Tag Archives: Bankruptcy

New Topic: High Frequency Trading – Splitting The Market?

Last topic started with the question: “Sovereign Debt – Just Take The Punch?” Point being will the best thing for countries in economic distress be to just default, restructure, go bankrupt like any other insolvent company and get over it? Over the summer its pretty clear that the answer is “yes.”

“Case closed.”

econotwist


Not being an expert in anything, just trying to apply some common scene to things, I really can’t see any other way around the problem of rising national debt than to let some of it go. It ought to be possible for a country like Greece to file for chapter 11, or 13, or something, to make a fresh start. If today’s policy is not changed, the EU will have a sovereign debt/GDP ratio of more than 400% by 2050.

440%, to be precis, according to the latest analysis by The International Monetary Fund.

And the IMF adds: “The surge in debt in this scenario, however, does not even take into account the possible negative feedback effects that higher debt could have on interest rates and economic growth.”

Brace yourselves, this is not a pretty picture:

(Download the report here.)

“Decisive action is needed to turn deteriorating public finances around without hampering near-term growth prospects. Markets have recently shown increased concern for fiscal vulnerabilities in advanced countries. Such concerns undermine confidence and threaten the economic recovery,” IMF says.

However, if eventually such “decisive action” will be taken, is still an open end deal.

“It is overly optimistic to assume that this can continue forever. The conflict that opposes bond holders to other government stakeholders is more intense than ever, and their interests are no longer sufficiently well aligned with those of influential political constituencies,” Morgan Stanley analyst Arnaud Marès writes.

And points out: “There exists an alternative to outright default. ‘Financial oppression’ (imposing on creditors real rates of return that are either negative or artificially low) has been used repeatedly in history in similar circumstances.”

Morgan Stanley seem to to have arrived at the same conclusion as myself and many others.

“Ask Not Whether Governments Will Default, but How,” analyst Arnaud Marès states.

So, as far as the MoonTalk is concerned; case closed.

Will the HFT Split The Financial Markets?

Our nest topic is just getting hotter and hotter.

The so-called high frequency trading is starting to dominate the markets to a degree where the super fast computers at Goldman Sachs, Morgan Stanley, Deutsche Bank, and a handful of other supreme actors, are making it impossible for others to participate in the day-to-day trading.

However, it don’t seem right to put the breaks on the technological innovation, does it?

But neither is it fair that some traders get faster access to the markets, and to market sensitive information,  than other investors do.

This financial speed dating is ripping the market apart, many market participants warns.

Well, let’s rip it then…..

Divided Anyway


Why not split the markets in two – one limited part of the tradeable assets made available to for the mega-machines to play with, the other made exclusively  available to traditional investors through the traditional channels?

Some definitions of who belongs where have to be made, and there would have to be a limited room for judgment.

But, when the EU implemented the MIFID-directives a couple of years back, after the first round of financial turmoil, they divided a clear distinction between “professional” and non-professional investors.

You now have to certified as a “professional” investor, with a certain amount of knowledge, in order to trade more sophisticated instruments.

There is already a divided market in terms of intellectual capacity.

The development of trading systems are getting close to the speed of light.

Perhaps there should be a classification in terms of technical capacity, too?

Feel free to post comments and guest posts.

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Filed under Laws and Regulations

Businessman To Declare Hunger Strike If Not Paid

The Estonian businessman, Kaido Peiker, says he is ready to declare a hunger strike in his office to convince his debtors to pay their debts. Peiker owns a garment maker that has 35 employees and a small road carrier.

“My objective is to get confirmation that they will make the payment that we agreed for this week.”

Kaido Peiker


Since debtors did not return his phone calls, Peiker last week decided to make an unannounced visit to the debtors in Tallinn and try to reclaim some of the debts. One debtor says Peiker is somewhat insane since delays in paying debts or leaving debts unpaid has become very common in Estonia, the Estonian newspaper Äripäev writes.

Peiker’s first visit is to Baltika, Estonia’s largest garment maker and retailer. “My objective is to get confirmation that they will make the payment that we agreed for this week,” says Peiker. Afterwards, Peiker says that Baltika honoured its obligations and made the transaction in the same day.

Afterwards, Ülle Järv, finance director of Baltika, said that it was clearly unusually that company owners make personal visits for reclaiming debts.

The next company to visit is Glaskek, one of Estonia’s largest window makers. Peiker says that he was ready to declare a hunger strike while in the office of Glaskek and decided not to leave Glaskek before he has reclaimed his money or got a written agreement from them.

Peiker says that his lawyer recommended such a visit and said that unless the debtor pays up, he should get some board member to sign a written agreement on obligations or threaten them with bankruptcy.

In Glaskek, the secretary asks Peiker to wait since there is a board meeting in progress. The company’s finance director promises him that Glaskek will pay 50% of its debt next day and the remaining 50% next week. This promise is not honoured and it takes several weeks before Glaskek pays about 25% of its debt to Peiker.

When Äripäev asks Peiker whether he really believes that such action will help him collect the debt, Peiker admits that the chances are slim. One debtor of Peiker told Äripäev that Peiker was somewhat insane since delays in paying debts or leaving debts unpaid has become very common in Estonia.

Source: balticbusinessnews.com

Related by the Econotwist:

Baltic Tax Authorities Increase Money Hunt

An Estonian Mystery

The Latvian Solution: Go Blonde!

Swedbank Buy Greek Bonds With Estonian Money

Estonian Company Claims $130mill from SEB

How To Make A Rat Look Like A Puppy

Swedbank In Estonia: “Daylight Robbery”

“SEB Robbed Customers,” Whistleblower Says

Bankrupt Baltic Baker Charged With Million-Dollar Fraud in U.S.

How Sweden sent Estonian economy into free fall



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Filed under National Economic Politics

Norwegian Oil Explorer Files For Bankruptcy

The Norwegian Oil Rig Company Petrojack have Monday filed for bankruptcy according to national laws. The company’s shares was suspended from Oslo Stock Exchange Friday after a weekly gain of almost 100%.

“In spite of the extensive efforts that have been made, it has not been possible to find a solution that can secure the continued operation of the Company or a solvent liquidation.”

Petrojack


The board of directors of Petrojack ASA (“Petrojack” or the “Company”) has resolved to file for bankruptcy proceedings. A bankruptcy petition will be submitted to Oslo District Court before opening of trade on Oslo Børs today, 8 March 20, the company says in a statement.

It’s been know for months that the oil exploration company have been in deep financial trouble.

In spite of the knowledge, the shares of Petrojack rose almost 100 percent last week, until Oslo Stock Exchange suspended the trading friday after another jump of 45 percent.

Petrojacks biggest shareholder is Petrolia Drilling – one of the major supplier of drilling vessels for offshore, deepwater oil and gas exploration and development drilling in the North Sea.

“The Company has in close co-operation with its principal creditors explored the possibilities for restructuring its debt and/or divesting its assets for the benefit of its creditors and shareholders. In spite of the extensive efforts that have been made, it has not been possible to find a solution that can secure the continued operation of the Company or a solvent liquidation. The board of directors of the Company has therefore concluded that the interests of the creditors are best served through a realisation of the Company’s assets through bankruptcy proceedings,” Petrojack says in a market statement.

Petrojack has since November 2009 been unable to service the interest on its bond loans. The Company has also failed to service its other debts as they have fallen due, including tax liabilities which fell due in December 2009 and January 2010.

Statement.

The shares of Petrolia Drilling (PDR) is down 6% monday morning, while the benchmark index in Oslo (OSEBX) is down 0,1%.

Shareholders Money Lost

“We do not anticipate any return to the shareholders,” analysts at the Norwegian brokerage firm Terra writes in an update.

• Petrojack has resolved to file for bankruptcy. This was announced in the market this morning.

• We are not surprised by the announcement, as we have seen the company in a distressed financial situation with significantly lower cash flow than debt payments.

• Based on the company’s asset values and liabilities, we do not anticipate any return to the shareholders and doubt if all the debtors will be covered fully.

Conclusion:

“Petrojack has filed for bankruptcy, which is not any surprise to us. Based on the company’s asset values and liabilities, we do not anticipate any return to the shareholders.”

Here’s a copy of the update from Terra.

Related by the Econotwist:

Consumer Confusion Index At Record High

Evaluation Of Norwegian Monetary Policy

Norway’s GDP Fall For First Time In 20 Years

How To Make A Rat Look Like A Puppy

The Northern Lights (And Dark)

Fears “Dutch Disease” In Norway

Norway: Key Policy Rate Remains Unchanged

Norway Economic Update – “Partly Grim”

Fear Of Norwegian Housing Market Collapse

Fighting The Reality

Norwegian Up- and Downgrades

Central Bank of Norway raise interest rate again

“The Norwegian Syndrome”

Not So Rosy After All

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Filed under International Econnomic Politics, National Economic Politics