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/raid1/www/Hosts/bankrupt/TCREUR_Public/100610.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Thursday, June 10, 2010, Vol. 11, No. 113 Headlines F R A N C E PEUGEOT CITROEN: Arranges New EUR1.8 Billion Refinancing Loan VALEO SA: Expects to Achieve EUR4.7 Bil. Sales in 1H 2010 G E R M A N Y ARCANDOR AG: Berggruen Inks Deal to Acquire Karstadt Unit EDSCHA NORTH AMERICA: Seeks Exclusivity Until August 6 LEHMAN BROTHERS BANKHAUS: Holds 4.9% of Electronic Sensor Shares I R E L A N D ANGLO IRISH: Collapse Would Have Led Other Banks' Cash-Strapped BELGARD MOTORS: Former HQ Building, Service Center Up for Sale BLACK SHORE: Anglo Opposes Survival Schemes for Two Companies R U S S I A MOBILE TELESYSTEMS: Posts US$381-Mil. Net Income in Q1 2010 PROGNOZ SILVER: Begins Bankruptcy Procedures, High River Discloses U N I T E D K I N G D O M BARCLAYS BANK: Moody's Upgrades Subordinated Debt Ratings From Ba3 BP PLC: Oil Spill Prompts Calls for Bankruptcy, Receivership BRITISH AIRWAYS: Cabin Crew Divided Over Further Strikes CRYSTAL PALACE: Completes Sale of Selhurst Park to Consortium DUNFERMLINE: Parent Group Closes Offices; 325 Jobs Affected HAVELOCK EUROPA: To Move to Aim Under Cost-Cutting Plan HIGHLAND QUALITY: 77 Jobs Axed; Administrators Seek Buyers NORTHERN ROCK: To Cut 650 Jobs by the End of Year PORTSMOUTH FOOTBALL: HMRC Set to Reject Repayment Offer ROYAL BANK: Gauges Investor Support on Issuance of Covered Bonds ROYAL BANK: Draws Up Shortlists of Bidders for Two Businesses * UK: Clubs Must File Accounts on Time or Face Transfer Embargo * UK: Pub and Bar Industry Insolvencies Continue to Soar * UK: FSA Stress-Testing Firms' Exposure to European Markets X X X X X X X X * EUROPE: Rescue Fund Created to Halt Greek Debt Crisis Spread * EUROPE: Aviation Industry Still in the Red, IATA Says * Countries Must Coordinate to Solve "Too Big to Fail" Concept * Upcoming Meetings, Conferences and Seminars ********* =========== F R A N C E =========== PEUGEOT CITROEN: Arranges New EUR1.8 Billion Refinancing Loan ------------------------------------------------------------- Zaida Espana at Reuters reports that PSA Peugeot Citroen has launched syndication of a EUR1.8 billion (US$2.4 billion) refinancing loan. According to Reuters, proceeds from the new three-year loan will refinance an existing EUR2.4 billion revolving credit facility signed in 2005 that matures next March. The new EUR1.8 billion loan has been arranged by BNP Paribas, Credit Agricole CIB, HSBC, Natixis, Royal Bank of Scotland and Societe Generale CIB as mandated lead arrangers and bookrunners; with Santander, Citigroup and Commerzbank as mandated lead arrangers, Reuters discloses. PSA Peugeot Citroen S.A. -- http://www.psa-peugeot-citroen.com/ -- is a France-based manufacturer of passenger cars and light commercial vehicles. It produces vehicles under the Peugeot and Citroen brands. In addition to its automobile division, the Company includes Banque PSA Finance, which supports the sale of Peugeot and Citroen vehicles by financing new vehicle and replacement parts inventory for dealers and offering financing and related services to car buyers; Faurecia, an automotive equipment manufacturer focused on four component families: seats, vehicle interior, front end and exhaust systems; Gefco, which offers logistics services covering the entire supply chain, including overland, sea and air transport, industrial logistics, container management, vehicle preparation and distribution, and customs and value added tax (VAT) representation, and Peugeot Motocycles, which manufactures scooters and motorcycles. In 2008, PSA Peugeot Citroen S.A. sold more than 3.2 million vehicles in 150 countries worldwide. * * * PSA Peugeot Citroen is rated BB+ by Standard & Poor's. VALEO SA: Expects to Achieve EUR4.7 Bil. Sales in 1H 2010 --------------------------------------------------------- Valeo's Combined Annual Shareholders' Meeting was held June 3 under the chairmanship of Pascal Colombani, Chairman of Valeo. 2009 Results and Outlook The shareholders approved the 2009 accounts, which were published on February 24, 2010. "Valeo has set as its objective for the first half 2010 to achieve sales of 4.7 billion, a 35% increase versus the first half 2009, and an operating margin level of close to 6% of sales, the highest half-yearly level for the past 8 years," said Jacques Aschenbroich, Valeo's Chief Executive Officer. "I am therefore very confident that we will achieve the objective for the full year 2010 that we communicated on February 24, which will be fine- tuned during the presentation of the first half results on July 27, 2010." By focusing the Group's R&D and investment efforts on technologies enabling a reduction in vehicle CO2 emissions and on emerging markets, Valeo intends to return to organic growth and aims to achieve sales of EUR10 billion in 2013. In addition, by lowering investments in mature countries and cutting Group overheads, Valeo aims to achieve a return on capital employed, before restructuring and goodwill, of 30% during the same period. Strengthened by this return to profitable growth, and as part of the industrial strategy unanimously approved by the Board and presented to investors, with the support of appropriate advisors Valeo intends to actively work to ensure the highest possible value for the Group in a fast evolving sector. Renewal and Appointment of Board Members The terms of Board Members Daniel Camus and Jerome Contamine were renewed and the cooptation of Michel de Fabiani as a Board Member was ratified. Noelle Lenoir was appointed as a new Board Member. Mrs. Lenoir is a lawyer, Member of the Conseil d'Etat, former Member of the Conseil Constitutionnel and former Deputy Minister in charge of European Affairs. Other Resolutions All other resolutions were also adopted, in particular those involving the approval of agreements benefiting the Chief Executive Officer and the granting of Valeo shares to employees and corporate officers. About Valeo Paris, France-based Valeo SA (EPA:FR) -- http://www.valeo.com/-- is an industrial company focused on the design, production and sale of components, systems and modules for cars and trucks on the original equipment market and also the aftermarket via its subsidiary, Valeo Service. The Company has 10 products families: lighting systems, wiper systems, interior controls, electrical systems, security systems, engine management systems, compressors, climate control, engine cooling and transmissions. As of December 2008, the Company is present in 27 countries with 121 production sites, 61 Research and Development centers and 10 distribution platforms. On May 31, 2008, Valeo SA sold its heavy duty engine cooling division to EQT. The Company also entered the Russian market in 2008 with the creation of a joint venture with Russian automotive systems supplier, Itelma. * * * Valeo has a credit rating of Ba2, two levels below investment- grade, from Moody's Investors Service, Bloomberg discloses. ============= G E R M A N Y ============= ARCANDOR AG: Berggruen Inks Deal to Acquire Karstadt Unit --------------------------------------------------------- Holger Elfes at Bloomberg News reports that Berggruen Holdings Ltd. signed a contract to acquire Karstadt AG, Arcandor AG's department-store operator. Bloomberg relates law firm Freshfields Bruckhaus Deringer, which acted as Berggruen's legal adviser on the deal, said in an e-mailed statement Tuesday that the contract has been signed "under certain conditions," which should be met soon. The law firm did not specify the conditions, Bloomberg notes. According to Bloomberg, Wolfgang Weber-Thedy, spokesman for the investment firm, said Berggruen hasn't yet reached an agreement on lowering the stores' rents. Rent Negotiations Matthias Inverardi at Reuters reports that Highstreet warned Karstadt buyer Nicolas Berggruen the insolvent German retailer could still be liquidated if he did not accept its deal on rents. According to Reuters, rent negotiations are planned for this week and Highstreet said it had an offer to cut rents. "Highstreet is ready to reduce rents by another EUR230 million (US$309 million) in the next five years in addition to the contribution of EUR160 million over three years pledged in the restructuring plan," Reuters quoted a spokesman for the Highstreet consortium as saying on Tuesday. Should this offer -- available to all potential Karstadt buyers -- not be taken up, "the probability of a Karstadt liquidation rises significantly," the spokesman said, according to Reuters. "An agreement with Highstreet is a core component of rescuing Karstadt." In an e-mail to Berggruen dated Monday and seen by Reuters, lexander Dibelius, who heads Goldman's German operations, suggested lowering the minimum fixed rent to EUR210 million from EUR250 million for the rest of this year after the closing of the deal. Reuters notes the e-mail said the rent would go up to EUR211 million for 2011 and 2012, and would then return to EUR250 million by 2018. As reported by the Troubled Company Reporter-Europe on June 9, 2010, Bloomberg News said Berggruen won the bidding for Karstadt over private equity company Triton and the Highstreet partnership, which owns most of Karstadt's real estate. Bloomberg disclosed insolvency administrator Klaus Hubert Goerg said in an e-mailed statement Monday that Berggruen's offer was chosen by a "significant majority" of the committee's members. No financial details were disclosed, Bloomberg said. Bloomberg noted that while the other bidders wanted Karstadt's 25,000 workers to agree on wage cuts or more flexible working hours, Berggruen had pledged he wouldn't ask the employees to contribute beyond salary reductions they have already accepted and which are worth about EUR150 million (US$179 million) over three years. About Arcandor AG Germany-based Arcandor AG (FRA:ARO) -- http://www.arcandor.com/-- formerly KarstadtQuelle AG, is a tourism and retail group. Its three core business areas are tourism, mail order services and department store retail. The Company's business areas are covered by its three operating segments: Thomas Cook, Primondo and Karstadt. Thomas Cook Group plc is a tour operator with operations in Europe and North America, set up as a result of a merger between MyTravel and Thomas Cook AG. It also operates the e-commerce platform, Thomas Cook, supporting travel services. Primondo has a portfolio of European universal and specialty mail order companies, including the core brand Quelle. Karstadt operates a range of department stores, such as cosmopolitan stores, including KaDeWe (Kaufhaus des Westens), Karstadt Oberpollinger and Alsterhaus; Karstadt brand department stores; Karstadt sports department stores, offering sports goods in a variety of retail outlets, and a portal, karstadt.de that offers online shopping, among others. As reported by the Troubled Company Reporter-Europe, a local court in Essen formally opened insolvency proceedings for Arcandor on September 1, 2009. The proceedings started for the Arcandor holding company and for 14 units, including the Karstadt department-store chain and Primondo mail-order division. Arcandor filed for bankruptcy protection after the German government turned down its request for loan guarantees. On June 8, 2009, the government rejected two applications for help by the company, which employs 43,000 people. The retailer sought loan guarantees of EUR650 million (US$904 million) from Germany's Economy Fund program. It also sought a further EUR437 million from a state-owned bank. EDSCHA NORTH AMERICA: Seeks Exclusivity Until August 6 ------------------------------------------------------ Bill Rochelle at Bloomberg News reports that Edscha North America Inc. is asking for a 60-day extension of the exclusive right to propose a Chapter 11 plan. The Court will consider the request for an August 6 extension at a hearing on June 17. Edscha ceased operating in June 2009 and filed under Chapter 11 in October. The Company said it won't be feasible to propose a plan until a sale of assets in Mexico concludes. The sale was approved by the judge in April. Germany-based Edscha AG manufactures door hinges, convertible roofs and driver controls for major carmakers. It was previously owned by buyout firm Carlyle Group. Edscha AG, the German auto parts company and parent of Edscha North America, filed for insolvency for its European operations on Feb. 2, 2009. At the time, it cited "massive declining trends" in the auto industry and difficulty in obtaining financing. The debts incurred by the company's leveraged buyout through Carlyle in late 2002 "was not responsible" for the insolvency filing, but the massive slump in car sales. The insolvency of Edscha followed a 50% drop in some of the company's businesses during the fourth quarter of 2008. Edscha North America Inc., has filed for Chapter 11 reorganization (Bankr. N.D. Ill. Case No. 09-39055), eight months after its German parent filed for insolvency. The Company listed assets of US$6.44 million and liabilities of US$672.4 million in its voluntary Chapter 11 petition. LEHMAN BROTHERS BANKHAUS: Holds 4.9% of Electronic Sensor Shares ---------------------------------------------------------------- Lehman Brothers Bankhaus AG (i. Ins.) disclosed that as of May 13, 2010, it may be deemed to beneficially own 7,965,000 shares or roughly 4.9% of the common stock of Electronic Sensor Technology, Inc. About Lehman Brothers Bankhaus Lehman Brothers Bankhaus AG filed for Chapter 15 bankruptcy protection in New York on April 29, 2009 (Bankr. S.D.N.Y. Case No. 09-12704). The petition for Chapter 15 bankruptcy listed more than US$1 billion each in debts and assets. The report discloses as of April 1, 457 creditors had filed claims against the German unit, of which 22 were based in the U.S. The German affiliate, established in 1987, has branch offices in South Korea, London and Milan, the report states. The offices in London and Milan are being wound down as part of the German court proceedings and the Korean office is subject to a moratorium on business activities by local banking authorities. In the Chapter 15 petition, Dr. Michael C. Frege served as insolvency administrator and foreign representative. Judge James M. Peck presides over the case. David Farrington Yates, Esq., at Sonnenschein, Nath & Rosenthal LLP in New York, serves as Chapter 15 Petitioner's Counsel. ============= I R E L A N D ============= ANGLO IRISH: Collapse Would Have Led Other Banks' Cash-Strapped --------------------------------------------------------------- Stephen Collins at The Irish Times, citing Ireland's Central Bank governor Patrick Honohan, reports that the main Irish banks would, in all likelihood, have run out of cash within days if Anglo Irish Bank had been allowed to collapse in a disorderly manner in the autumn of 2008. The Irish Times reports that, in his report on the banking crisis, which was considered by the Cabinet Tuesday night, Mr. Honohan questioned the inclusion of subordinated debt, which accounted for just over 3% of the total, in the bank guarantee scheme but says that a guarantee was justified. The report looks at the issue of how important Anglo Irish was to the banking sector, The Irish Times notes. "Anglo was clearly systemically important in the prevailing conditions at the end of September 2008. There can be little doubt that a disorderly failure of Anglo would, in the absence of any other protective action, have had a devastating effect on the remainder of the Irish banks. Given the other banks' reliance from day-to-day and week-to-week on the willingness of depositors and other lenders not to withdraw their funds, and the certainty that those lenders would infer from the failure of Anglo that all the other Irish banks might be in a comparable situation, in all likelihood the main banks would have run out of cash within days," the Honohan report said, according to The Irish Times. Anglo Irish Bank Corp PLC -- http://www.angloirishbank.com/-- operates in three core areas: business lending, treasury and private banking. The Bank's non-retail business is made up of more than 11,000 commercial depositors spanning commercial entities, charities, public sector bodies, pension funds, credit unions and other non-bank financial institutions. The Company's retail deposits comprise demand, notice and fixed term deposit accounts from personal savers with maturities of up to two years. Non-retail deposits are sourced from commercial entities, charities, public sector bodies, pension funds, credit unions and other non-bank financial institutions. In addition, at September 30, 2008, its non-retail deposits included deposits from Irish Life Assurance plc. The Private Bank offers tailored products and solutions for high net worth clients and operates the Bank's lending business in Ireland and the United Kingdom. * * * As reported by the Troubled Company Reporter-Europe on April 7, 2010, Fitch Ratings affirmed Anglo Irish Bank Corporation's lower Tier 2 subordinated debt downgraded to 'CCC' from 'BBB+'. Fitch affirmed the rating on the bank's Upper Tier 2 subordinated notes at 'CC'. It also affirmed the rating on the bank's Tier 1 notes at 'C'. BELGARD MOTORS: Former HQ Building, Service Center Up for Sale -------------------------------------------------------------- The Irish Times reports that the former headquarters building of Belgard Motors and a separate service center at the front of the Cookstown Industrial Estate on Belgard Road in Tallaght, Dublin 24, were put up for sale on Wednesday on the instructions of the official liquidator. The report recalls the business closed November 2009 because of serious trading difficulties. The sale was being handled by Brendan Smyth of DTZ Sherry Fon the instructions of liquidators Kavanagh Farrell, the report discloses. According to the report, the two buildings should make a combined sum of about EUR8 million. As reported by the Troubled Company Reporter-Europe on Dec. 9, 2009, Irish Independent said the company, which laid off 37 people earlier in 2009, was insolvent with debts of more than EUR17 million. Belgard Motors Group was a Tallaght-based motor company. Its business includes a Porsche dealership. BLACK SHORE: Anglo Opposes Survival Schemes for Two Companies ------------------------------------------------------------- Mary Carolan at The Irish Times reports that Anglo Irish Bank has opposed survival schemes for Sweeney Oil Retail Ltd. and Sweeney Oil Service Stations Ltd., two of the companies in Galway businessman John Sweeney's insolvent Black Shore group. According to the report, the survival schemes were proposed Tuesday by James Doherty, for Michael McAteer, the court-appointed examiner to the companies, and supported by the companies and some small creditors. Anglo is the largest creditor, while Bank of Scotland Ireland, which had earlier opposed the scheme, withdrew its opposition, the report notes. Anglo, the report says, is owed EUR3.5 million by one of the companies, and claims the EUR1.7 million being made available to it under the survival scheme is less than it would secure if it appointed a receiver who would sell the companies. The report recalls Anglo previously installed a receiver over a number of assets in the Black Shore group after the holding firm failed in a bid for examinership last February. Blackshore Holdings comprises Mr. Sweeney's oil, property and hotel interests. =========== R U S S I A =========== MOBILE TELESYSTEMS: Posts US$381-Mil. Net Income in Q1 2010 ----------------------------------------------------------- Maria Ermakova at Bloomberg News reports that OAO Mobile TeleSystems posted net income of US$381 million in the first quarter of 2010, compared with a net loss of US$53.5 million in the same period last year, as the country's economy rebounded from its steepest decline on record. According to Bloomberg, sales gained 23% to US$2.61 billion. Bloomberg relates Chief Executive Officer Mikhail Shamolin said the increase was led by new customers and services, including in data transmission. Mr. Shamolin, as cited by Bloomberg, said MTS's "strong competing position" is allowing the company to "take advantage of the economic growth." Headquartered in Moscow, Mobile TeleSystems OJSC -- http://www.mtsgsm.com/-- is a provider of mobile cellular communications services in Russia, Uzbekistan, Turkmenistan and Armenia and Ukraine. During the year ended December 31, 2008, the Company had a subscriber base of 91.33 million (64.63 million in Russia, 18.12 million in Ukraine, 5.65 million in Uzbekistan, 0.93 million in Turkmenistan and 2.02 million in Armenia). In addition to standard voice services, the Company offers its subscribers value added services, including voice mail, short message service (SMS), general packet radio service (GPRS), augmented by enhanced data rates for GSM evolution (EDGE), high-speed downlink packet access (HSDPA), and various SMS- and GPRS/EDGE/HSDPA-based information and entertainment services (including multi media message service (MMS)). It also offers its subscribers the ability to roam automatically throughout Europe and in much of the rest of the world. * * * As reported by the Troubled Company Reporter-Europe on Dec. 23, 2009, Standard & Poor's Ratings Services said that it had assigned a recovery rating of '3' on the Russian ruble (RUR) unsecured bonds (RUR10 billion due 2013, RUR10 billion due 2015, RUR10 billion due 2018, RUR15 billion due 2014, and RUR15 billion due 2016) issued by Russian mobile operator Mobile TeleSystems (OJSC) (BB/Stable/--). The recovery rating indicates S&P's expectation of meaningful (50%-70%) recovery in the event of a payment default. The issue-level ratings on these unsecured debt instruments remains 'BB', in line with the 'BB' corporate credit rating on MTS. The issue rating on the US$400 million bonds due 2010 and US$400 million bonds due 2012 issued by Mobile Telesystems Finance S.A., guaranteed by MTS is 'BB', in line with the corporate credit rating on MTS. The recovery rating on these notes is '3', indicating S&P's expectation of meaningful (50%-70%) recovery in the event of a payment default. PROGNOZ SILVER: Begins Bankruptcy Procedures, High River Discloses ------------------------------------------------------------------ High River Gold Mines Ltd. was informed that the Arbitration Court of the City of Moscow has approved the application of OJSC Buryatzoloto for official bankruptcy procedures for Prognoz Silver LLC, which operates the Prognoz silver project in the Republic of Sakha (Yakutia), Russia, which the Company has an interest in. The commencement of the procedures will result in the preservation of Prognoz Silver LLC's assets, an analysis of its financial condition, the preparation of the list of creditors and the holding of the first creditors' meeting. It is anticipated that the bankruptcy procedures may last at least seven months and may permit Buryatzoloto to collect or restructure the indebtedness of Prognoz. Buryatzoloto is 85% owned by High River. High River holds a 50% indirect interest in Prognoz Silver LLC. In October 2009, Buryatzoloto filed a claim to the Arbitration Court of the City of Moscow against Prognoz Silver LLC to recover an outstanding debt due under the contract for exploration work on the Prognoz silver project. The amount of claim including interest and other expenses was approximately US$18 million. The outstanding debt of Prognoz Silver LLC originated from the inability of the shareholders other than High River to finance their share of expenditures at Prognoz Silver LLC. In December 2009, the court ruled in favour of Buryatzoloto. Later, in March 2010, the ruling was confirmed by the appellate court. The court awarded Buryatzoloto the claimed amount; however Buryatzoloto did not succeed in collecting it. About High River High River is unhedged gold company with interests in producing mines and advanced exploration projects in Russia and Burkina Faso. Two underground mines, Zun-Holba and Irokinda, are situated in the Lake Baikal region of Russia. Two open pit gold mines, Berezitovy in Russia and Taparko-Bouroum in Burkina Faso, are also in production. Finally, High River has two advanced exploration projects with NI 43-101 compliant resource estimates, the Bissa gold project in Burkina Faso and 50% interest in the Prognoz silver project in Russia. =========================== U N I T E D K I N G D O M =========================== BARCLAYS BANK: Moody's Upgrades Subordinated Debt Ratings From Ba3 ------------------------------------------------------------------ Moody's Investors Service has upgraded the long term A2 debt/deposit ratings of Standard Life Bank plc to Aa3, the same level as Barclays Bank PLC. In the same rating action, the subordinated debt ratings of Ba3 were upgraded to Baa1 and the junior subordinated ratings of B1 were upgraded to Baa2. All ratings carry a stable outlook. The D Bank Financial Strength Rating of SLB was confirmed and subsequently withdrawn. The short-term ratings of Prime-1 were also withdrawn. This follows the completion of the transfer of assets and liabilities of SLB to Barclays on June 1, 2010. Moody's commented that the upgrade of the debt and deposit ratings of SLB reflects the alignment of its ratings to those of Barclays, given that the legal transfer of SLB's assets and liabilities to Barclays has been completed and Barclays has directly or indirectly assumed these liabilities. SLB no longer exists as a separate regulated legal entity and hence its BFSR, which was on review for upgrade pending the final status of the bank within Barclays, was confirmed before being withdrawn. The P-1 short- term ratings of SLB were also withdrawn as this issuer no longer exists. The last rating action on SLB was on October 26, 2009, when the long term debt ratings and BFSR of SLB were placed on review for possible upgrade. Standard Life Bank had total assets of approximately GBP9.4 billion at year-end 2009. BP PLC: Oil Spill Prompts Calls for Bankruptcy, Receivership ------------------------------------------------------------ Tennille Tracy at Dow Jones Newswires reports that energy specialist Matt Simmons, founder and chairman emeritus of Simmons & Co., has told Fortune magazine that BP Plc has "about a month before they declare Chapter 11." Jeff Plungis and Christopher Condon at Bloomberg's Businessweek, meanwhile, relate Representative Steve Cohen, a Tennessee Democrat, said because BP is likely to end up in bankruptcy, the Obama administration should consider placing the company in receivership to preserve company assets. "The president could put it in receivership to protect the people," Mr. Cohen said. Businessweek reports that more than 40 U.S. lawmakers on Wednesday called for BP to suspend its dividend, stop its advertising and spend the money instead cleaning up its oil spill in the Gulf of Mexico. "Not a single cent" should be spent on television ads, said Representative Lois Capps, a California Democrat, at a news conference in Washington, according to Businessweek. "If BP is so concerned about its public image, it should plug the hole." The Wall Street Journal's Guy Chazan and Stephen Power report that the Obama Administration ratcheted up its demands on Wednesday that BP cover all costs stemming from the Gulf of Mexico oil spill, including millions of dollars in salaries of oil-industry workers laid off because of the federal moratorium on deepwater drilling. Businessweek says a dividend moratorium would hit BP shareholders led by BlackRock Inc. and Legal & General Group Plc. According to Bloomberg data drawn from regulatory filings, New York-based BlackRock was the biggest holder of BP shares, with 5.92% as of December 31, 2009. Bloomberg says Legal & General Group, the U.K. insurer and money manager, holds 4% of the shares as of May 4. Businessweek also notes sovereign wealth funds are among BP's largest shareholders. According to Businessweek, Norges Bank Investment Management, which oversees Norway's state fund, held 1.8% as of May 1. Kuwait Investment Authority owned 1.8% and the Republic of China held 1.1%, both as of May 1. U.S. investors are the biggest holders in BP, Businessweek says, citing Junction RDS, a London-based shareholder research firm. They held 9.4% through BP's London-listed shares and an additional 28% via New York-listed American depositary receipts as of May 1. U.K. investors came next with 31%, Businessweek reports. The Journal's Messrs. Chazan and Stephen Power relate that the sudden increase in BP's potential liabilities -- along with growing evidence that even more oil than expected is gushing from BP's crippled well -- helped send BP's shares plummeting almost 16% in New York, to US$29.20. The stock has lost close to half its value, more than US$82 billion, in the seven weeks since the spill started. Meanwhile, Dow Jones' Ms. Tracy says options traders made a beeline for bearish options in BP, with some willing to make a cheap bet that the stock could sink below US$7.50 a share. She said trading in BP options soared well above normal levels as shares in the company dropped to their lowest level in years. With its American depositary shares closing the day at US$29.20, down 16%, BP has lost more than half of its value since the Deepwater Horizon rig caught fire on April 20, according to Dow Jones. BP has committed to fund the entire US$360 million cost of six berms in the Louisiana barrier islands project. On June 7, BP said it will make an immediate payment of US$60 million to the State of Louisiana. The initial US$60 million payment is intended to permit the State to begin work on the project immediately. BP will then make five additional US$60 million payments when the Coastal Protection and Restoration Authority of Louisiana, which is chaired by Garret Graves, certifies that the project has satisfied 20%, 40%, 60%, 80% and then 100% completion milestones. The entire US$360 million will be funded by the completion of the project. BP plans to make payments directly to the State of Louisiana rather than establishing an escrow fund for this project. "We are committed to doing everything we can to protect the coastline and reduce the impact of the oil and gas spill in the Gulf of Mexico. We understand that the United States Coast Guard and the State of Louisiana want this project to proceed with urgency, so we want to ensure that funding is immediately available to begin construction of the berms," said Bob Dudley, BP Managing Director. BP already has provided US$170 million to Louisiana, Alabama, Mississippi, and Florida to help with those state's response costs and to help promote their tourism industries. The company also has paid approximately US$51 million in compensation to people and companies affected by the spill. BP Plc -- http://www.bp.com/-- is one of the world's largest energy companies, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemicals products for everyday items. Bloomberg's Businessweek notes BP represents 5.6% of the FTSE 100 Index, the second biggest weighting of the top U.K.-listed companies behind London-based bank HSBC Holdings Plc. BP also represents the biggest portion of the FTSE 350 Oil & Gas Producers Index at 31%, and the MSCI EAFE/Energy Index at 16%. BRITISH AIRWAYS: Cabin Crew Divided Over Further Strikes -------------------------------------------------------- Gill Plimmer in London and Pilita Clark at The Financial Times report that British Airways cabin crew are increasingly divided over whether to press ahead with further strikes this summer. The Unite union, representing 11,000 cabin crew, needs to decide whether to ballot for further action if the dispute is not resolved soon, the FT notes. The FT says Unite, which has pledged not to take further action during the World Cup, is determined to press ahead with a vote for further action, potentially on the alleged bullying and harassment of staff who participated in the walkout. But given the airline's record on using the courts to block strike action, the union is taking legal guidance on the grounds for the dispute, the FT discloses. The FT relates Acas, the conciliation service, has said it expects a date to be set shortly for peace talks to resume. But with Willie Walsh, chief executive, pledging to "hold out for as long as it takes", the airline appears intent on permanently altering the balance of power with the union, the FT states. According to the FT, Mr. Walsh insists a settlement does not hinge on the restoration of travel concessions but on the need for cabin crew to accept much-needed cultural changes to the company's working practices. In particular, he wants the freedom to introduce future cost savings without the constant threat of strikes, the FT says. BBC News reports British Airways cabin crew met MPs on Tuesday -- the penultimate day of the last of a series of five-day walkouts. BBC relates they have told MPs how the airline is currently gripped by a "climate of fear". About British Airways Headquartered in Harmondsworth, England, British Airways Plc, along with its subsidiaries, (LON:BAY) -- http://www.ba.com/-- is engaged in the operation of international and domestic scheduled air services for the carriage of passengers, freight and mail and the provision of ancillary services. The Company's principal place of business is Heathrow. It also operates a worldwide air cargo business, in conjunction with its scheduled passenger services. The Company operates international scheduled airline route networks together with its codeshare and franchise partners, and flies to more than 300 destinations worldwide. During the fiscal year ended March 31, 2009 (fiscal 2009), the Company carried more than 33 million passengers. It carried 777,000 tons of cargo to destinations in Europe, the Americas and throughout the world. In July 2008, the Company's subsidiary, BA European Limited (trading as OpenSkies), acquired the French airline, L'Avion. * * * As reported in the Troubled Company Reporter-Europe on March 19, 2010, Moody's Investors Service lowered to B1 from Ba3 the Corporate Family and Probability of Default Ratings of British Airways plc; and the senior unsecured and subordinate ratings to B2 and B3, respectively. Moody's said the outlook is stable. This concludes the review that was initiated on November 10, 2009. The rating action reflects Moody's view that credit metrics will not be commensurate with the previous rating category in the medium term. Moody's expect furthermore that metrics will be burdened in the foreseeable future by the company's significant pension deficit, which was at GBP2.6 billion for the APS and NAPS schemes combined as of September 2009 (under IAS). Moody's nevertheless understand that under the current agreement with the trade unions, the cash contributions to these deficits will be frozen at GBP330 million per year for three years, subject to approval by the Pensions Regulator and the trustees CRYSTAL PALACE: Completes Sale of Selhurst Park to Consortium ------------------------------------------------------------- The joint administrators for Selhurst Park, home of Crystal Palace FC, confirmed that, following the "in-principle" agreement on June 1 to sell the ground to CPFC 2010 (the Consortium) at an agreed and undisclosed price, the deal has been effectively concluded with the formal exchange of contracts. The completion of the purchase by CPFC 2010 remains dependent on the CVA being secured by Crystal Palace FC's administrators, The P&A Partnership, and approval from the Football League. Barry Gilbertson, partner at PricewaterhouseCoopers LLP, said: "This transaction has been one of the more complex to resolve. We would like to reassure everyone, and the Club's loyal fans in particular, that all parties have worked diligently and with a spirit of determination to find the right solution to the very many issues that arose. This has ultimately involved many hours of hard work, before, during and after lengthy meetings and conference calls late into several nights, in the best interests of making the deal work. "We believe that the Consortium's vision for the Club, which they are purchasing in a parallel transaction, using Selhurst Park as their ground, matches that of the community, the football club and its supporters. "Enabling the paperwork to be prepared, negotiated and agreed, in what has been a short space of time, is testament to the ongoing support we have received from Lloyds Banking Group and other key stakeholders with their respective advisers. We would like to take this opportunity to thank them all for the contribution they have made in securing this successful outcome. "Importantly, we wish the Club well in the days, weeks and months ahead as they work their way out of administration, continue their discussions with the Football League, and prepare for the start of a much happier season in the Championship." As reported by the Troubled Company Reporter-Europe on Jan. 28, 2010, The Times said Crystal Palace went into administration after running into financial problems. The Times disclosed the club has debts estimated at GBP30 million. London-based Crystal Palace Football Club -- http://www.cpfc.premiumtv.co.uk/-- plays in the English League. The team, also known as the "Eagles" represents a borough of London called Croydon. It was founded in 1905 by workers at the Crystal Palace, a wrought iron and glass building originally erected in the Hyde Park area of London to house the Great Exhibition of 1851 (the first in a series of World's Fair exhibitions). The Crystal Palace Football Club moved to its current stadium Selhurt Park in 1924. Chairman Simon Jordan took over the club in 2000, ending Crystal Palace's stint with bankruptcy. DUNFERMLINE: Parent Group Closes Offices; 325 Jobs Affected ----------------------------------------------------------- Terry Murden at The Scotsman reports that Dumferline Building Society's head office is to become the administrative hub for parent group Nationwide's regional businesses in a shake-up that will result in more jobs in the Fife town. According to the report, Nationwide, which acquired a large part of the Dunfermline following its collapse in March 2009, will close the head offices of Cheshire and Derbyshire building societies and move their operations to Scotland. The report says it will create 150 jobs at Caledonia House in Dunfermline, but 75 will go as Dunfermline will no longer offer its own mortgages. The site will become a call center and administrative hub for the three brands, which will focus on savings and investments, the report states. The report relates administrative offices in Macclesfield, Cheshire and Duffield, Derbyshire will close over the next two years along with 17 branches in the Cheshire and Derbyshire networks, because of low customer use and the proximity of other Nationwide branches. The Cheshire Estate Agency will also close as it is not core to the Nationwide model, the report says. The overall impact of the group changes is a loss of 325 jobs, the report notes. Restructuring As reported by the Troubled Company Reporter-Europe on Jan. 26, 2010, the European Commission approved under EU state aid rules the aid given by the UK authorities to facilitate restructuring of the Dunfermline Building Society of the United Kingdom. The restructuring consisted of the immediate split-up of Dunfermline, after which the part containing the good assets and liabilities was sold in an auction to a competitor with a financial contribution by the UK State of over GBP1.5 billion. The part containing the impaired assets was put into administration. The Commission found that the orderly break-up of Dunfermline resulted in the return to viability of the good part that was sold. The Commission furthermore concluded that there was sufficient burden-sharing as subordinated debt-holders contributed to the restructuring as much as possible and that the liquidation of a substantial part of Dunfermline limited the distortion of competition caused by the aid. The Commission therefore concluded that the direct restructuring is compatible with the EU rules on state aid to remedy a serious disturbance in a Member State's economy (Article 87(3)(b) of the EC Treaty). Dunfermline Building Society -- http://www.dunfermline-bs.co.uk/ -- offers a range of financial products and services including mortgages, savings accounts, business and personal loans, credit cards, personal insurance, financial planning, investment products, and share brokering. Founded in 1869, the mutually- owned Dunfermline is one of the oldest and largest building societies in Scotland. It operates through more than 30 branches and 40 agencies. The building society has engineered two social housing deals with the Royal Bank of Scotland and Lloyds TSB worth a combined 40 million. HAVELOCK EUROPA: To Move to Aim Under Cost-Cutting Plan ------------------------------------------------------- Perry Gourley at The Scotsman reports that Havelock Europa announced plans to cut costs by moving from the main market to Aim, the junior exchange. According to the report, the firm said the move would also give it greater flexibility to react quickly to acquisitions and other corporate transactions if "opportunities arise". The report says approval for the proposal will be sought at a shareholder meeting on July 1 and the move to Aim is expected by the end of that month. The report recounts Havelock Europa's market value has shrunk dramatically over the past five years. The report recalls in 2006, its shares were trading at 158p compared with Wednesday's close of just 10.5p, valuing the company at just over GBP4 million. In the past year, the company has lost 80% of its value, the report notes. The report relates Havelock -- whose exceptional costs have soared on the back of problems with merging its retail interior and education supply operations -- issued three profit warnings in the six months leading up to the departure of its chief executive Hew Balfour. Havelock Europa is a Fife-based shopfitter. HIGHLAND QUALITY: 77 Jobs Axed; Administrators Seek Buyers ---------------------------------------------------------- The Inverness Courier reports that a total of 77 employees have been made redundant at Highland Quality Construction, which went into administration last week. According to the report, only three employees remain at the firm and are assisting the administrators KPMG. The administrators are now inviting offers for the business as a going concern, the report discloses. "Unfortunately Highland Quality Construction experienced significant trading losses and cashflow pressures and was owed significant amounts by contractors," the report quoted Blair Nimmo, head of restructuring for KPMG in Scotland, as saying. Highland Quality Construction is an Inverness-based civil engineering and construction firm. It had an annual turnover of GBP20 million, according to The Inverness Courier. NORTHERN ROCK: To Cut 650 Jobs by the End of Year ------------------------------------------------- Katherine Griffiths at Times Online reports that Northern Rock will cut up to 650 jobs by the end of the year as part its drive to shrink costs before a sale back to the private sector. According to the report, the latest cuts, which will be accompanied by the close of the final salary pension scheme to future contributions, were described by the union Unite as "devastating". The report says Northern Rock's "good" bank, which is responsible for new lending, and its asset management company, which is running off its back book, will each be hit. Northern Rock's centers in Newcastle and Sunderland will bear the brunt of the latest measures, with posts going from across the business, the report notes. The report relates Unite criticized the move, saying that the bank had cut 20% of its workforce overall. The bank will enter a 90-day consultation with the union and employees, the report discloses. About Northern Rock Headquartered in Newcastle upon Tyne, England, Northern Rock plc -- http://www.northernrock.co.uk/-- deals with mortgages, savings accounts, loans and insurance. The company also promotes secured loans to its existing mortgage customers. The company had more than US$200 billion in assets at the end of June 2007. * * * As reported by the Troubled Company Reporter-Europe on Dec. 11, 2009, Standard & Poor's Ratings Services raised the rating on Northern Rock's dated subordinated lower Tier 2 debt to 'BB' from 'CCC'. The ratings on its perpetual subordinated debt and preference shares were unaffected. S&P said the outlook is stable. PORTSMOUTH FOOTBALL: HMRC Set to Reject Repayment Offer ------------------------------------------------------- UKPA reports that the HM Revenue and Customs is set to reject Portsmouth Football Club's repayment offer to creditors. According to the report, a vote on the 20p in the pound offer will be taken at a creditors meeting on June 17 and HMRC -- who claim they are owed GBP35 million -- will seek a better offer. The report says the opposition from HMRC would seriously threaten Portsmouth's chances of securing a company voluntary arrangement (CVA) which would enable them to come out of administration and avoid any further points deductions next season. The club needs 75% of creditors to vote in favor of the 20p deal and Portsmouth's administrator Andrew Andronikou claims that HMRC only hold 21% of the vote, the report notes. Mr. Andronikou believes the HMRC should only be claiming GBP21 million and that the other GBP14 million relates to image rights and is challengeable, and that on that basis they would not be able to block the CVA deal, the report states. As reported by the Troubled Company Reporter-Europe, Bloomberg News said Portsmouth on Feb. 26 became the first team in England's Premier League to go into administration after U.K. authorities tried to force its closure over unpaid tax of GBP12.1 million. Portsmouth Football Club Ltd. -- http://www.portsmouthfc.co.uk/-- operates Portsmouth FC, a professional soccer team that plays in the English Premier League. Established in 1898, the club boasts two FA Cups, its last in 2008, and two first division championships. Portsmouth FC's home ground is at Fratton Park; the football team is known to supporters as Pompey. Dubai businessman Sulaiman Al-Fahim purchased the club from Alexandre Gaydamak in 2009. A French businessman of Russian decent, Gaydamak had controlled Portsmouth Football Club since 2006. ROYAL BANK: Gauges Investor Support on Issuance of Covered Bonds ---------------------------------------------------------------- Jennifer Hughes at The Financial Times reports that Royal Bank of Scotland has sounded out investors about issuing covered bonds in a move that could see the troubled British bank diversify its funding sources. The FT recalls the bank won approval from the UK's Financial Services Authority last year for the bonds, a safer form of securitization where the loans backing the bonds remain on the balance sheet but are ring-fenced so that the bonds pay out even if the bank were to fail. Last month RBS hosted investor roadshows to gauge likely interest in the bonds, the FT recounts. RBS has no definite issue plans at the moment, the FT notes. About RBS The Royal Bank of Scotland Group plc (NYSE:RBS) -- http://www.rbs.com/-- is a holding company of The Royal Bank of Scotland plc (Royal Bank) and National Westminster Bank Plc (NatWest), which are United Kingdom-based clearing banks. The company's activities are organized in six business divisions: Corporate Markets (comprising Global Banking and Markets and United Kingdom Corporate Banking), Retail Markets (comprising Retail and Wealth Management), Ulster Bank, Citizens, RBS Insurance and Manufacturing. On October 17, 2007, RFS Holdings B.V. (RFS Holdings), a company jointly owned by RBS, Fortis N.V., Fortis SA/NV and Banco Santander S.A. (the Consortium Banks) and controlled by RBS, completed the acquisition of ABN AMRO Holding N.V. (ABN AMRO). In July 2008, the company disposed of its entire interest in Global Voice Group Ltd. * * * As reported by the Troubled Company Reporter-Europe on March 29, 2010, Standard & Poor's Ratings Services said that it lowered its ratings on "may pay" Tier 1 securities issued or guaranteed by The Royal Bank of Scotland Group PLC (A/Stable/A-1) to 'C' from 'CC'. At the same time, the rating on the RBSG-related security issued by Argon Capital PLC was similarly lowered to 'C' from 'CC'. The counterparty credit ratings and stand-alone credit profiles of RBSG and subsidiaries, and the ratings on other debt securities issued by these entities, are unaffected. ROYAL BANK: Draws Up Shortlists of Bidders for Two Businesses ------------------------------------------------------------- Javier Blas, Martin Arnold, Sharlene Goff, Helen Thomas and Gregory Meyer at The Financial Times report that Royal Bank of Scotland has drawn up shortlists for two businesses which are expected to fetch about GBP4 billion for the government-backed bank. According to the FT, people familiar with the process said Morgan Stanley and Jefferies are among the final bidders for RBS Sempra Commodities' North America business, which focuses on gas and power trading and could reach a value of US$2 billion (GBP1.4 billion). RBS has also narrowed the field of bidders for its GBP2.5 billion payment processing arm to two US private equity consortiums, which are vying to seal the UK's biggest buy-out deal for almost three years, the FT discloses. The sales were triggered by a European Commission ruling ordering RBS to sell assets in return for receiving a bail-out, the FT notes. The FT relates people familiar with the process said the commodities business -- a joint venture between RBS and Sempra Energy, the US utility group -- could be sold in pieces, and the negotiations with some bidders could fail. The bidding is expected to produce a deal by next month, the FT states. About RBS The Royal Bank of Scotland Group plc (NYSE:RBS) -- http://www.rbs.com/-- is a holding company of The Royal Bank of Scotland plc (Royal Bank) and National Westminster Bank Plc (NatWest), which are United Kingdom-based clearing banks. The company's activities are organized in six business divisions: Corporate Markets (comprising Global Banking and Markets and United Kingdom Corporate Banking), Retail Markets (comprising Retail and Wealth Management), Ulster Bank, Citizens, RBS Insurance and Manufacturing. On October 17, 2007, RFS Holdings B.V. (RFS Holdings), a company jointly owned by RBS, Fortis N.V., Fortis SA/NV and Banco Santander S.A. (the Consortium Banks) and controlled by RBS, completed the acquisition of ABN AMRO Holding N.V. (ABN AMRO). In July 2008, the company disposed of its entire interest in Global Voice Group Ltd. * * * As reported by the Troubled Company Reporter-Europe on March 29, 2010, Standard & Poor's Ratings Services said that it lowered its ratings on "may pay" Tier 1 securities issued or guaranteed by The Royal Bank of Scotland Group PLC (A/Stable/A-1) to 'C' from 'CC'. At the same time, the rating on the RBSG-related security issued by Argon Capital PLC was similarly lowered to 'C' from 'CC'. The counterparty credit ratings and stand-alone credit profiles of RBSG and subsidiaries, and the ratings on other debt securities issued by these entities, are unaffected. * UK: Clubs Must File Accounts on Time or Face Transfer Embargo --------------------------------------------------------------- UKPA reports that new rules voted at an annual general meeting in Malta on Tuesday will see Football League clubs being hit with a transfer embargo if they do not file their financial accounts in time. The report relates a proposal by Leyton Orient to impose a relegation of two divisions for any club going into administration was rejected. According to the report, League chiefs will review the punishments for administration to see if they need toughening up. The clubs have also closed a loophole so that clubs that go into administration are hit with sporting sanctions even when the club is part of a group company, the report notes. * UK: Pub and Bar Industry Insolvencies Continue to Soar -------------------------------------------------------- The number of bar and pub companies going bust has continued to soar in the last year, defying the trend of falling corporate insolvencies across the rest of the economy says Top 22 accountancy firm Wilkins Kennedy. A total 23 pub, bar and nightclub companies have become insolvent in the first three months of 2010 alone, a jump of 109% on the 11 that went bust in the first 3 months of 2009. In total 87 pub, bar and nightclub companies have gone bust in the last year (to March 31 2010), compared with 79 in the previous 12 months. In comparison, the total number of corporate insolvencies in the last year fell 36% to 5,911 from 9,233 in the previous year. Wilkins Kennedy said that the sector clearly has not recovered from either from the impact of the recession or from the legislative and tax burden dropped on them from the last Government. The accountancy firm said that the new Government must avoid weakening the sector further in the emergency Budget, on June 22. Anthony Cork, director of Wilkins Kennedy, commented, "What the pub and bar industry needs to see in the June 22 budget is an end to duty increases. The Government needs to be understanding of the sector and not tax it out of existence." "Such is the weak pricing power of much of the bar industry that bar operators have to either swallow tax increases themselves or lose custom to the supermarkets." Wilkins Kennedy said that the Governments proposals to review the current Licensing Act that could restrict opening hours for some establishments is a real risk. Mr. Cork said, "For many establishments, working on wafer thin margins and high fixed costs, any restriction in trading hours could tip them into loss." Wilkins Kennedy said one ray of light from the new Government is the new Social Responsibility Bill announced in the Queens Speech which may see the banning of the sale of alcohol below cost price and, therefore, lessen the competitive pressure from supermarkets. Mr. Cork explained, "Bars continue to suffer an intense competitive threat from the buying might of the Big 4 supermarkets, undercutting local establishments and encouraging people to drink at home cheaply and 'pre-loading' before coming out." "The choice available in supermarkets is so extensive that pubs can only compete on that aspect without reshuffling their contracts with suppliers and that can be difficult." Mr. Cork said that spending in bars that fell steeply because of the recession started its slide with the introduction of the smoking ban. He suggested that because it was regulatory and legal changes that pushed the sector over the edge politicians have an obligation not to heap further pain on pubs and bars. Mr. Cork added, "Pubs and bar owners have been entrepreneurial and have followed the standard advice to try and transition into a more food led offering. But, this is not easy and can involve reskilling as well as alterations to the premises which are capital intensive. That solution to the woes of the sector seemed to assumed that the eating-out market could grow unchecked." * UK: FSA Stress-Testing Firms' Exposure to European Markets ------------------------------------------------------------ Jonathan Russell at The Daily Telegraph reports that the Financial Services Authority is working with UK companies to stress test their exposure to European markets as fears over the future of the euro mount. According to the report, the regulator is understood to be mapping where risks come from, focusing on currencies, countries and commodities. The report relates the increased focus on foreign risk comes as leading economists predict the euro will have broken up within the next five years. The report notes that although sources denied the FSA had drawn up a "risk map" of Europe identifying problem areas such as Greece and Hungary, the FSA's supervisory teams have been analysing companies' exposure to countries in and around the eurozone. =============== X X X X X X X X =============== * EUROPE: Rescue Fund Created to Halt Greek Debt Crisis Spread -------------------------------------------------------------- Jonathan Stearns and Meera Louis at Bloomberg News report that European finance minister put the finishing touches on a rescue fund being backed by EUR440 billion (US$524 billion) in national guarantees, seeking to halt the spread of Greece's debt crisis. According to Bloomberg, the European Financial Stability Facility would sell bonds backed by the guarantees and use the money it raises to make loans to euro-area nations in need, the finance ministers agreed yesterday in Luxembourg. The new entity would sell debt only after an aid request is made by a country, Bloomberg discloses. Bloomberg says the ministers aim for ratings companies to assign a AAA rating to the facility, whose bonds would be eligible for European Central Bank refinancing operations. The fund will be based in Luxembourg, Bloomberg states. The fund, being created for three years, is the main part of a EUR750-billion aid package that European Union finance ministers hammered out a month ago to combat a sovereign debt crisis, Bloomberg notes. * EUROPE: Aviation Industry Still in the Red, IATA Says ------------------------------------------------------- The International Air Transport Association expects airlines to post a global profit of US$2.5 billion in 2010. This is a major improvement compared with IATA's previous forecast released in March of a US$2.8 billion loss. Industry revenues are forecast to be US$545 billion in 2010. This is up from the US$483 billion in 2009, but still below the US$564 billion achieved in 2008. "The global economy is recovering from the depths of the financial crisis much more quickly than could have been anticipated. Airlines are benefiting from a strong traffic rebound that is pushing the industry into the black. We thought that it would take at least three years to recover the US$81 billion (14.3%) drop in revenues in 2009. But the US$62 billion top line improvement this year puts us about 75% on the way to pre-crisis levels," said Giovanni Bisignani, IATA's Director General and CEO. "The US$2.5 billion profit comes with some important health warnings. First, this represents a net margin of just 0.5%, which is a long way from sustainable profitability. Second, a major part of the global industry is still posting big losses. A stagnating economy, strikes, natural disasters, and a currency crisis have left European carriers struggling with an anticipated US$2.8 billion loss," said Mr. Bisignani. Highlights of the revised forecast include: Traffic: Passenger traffic is forecast to grow by 7.1% in 2010 while cargo traffic will expand by 18.5%. This is significantly better than the previous forecast growth of 5.6% and 12.0% respectively. Over the first quarter, the industry was growing at an annualized rate of 9% for passenger and 26% for cargo. Much of the cargo growth is associated with inventory re-stocking. As this cycle completes with normal inventory to sales ratios, we are expecting moderate growth driven by consumer spending. Yields: Yields are now forecast to grow by 4.5% for both the cargo and passenger business. This is a significant improvement from the previously forecast yield growth of 2.0% in passenger markets and 3.1% for cargo. The 4.5% rate is just ahead of consumer price inflation. This is contributing strongly to the 13% rise in revenues forecast for 2010. Despite the increase, revenues remain 4% below their 2008 peak. Load Factors: New capacity will be added to the global system as a result of the 1,340 aircraft that are scheduled to join the fleet in 2010. Of these, approximately 500 are replacement aircraft while the rest will be new capacity. Latent capacity is also present as a result of reduced long-haul fleet utilization which remains several percentage points below pre-crisis levels. Over the year, we expect an average demand improvement of 10.2% (passenger and cargo) to be met with a 5.4% increase in capacity. This will support load factors which remained near record levels for most of the first quarter. Ash: Air space closures following the eruption of an Icelandic volcano dented the recovery in April as a result of over 100,000 flight cancellations associated with European markets over six days. While uncertainty remains with the potential for future eruptions, it appears that this was a short-lived shock. Early May figures show a rebound in traffic for European carriers. Premium Travel: Despite earlier fears that the financial crisis would result in a structural change to the premium market, it now appears to be recovering cyclically in many regions-alongside improvements in global trade. Premium travel was rebounding at an annualized growth rate of 20% over the first quarter and economy travel is now back to pre-recession levels. In the absence of a strong improvement in consumer confidence that would be needed to drive leisure traffic growth, it would appear that business travel also supported some of the recovery in the economy cabin. Fuel: Fuel costs continue in line with the previous forecast expectations. IATA maintained its expectation for an average annual oil price of US$79/barrel (Brent) in 2010. Regional Differences Regional differences in airline performance sharpened with this forecast. "The recovery from this crisis is asymmetrical. Worsening conditions in Europe are in sharp contrast to improvements in all other regions," said Mr. Bisignani. Highlights include: Asia-Pacific: Asia-Pacific carriers continue to benefit from strong regional growth. Against a global GDP growth expectation of 2.9%, the Asian economy (excluding Japan) is expected to grow by 7% this year. China will outpace that with an expected 9.9% GDP expansion. As a result, the region's carriers are expected to deliver the largest profit at US$2.2 billion. This is more than double the previously forecast US$900 million in March and a major reversal from the US$2.7 billion loss in 2009. North America: North American carriers are expected to return a profit of US$1.9 billion. This is a major reversal from the previously forecast US$1.8 billion loss, and the US$2.7 billion that the region's carriers lost in 2009. The US economy is growing with a 3.3% GDP expansion. Carriers are improving efficiencies as a result of demand growth, capacity cuts and domestic mergers. Latin America: Latin American carriers will show a profit of US$900 million, up slightly from the US$800 million previously forecast. Having posted a US$500 million profit in 2009, Latin America will be the only region to post two consecutive years of profit. The region's commodities are closely linked with Asian growth and supported by a 3.9% GDP expansion this year. Middle East: Middle Eastern carriers are expected to post a profit of US$100 million-their first since 2005. This is significantly better than the previously forecast US$400 million loss and the US$600 million that the region's carriers lost in 2009. GDP growth of 4.3% is outstripping the global average and Gulf carriers continue to gain market share through their hubs for Europe to Asia-Pacific traffic even as capacity is being added at a more cautious rate. Africa: African carriers are expected to post a US$100 million profit, their first since 2002. This reverses the US$100 million loss previously forecast in March and the US$100 million that the region lost in 2009. Europe: Europe will be the only region in the red with a US$2.8 billion loss. This is a downgrading from the US$2.2 billion loss previously forecast in March, although it is an improvement on the US$4.3 billion that the region lost in 2009. GDP growth of 0.9% is not enough to support a recovery and the currency crisis clouds the future with uncertainty. Moreover, 70% of the US$1.8 billion loss in revenue as a result of the volcanic ash crisis was borne by European carriers. A series of labor strikes and strike threats have also impacted the region's performance. "Seeing black on the bottom line is a great achievement. The resilience of the industry has been strengthened by a decade of cost cutting, restructuring and re-engineering processes. IATA's programs have contributed to this with US$47 billion in cost savings since 2004 with efficiencies in safety auditing, fuel management, infrastructure costs, and Simplifying the Business," said Mr. Bisignani. "But even with all of our hard work, the result is just a 0.5% margin that does not even cover our cost of capital. The industry is fragile. The challenge to build a healthy industry requires even greater alignment of governments, labor, and industry partners. They must all understand that this industry needs to continue to reduce costs, gain efficiencies and be able to re- structure itself if it is to be sustainably profitable. We must all be prepared for a greater change," said Mr. Bisignani. * Countries Must Coordinate to Solve "Too Big to Fail" Concept -------------------------------------------------------------- Rachelle Younglai at Reuters reports that Germany's financial regulator said on Monday that countries must coordinate efforts to thwart a market perception that some large financial services firms are considered too large to fail. "We need a clearly defined liquidation process," Jochen Sanio, president of Federal Financial Supervisory Authority (BaFin), told a conference in Montreal, according to Reuters. * Upcoming Meetings, Conferences and Seminars --------------------------------------------- June 17-20, 2010 AMERICAN BANKRUPTCY INSTITUTE Central States Bankruptcy Workshop Grand Traverse Resort and Spa, Traverse City, Michigan Contact: 1-703-739-0800; http://www.abiworld.org/ July 7-10, 2010 AMERICAN BANKRUPTCY INSTITUTE Northeast Bankruptcy Conference Ocean Edge Resort, Brewster, Massachusetts Contact: 1-703-739-0800; http://www.abiworld.org/ July 14-17, 2010 AMERICAN BANKRUPTCY INSTITUTE Southeast Bankruptcy Conference The Ritz-Carlton Amelia Island, Amelia, Fla. Contact: http://www.abiworld.org/ Aug. 5-7, 2010 AMERICAN BANKRUPTCY INSTITUTE Mid-Atlantic Bankruptcy Workshop Hyatt Regency Chesapeake Bay, Cambridge, Maryland Contact: 1-703-739-0800; http://www.abiworld.org/ Oct. 6-8, 2010 TURNAROUND MANAGEMENT ASSOCIATION TMA Annual Convention JW Marriott Grande Lakes, Orlando, Florida Contact: http://www.turnaround.org/ Dec. 2-4, 2010 AMERICAN BANKRUPTCY INSTITUTE 22nd Annual Winter Leadership Conference Camelback Inn, Scottsdale, Arizona Contact: 1-703-739-0800; http://www.abiworld.org/ Mar. 31-Apr. 3, 2011 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting Gaylord National Resort & Convention Center, Maryland Contact: 1-703-739-0800; http://www.abiworld.org/ June 9-12, 2011 AMERICAN BANKRUPTCY INSTITUTE Central States Bankruptcy Workshop Grand Traverse Resort and Spa Traverse City, Michigan Contact: http://www.abiworld.org/ October 25-27, 2011 TURNAROUND MANAGEMENT ASSOCIATION Hilton San Diego Bayfront, San Diego, CA Contact: http://www.turnaround.org/ Dec. 1-3, 2011 AMERICAN BANKRUPTCY INSTITUTE 23rd Annual Winter Leadership Conference La Quinta Resort & Spa, La Quinta, California Contact: 1-703-739-0800; http://www.abiworld.org/ ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than US$3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Thursday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/booksto order any title today. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter -- Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Joy A. Agravante, Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez, Frauline S. Abangan and Peter A. Chapman, Editors. Copyright 2010. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$625 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *