Archive for June, 2011

Asia looks to "friend" Lagarde to honor IMF pledges

Wednesday, June 29th, 2011 | Finance News

SINGAPORE (Reuters) – Asia's fast-rising economies set their sights on securing key IMF posts under new chief Christine Lagarde, hopeful she would be the one to make good on oft-heard pledges to give more power to emerging markets.

Lagarde said all the right things during her recent campaign-trail tour of Asia. She acknowledged that countries like China and India deserve increased IMF voting power to reflect their growing economic clout, and a fair shot at the emergency lending institution's top decision-making posts.

"Lagarde is a friend of India," a senior Indian government source said on Wednesday.

"We can't get the IMF managing director's chair for now but at least India can get some high-level appointments in the IMF during her tenure and we will work toward that."

Lagarde begins her five-year term as managing director of the International Monetary Fund on July 5, and will find herself immediately immersed in efforts to head off a Greek debt default that could spark an international crisis.

High on her to-do list within the Fund will be appointing a top leadership which fairly reflects global economic influence, and shepherding through an already agreed process to reallocate IMF voting rights to give emerging markets greater say.

China's central bank said in a brief statement that it hoped Lagarde would push for reform, and wanted to see the IMF play a positive role in promoting global financial stability "and to increase the representation of emerging economies in the IMF governance structure."

Lagarde received support from many major Asian economies even though she perpetuates a pattern they despise of Europeans holding the top IMF job. No Asian candidate stepped forward to challenge Lagarde and Mexico's Agustin Carstens.

"Lagarde has been more successful in consensus building to bridge relationships between advanced countries and emerging markets," Indonesia's central bank deputy governor Hartadi A. Sarwono told Reuters.

Carstens, Mexico's central bank governor, hit out at international bodies on Wednesday, saying they failed to live up to the standards they set for others.

"The reality is that these institutions have always asked for transparency from us, they have asked us to adopt democratic principles that they do not enforce themselves," Carstens told Mexican radio.

Lagarde will need to be diplomatic for the tough personnel decisions. The United States is already considering putting forward a Treasury Department official for the No. 2 role, which has traditionally been filled by an American.

Breaking with that tradition might help convince Asian countries that Lagarde is serious about reforming the IMF, although there was no indication that she had made any promises to award the second-in-command role to someone from Asia.

Singapore Finance Minister Tharman Shanmugaratnam, who also chairs the IMF's steering committee, said he had spoken to Lagarde about the importance of IMF reforms that "reflect the evolving balance in the global economy and financial system."

Even countries that had backed Lagarde's challenger, Carstens, pledged their support.

Australian Treasurer Wayne Swan said he had worked with Lagarde through the Group of 20 club of rich and emerging countries, and welcomed her appointment.

"We're very happy to see the process concluded so this important institution can continue its work," Swan said through a spokesman.

(Reporting by Aditya Suharmoko in Jakarta, Abhijit Neogy in New Delhi, Kevin Lim in Singapore, Luis Rojas in Mexico City, James Grubel in Canberra and Zhou Xin and Kevin Yao in Beijing; Writing by Emily Kaiser; Editing by Jonathan Thatcher and Neil Fullick, Gary Hill)


Paulson gets more time for bankrupt hotel payoffs

Wednesday, June 29th, 2011 | Finance News

NEW YORK (Reuters) – Hedge fund Paulson & Co. has more time to increase the payout on a group of U.S. luxury resort hotels it owns after bankruptcy court gave it an extension on Wednesday.

Paulson, which regularly invests in distressed and bankrupt companies, acquired the equity in the hotels from Morgan Stanley (MS.N) Real Estate in a foreclosure auction in January.

It put the five U.S. luxury resort hotels, including the Doral Golf Resort & Spa in Miami, into bankruptcy court within a couple of weeks, saying that it wanted to reorganize the upscale properties.

Saul Burian, managing director at Houlihan Lokey and financial adviser to MSR Resort, confirmed that the judge ruled in favor of the extension.

More than four months later, Paulson is still working on a way to get the hotels out of bankruptcy. It plans to sell one, the Doral; restructure the Hilton hotel management agreement for three others; and rework member club agreements.

If it can do that, and boost the value of the hotels above and beyond the level of its debt, it will be able to have its equity repaid.

The company has had enough time to make more progress than it has on a plan, some of its biggest creditors argued this week in an extended court hearing on the issue.

Instead, they said, the company should accept a $1.5 billion cash and debt offer for the hotels from the Government of Singapore Investment Corp, one of the resort group's lenders.

Singapore and other creditors have argued that the Singapore offer should be accepted because it will pay off most of the creditors.

But Singapore's bid may have actually helped the company to believe that it could receive an even higher offer down the road, U.S. Bankruptcy court Judge Sean Lane suggested during the hearing.

GIC is a sovereign wealth fund that manages Singapore's foreign reserves and is a large real estate investor in the United States.

The court's ruling gives Paulson another 120 days, or until September 29, 2011, to come up with a restructuring plan for the company. By restructuring its debt and increasing the value of the group to pay off equity -- which is only paid after all other creditors -- Paulson could effectively control the bankruptcy process.

Paulson, with $37 billion in assets in his investing empire, rose to hedge fund fame and made a fortune on an early bet that the mortgage market would collapse. He is now an investor in that sector as well as other distressed properties, like Lehman Brothers Holdings Inc.

In addition to the Doral, the hotels include the Arizona Biltmore, La Quinta Resort & Club, Grand Wailea Resorts Hotel & Spa in Hawaii and the Claremont Resort & Spa in Berkeley, California.

Morgan Stanley purchased the five hotels and three others in 2007 for about $4 billion. The hotels filed with $2.2 billion in assets and $1.9 billion in debt.

The case is in Re: MSR Resort Golf Course, U.S. Bankruptcy Court, District of Delaware, No. 11-10372

(Reporting by Caroline Humer; Editing by Gary Hill)


AMR talking with Boeing, Airbus for 250 planes: report

Wednesday, June 29th, 2011 | Finance News

(Reuters) – AMR Corp's (AMR.N) American Airlines is negotiating with aircraft makers Airbus (EAD.PA) and Boeing Co (BA.N) to replace its entire domestic fleet by purchasing at least 250 airplanes in a deal valued at about $15 billion, the Wall Street Journal reported.

American, which currently operates an all Boeing fleet, is interested in Airbus' narrow-body family of A320 airplanes as well as a new-engine A320 variant that will go into production in 2015, the Journal reported citing people familiar with the matter.

American, which is also evaluating Boeing's 737 family of airplanes, hopes to resolve the terms of the order this summer, the paper reported.

American Airlines and Boeing could not be immediately reached for comment.

Airbus, which is a unit of European Aeronautic Defense and Space Co also could not be immediately reached for comment.

(Reporting by Abhishek Takle in Bangalore; Editing by Gary Hill)