second-largest wireless carrier, added 2.4 per cent to Rs191.70 – its highest level for eight months – on reports that it is considering raising up to $500m by selling as much as 26 per cent of its Reliance Globalcom unit, which owns an undersea cable system.
Oil & Natural Gas, India’s largest state-owned oil explorer, gained 1.9 per cent to Rs1,186.05 after it was rated a “buy” by Deutsche Bank with a price target of Rs1,300.
Ramsarup Industries, a maker of steel wire, surged 11 per cent to Rs81, on a report that ArcelorMittal, the world’s largest steel company, may buy a stake.
A rapidly expanding economy boosted the outlook for industrial bellwethers Larsen & Toubro, the nation’s biggest engineering company, and Reliance Industries, the energy major that has the biggest weighting on the Sensex.
Larsen rallied 3.3 per cent to Rs1,777, its biggest one-day rise in a month, while Reliance gained 1.3 per cent to Rs1,071.40 ahead of its annual meeting on Friday.
Hong Kong matched Mumbai in recording its seventh successive session of gains, as the Hang Seng index climbed 0.4 per cent to 20,138.40.
Standard Chartered surged 4.1 per cent to HK$194.60 as the UK lender that earns at least three-quarters of its profit in Asia said it would form a partnership with the Agricultural Bank of China – poised for the world’s biggest flotation – to work together in retail and wholesale banking.
Strong manufacturing data out of the US boosted stocks with significant stateside interests. Li & Fung, a trading company that generates two-thirds of its sales in the US, increased 4.4 per cent to HK$ 38.15.
CNOOC, China’s biggest offshore oil explorer, gained 2.3 per cent to HK$13.42 after an HSBC upgrade.
The index of China stocks listed in Hong Kong, or H shares, rose 0.3 per cent to 11,592.22, but the leading mainland index gave up early gains after failing to breach a psychological barrier at 2,600 points that has capped the market since the big sell-off last month.
The Shanghai Composite ended the session 0.4 per cent lower at 2,560.20, retreating from a high of 2,595.5 in early trading.
The biggest gainer among Asia’s stock markets was Indonesia, with the Jakarta Composite rising 1.1 per cent to 2,891.10 as optimism over the region’s growth buoyed shares.
But Tokyo stocks slid for the first time in six days, falling 0.7 per cent to 9,999.40 – the Nikkei 225 Average slipping below the 10,000 mark that has acted as both a support and resistance level over the past year.
But renewed sovereign debt fears among the European peripheral nations limited gains across the region with the FTSE Asia-Pacific inching forward just 0.01 per cent to 221.59.
“We’re much happier over here in Asia, but we don’t live in our own world,” said Nicholas Yeo of Aberdeen Asset Management. “What happens in the west will affect Asia.”
Robust earnings expectations drove Mumbai’s BSE Sensex 0.9 per cent higher to 17,616.69, its highest close since the end of April and its seventh successive session of gains.
“The market will remain very volatile but India is doing well,” said DK Aggarwal of SMC Wealth Management Services. “Investors are buying selectively.”
Reliance Communications, India’s second-largest wireless carrier, added 2.4 per cent to Rs191.70 – its highest level for eight months – on reports that it is considering raising up to $500m by selling as much as 26 per cent of its Reliance Globalcom unit, which owns an undersea cable system.
Oil & Natural Gas, India’s largest state-owned oil explorer, gained 1.9 per cent to Rs1,186.05 after it was rated a “buy” by Deutsche Bank with a price target of Rs1,300.
Ramsarup Industries, a maker of steel wire, surged 11 per cent to Rs81, on a report that ArcelorMittal, the world’s largest steel company, may buy a stake.
A rapidly expanding economy boosted the outlook for industrial bellwethers Larsen & Toubro, the nation’s biggest engineering company, and Reliance Industries, the energy major that has the biggest weighting on the Sensex.
Larsen rallied 3.3 per cent to Rs1,777, its biggest one-day rise in a month, while Reliance gained 1.3 per cent to Rs1,071.40 ahead of its annual meeting on Friday.
Hong Kong matched Mumbai in recording its seventh successive session of gains, as the Hang Seng index climbed 0.4 per cent to 20,138.40.
Standard Chartered surged 4.1 per cent to HK$194.60 as the UK lender that earns at least three-quarters of its profit in Asia said it would form a partnership with the Agricultural Bank of China – poised for the world’s biggest flotation – to work together in retail and wholesale banking.
Strong manufacturing data out of the US boosted stocks with significant stateside interests. Li & Fung, a trading company that generates two-thirds of its sales in the US, increased 4.4 per cent to HK$ 38.15.
CNOOC, China’s biggest offshore oil explorer, gained 2.3 per cent to HK$13.42 after an HSBC upgrade.
The index of China stocks listed in Hong Kong, or H shares, rose 0.3 per cent to 11,592.22, but the leading mainland index gave up early gains after failing to breach a psychological barrier at 2,600 points that has capped the market since the big sell-off last month.
The Shanghai Composite ended the session 0.4 per cent lower at 2,560.20, retreating from a high of 2,595.5 in early trading.
The biggest gainer among Asia’s stock markets was Indonesia, with the Jakarta Composite rising 1.1 per cent to 2,891.10 as optimism over the region’s growth buoyed shares.
But Tokyo stocks slid for the first time in six days, falling 0.7 per cent to 9,999.40 – the Nikkei 225 Average slipping below the 10,000 mark that has acted as both a support and resistance level over the past year.
Wednesday, June 16, 2010
India to Buy Back $2.1 Billion of Debt Tomorrow to Boost Cash
June 17 (Bloomberg) -- India will buy back 100 billion rupees ($2.1 billion) of government securities through an auction tomorrow to boost cash in the financial system.
The government will buy the bonds through a multiple price-based “multi-security” auction, The Reserve Bank of India said in an e-mailed statement yesterday. The auction tomorrow is part of the government’s plan to buy as much as 200 billion rupees of debt in one or more tranches, it said.
Overnight interbank rates climbed to as much as 5.4 percent yesterday from 4.9 percent at the end of May. Banks borrowed an average 375 billion rupees a day from the central bank through its repurchase-auction window this month, indicating a shortage of cash after license-fee payments by phone companies. Last month, they lent a daily average of 328 billion rupees of surplus to the central bank.
“It’s a short-term measure to address a temporary tightening in liquidity and will help infusing confidence among investors,” said Srinivasa Raghavan, head of fixed-income trading in Mumbai at IDBI Gilts. The yield on the benchmark 10- year bond may drop as much as 10 basis points today, he said.
The yield on the 7.80 percent note due May 2020 dropped seven basis points yesterday to 7.59 percent as of the 5:30 p.m. close in Mumbai, according to the central bank’s trading system.
The finance ministry will tomorrow repurchase the 12.25 percent notes maturing in 2010, 11.3 percent securities due 2010 and 6.57 percent debt maturing 2011, it said in the statement.
Cash availability has dropped after the government raised 677.2 billion rupees from last month’s auction of mobile-phone permits prompting the central bank to ease bond reserve requirement rules until July 2.
Wireless License
The central bank said lenders can raise more cash by cutting their debt holdings by as much as 0.5 percentage point below the minimum regulatory requirement of 25 percent of deposits. The Reserve Bank is also holding additional daily money-market auctions to increase the availability of funds.
The government is also raising a combined 385.4 billion rupees from winners of wireless broadband licenses by June 22. Companies may pay up to 350 billion rupees in quarterly tax this week, said Pradeep Madhav, managing director of Mumbai- based Securities Trading Corp. of India last week.
The Reserve Bank, whose next policy meeting is scheduled on July 27, has raised interest rates twice since mid-March, by a quarter-percentage point each time. The reverse-repurchase rate, or the rate at which the central bank absorbs surplus cash, is 3.75 percent, while the repurchase auction rate is 5.25 percent.
The government will buy the bonds through a multiple price-based “multi-security” auction, The Reserve Bank of India said in an e-mailed statement yesterday. The auction tomorrow is part of the government’s plan to buy as much as 200 billion rupees of debt in one or more tranches, it said.
Overnight interbank rates climbed to as much as 5.4 percent yesterday from 4.9 percent at the end of May. Banks borrowed an average 375 billion rupees a day from the central bank through its repurchase-auction window this month, indicating a shortage of cash after license-fee payments by phone companies. Last month, they lent a daily average of 328 billion rupees of surplus to the central bank.
“It’s a short-term measure to address a temporary tightening in liquidity and will help infusing confidence among investors,” said Srinivasa Raghavan, head of fixed-income trading in Mumbai at IDBI Gilts. The yield on the benchmark 10- year bond may drop as much as 10 basis points today, he said.
The yield on the 7.80 percent note due May 2020 dropped seven basis points yesterday to 7.59 percent as of the 5:30 p.m. close in Mumbai, according to the central bank’s trading system.
The finance ministry will tomorrow repurchase the 12.25 percent notes maturing in 2010, 11.3 percent securities due 2010 and 6.57 percent debt maturing 2011, it said in the statement.
Cash availability has dropped after the government raised 677.2 billion rupees from last month’s auction of mobile-phone permits prompting the central bank to ease bond reserve requirement rules until July 2.
Wireless License
The central bank said lenders can raise more cash by cutting their debt holdings by as much as 0.5 percentage point below the minimum regulatory requirement of 25 percent of deposits. The Reserve Bank is also holding additional daily money-market auctions to increase the availability of funds.
The government is also raising a combined 385.4 billion rupees from winners of wireless broadband licenses by June 22. Companies may pay up to 350 billion rupees in quarterly tax this week, said Pradeep Madhav, managing director of Mumbai- based Securities Trading Corp. of India last week.
The Reserve Bank, whose next policy meeting is scheduled on July 27, has raised interest rates twice since mid-March, by a quarter-percentage point each time. The reverse-repurchase rate, or the rate at which the central bank absorbs surplus cash, is 3.75 percent, while the repurchase auction rate is 5.25 percent.
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