From Washington Post

The chaos at Toshiba, the Japanese corporate giant, deepened Tuesday, with its chairman resigning and the company saying it would book a $6.3 billion loss related to its U.S. nuclear business.

Analysts are now speculating about the possibility that Toshiba, which employs almost 200,000 people in Japan and has significant investments in the United States, will have to file for bankruptcy.

“This is one of Japan’s historic corporations and it’s very important to the Japanese economy, so this could be very significant for Japan,” said Tom O’Sullivan, a Tokyo-based energy analyst. “It would even impact Japan’s sovereign credit rating if there’s a knock-on effect.”

The news came a day after government statistics showed that the Japanese economy grew by an anemic 0.2 percent in the three months to December, the third consecutive quarter that growth in the world’s third-largest economy had slowed.

Toshiba executives were due to deliver the company’s quarterly earnings announcement Tuesday — the deadline for the Tokyo Stock Exchange rule to report earnings within 45 days — but they failed to show up. Instead, the company said that it was “not ready” to make the announcement and asked for another month to file.

The company’s shares fell 8 percent in local trading Tuesday.

Then, after the stock market had closed, Toshiba said that it would take a $6.3 billion hit related to Westinghouse’s acquisition in December of Stone & Webster, a nuclear construction business, from Chicago Bridge & Iron in December.

Shigenori Shiga, its chairman, would step down Wednesday to take responsibility for the losses, the company said.

“I apologize from the bottom of my heart for causing such major troubles for shareholders and investors,” the company’s president, Satoshi Tsunakawa, said Tuesday night when announcing the news.

Tsunakawa said Toshiba was considering selling its memory chip business to try to stanch the bleeding at the company. Its market capitalization has already plummeted by $7 billion to sit at the end of Tuesday at about $8 billion.

Toshiba, which bought a majority stake in Pennsylvania-based nuclear power company Westinghouse in 2006, earlier said that it had received internal information late last month about irregularities during the acquisition. It had learned that controls at Westinghouse had been “insufficient” and that the company had used “inappropriate pressure” to make the acquisition.

“We concluded on Monday afternoon that we need further research on the internal reporting . . . and its impact on financial results,” the company said in a statement, adding that its lawyers and an independent auditing firm were still poring over the details.

Japanese media reported that the delay was due to a disagreement between Toshiba’s management and its auditors. O’Sullivan, the analyst, said he thought there had probably been a dispute about whether to issue a “going concern” notice, often a precursor to liquidation or bankruptcy.

“My guess is that the auditors wouldn’t sign off on the accounts with a going concern order,” he said.

The Nikkei business newspaper, which has a record of eerily precise leaks from Japanese companies, had earlier reported that Toshiba would say it faced “material uncertainty” about its prospects for remaining in business.

Toshiba, which makes products as diverse as televisions and nuclear reactors, has had a rocky few years. In 2015, it was discovered to have exaggerated its profits, leading to wide-ranging restructuring and asset sales.

This has compounded huge problems with its international business. The company has been trying to deal with huge cost overruns at its nuclear plants in Georgia and South Carolina. Although it says it will finish building those reactors, it has curtailed expansion plans in Britain and elsewhere.


The Limited

From Today Every


Esther Fung

The next big short opportunity is in the debt of dying shopping malls, according to one prominent New York hedge fund.

Alder Hill Management on Jan. 30 issued a report to its investors making the case against commercial mortgage-backed securities tied to retail property, saying it expects more defaults to occur in lower-quality malls during the wave of retail closures, including department stores.

“We expect 2017 to be a tipping point for the pace of retail store closures and rent reductions,” said the report, reviewed by The Wall Street Journal.

The report said the fund’s researchers visited malls and created their model based on individual properties. They found a pattern in which fast-changing consumer tastes and the growth of e-commerce are putting pressure on retail tenants, forcing many of them to downsize their bricks-and-mortar presence, which in turn hurts mall landlords.

The report’s conclusion: “We believe this opportunity, created by the ongoing retail upheaval and the power of structured leverage, to be among the most asymmetric our team has ever seen.”

Alder Hill said in the report it recently placed a short position, betting certain low-rated securities would suffer a 30% to 70% loss.

One way to short these CMBS is through the CMBX, a little-known credit default swap index that tracks the values of bonds backed by mortgages on malls, office buildings and other commercial property. Alder Hill described a portion of the index, known as CMBX Series 6, as being a “toxic cocktail” of deteriorating fundamentals, adding that investors don’t appreciate the risks posed by mall loans.

“High-risk loans are loans backed by malls that we believe are highly likely to become ‘dead malls’ over the next several years and default either prior to maturity or at the 2022 maturity wall,” Alder Hill Management said in the report.


  • Race to Revamp Shopping Malls Turns Nasty

The report has placed downward pressure on prices. Since Jan. 30 the prices of CMBX Series 6 BBB- and BB rated securities dropped around $5 apiece to $90.24 and $82.24, respectively, though they rebounded slightly late last week, according to data from securities-data tracker Markit, which publishes the CMBX index.

The problems facing malls are a symptom of a weak environment for retailers. In January, Sears Holdings Corp. said it would close 150 stores, while Macy’s Inc. gave more details of a plan to close 100 stores, weakening sentiment among mall investors.

“The issues with weak anchor tenants have been around for several years,” said Moody’s managing director Mike Gerdes.

In recent years, some bankers on Wall Street have been predicting that investors who financed the building of malls would lose billions as the situation of mall oversupply is exacerbated by store closures and competition from e-commerce. Still, some investors remain skeptical that loan defaults may happen earlier than expected.

Last week, Deutsche Bank analysts recommended shorting risky slices of debt tied to malls, noting there had been some hesitation to make such a recommendation earlier. They pointed to lackluster retail sales over the holidays and said the risk of a more rapid contagion from retailer bankruptcies and stores closures would lead to a pickup in mortgage defaults.

So-called B and C malls, which typically are in locations with weaker demographics, are more reliant on anchor stores and more vulnerable when a department store closes, especially when there are no viable replacement tenants. Other tenants in the mall could also trigger co-tenancy clauses to pay lower rents or break their leases.

To be sure, not all bond investors with exposure to mall loans are facing pressure, and there hasn’t been a widespread reaction to the securities following news of the store closures. The recent disclosure by Macy’s and Sears, of the locations that will close, affected around 60 malls that were secured by CMBSs totaling $3.5 billion. They represent only 0.6% of the outstanding CMBS universe, according to Moody’s Investors Service.

“Downward pressure on CMBS bonds has so far been limited to lower-rated bonds from deals with concentrated lower-quality mall exposure,” said Jasraj Vaidya, director and senior research analyst at Amherst Capital Management.

But if other retail properties, such as higher-end malls or retail centers with grocery tenants, start getting hurt by online competition, the effect on CMBSs could be more widespread, he said.



From Bloomberg

Payless Inc. is in talks with its lenders over a restructuring plan that includes closing about 1,000 stores as it wrestles with an unsustainable debt load, according to people with knowledge of the matter.

The discount shoe retailer may consider filing for bankruptcy if it’s unable to reach a deal with the creditors, said the people, who asked not to be identified because the information isn’t public. A decision on whether to restructure in or out of court may be reached as soon as this month, they said.

The chain has hired Guggenheim Partners to help in the effort, the people said. Guggenheim declined to comment, as well as Payless.

Payless is the latest retailer to find its back against the wall because of declining mall traffic as more and more customers shift spending to experience from shoes and apparel. The retailer hired law firm Kirkland & Ellis LLP to look at options for its $600 million debt load, people with knowledge of the matter said earlier.

Traditional chains are struggling because of the quickening shift to online shopping offered by competitors led by Inc. Retailers such as J. Crew Group Inc., Claire’s Stores Inc., Gymboree Corp., Rue21 Inc., and True Religion Apparel Inc. are identified as the most troubled companies on S&P Global’s list of retailers on negative outlook.

Payless was bought by private equity firms Golden Gate Capital and Blum Capital Partners in 2012 as part of a split of publicly traded Collective Brands Inc. The company, founded in 1956 in Topeka, Kansas, has more than 4,400 stores in 30 countries and employs more than 25,000 people, according to its website.

The company’s biggest debt piece is a $520 million term loan due in 2021, according to data compiled by Bloomberg. The loan, which was last quoted above par July 2014, declined another 2 cents to trade around 51 cents on the dollar.

Moody’s Investors Service and S&P both cut the ratings of Payless’s loans in February, pointing to revenue declines and mounting leverage. Moody’s in its report highlighted the company’s high leverage and limited access to liquidity.


From Breeze and Wyles

In a recent decision of Terence Mowschenson QC sitting as a deputy High Court Judge in the case of Oakdene Homes PLC (In Liquidation) (the ‘Company’) and Carl Stephen Turpin dated 03 November 2016 the director of the Company in Liquidation was ordered to pay the total sum of circa £825,000.00.

That is a significant sum of money for a director of a company to find post that company’s liquidation. So, what happened?


The Company’ business was residential house building. In 2007 there was a sharp slowdown in the market for residential homes as a consequence of the financial crisis.

The judge found that the Company was insolvent from the end of 2007 to 23 January 2009 when it was placed into administration.


The lead claim advanced against the director was for £750,000.00 for a call in respect of subscription monies due on a subscription of shares in the Company.

The judge found that the Company was short of cash in 2008. In about May 2008 the director agreed to subscribe for further shares for a consideration of £750,000.00. The judge referred to contemporaneous evidence where it was found that the shares had been allotted and the liability due from the director. The judge found that the director was liable to pay that sum.

A further claim was advanced by the director in the sum of £75,000.00 for monies that the judge found were simply a misappropriation of company monies to meet the directors’ personal liability to a bank. The judge found that the director had a fiduciary duty to safeguard company assets. He did not do so, therefore he was required to make good the assets as if he was a trustee and repay the monies.

A further claim in the sum of just over £5,000.00 was found to be owed by the director as a debt.

On the facts and the law the director’s counterclaims for set off and other claims were rejected.

A small crumb of comfort was allowed by way of the director’s counterclaim for a month’s unpaid salary, 12 week’s salary by way of wrongful dismissal and a redundancy payment.


Oddly the judgment does not set out the pleaded legal basis of the Liquidators claims. However, it is likely that they were for Misfeasance pursuant to section 212 of the Insolvency Act 1986. This is a fairly typical claim that directors of a company can face it that company has been placed into Administration or Liquidation to make them personally liable.

The Court may explore the conduct of a director and may via a Misfeasance claim compel the director to repay, restore or account to the company for any property or money (plus interest), or contribute such sum to the company’s assets by way of compensation in respect of the breach of duty as the Court thinks fit.

If the company is insolvent or financially distressed, an additional duty is imposed on the director to consider or act in the interests of creditors of the company (section 172(3) of the Companies Act 2006). However, that duty is owed to the company.

This is in circumstances where, as in this case, the judge found that the Company had been insolvent over a long period of time and that means that the director(s) of the company then have a duty to consider the best interests of creditors as a whole. These interests are paramount.


Particularly when the company is or may be trading insolvently the paramount consideration for the well-advised director is to consider the best interests of creditors. That protective advice should be sought from an accountant, a Licensed Insolvency Practitioner or an insolvency Solicitor to forestall an application by a subsequently appointed Administrator or Liquidator for Misfeasance to make you personally liable.


If you are faced with a claim for Misfeasance please talk to me today. That is in order to protect your position without delay. The earlier that you speak with me the more that I can help. Why not call me today on 01992 558 411 and speak to me without obligation, pressure or cost.

If you are happy to instruct me my firm and I are happy to talk to you about fixed fees or staged fees that are agreed with you in advance of any work being carried out or we can liaise with your insurers. Your work will be carried out by me or others under my close supervision. I am happy to come to you to take instructions. My firm is based in London and Hertfordshire, here in the UK.

Finally, is you advisor a practising solicitor (and thus insured to advise you – check with the SRA) and if so is your solicitor a full member of the Insolvency Lawyers Association (‘ILA’) (ask them). Membership of the ILA is a public mark from insolvency peers that your representative has the requisite knowledge, skill and experience to advise you. I am both. Accept no substitutes.


From Business North

Resolution of the Essar Steel Minnesota bankruptcy filing became more complicated with the filing of a $1 billion claim against Essar by ArcelorMittal. ArcelorMittal is claiming more than $1 billion in losses against Essar. The losses, it contends, stem primarily from the difference in pricing between its agreement with Essar and one ultimately signed with Cliffs Natural Resources.

An order filed in Delaware Bankruptcy Court this week will compel Cliffs Natural Resources, against its objection, to disclose details of its supply agreement with ArcelorMittal.

The order is one piece of a complicated bankruptcy case initially filed by Essar Steel Minnesota in July of 2016. Since that time, a Essar has filed a reorganization plan and rebranded itself Mesabi Metallics, with new investors and new leadership at the helm.

Essar filed for bankruptcy protection on its half-built taconite plant, located near Nashwauk, following notification from the state of Minnesota that it intended to revoke mineral leases critical to the project. The state and Gov. Mark Dayton openly talked of reassigning the leases to competitor Cliffs Natural Resources, whose CEO Lourenco Golcalves promised to build not only a taconite mine, but direct reduced iron facilities.

Essar’s bankruptcy filing was followed by a flurry of other filings, including claims by contractors and others for losses incurred and debts left unpaid by India-based Essar.

Cliffs, however, fought a subpoena to disclose the terms of its 10-year contract with ArcelorMittal, arguing that revelation of its pricing formulas would place the company at a competitive disadvantage.

In an order dated Feb. 6, Delaware Bankruptcy Judge Brendan Shannon denied Cliffs motion to quash.

“It is clear that the pricing formula and related information in the Cliffs Contract constitute trade secrets. Trade secrets are not, however, absolutely privileged from discovery,” wrote Shannon.

To offer as much protection to Cliffs as possible, however, Shannon did limit the disclosure to those representing Essar/Mesabi Metallics, who must have the information in order to assess ArcelorMittal’s claim as it pertains to its reorganization efforts. It is unclear at this point, what impact ArcelorMittal’s claim may have on reorganization efforts.

Meanwhile, Mesabi Metallics has filed its own plan for reorganization with the court. That plan calls for raising at least $250 million in a private placement. Dayton this week objected to the Mesabi Metallics plan, saying the suitor lacks the necessary financial resources to complete the processing plant.

“In its filing, Mesabi Metallics again failed to demonstrate any ability to finance the completion of the Essar construction project or to operate it successfully. For the past 16 months, Essar/Mesabi Metallics has been unable to show the solid financial commitments, sufficient to complete the project and to repay the Range contractors the money they are owed,” the governor said in a prepared statement.

“Mesabi Metallics proposes that it be granted possession of the State’s mineral leases for the next 17 years without any commitment to complete the project or begin mining. The DNR terminated those leases last July, when then-Essar once again failed to meet the leases’ conditions. However, Essar declared bankruptcy, thus blocking the State’s rightful termination of them,” Dayton continued.

“I want that half-completed project to be completed and to fulfill then-Essar’s long-broken promise to bring new jobs to the Iron Range. Regaining the State’s rightful control of its leased properties, so that through an open process they can be transferred to a company with the demonstrated ability to develop and operate a successful project, is essential to bringing important new jobs to the Range. I therefore support the DNR’s decision to object to Mesabi Metallics’ proposal.”


From Nissan News

Open minds and enthusiasm: Early days in Tokyo

Cultural sensitivity and a sincere desire to fix Nissan help Ghosn break the ice

Before the alliance between Renault and Nissan Motor, I had been to Japan only once in my life. It was in 1984, and I was still with Michelin. I had gone on a business trip to visit Komatsu, but my stay lasted for only two days – too short to get a real impression.

I visited Japan a few other times during the partnership negotiations with Nissan, but my true relationship with the country began when my family moved there in May 1999. I arrived in Japan a month before the rest of my family, and initially lived in a hotel. The Nissan headquarters was then in a prime location in Ginza, near the center of Tokyo. My first office as chief operating officer was a renovated conference room a few doors down from the then-CEO Hanawa-san. My executive assistant, Takahashi-san, was extremely efficient, expertly managing my appointments so that I could work at a brisk pace.

Upon my arrival, I could tell people were curious about my intentions. My reputation as a “cost cutter” had preceded me. Nevertheless, I jumped headfirst into the task at hand. I was careful to respect the traditions of the Japanese culture at Nissan. For the general shareholders meeting, I had practiced bowing at 30 and 60 degrees. But I was there for one reason: to fix the company. I told those shareholders: “I came to Japan not for the sake of Renault, but for Nissan.” I still remember the warm applause.

I met with many stakeholders, including the unions and suppliers. They were unanimous in saying that while the changes would require sacrifice, as long as I fixed the problems, they supported me. That was all the approval I needed.

Around this same time, other executive- and manager-class personnel from Renault were beginning to arrive in Japan – 30 in all. Many were hand-picked by me, and others came recommended. For each position I filled, I focused on whether that person possessed enthusiasm and an open mind. As a leader who had run many companies in several countries, I knew that the only ones who could truly change the company were people inside it; the chances of a French outsider trying to “reform” it from the outside were zero. What I needed were managers who could solve problems in close cooperation with the Japanese. And I did not want there to be any division within the ranks, so I discouraged exclusive gatherings or private clubs for the people who came from Renault.

Because I had chosen people with open minds, the French newcomers adjusted well and were welcomed by their colleagues. Certainly there were some inside Nissan who were skeptical. I remember a popular TV commercial jingle: “The new boss is French. Not even the body language gets through.” This ad referred to the significant cultural differences between the French, who shake hands, and the Japanese, who bow.

And that was only the beginning of the differences I would encounter. Still, our alliance was successful because we were able to come together around shared goals.

And it wasn’t just Renault people coming to Nissan – Nissan employees also went to Renault. In the end, everything we have done as an alliance has benefited both companies – otherwise we wouldn’t do it. And it’s a critical reason why the alliance continues to succeed today, while others who have tried this model have failed.

This portion of My Personal History: Carlos Ghosn was originally posted on

Mapping out a plan to save Nissan

Seeing losses everywhere, Ghosn rejects the first X-Trail, initiates huge cost cuts

The first order of business when I joined Nissan Motor was to build a plan for its recovery. At the time, Nissan was in a desperate situation. The company’s share of the Japanese market had been steadily falling for 26 years. Financially, it had been in the red for seven of the eight years through 1999. Interest-bearing debt was more than 2 trillion yen ($17 billion at current rates). Because of this, the release of new models had slowed almost to a stop.

How did Nissan find itself in such a hole? One reason was that the company had simply not valued profits. Back in 1999, Nissan offered 43 models, but saw profits for only four of them, and small ones at that. I remember one executive meeting early on in my tenure in which I rejected the development plan for a new model called the X-Trail.

To me, the reason was clear: The proposed business plan would result in a loss. But other executives and staff were shocked. It was the first time that a plan for a new model had been rejected by the executives. The team argued that without the plan, dealers would have nothing to sell. I responded to their pleas by saying, “no profit, no program.” Discipline was critically important. (The X-Trail we have produced since 2001 is an improved, and profitable, version of that plan.)

The issue wasn’t that Nissan executives hadn’t recognized the problems in front of them; it was that no one wanted to take the tough action needed to solve them. But I was adamant: We had to confront reality.

Over the next several months, I turned to the employees to put forth their ideas and plans. A key part of this process was the development of cross-functional teams (CFT). The CFT is a concept at the core of my management approach, and it was a method I had practiced many times before and proved successfully in the face of many corporate challenges over my career. The problem at many large companies is that individual teams only hold a piece of the solution, but they don’t talk to each other to assemble those pieces together. A CFT facilitates this.

At Nissan, we put together 10 teams in all, composed of 10 middle managers from purchasing, production, development, finance and other relevant functions. Each team addressed a specific company challenge. I also joined in the discussions, which was an invaluable learning experience for me.

One team was focused on purchasing. At the time, Nissan was paying 20 percent more than Renault for parts. Not because they were higher quality, but because Nissan was trading with so many suppliers, we were not achieving the appropriate economies of scale to bring down the price per part. We could do better.

At first, members of the purchasing CFT said they would target a 5 percent cost reduction in three years. I refused. This was not a big enough improvement. I pushed them to think bigger. At the end of a series of meetings, we had agreed on a 20% cost reduction over two years. I didn’t tell them that was the goal — they arrived at it on their own, which was much more effective than a solution imposed from the top down.

Discussions regarding Nissan’s revival plan continued through September 1999. At the end of that month all major elements were assembled into one big file. In October, I locked myself in my office to review the details and refine it. As the plan fell into place, it was clear to me that this would require enormous change and bring much pain – but with potential long-term benefits. The alternatives were to risk the collapse of the entire company. I knew it was time to explain those changes and rewards to the public.

On Oct. 18, two days before the Tokyo Motor Show, I stood on the stage at a venue in Tokyo’s Hakozaki district, preparing to deliver a speech. I was using a teleprompter, which was still not used often in Japan. I wanted to make sure I had every word precise, as it would affect many lives. After I finished, a wave of applause erupted from both Japanese and foreign media. A veteran observer told me then, “I’ve never seen such an overwhelming response before in Japan.” Now the hard work could begin.

This portion of My Personal History: Carlos Ghosn was originally posted on

A whole new Nissan (almost) overnight

Saving the automaker from a sea of red took a massive effort from all involved

The Nissan Revival Plan produced a range of reactions worldwide. Some worried that the plan, introduced in late 1999, would lead to the destruction of traditional Japanese business relationships. Others worried about their jobs. But I wasn’t putting out a plan I didn’t believe in fully. I asked for trust and backed it up by saying that if we did not return to profit after a year, I would resign, as would my executive committee.

One of the biggest changes we made was in purchasing, which caused some tense moments. Traditionally, Japanese companies form close ties with their suppliers. However, as with the Renault restructuring, we focused on reducing procurement costs by doing more business with whichever companies could best meet our requests for lower prices. It was based purely on merit. That was the only way.

For example, Nissan Motor was purchasing almost all of its sheet steel from four of the five major Japanese iron and steel companies, which was one of the main reasons our purchasing costs were so high. To remedy this, we maintained relationships with all four steelmakers but began focusing on Nippon Steel (now Nippon Steel & Sumitomo Metal) and Kawasaki Steel as our primary suppliers.

Our transactions with another steelmaker, NKK, decreased significantly, and the company announced in 2001 that it would merge with Kawasaki Steel. The media dubbed this the “Ghosn Shock.” But I knew better – long before the announcement, I had met with the top executives of NKK and personally outlined our new strategy and policies, so no one was caught off guard, let alone “shocked.”

These cost-saving measures were carried out in other segments as well. The revival plan included a target of reducing the total number of trading partners by half. At first, the number of suppliers decreased. But when Nissan’s fortunes turned the corner after 2000, the number of our business partners actually rose. And as we focus on new technology, such as electric vehicles, our list of suppliers continues to grow.

We have seen this trend across the board. We had to close five plants but have since opened 15. We also had to cut 20,000 people from a workforce of around 150,000, but today we have a headcount two times the size after the initial reduction. Nissan had 2 trillion yen ($17 billion at current rates) in debt, but now has 1.5 trillion yen in cash.

I do not want to discount the sacrifice so many people made during this process. I remember seeing a story in an American newspaper at that time that featured managers of some of the small and midsize companies near Tokyo’s Murayama factory, which we shut down. They told the paper that their companies would not be able to survive unless Nissan returned. But they acknowledged there wasn’t a better plan -– and they wanted to cooperate, no matter what it took.

I will never forget these words. They strengthened my resolve to deliver a better future for our entire ecosystem of suppliers, partners, employees and communities.

And we did deliver it – faster than expected. By the year through March 2002, Nissan had achieved a 4.5 percent margin on operations and reduced interest-bearing debt to less than 700 billion yen. We were one year ahead of schedule. As it turns out, I didn’t have to quit my job. In fact, I was named chief executive officer in 2001.

This portion of My Personal History: Carlos Ghosn was originally posted on

The meaning behind Nissan 180

The first post-recovery medium-term plan set important precedents for the automaker

When the financial results of our recovery were released, Japanese society began seeing Nissan Motor in a new light. As the now CEO and president of this success story, I was graciously welcomed everywhere I went. I received requests for interviews and speeches, and I even appeared on a couple of talk shows. Suddenly even our local yakitori restaurant, one of my family’s favorite hangouts, was swarmed with cameras. The attention was new to me, but I didn’t let it distract me from the ongoing work. Recovery is a continuous process.

Nissan’s financial performance was on the upswing. At the same time, we were restructuring and adopting a fresh growth strategy, which included construction of our Mississippi plant in the U.S., which now produces large pickup trucks and is a backbone of Nissan’s growth. It was time to move to the next phase.

The next medium-term management plan was called Nissan 180. Each number had a meaning.

The “1” signified our target of increasing sales by 1 million units worldwide by 2005. The “8” stood for the 8 percent or better operating margin – the highest level in the industry – to which we aspired. And the “0” indicated our goal of zero interest-bearing debt. We’ve kept up the practice of using numbers in the names of our medium-term plans, including the current one, Nissan Power 88, which runs through March 2017. To me, numbers provide a common language that can effectively communicate the management’s vision to all employees.

There is another reason we focus on numbers. One of the differences between Japanese and French cultures is how decisions are made and executed. In France, we come to decisions quickly, but the execution can take a variety of directions, because the decision is open to interpretation. In Japan, it takes longer to come to a decision, but once it’s made, action is uniform and swift. So the best way to achieve a target is to make sure it is specific.

Another cultural difference is that in Japan, there is a high level of deference for the rule of seniority. While I think it is important to respect seniority, it should not be in the form of discrimination against young people. A wage and promotion system based solely on seniority produces negative effects. Rather, people should be evaluated on the results of their work and their contribution to the company. To me, it’s about performance. That is why Nissan introduced an incentive system that rewards financial performance at management levels.

We are continuing with these changes to ensure that younger employees and women are empowered with opportunities. After all, I was given big responsibility at a young age, and that is the reason I am where I am today. In these ways, Nissan’s revival is still ongoing. But by 2003, at least financially, we had fully recovered.


From CDN

Greece has been under financial assistance programmes for almost seven years. There have been delays, concerns and real drama that brought the country close to leaving the eurozone. There has also been a lot of progress in making the Greek economy more competitive. But for many, Greece remains synonymous with bad news. Few were surprised, therefore, when the International Monetary Fund recently stated that the country’s debt was on an explosive trajectory.

A sober look at the facts shows that Greece’s debt situationdoes not have to be cause for alarm. The European Financial Stability Facility and the European Stability Mechanism, the eurozone’s rescue funds, have disbursed €174bn to Greece. We would not have lent this amount if we did not think we would get our money back.

Much has already happened to ease the country’s debt burden. Both public and private creditors have made unprecedented efforts to keep Greece’s debt sustainable. No other country in the world has ever received greater debt reduction. In 2012, private investors took a haircut on their holdings, scrapping €107bn in loans from Greece’s books.

Then, public creditors eased lending conditions significantly. This reduced the economic value of the country’s debt by around 40 per cent. As a result, Greece enjoys budgetary savings of about €8bn annually — the equivalent of about 4.5 per cent of gross domestic product — and will continue to do so for years to come. This does not lead to budgetary cost for European taxpayers. However, they do take on risks.

As a result, the actual cost to Greece of servicing its debt is among the lowest in Europe and will remain so for a long time. Its gross financing needs will drop in the coming years and fall well below those of most other eurozone countries by 2020. The recent short-term debt relief measures taken by the ESM will also help. If the agreed reform programme is fully implemented, debt sustainability is within reach.

Why does the IMF come to a different conclusion? The fund has so far not been able to integrate into its analysis of Greece fundamental factors that set a member of the eurozone apart from other countries in the world.

The ESM provides very long-term loans at exceptionally favourable conditions. In May 2016, Greece’s eurozone partners pledged additional debt relief at the end of the ESM programme in mid-2018, should there be a need for it. And in the long term, they have committed to even more help, provided that Greece sticks to its side of the bargain. It is hard to overestimate the significance of this pledge, made by the finance ministers of the eurozone. Solidarity with Greece will continue.

oldest bank

From Bloomberg

The abandoned farmhouse surrounded by acres of prime Tuscan vineyards, known as the Aquilaia estate, stands as a monument to failure—to the tens of billions of euros in bad loans that sank the world’s oldest bank.

Born at about the same time as Michelangelo, Banca Monte dei Paschi di Siena crumbled under the weight of a lending binge whose legacy has become the headache of Italian taxpayers after the government said in December it would take it over.

While the bank says it has already accounted for much of the potential losses, skeptics say the signs aren’t promising.

“It’s very likely that Monte Paschi will need more help to fix its issues,” said Pierluigi Piccini, 64, a former mayor of Siena and a former manager at the bank in Paris, while sipping coffee near Piazza del Campo, the iconic square where the horse race known as Palio is held twice a year. “The worst is yet to come.”

A spokeswoman for Monte Paschi declined to comment on the loans and the value of the underlying assets.

Even in a country whose banks hold almost €360 billion ($388 billion) of nonperforming loans—about €6,000 per person—Monte Paschi stands out. Almost 35 percent of all its loans were deemed to be stressed in June, according to data compiled by PricewaterhouseCoopers.

After the bank’s 1999 initial public offering, Monte Paschi’s net loans almost tripled to a peak of €155 billion in 2010.

With that—and notwithstanding state aid in 2009 and 2013—its gross nonperforming assets increased sevenfold in the past decade, to €47 billion at the end of 2015.

A chunk of that is tied up in the picturesque hills that have drawn tourists, winemakers, and olive growers for centuries. What it hasn’t drawn more recently is investors.

Monte Paschi pumped about €3 million into the Aquilaia estate, borrowed to turn it into a 1-million-bottle-a-year company that included the Morellino di Scansano red wine, according to private and public documents. Now the bank is stuck with an unpaid loan and no buyers for a property on the market for less than half the value of the debt.

A local court in Grosseto failed in at least two attempts to draw bidders for the estate, even after lowering the minimum acceptable price to €1.3 million, according to court documents. The property will be offered again for even less, though not until 2018 because of a backlog of foreclosures, according to a court employee, who asked not to be identified because the matter is private.

“After the local real estate crisis, it’s hard to sell properties in auction,” said Lorenzo Mascagni, a lawyer in Grosseto.

Nearby in Scansano is another failure, Aia della Macina. The half-built tourist complex overlooking a farm and vineyards was backed by a €1.6 million loan from Monte Paschi in 2002. The bank foreclosed in 2006, and the property was later put on the market for €2 million. Even after six auctions, no buyer emerged.

The court will try again this year and lower the minimum acceptable price to €733,000, according to documents on, a website for advertising legal auctions.

“Court auction prices are still unrealistically high,” said Luca Desideri, 46, a real estate agent in Grosseto. “There’s no price for these properties simply because there are no buyers.”

It’s a far cry from the boom years. Before the financial crisis hit almost a decade ago, Monte Paschi would offer financing to farms for as much as four years of future wine sales, according to Desideri.

“Credit was easy to get back then,” said Alessandro Sabatini, 36, who has been running a wine shop in the town of Scansano for more than 15 years. “Many wine projects sprang up without a real business plan behind them.”

Distressed-debt investors have been circling Italian banks for years to get their hands on nonperforming-loan portfolios. Funds managed by Fortress and Pimco are now working with UniCredit, Italy’s largest lender, to acquire a stake in companies managing about €18 billion of bad loans.

Monte Paschi, however, is weaker and hasn’t been able to take losses the way its Italian competitors have without breaching European Central Bank regulatory levels. The Siena-based bank had to keep the bulk of its soured debt on its balance sheet. Selling it cheaply to lure investors would have forced the lender to squeeze its capital to below ECB requirements.

“You can’t sell these properties unless the price is at least less than half of the precrisis value,” said Amelia Colvin, a distressed-debt specialist working in London and Milan for Cadogan Securities. “Only when they try to sell the assets, banks realize they are worth much less than they expected.”

The bank says it’s committed to selling €27.7 billion of bad loans.

The disposal was meant to follow a €5 billion share sale. When the rights issue failed, the government said it would step in and help plug a capital shortfall that the European Central Bank says is €8.8 billion.

“More stressed loans could turn sour after the cleanup,” said Massimo Famularo, a Milan-based adviser on bad-loan deals at Frontis NPL.

A year after the Italian government transferred soured debt of lenders Banca Etruria, Banca Marche, and CariChieti to a bad bank, they had at least €2.2 billion of new nonperforming loans on their balance sheets.

Around Siena, Monte Paschi is known as Babbo Monte, echoing the Tuscan term for daddy, because of its historic support to nearby communities and via the foundation that’s controlled by local politicians and tht held the largest stake in the bank until 2014, said Roberto Porciatti, 39, who runs a deli in the city center. “Before the crisis you just needed to ask for money, and Babbo Monte would provide it,” said Francesco Zampetti, 74, a retired dental technician and lifelong Siena resident, as he tucked into his salami-based breakfast at Porciatti’s.

But after going public, Monte Paschi’s horizons widened.

The bank is on the hook for Rome-based construction business, ImpreMe, owned by the Mezzaroma family, which is struggling to sell its residential properties on the outskirts of the capital. Monte Paschi increased its exposure to the company at the same time that the former chairman, Massimo Mezzaroma, took over Siena’s soccer team, then in Italy’s top division, according to people familiar with the matter, who asked not to be identified because the information is private. The team, which was also sponsored by the bank, failed in 2014.

Monte Paschi accounts for more than €200 million of ImpreMe’s total indebtedness of about €300 million, the person said.

“ImpreMe is still a solvent company, and it’s working with Monte Paschi to restructure the debt,” said Benedetto Marcucci, a spokesman for the company in Rome.

Even luxury properties have struggled to find buyers.

A short drive north of Scansano lies the medieval castle of Montepo and its 1,000-acre estate of vineyards and olive trees. The owner, Jacopo Biondi Santi, heir of an aristocratic family that created the Brunello di Montalcino red wine in the 19th century, borrowed almost €18 million from Monte Paschi, according to people familiar with the matter. The bank foreclosed in 2011, and in November the property was put at auction for €13 million by the Grosseto court.

The estate received no bids. But the property will be withdrawn from auction because Biondi Santi has pledged to pay off the outstanding debt after his family sold a stake in a larger wine estate near Siena in December, according to Giovanni Gatteschi, his lawyer, who’s based in Arezzo.

“Biondi Santi will pay back all his debt by the end of the month,” he said. Among Monte Paschi’s borrowers, “he’s is one of the few who will settle his debt in full.”



From Reuters

Feb 9 Creditors to French vehicle leasing firm Fraikin are hiring debt restructuring advisers after fellow leasing group Petit Forestier announced last month that it is no longer able to acquire the company, sources close to the situation said.

Fraikin, owned by private equity firm CVC Capital Partners, has hired Rothschild to advise it on a potential upcoming debt restructuring, while junior mezzanine holders have hired Lazard, one of the sources said. Senior debt holders have been holding pitches for a restructuring adviser with a decision expected to be made within the next week.

CVC, Rothschild and Lazard declined to comment.

The company has at least €1.4bn of debt, including €900m remaining on a €1bn five-year securitisation that was signed in June 2012, a €70m mezzanine bond, €350m senior holdco debt and an €80m opco bond, the source said.


From Business Insider

The US “restructuring industry” – the advisories, law firms, investment banks, lenders, private equity firms, hedge funds, and others that deal with troubled companies when they’re restructuring their debts either in bankruptcy our outside of bankruptcy – had been through some very lean years as the Fed’s easy money and yield-desperate investors were floating even the leakiest boats.

But in 2015, the industry began licking its chops. And in 2016, total commercial bankruptcy filings jumped 26% from a year earlier, according to the American Bankruptcy Institute. It was the first rise since 2010.

2016 was the “official rebound of the turnaround industry,” as Alix Partners, one of the big advisories in this industry, put it in its report, North American restructuring experts survey: a changing world. The year “will be remembered for some of the most impactful global events on record that not even the most well-informed experts could have predicted.” Hence, increased profit opportunities in 2017 for the restructuring industry.

Industry experts are now counting on a surge in companies that, buckling under their debts, will seek to “restructure” them either in bankruptcy court our outside of it, at the expense of their creditors and equity holders.

In its survey of restructuring experts – lawyers, investment bankers, lenders, hedge fund professionals, financial advisors, private equity professionals, claims agents, and others – Alix Partners found that 49% of the respondents expected US restructuring activity to increase further in 2017 while 29% expected activities to remain at the already elevated 2016 level.

Among the dominant macroeconomic factors that could impact US companies (respondents could list several): 90% listed the slowdown in China and 85% “global sovereign instability.”

“Where are the likely pockets of distress in 2017?”

The energy sector had been in the top position of expected restructuring activities in 2015 and 2016. But for 2017, the experts – perhaps reminiscing about how much money they could havemade with oil at $30 a barrel instead of over $50 – lowered the sector into second spot behind retail. And then there’s a surprising sector to move into third position: healthcare. Note, experts could select up to three sectors (chart by Alix Partners):

In one of my more infamous typos, I’ve called brick-and-mortar retailers “brick-and-mortal.” It wasn’t far off.

We’ve been waiting for Sears Holding, the big whale, to wash up on the beach. And just today, Eastern Outfitters, the parent of Bob’s Stores and Eastern Mountain Sports, filed for bankruptcy protection. Like so many failed brick-and-mortar retailers, it is owned by a private equity firm. On January 17, Limited stores filed for bankruptcy.

And in 2016, there was a whole slew retailer bankruptcies, including:

  • American Apparel (November 2016), for the second time
  • Claire Stores (An out-of-court distressed exchange offer)
  • Aeropostale (May 2016)
  • Fairway Group Holdings, parent of New York food retailer Fairway Market with 18 stores (May 2016)
  • Vestis Retail Group, the operator of above mentioned sporting goods retailers Eastern Mountain Sports, Bob’s Stores, and Sport Chalet (April 2016)
  • Pacific Sunwear of California (April 2016)
  • Sports Authority (March 2016), which, after restructuring was abandoned, was liquidated messily.
  • Hancock Fabrics, for the second time (February 2016)
  • Wet Seal, teen fashion retailer (January 2015 and January 2017)

So in 2017, retailers should be even more fruitful for the restructuring industry. Alix Partners sees some particular challenges for teetering retailers:

Retail’s cost base is structurally difficult to adjust because of the industry’s large real estate footprint. Once a retailer gets into trouble, it becomes more difficult for that retailer to recover than it is for most other businesses. Our November 2015 retail bankruptcy study revealed that 55% of retail bankruptcies have ended in liquidation since 2005.

The oil & gas sector has moved down a notch as supplier of restructuring candidates, with 27% of the experts predicting that the sector will “stabilize” in 2017, and with new money flowing back into the sector, “the worst may have passed.” But still, 55% of the respondents do not expect a turning point until 2018,

And in third position on the above list of distress and restructuring opportunities in 2017, healthcare. There’s a new reason. The report:

The incoming US president’s campaign platform of repealing and replacing the Affordable Care Act is creating enormous uncertainty in the insurance, pharmaceutical, and healthcare services sectors. Complex reimbursement regulations and other regulations – the basis of the industry’s business models – are all potentially subject to change.

Many state-level insurance exchanges have already failed or are severely distressed, but opportunities may open up for new models and start-ups in the insurance sector. Similarly, more consumer-directed healthcare consumption could also expose inefficient providers and hasten their declines.

And outside the US?

The experts see even more opportunities for the restructuring industry globally: 57% expect restructuring activity outside the US to increase, and 40% expect it to remain at the level of 2016.

Oil & gas is still in first position for 2017 restructuring opportunities globally, followed by the maritime and shipping industry, the great model having been the Hanjin bankruptcy last August and the mayhem that followed. Alix Partners predicts that “the real pain in 2017 will be felt by tonnage providers in containers, dry bulk, tankers, and offshore supply that are facing limited demand for their vessels.”

Also note that 32% of the experts have their eyes on sovereign debt as a restructuring opportunity, in fourth position (chart by Alix Partners):

The experts figure that beyond the US, the UK will see the most restructuring activity in 2017, based on the dynamics of Brexit, followed by Italy, China, and Brazil.

The misery of those struggling sectors in 2017 in the US and globally – and the pain for bondholders, other creditors, stockholders, and employees – should make it a year brimming with opportunities for the restructuring industry. Because there are always opportunities somewhere.

And here’s a red flag that’ll be highlighted only afterwards as a turning point.

Read the original article on Wolf Street. Copyright 2017. Follow Wolf Street on Twitter.