Detroit Bankruptcy Judge Approves Debt Deal With Two Banks

DETROIT--The judge in Detroit's municipal bankruptcy case approved a troublesome settlement the city reached with two banks owed nearly $300 million.

The settlement marks a clear win for Detroit Emergency Manager Kevyn Orr, who has resolved some of the city's debt and moved it closer to exiting bankruptcy court.

According to the settlement, the city will pay about $85 million to two banks, Bank of America Corp. and UBS AG, owed about $288 million in pension-related debt. The city has argued that the settlement allows Detroit to avoid costly litigation and secure continued access to the city's casino tax revenue, estimated at about $170 million a year, used to back the debt.

U.S. Bankruptcy Judge Steven Rhodes ruled Friday that the settlement using a 70% discount on the original debt was "reasonable and quite fairly compromises" the claims in the case, including a question over whether the city should have sued the banks to cancel the debt over other legal issues.

"The message is now is the time to negotiate," Judge Rhodes said, addressing many other creditors in the case who have yet to settle. He cited the city's new ability under the approved settlement to seek a "cramdown," which would allow the judge to approve the city's overall debt-cutting plan even over the objection of other creditors.

The judge also chided parties in the case, including the city, for waging a "public relations campaign" in an effort to win the case, rather than focusing on reaching an equitable solution balancing the needs of creditors as well as the residents of the cash-poor city looking to revitalize.

Judge Rhodes, who earlier indicated that the city may have a claim against the banks arguing that the original agreement was legally flawed, said Friday that the settlement quickly resolves a case that could have taken years in expensive litigation.

The settlement at issue with the federal bankruptcy court in Detroit is the third time the parties have attempted to persuade Judge Rhodes to allow the city to resolve the pension-related debt. Judge Rhodes rejected a previous deal in January, calling it too favorable to the banks.

City leaders had touted the settlement as the first agreement between Detroit and its major creditors, a key milestone in the city's effort to push through a debt-cutting plan to restructure $18 billion in long-term obligations. But it only represents a fraction of that debt, leaving unresolved the billions of dollars owed to other major bondholders and the city's pension systems. Earlier this week, the city announced another deal with some bondholders which still needs the judge's approval.

Some creditors in the banks case had raised questions about whether the proposed settlement is the best deal for the city and could unfairly leave insurers liable to pay banks for not being able to recover the full amount owed. The judge also questioned last week whether the original deal may have improperly used casino tax revenue to back the original deal.

At issue was whether the city under Mr. Orr should have tried to break the so-called swaps agreements and recover the hundreds of millions of dollars the city has paid the bank over about the last decade. Judge Rhodes in January indicated the city may have had a good chance to challenge the legality of interest-rate bets that may have helped speed the city's fall into insolvency. But on Friday, he said that the settlement offered the right approach to avoid further litigation.

Write to Matthew Dolan at matthew.dolan@wsj.com

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China suggests full interest rate liberalisation in 2 years

Chinese yuan banknotes are seen inside a counter of the Suining City Commercial Bank in Suining, Sichuan province December 7, 2010.

(Reuters) - China's central bank governor said on Tuesday that the country's deposit rates are likely to liberalised in one to two years - the most explicit timeframe to date for what would be the final step in freeing up banks to set their own interest rates.

The move will let financial markets decide the price of loans, which economists say will go a long way to prevent the wasteful investment funded by artificially cheap credit that has led to a massive buildup in debt.

"Deposit rate liberalisation is on our agenda. Personally I think it's very likely to be realised within one to two years," said Zhou Xiaochuan, the head of the People's Bank of China.

Zhou spoke in a media briefing lasting more than an hour at China's annual parliament session. He offered few surprises, reiterating a promise to speed-up financial reform and to move steadily towards freeing up the yuan on the country's capital account.

Analysts expect the controls on deposit rates to be lifted gradually. The current ceiling on deposit rates is 110 percent of the benchmark set by the central bank.

However, Zhou said he expected deposit rates to rise as a result of liberalisation. The central bank already allows banks to set their own lending rates, but there is limited room for them to float lending rates given the controls on deposit rates.

Beijing announced sweeping reforms late last year as it tries to shift the economy away from a reliance on the investment and exports that have fuelled double-digit expansion for three decades in favour of consumption and services, which it hopes will generate more sustainable long-term growth.

Analysts said Zhou's remarks showed China's reform plans are on track. "It's in line with expectations," said Ting Lu of Bank of America-Merrill Lynch in Hong Kong.

The central bank is widely expected to introduce a deposit insurance scheme before liberalising deposit rates to protect savers in case a freed-up market leads to major turbulence for smaller banks.

HSBC analysts said they expected the insurance scheme to be introduced "in the coming months".

Much of China's economic expansion in recent years was fuelled by a rapid rise in debt levels, stirring concerns that China is inflating a credit bubble that may destabilise its economy as growth cools.

A Thomson Reuters analysis of 945 listed medium and large non-financial firms showed total debt soared by more than 260 percent, from 1.82 trillion yuan to 4.74 trillion yuan, between December 2008 and September 2013.

Standard & Poor's estimated outstanding bank loans and bond debt among non-financial companies in China reached about $12 trillion at the end of 2013, the equivalent of more than 120 percent of GDP.

On Friday, China recorded its first domestic bond default when loss-making solar equipment producer Chaori Solar missed an interest payment, setting a landmark for market discipline in the world's second-largest economy.

However, Shang Fulin, the head of China's bank regulator, played down the debt risks.

"China's banks have been growing with high speed in recent years, which indeed brings some risks. But the risks are generally under control," Shang said.

"Our provisions and capital for bad assets are sufficient."

SMALLER STATE PRESENCE

China also flagged more competition for the country's banks.

Shang said the government will allow five privately owned banks to be set up in the wealthier regions of Tianjin, Shanghai, Zhejiang and Guangdong to support cash-starved small firms.

E-commerce giants Alibaba Group Holding (IPO-ALIB.N) and Tencent Holdings Ltd (0700.HK) are among the companies with approval to take part in the pilots, the Communist Party's official newspaper, the People's Daily, reported.

Private investors have long complained about how they are unable to invest in China's profitable banking sector, which is overwhelmingly dominated by the state.

Cutting bureaucracy and reducing state presence across a range of sectors is a central theme in China's reform ambition, a subject also touched upon by Xiao Gang, the head of China's securities regulator.

Xiao said it is normal to see increased volatility in the country's capital market, and the regulator will consider possible market impact when introducing new reforms.

The securities regulator let initial public offerings resume in January after a 14-month hiatus, but the worrying spectre of insider trading in the IPO market has prompted regulators to tighten controls.

Neither Zhou nor the other financial chiefs commented about the state of China's economy.

Data at the weekend raised fresh concerns about the outlook for the world's second-biggest economy. Exports in February tumbled more than 18 percent from a year earlier and purchasing managers' reports have suggested factory sector growth is stalling.

Every bout of weaker-than-expected data raises market speculation that in pushing through with reforms, Beijing is at the same time sending the economy into a slump.

The government expects the economy to grow 7.5 percent this year, which would be the lowest pace in 24 years, although Finance Minister Lou Jiwei said that this target was flexible. The economy grew 7.7 percent last year.

(Additional reporting by Adam Rose and Koh Gui Qing; Editing by Neil Fullick)

News Source: in.reuters.com

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Disney Cuts Boy Scouts Funds Over Gay Policy

The Boy Scouts of America lifted a ban on gay youths, but still restricts homosexual adults being part of the organisation.

The Boy Scouts of America is one of the largest youth groups in the US

By Sky News US Team

The Walt Disney Company will cut funding to the Boy Scouts of America starting next year due to a disagreement over its gay policy.

The Boy Scouts lifted a ban on gay youths last year, but Walt Disney is unhappy because the group is keeping a restriction on gay adult leaders.

The organisation says it is disappointed by Walt Disney's decision.

"We believe every child deserves the opportunity to be a part of the Scouting experience and we are disappointed in this decision because it will impact our ability to serve kids," a spokesman said.

Debate over the inclusion of gay members has been heated

Debate about the inclusion of gay members in the Boy Scouts led to protests last year.

Some conservative churches that sponsor scout units lobbied to continue excluding gay youths, even threatening to defect before the ban was lifted.

Disney does not provide direct funding to the Boy Scouts, but it donates money to some troops in exchange for volunteer hours completed by Disney employees.

Its donations will end in 2015.

The number of scouts has fallen in recent years to about 2.6 million from a peak of around four million. It also has one million adult leaders and volunteers.

:: Watch Sky News live on television, on Sky channel 501, Virgin Media channel 602, Freeview channel 82 and Freesat channel 202

News Source: news.sky.com

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Disney to pull Boy Scouts funding by 2015 over policy banning gay leaders

By Devon M. Sayers

(CNN) — The Walt Disney Company has given notice to the Boy Scouts of America that it will pull all funding to the group starting in 2015 because of a BSA membership policy that bans gay leaders, the entertainment company said Friday.

Disney does not give money directly to the national organization or local BSA councils. However, through its VoluntEARS program, Disney allows employees to do volunteer work in exchange for cash donations to the charities of their choice.

Employees taking part in the VoluntEARS program will no longer be able to submit the funds to the Boy Scouts, the organization said. The new policy will not affect Walt Disney employees who volunteer with the Scouts, the company said.

“We believe every child deserves the opportunity to be a part of the Scouting experience, and we are disappointed in this decision because it will impact our ability to serve kids,” BSA spokesman Deron Smith said in a statement. “America’s youth need Scouting, and by continuing to focus on the goals that unite us, we continue to accomplish incredible things for young people and the communities we serve.”

Though the Boy Scouts voted last year to allow gay youths to join its ranks, the group maintains a ban on gay Scout leaders.

According to Disney’s charitable giving guidelines, groups become ineligible to receive Disney funding if they “discriminate in the provision of services unlawfully or in a manner inconsistent with Disney’s policies on the basis of race, religion, color, sex, national origin, age, marital status, mental or physical ability, or sexual orientation.”

Disney would not divulge its formula for converting volunteer hours to dollars, but a chart on Disney’s corporate website shows that in 2010, employees raised $4.8 million via 548,000 volunteer hours, which works out to $8.79 an hour.

Among the events for which employees volunteered were a triathlon for Children’s Hospital Los Angeles, the Revlon Run-Walk for cancer, Children’s Hospital of Orange County Walk at Disneyland Resort and the Champion 5K at ESPN for the V Foundation, according to Disney.

Deena Fidas, the director of workplace equality for the Human Rights Campaign, said Disney’s decision “carries a unique weight. When you think about brands that exemplify childhood, you think of Disney, and with them dissociating with BSA, it speaks volumes of where we are with the views we want to send to young people.”

In a recent report, HRC cited numerous victories in its quest to ensure workplace equality and applauded the majority of Fortune 500 companies that now offer sexual-orientation and gender-identity protections to their employees.

Despite that, “we know that over 50% of (lesbian, gay, bisexual and transgender) employees remain closeted on the job,” the report said.

On Thursday, Scouts for Equality, which says it works to end discrimination within the BSA, praised Walt Disney World for ending local support for the BSA’s Central Florida Council.

“We’re never happy to see Scouting suffer as a result of the BSA’s anti-gay policy, but Disney made the right decision to withhold support until Scouting is fully inclusive,” Eagle Scout and Scouts for Equality co-founder Zach Wahls said in a statement.

Scouts for Equality says Disney joins Lockheed Martin, Caterpillar, Major League Soccer, Merck, Intel and UPS as companies who have ended partnerships with the Scouts because of its policy. Fidas said Alcoa and AT&T are also on that list.

News Source: fox59.com

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BofA Discloses Probes Amid Surge in Potential Legal Costs

Bank of America Corp., the second-biggest U.S. lender, disclosed new probes into its mortgage and foreign-exchange businesses and boosted an estimate of potential legal losses by 20 percent to $6.1 billion.

The developments were reported in an annual regulatory filing yesterday by the Charlotte, North Carolina-based company. The fresh estimate of litigation expenses, which concerns costs that aren’t covered by reserves as of Dec. 31, compares with $5.1 billion at the end of the third quarter.

New claims could hinder Chief Executive Officer Brian T. Moynihan’s effort to clean up fallout from the 2008 credit crisis, when his predecessor bought Countrywide Financial Corp. and Merrill Lynch & Co. The disputes that followed with regulators, investors and customers have cost more than $50 billion. Much of the sum has been tied to faulty home loans, servicing and foreclosures inherited from Countrywide.

The latest mortgage investigation involves loans backed by the Federal Housing Administration, according to yesterday’s filing. The U.S. Attorney’s Office in Brooklyn, New York, is probing the compliance for loans originated by the firm after May 2009, according to a person with knowledge of the matter.

The inquiry follows the firm’s $1 billion settlement in 2012 for FHA-backed loans originated by Countrywide, the subprime mortgage firm acquired by Bank of America. In that case, the government accused the lender of knowingly making loans insured by the FHA to unqualified home buyers.

Foreign Exchange

Bank of America also said governments in North America, Europe and Asia are examining several participants including the company for conduct in foreign-exchange markets spanning several years. The lender said it’s cooperating with inquiries.

At least 20 employees of global banks have been fired, suspended or put on leave since Bloomberg News first reported in June that dealers said they shared information about client orders to manipulate benchmark rates used in the $5 trillion-a-day currency market. No firms or traders have been accused of wrongdoing by government authorities.

Bank of America said in October the Department of Justice may file another suit tied to mortgage bonds. The firm had warned in its third-quarter filing that a U.S. attorney’s office planned to recommend civil action tied to the bundling of home loans into securities.

To contact the reporter on this story: Rick Green in New York at rgreen18@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Peter Eichenbaum at peichenbaum@bloomberg.net

News Source: www.bloomberg.com

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