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Facing cash crunch, Greece to tap into bank rescue fund

To help ease the looming crisis, the government plans to take 555 million euros sitting at the Hellenic Financial Stability Fund (HFSF) — the bank rescue vehicle that was used in 2012 to recapitalise its main lenders.

Greece’s four top banks — National, Piraeus, Eurobank and Piraeus — handed over this money in commissions following their recapitalization.

Read More‘Wasting time’: War of words over Greece heats up

“This is money for which there is no other claim, it is available for the government,” a senior banker with direct knowledge of the matter told Reuters, declining to be named.

“The HFSF has discussed this with the European Stability Mechanism over the weekend and there is no issue,” the banker added, referring to the euro zone rescue fund. He said it was up to the government to decide when it withdraws the cash.

The HFSF, funded from the country’s EU/IMF bailout with 50 billion euros, recapitalized lenders with European Financial Stability Facility (EFSF) bonds, which banks can still use as collateral for direct funding from the European Central Bank.

Greece has been also looking to tap into the cash reserves of pension funds and public sector entities through repo transactions to cover part of its funding needs in March.

In such transactions, pension funds and other state entities sitting on cash lend the money to the country’s debt agency through a short-term repurchase agreement for up to 15 days, debt agency officials have told Reuters.

Greece is due to resume talks with its creditors in Brussels on Wednesday, with the aim of unlocking desperately needed funding for the heavily indebted state.

[…]

Greece sends EU reform list, more hurdles before early cash

By Renee Maltezou and Jan Strupczewski

ATHENS/BRUSSELS (Reuters) – Greece sent its euro zone partners an augmented list of proposed reforms on Friday but EU officials said several more steps were required before any release of aid funds to a country that Prime Minister Alexis Tsipras says has a noose around its neck.

Struggling to scrape together cash and avoid possible default, Athens made a 310 million euro partial loan repayment to the International Monetary Fund, while Tsipras pleaded to be allowed to issue more short-term debt to plug a funding gap.

Greece is running out of options to fund itself despite striking a deal with the euro zone in February to extend its EU/IMF bailout by four months.

European Central Bank President Mario Draghi has refused to raise a limit on Athens’ issuance of three-month treasury bills which Greek banks buy with emergency central bank funds. He said on Thursday the EU treaty prohibited indirect monetary financing of governments.

“The ECB has still got a rope around our neck,” the leftist Greek premier complained in an interview with German magazine Der Spiegel released on Friday. If the ECB continued to object, it would be assuming a grave responsibility, he said.

“Then it would be back to the thriller we saw before Feb. 20,” Tsipras said, referring to the date when Greece agreed a four-month extension of its bailout with euro zone partners after market jitters ignited by political uncertainty.

In a letter to the 19-nation Eurogroup, Finance Minister Yanis Varoufakis outlined plans to fight tax evasion, activate a “fiscal council” to generate budget savings and update licensing of gaming and lotteries to boost state revenues, a Greek official said.

However, the expanded list of reforms arrived too late for deputy finance ministers and European Commission experts who met on Thursday to scrutinise it before a regular meeting of finance ministers of the currency area next Monday.

“Whatever proposals emerge (from Varoufakis), they can’t be seen in isolation,” said a senior EU official, who declined to be named due to the sensitive nature of the talks. “They have to been seen in the overall context of all policy measures … There is no connection with the disbursements.”

One key condition for Greece to receive any more euro zone money is for Athens to reach an agreement with its three international creditors – the euro zone, the ECB and the IMF – on the implementation of reforms agreed by the previous government. Such talks have not even begun yet.

“FEWER WORDS, MORE DEEDS”

Greece must repay a total of 1.5 billion euros to the IMF over the next two weeks against a backdrop of dwindling tax revenues, frozen bailout funds and economic stagnation. Three other instalments are due on March 13, 16 and 20.

In an apparent recognition that outspoken public statements that the country is broke and will not repay its debts and attacks on other euro zone governments have damaged Greece’s position, Tsipras said he had asked his cabinet – including Varoufakis – for “fewer words and more deeds”.

Many EU partners have been exasperated by a torrent of rhetoric from Athens since Tsipras’ hard-left Syriza party won a parliamentary election on Jan. 25 and formed a coalition with the right-wing nationalist Independent Greeks party.

Greece has monthly needs of about 4.5 billion euros, including a wage and pension bill of 1.5 billion euros. It is not due to receive any financial aid until it completes a review by lenders of final reforms required under its bailout.

Greek central bank chief Yannis Stournaras said after talks with Tsipras on Friday that Greek banks were sufficiently capitalised and faced no problem with deposit outflows.

“There is full support for Greek banks (from the ECB), there is absolutely no danger,” he said after the meeting. But he added Monday’s euro zone meeting had to be “successful”.

Athens has begun tapping cash held by pension funds and other entities to avoid running out of funds as early as this month. Various short-term options it has suggested to overcome the cash crunch have been blocked by euro zone lenders to pressure the Tsipras government into enacting reforms.

A German Finance Ministry spokesman said on Friday that Berlin saw no basis for Greece to get the next 1.5 billion euro tranche of its bailout immediately, but if Athens implemented its reforms sooner than expected, it could get paid early.

“If the Greek programme is in a position to work out its list of reforms in detail earlier than the end of April and the troika agrees to it and if this programme is, accordingly, implemented earlier, it would of course be possible to make a payment earlier,” spokesman Martin Jaeger told reporters.

(Additional reporting by Stephen Brown in Berlin, Lefteris Papadimas and George Georgiopoulos in Athens and Robin Emmott in Brussels; Writing by Paul Taylor; Editing by Gareth Jones)

Politics & GovernmentBudget, Tax & Economy […]

Sunesis Announces Amendment to Loan Agreement

SOUTH SAN FRANCISCO, Calif., March 2, 2015 (GLOBE NEWSWIRE) — Sunesis Pharmaceuticals, Inc. (SNSS) today announced the signing of an amendment to its loan and security agreement (the “Loan Agreement”) with Oxford Finance LLC, Silicon Valley Bank, and Horizon Technology Finance Corporation (collectively, “the Lenders”).

The amendment, effective February 27, 2015, creates an interest-only period from March 1, 2015 through February 1, 2016 on the remainder of Sunesis’ loan balance. Principal payments will resume March 1, 2016. In consideration for the amendment, Sunesis will issue the Lenders warrants to purchase an aggregate of 61,467 shares of Sunesis common stock at an exercise price of $2.22 per share. Additionally, the final payment will be deferred by 12 months to the fourth quarter of 2016, and will be increased from 3.75% to 4.65% of the total loan amount, a difference of $225,000. Sunesis entered into the $25 million Loan Agreement with the Lenders in October 2011.

“This amendment to our loan facility provides us with additional financial flexibility to execute our corporate strategy, including the potential submission in 2015 of U.S. and European filings for regulatory approval of vosaroxin in relapsed or refractory acute myeloid leukemia,” said Eric Bjerkholt, Executive Vice President of Corporate Development and Finance and Chief Financial Officer of Sunesis. “We believe that this loan amendment, together with our current cash position, provide us with the resources to fund operations through the first quarter of 2016.”

About Sunesis Pharmaceuticals

Sunesis is a biopharmaceutical company focused on the development and commercialization of new oncology therapeutics for the potential treatment of solid and hematologic cancers. Sunesis has built a highly experienced cancer drug development organization committed to advancing its lead product candidate, vosaroxin, in multiple indications to improve the lives of people with cancer.

For additional information on Sunesis, please visit http://www.sunesis.com.

SUNESIS and the logos are trademarks of Sunesis Pharmaceuticals, Inc.

This press release contains forward-looking statements, including statements related to Sunesis’ overall strategy, the preliminary analysis, assessment and conclusions of the results of the VALOR trial and Sunesis’ other clinical trials, the efficacy and commercial potential of vosaroxin, and the sufficiency of Sunesis’ cash resources and the use of the proceeds under the loan facility with Oxford Finance LLC, Horizon Technology Finance Corporation and Silicon Valley Bank. Words such as “believe,” “expect,” “potential,” “provide,” “through,” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon Sunesis’ current expectations. Forward-looking statements involve risks and uncertainties. Sunesis’ actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks related to Sunesis’ need for substantial additional funding to complete the development and commercialization of QINPREZO, risks related to Sunesis’ ability to raise the capital that it believes to be accessible and is required to fully finance the development and commercialization of QINPREZO, the risk that Sunesis’ development activities for QINPREZO could be otherwise halted or significantly delayed for various reasons, the risk that Sunesis’ clinical studies for QINPREZO may not demonstrate safety or efficacy or lead to regulatory approval, the risk that data to date and trends may not be predictive of future data or results, risks related to the conduct of Sunesis’ clinical trials, and the risk that Sunesis’ clinical studies for vosaroxin may not lead to regulatory approval. These and other risk factors are discussed under “Risk Factors” and elsewhere in Sunesis’ Annual Report on Form 10-K for the year ended December 31, 2013, and Sunesis’ other filings with the Securities and Exchange Commission, including Sunesis’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2014. Sunesis expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Sunesis’ expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.

View photo.FinanceBusinessSunesis Pharmaceuticals Contact: Investor and Media Inquiries:
David Pitts
Argot Partners
212-600-1902
Eric Bjerkholt
Sunesis Pharmaceuticals Inc.
650-266-3717
[…]

Greece requests euro zone loan extension, offers big concessions

* Athens uses vital EU wording to request extension

* Euro zone officials to discuss whether letter meets terms

* Greek bailout deal due to expire on Feb. 28

* State faces running out of cash by late March – source

* ECB raises emergency funding for Greek banks only modestly (Adds Dijsselbloem confirms euro zone ministers to meet Friday)

By Renee Maltezou and Jan Strupczewski

ATHENS/BRUSSELS, Feb 19 (Reuters) – Greece formally requested a six-month extension to its euro zone loan agreement on Thursday, offering major concessions as it raced to avoid running out of cash within weeks and overcome resistance from sceptical partners led by Germany.

With its EU/IMF bailout programme due to expire in little more than a week, the government of leftist Prime Minister Alexis Tsipras urgently needs to secure a financial lifeline to keep the country afloat beyond late March.

Euro zone finance ministers will meet on Friday afternoon in Brussels to consider the request, the chairman of their Eurogroup, Jeroen Dijsselbloem, said in a tweet.

That raised hopes of a deal to avert possible bankruptcy and a Greek exit from the 19-nation currency area.

A government official told Reuters that Athens had asked for an extension to its “Master Financial Assistance Facility Agreement” with the euro zone. However, he insisted the government was proposing different terms from its current bailout obligations.

Greece had committed to maintain fiscal balance during the interim period, take immediate reforms to fight tax evasion and corruption, and measures to deal with what Athens calls its “humanitarian crisis” and kick-start economic growth, he said.

In the document seen by Reuters, Greece pledged to meet its financial obligations to all creditors, recognise the existing EU/IMF programme as the legally binding framework and refrain from unilateral action that would undermine the fiscal targets.

Crucially, it accepted that the extension would be monitored by the European Commission, European Central Bank and International Monetary Fund, a climbdown by Tsipras who had vowed to end cooperation with “troika” inspectors accused of inflicting deep economic and social damage on Greece.

The six month interim period would be used to negotiate a long-term deal for recovery and growth incorporating further debt relief measures promised by the Eurogroup in 2012.

Euro zone partners have so far said Athens must comply with the terms of the current bailout, which require it to run a 3 percent primary budget surplus this year, before debt service payments.

Senior euro zone officials were due to hold a teleconference later on Thursday to discuss the Greek application.

The wording chosen could help to satisfy at least some of the concerns that have held up agreement over the past two weeks, allowing Athens to avoid saying it is extending the current programme that it opposes while creditors can avoid accepting a “loan agreement” without strings attached.

Crucial details remain to be clarified on the fiscal targets, labour market reforms, privatisations and other measures due to be implemented under the existing programme.

Government spokesman Gabriel Sakellaridis dismissed a German newspaper report that Athens was under pressure to impose capital controls on Greeks pulling their money out of local banks, telling Reuters that such a scenario “had no bearing on reality”.

An ECB spokeswoman also denied the Frankfurter Allgemeine Zeitung report, saying there had been no discussion of capital controls at a meeting of the central bank’s Governing Council on Wednesday, which slightly raised the limit on emergency lending to Greek banks.

Greek stocks rose on Thursday’s developments, with the benchmark Athens stock index up 2 percent while banks gained 9 percent.

“We are doing everything to reach a mutually beneficial agreement. Our aim is to conclude this agreement soon,” Sakellaridis told Skai TV earlier on Thursday. “We are trying to find common points.”

GERMAN COMPROMISE?

EU paymaster Germany and fellow euro zone governments have so far insisted no loan deal without the full bailout conditions is on the table. Tsipras promised to ditch austerity measures imposed by the lenders when he was elected last month.

German Finance Minister Wolfgang Schaeuble has poured scorn on suggestions that Athens could negotiate an extension of euro zone funding without making any promises to push on with budget cuts and economic reforms.

But on Wednesday he indicated there may be some possibility of a compromise. “Our room for manoeuvre is limited,” he said during a debate in Berlin, adding, “We must keep in mind that we have a huge responsibility to keep Europe stable.”

Greek Finance Minister Yanis Varoufakis expressed confidence on Wednesday that euro zone finance ministers would approve the Athens government’s proposal on Friday. “The application will be written in such a way so that it will satisfy both the Greek side and the president of the Eurogroup,” he said.

Greece’s finances are in peril. It is burning through its cash reserves and could run out of money by the end of March without fresh funds, a person familiar with the figures said.

Likewise its banks are dependent on the emergency funding controlled by the ECB in order to pay out depositors who have been withdrawing their cash. The ECB agreed on Wednesday to raise a cap on funding available under its Emergency Liquidity Assistance scheme to 68.3 billion euros (US$78 billion), a person familiar with the ECB talks said.

That was a rise of just 3.3 billion euros, less than Greece had requested. The modest increase raises the pressure for a compromise at the Eurogroup. One senior banker said it would be enough to keep Greek banks afloat only for another week if present outflow trends persist.

Euro zone finance ministers rejected Greek proposals to avoid the bailout conditions at a meeting on Monday.

German Chancellor Angela Merkel made clear on Wednesday that Athens would have to give as well as take in negotiations.

“If countries are in trouble, we show solidarity,” she said in a speech to conservative supporters, naming Greece and other euro zone countries that had to take bailouts during the debt crisis. But she added, “Solidarity is not a one-way street. Solidarity and efforts by the countries themselves are two sides of the same coin. And this won’t change.” (Additional reporting by Renee Maltezou and Deepa Babington in Athens, Jan Strupczewski in Brussels, Gernot Heller, Michael Nienaber and Caroline Copley in Berlin, Jason Lange in Washington and Paul Carrel in Frankfurt; Writing by David Stamp and Deepa Babington; Editing by Peter Graff and Paul Taylor)

Politics & GovernmentBudget, Tax & EconomyECB […]

Greece to seek loan extension from sceptical euro zone

* Athens to use vital EU wording to request extension -newspaper

* Greek bailout deal due to expire on Feb. 28

* State faces running out of cash by late March – source

* ECB raises emergency funding for Greek banks only modestly (Adds Kathimerini report)

By Lefteris Papadimas and George Georgiopoulos

ATHENS, Feb 19 (Reuters) – Greece is expected to ask on Thursday for an extension to its euro zone loan agreement skirting tough bailout conditions to avoid running out of cash within weeks, but it must overcome resistance from sceptical partners led by Germany.

With the EU/IMF bailout programme due to expire in little more than a week, the government of leftist Prime Minister Alexis Tsipras urgently needs to secure a financial lifeline to keep the country afloat beyond late March.

Athens is expected to submit a request to extend the loan agreement for up to six months, boosting hopes for a last minute compromise to avert a Greek bankruptcy and exit from the euro zone. But Athens still rejects the austerity requirements that have been attached to the loans as part of the bailout package.

“We are doing everything to reach a mutually beneficial agreement. Our aim is to conclude this agreement soon,” government spokesman Gabriel Sakellaridis told Skai TV. “We are trying to find common points.”

Conservative daily Kathimerini said the government is expected to seek an extension to the so-called Master Financial Assistance Facility Agreement with the euro zone, under which aid is disbursed on condition that Athens fulfills bailout obligations. That could satisfy both sides as it would mean Athens can avoid saying “extension of the existing program” and the creditors can avoid using the term “loan agreement.”

EU paymaster Germany and fellow euro zone governments have insisted no loan deal without the full bailout is on the table, and Athens must seek an extension to the entire programme, which Tsipras promised to ditch when he was elected last month.

German Finance Minister Wolfgang Schaeuble has poured scorn on suggestions that Athens could negotiate an extension of euro zone funding without making any promises to push on with budget cuts and economic reforms.

But on Wednesday he indicated there may be some possibility of a compromise. “Our room for manoeuvre is limited,” he said during a debate in Berlin, adding, “We must keep in mind that we have a huge responsibility to keep Europe stable.”

Greek Finance Minister Yanis Varoufakis expressed confidence on Wednesday that euro zone finance ministers would approve the Athens government proposal in a teleconference on Friday.

“The application will be written in such a way so that it will satisfy both the Greek side and the president of the Eurogroup,” he said, referring to the head of the group of euro zone finance ministers.

FINANCES IN PERIL

Greece’s finances are in peril. It is burning through its cash reserves and could run out of money by the end of March without fresh funds, a person familiar with the figures said.

Athens had enough to repay a 1.5 billion euro instalment to the International Monetary Fund next month but would struggle to pay public sector salaries and pensions in April.

Likewise its banks are dependent on emergency funding controlled by the European Central Bank in order to pay out depositors who have been withdrawing their cash. The ECB agreed on Wednesday to raise a cap on funding available under its Emergency Liquidity Assistance scheme to 68.3 billion euros (US$78 billion), a person familiar with the ECB talks said.

That was a rise of just 3.3 billion euros, less than Greece had requested. The modest increase raises the pressure for a compromise at the Eurogroup. One senior banker said it would be enough to keep Greek banks afloat only for another week if present outflow trends persist.

The Frankfurter Allgemeine Zeitung (FAZ) – a conservative German newspaper that often takes a stance similar to Germany’s Bundesbank – said on Thursday the ECB would feel more comfortable if Greece introduced capital controls to stem the outflow from banks, citing central bank sources.

Finance ministers of the 19-nation currency bloc rejected Greek proposals to avoid the bailout conditions at a meeting on Monday. Whether they accept its new request as a basis to resume negotiations will depend on how it is formulated, an EU source said. The wording has to match EU legal texts to win approval in several euro zone parliaments.

Tsipras said on Wednesday talks were at a crucial stage and his demands for an end to austerity were winning backing.

In a sign of concern in Washington at the financial risks to a strategically located NATO ally, U.S. Treasury Secretary Jack Lew telephoned Varoufakis to urge Greece to strike a deal with the euro zone and IMF, warning that failure would lead to immediate hardship.

Lew said the United States would continue to prod all parties in the talks to make concrete progress, noting that uncertainty was “not good for Europe.”

The Athens government released documents indicating it was taking a more flexible line to placate euro zone creditors than its anti-bailout rhetoric at home has suggested. They showed Varoufakis had offered on Monday to accept some conditions on an extension to its loan agreement with a check-up by the European Commission at the end of the period.

German Chancellor Angela Merkel made clear on Wednesday that Greece would have to give as well as take in negotiations.

“If countries are in trouble, we show solidarity,” she said in a speech to conservative supporters, naming Greece and other euro zone countries that had to take bailouts during the debt crisis. But she added, “Solidarity is not a one-way street. Solidarity and efforts by the countries themselves are two sides of the same coin. And this won’t change.” (Additional reporting by Renee Maltezou and Deepa Babington in Athens, Jan Strupczewski in Brussels, Gernot Heller, Michael Nienaber and Caroline Copley in Berlin, Jason Lange in Washington and Paul Carrel in Frankfurt; Writing by David Stamp; Editing by Peter Graff and Paul Taylor)

Politics & GovernmentBudget, Tax & Economyloan agreement […]

Greece to seek loan extension from Euro zone

By Lefteris Papadimas and Jan Strupczewski

ATHENS/BRUSSELS (Reuters) – Greece is expected to ask on Thursday for an extension to its “loan agreement” with the euro zone as it faces running out of cash within weeks, but it must overcome resistance from sceptical partners led by Germany.

With Greece’s bailout programme due to expire in little more than a week, the government of leftist Prime Minister Alexis Tsipras urgently needs to secure a financial lifeline to keep the country afloat beyond late next month.

Financial markets rallied after Athens said on Wednesday it would submit a request to extend the loan agreement for up to six months, hoping this signalled a last minute compromise to avert a Greek bankruptcy and exit from the euro zone.

EU paymaster Germany and fellow euro zone governments have insisted that no such deal is on the table and Athens must seek an extension to its full bailout, the very programme that Tsipras promised to ditch when he was elected last month.

German Finance Minister Wolfgang Schaeuble has poured scorn on suggestions that Athens could negotiate an extension of euro zone funding without making any promises to push on with budget cuts and economic reforms.

But on Wednesday he indicated there may be some possibility of a compromise. “Our room for manoeuvre is limited,” he said during a debate in Berlin, adding, “We must keep in mind that we have a huge responsibility to keep Europe stable.”

Greek Finance Minister Yanis Varoufakis expressed confidence on Wednesday that euro zone finance ministers would approve the Athens government proposal in a teleconference on Friday. “The application will be written in such a way so that it will satisfy both the Greek side and the president of the Eurogroup,” he said.

FINANCES IN PERIL

Greece’s finances are in peril. It is burning through its cash reserves and could run out of money by the end of March without fresh funds, a person familiar with the figures said. The person said Athens had enough to repay a 1.5 billion euro instalment to the International Monetary Fund next month but would struggle to pay public sector salaries and pensions in April.

Likewise its banks are dependent on emergency funding controlled by the European Central Bank. The ECB agreed on Wednesday to raise a cap on funding available under the Emergency Liquidity Assistance scheme to 68.3 billion euros (£50.4 billion), a person familiar with the ECB talks said.

View gallery

Greek Prime Minister Alexis Tsipras meets with former Greek Interior Minister and former New Democra …

That was a rise of just 3.3 billion euros, below what Greece had requested. “The increase in the cap was a bit below what was requested, about 5 billion more, and expected,” one senior banker said. “Assuming the present outflow trends persist, it is enough to carry us over for another week.”

This modest increase keeps Greece’s banks, and thereby the government, on a tight leash and raises the pressure for a compromise at the Eurogroup.

Whether finance ministers of the 19-nation currency bloc, who rejected such Greece’s ideas at a meeting on Monday, accept its request as a basis to resume negotiations will depend on how it is formulated, an EU source said. The wording has to match EU legal texts to win approval in several euro zone parliaments.

Tsipras said talks were at a crucial stage and his demands for an end to austerity were winning backing. “We have managed for the first time through contacts with foreign leaders to create a positive stance on our requests,” he said at a meeting with President Karolos Papoulias.

In a sign of concern in Washington at the financial risks to a strategically located NATO ally, U.S. Treasury Secretary Jack Lew telephoned Varoufakis to urge Greece to strike a deal with the euro zone and IMF, warning that failure would lead to immediate hardship.

Lew said the United States would continue to prod all parties in the talks to make concrete progress, noting that uncertainty was “not good for Europe.”

The Athens government released documents on Wednesday indicating that it was taking a more flexible line to placate euro zone creditors than its anti-bailout rhetoric at home has suggested. They showed Varoufakis had offered to accept conditions on an extension to its loan agreements and even an inspection by the European Commission at a fraught meeting in Brussels on Monday.

German Chancellor Angela Merkel signalled on Wednesday that Greece would have to give as well as take in negotiations.

“If countries are in trouble, we show solidarity,” she said in a speech to conservative supporters, naming Greece and other euro zone countries that had to take bailouts during the debt crisis. But she added, “Solidarity is not a one-way street. Solidarity and efforts by the countries themselves are two sides of the same coin. And this won’t change.”

(Additional reporting by George Georgiopoulos, Lefteris Papadimas and Deepa Babington in Athens, Jan Strupczewski in Brussels, Gernot Heller, Michael Nienaber and Caroline Copley in Berlin, Jason Lange in Washington and Paul Carrel in Frankfurt; Writing by David Stamp; Editing by Toni Reinhold)

Politics & GovernmentBudget, Tax & EconomyAlexis Tsiprasloan agreement […]

Exclusive – Greece to run out of cash by end-March without new aid -source

REUTERS – Greece is burning through its cash reserves and will not be able to meet payment obligations beyond the end of March at the latest unless it secures additional funds from its creditors, a person familiar with the figures told Reuters on Wednesday.

Athens is locked in a battle with euro zone partners over the future of its bailout programme, which is due to expire in 10 days. Failure to clinch a deal would leave it at risk of bankruptcy, though until now it had not been clear how much time Athens had until state coffers run dry.

Greece will be able to repay a 1.5 billion euro loan from the International Monetary Fund that falls due in mid-March, but the state will struggle to make payments after that despite continuing efforts to minimize cash needs, the person said.

“Greece can cover its needs until mid-March or the latest by the end of March unless it secures additional funding from official lenders,” the person told Reuters.

Athens has repeatedly asked its euro zone partners to be allowed to issue more Treasury bills beyond an existing 15 billion euro ceiling that it has already hit but its request has been denied.

Adding to the pressure, budget data for January showed the state’s finances worsening sharply as Greeks held off on paying taxes ahead of the Jan. 25 general election. That resulted in a 1 billion euro shortfall in tax revenues, 23 percent below the targeted level, putting the country’s bailout target of a 3 percent budget surplus this year in doubt.

Prime Minister Alexis Tsipras leftist-led government has sought to play down cashflow concerns, with ministers saying the state has enough money on hand and refusing to speculate on when it might run out.

Asked at a news conference on Wednesday about the state’s cash reserves, Deputy Finance Minister Dimitris Mardas said: “We are trying to pay our obligations all the time, I don’t have anything else to tell you.”

Earlier on Wednesday, the conservative daily Kathimerini said cashflow projections showed government coffers would start to run dry as early as Feb. 24.

After the March IMF repayment, Athens faces 800 million euros in interest payments in April followed by a major financing hump in the summer, when it has to repay about 8 billion euros to official lenders including 6.5 billion euros to the ECB for maturing bonds.

In addition, Athens also faces a monthly bill of 1.5 billion euros for public sector salaries and pensions, and an additional 1 billion euros a month for social security and healthcare costs.

Shut out of capital markets in 2010, Greece has survived over the past four and a half years on a continued stream of over 240 billion euros in aid from the European Union and IMF.

It broke its four-year exile from bond markets in April last year amid signs that the worst of its debt crisis was over, but the return was short-lived as bond yields rose to unsustainable levels in the autumn when political tensions rose.

(Editing by Paul Taylor and John Stonestreet)

Politics & GovernmentBudget, Tax & EconomyInternational Monetary FundAthens […]

Payday loans firms to shut as new caps bite — business live …

Image abe578af-16ac-48ef-a8d7-b9801e785d9d-620x316.png

Good morning, and welcome to our rolling coverage of the financial markets, the world economy, business and the eurozone.

Vodafone has got the morning rolling with a reminder that Europe’s weaker countries remain a tough place to operate.

But the mobile giant has also cheered the City by raising its profit forecasts; good news for millions of small shareholders.

In its latest financial results, Vodafone reports that it suffered “continued revenue declines in Europe”, particularly in areas hit hard by the eurozone crisis.

Service revenue across Europe fell by 7.1% in the six months to the end of September. That included a 13% in service revenues in Italy in the first half of the year, and 12.4% in Spain — where underlying profits slumped by over 40%.

Here’s the key details:

Vodafone results, November 11 2014 Photograph: Vodafone

Vodafone blamed “ongoing pressures from competition, regulation and weak economies” in Europe.

There are signs that the slump may be bottoming out — revenues in the last three months were ‘only’ down by 9.7% in Italy, and by 9.3% in Spain.

Chief executive Vittorio Colao claims that conditions are improving:

“We have made encouraging progress during the quarter.

There is growing evidence of stabilisation in a number of our European markets, supported by improvements in our commercial execution and very strong demand for data.

And Vodafone has raised its forecast for underlying earnings this year, to between £11.6bn and £11.9bn, from £11.4bn-£11.9bn previously.

But still, the situation in Southern Europe remains concerning, as Bloomberg’s Jonathan Ferro explains.

More to follow….

[…]

How Easy Is It To Get An Art-Backed Loan?

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Would you spend more money on art if you thought that you could borrow money against its value? After all, buying art can be an expensive business and collectors are often loathed to part with it. Even collectors who do want to sell soon discover that art is an illiquid asset. If you could borrow against your prized Picasso, so much the better, and if you could borrow that money cheaply and channel that cash into something with a higher yield, art would start to look considerably more appealing as an investment.

The reality, though, is that art is hard to value and hard to authenticate and few mainstream banks want to lend against it. Some banks do offer art-secured loans at very low rates of around 2.5% to 3% to ultra high-net-worth collectors such as Steve Cohen, whose art collection is worth an estimated $1 billion.

Collectors at this level (and let’s face it, not many collectors are) can use these cheap loans to buy property, businesses or even more art, but there’s a big catch, and that it to arrange these loans, banks typically need to hold other assets with that institution that can be used to repay it. These borrowers are essentially taking out a loan against their whole portfolio, not just their art collection. Auction houses such as Sotheby’s and Christie’s also offer loans at competitive rates – as long as you are buying or selling art through them.

It is possible to take out a non-recourse, general purpose loan that is just secured against the value of your art from one of the other specialist lenders in the market. Interest rates here range from high single digits to well over 20%, but most lenders are only interested in making loans of over $500,000 and typically will only lend 40% of an artwork’s value. That means you need to have an artwork worth at least $1.25 million to be considered.

Some companies like Borro will make short-term loans against lower value art and collectibles, but will charge you interest of between 35% and a staggering 83% on an annualized basis. Then there are the so-called loan-to-own lenders, who bet that borrowers will default on the terms of their loan so that they can sell their precious artwork and keep the profits for themselves.

Put all these different lenders together and current size of the art lending market is estimated at £6 billion ($9.6 billion) a year, according to Deloitte and ArtTactic’s 2014 Art & Finance report, which was published last month. When you consider that global art sales last year were an estimated $63 billion, that isn’t very much at all.

However, the same report predicts the art secured-lending market could triple in size with the help of some new art insurance products, including those that allow collectors to keep the art they borrow against hanging on their wall.

If their art is located in the US, collectors can already do this. Under the Uniform Commercial Code, lenders can place a charge on the art collateral in someone’s home, but in most of Europe (except France, Belgium and Spain) and in other major art centers such as Hong Kong, lenders cannot register charges against art assets, so borrowers often have to hand over their art to their lender during the loan, which is not exactly an appealing prospect.

Today, though, some insurance companies are offering new products to protect the lender against the risks of letting the borrower keep the art. If the borrower grants a charge against the art collateral to someone else, or takes off with the art, or refuses to give it up if they default, the insurers will cover the lender for its loss.

Is this really going to result in the rapid growth of the art lending market, though? Dr. Tim Hunter, the head of Falcon Group’s new art division, Falcon Fine Art, which has just launched in London, says the company plans to allow clients in England, Wales and potentially other countries, on a case-by-case basis, to keep possession of their art.

That is certainly a departure from the norm, but the company isn’t relying on insurance to underwrite the risk. “Allowing clients to keep possession of their artworks is an important part of our model, but we’re not relying on any external product that may or may not be able to insure this service,” says Hunter, who is also an art adviser and spent 16 years at Christie’s, where he was a senior director in its Old Master and British Pictures department, a director in its Impressionist and Modern department and head of 19th Century European Art. “Falcon Group have been doing asset-backed financings for 20 years and I have 20 years of experience in the art world. In the end, there’s no short cut to knowing your client.”

Falcon Fine Art plans to offer clients non-recourse loans of one to three years, with the option to extend, financed from the Falcon Group’s own balance sheet. Although the terms will depend on the type of art, Hunter says interest rates will typically be in the high single digits and loan-to-value ratios will be 40%.

However, Paul Ress, managing director of Right Capital, another UK-based art finance company that matches borrowers, either individual collectors or professional dealers, with high-net-worth individuals that are willing to lend, thinks that the new insurance products for art lenders are one of the most interesting developments in the industry.

“They will allow more borrowers to keep collateral, while differential insurance, which hopefully is also coming soon, will insure lenders against a loss of capital if a painting has to be sold and doesn’t cover the amount of the loan. In theory, that shouldn’t be too expensive if you’ve done the right due diligence up front.”

Right Capital, which is about to open an office in Luxembourg, organizes asset-backed, non-recourse loans of between £500,000 and £5 million ($800,000 and $8 million) at interest rates ranging from 8% to 13%. Its typical loan-to-value is 35% to 45% and the company is currently looking at ways to bring multiple lenders into individual loans to spread the risk. Ress hopes that as more companies start offering art loans, there will be more standardization throughout the market, which will bring costs down for borrowers and lenders alike.

Right now, though, organizing art loans is a complex business, because art is a complicated asset. Ress and Hunter say that each loan takes four to six weeks to structure, which includes the time it takes to put together all the documentation on the title of the art, its value, its provenance and authenticity. Valuation is particularly subjective and contentious and art prices are also volatile.

“Valuation can be so variable when it comes to art,” says Ress. “We always form an internal view on what we think the valuation should be, obtain an independent view for the borrower, and insist that the lender obtains their own valuation too.” Even then, he says that lenders are sometimes only comfortable loaning 30% of the value of some contemporary works.

That is why art lending is still a niche market. There may be an increasingly large mountain of money tied up in art around the world, but there’s hardly a flood of new lenders that are dying to serve this market. On that basis, there’s not going to be a three-fold increase in art lending any time soon.

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Europe fears banks lack cash cushion to cover bad loans

As slogs through its latest round of bank stress tests, a growing number of analysts have already reached their own conclusion: need additional cash.

To buttress their case, some analysts have dusted off an obscure American bank metric that highlights the extent to which Europe’s increasing number of nonperforming loans is threatening to overwhelm existing bank cushions.

The measure, called the Texas ratio, was developed by an analyst who covered troubled United States banks during the late 1980s and early 1990s. During that period, numerous Texas-based financial institutions collapsed under the weight of faulty real estate loans.

Part of what has made the attractive to analysts and regulators is its simplicity. When the ratio of to equity and cash set aside exceeds 100 per cent, it suggests that the bank is either ready to fail or is in desperate need of new capital – as was the case with Texas banks in the 1980s.

“We found it to be a very good guide telling you which banks would fail,” said Gerard S Cassidy, the bank analyst who introduced the formula and coined the name. “It’s a ratio that everyone can understand.”

Now as the prepares to become the primary bank regulator in the Euro zone, the extent to which lenders in troubled economies like Spain, Italy, Portugal and Greece have sufficient cash to protect against ever-rising bad loans has emerged as a crucial question for investors, banks and regulators.

The will publish the results of its half-year investigation into Europe’s 128 largest banks on October 17. But until then, with worries mounting that the central bank will come down hard on banks with particularly weak loan books, investors and analysts have been scrambling to determine which of these lenders are most at peril.

And with sharing similar characteristics with Texas banks in the late 1980s – nonperforming real estate loans and slim cash buffers – the Texas ratio has emerged as a popular analytical tool.

This spring, banking analysts for Nomura in London used the Texas ratio to highlight 11 banks in Southern Europe that were most exposed to nonperforming loans relative to cash they had on hand.

Of the 11 banks that exceeded the 100 per cent threshold, three banks stood out with ratios of 150 per cent and above: Piraeus Bank in Greece, Banco Popolare in Italy and Banco Popular Español in Spain.

Cassidy, who covers United States financial institutions for RBC Capital Markets in Portland, Maine, does not pretend to be an expert on European banks – although he still uses the measure to examine American banks. But he is not surprised that his peers covering banks in troubled Euro zone countries have started to use it.

It is a great way, Cassidy said, to ask the most important question a bank analyst or investor will ever want answered: Does the bank have enough money?

Of course, like all financial formulas, the Texas ratio is not infallible. For example, Banco Espírito Santo in Portugal, which collapsed two months after the Nomura report came out, was not listed as a bank with a ratio in the danger zone. And there is no sign yet that Piraeus or the other two banks are in dire straits, despite bad loan burdens that exceed their peers.

Moreover, Piraeus in Greece and Popular in Spain have both been subjected to particularly intense scrutiny of late by private sector stress tests undertaken to calm fears about the banks in these countries.

Still, as concerns build that weak banks will be forced to raise more cash as bad loans increase, investors – once eager to pile into these stocks, based on recovery hopes – have reversed course. Since early June, Piraeus and Popolare in Italy are down by a quarter, while Popular in Spain has lost 16 percent.

Using the Texas ratio also underscores the ever-increasing gap that separates European banks from their American counterparts, highlighting as well the contrasting approaches taken by bank regulators here and in Europe.

According to the most recent data, the average ratio for all United States banks is 15 percent, with giants like Chase and boasting very healthy metrics: 16 percent for JPMorgan and 13 percent for Citigroup.

By contrast, the largest banks in the euro zone that also pretend to have global ambitions have much higher ratios – and arguably would be considered to carry more risk. Santander and BBVA in Spain have ratios of about 70 percent; UniCredit in Italy comes in at 90 percent; BNP Paribas has a lower measure of 41 percent. Deutsche Bank in Germany has one of the lowest scores in Europe, at 14 percent, but that understates its risk because most of its assets comprise riskier traded securities like derivatives and bonds.

For more than two years, outside analysts have argued that European banks, compared with their American peers, suffer from a fundamental capital deficit. Adrian Blundell-Wignall, who oversees financial research at the Organization for Economic Cooperation and Development in Paris, has been one of the more vocal critics in this regard.

And last year, economists at the Danish Institute for International Studies came out with a report highlighting how low cash buffers were in European banks, especially in France and Germany.

Since 2010, European regulators have sponsored two comprehensive stress tests, both of which were discredited after banks failed soon after each was completed.

Local central banks in countries hardest hit by the crisis – Spain, Ireland, Cyprus and Greece – have hired outside financial firms to run independent stress tests.

In Cyprus and Greece, these reports have drawn criticism over their independence. The most recent of them, a comprehensive study issued in March by BlackRock, which estimated Greek banks would need only 6 billion euros in new cash, has been criticized by one of Greece’s primary creditors, the International Monetary Fund, as being too upbeat.

“The picture they have painted is too optimistic,” said Jens Bastian, an Athens-based financial analyst. “The events on the ground do not support these optimistic scenarios.”

Mr. Bastian worked recently for the so-called troika – the E.C.B., the European Commission and the I.M.F. – overseeing Greece’s finances. And he points out that in the March BlackRock report, nonperforming loans in Greece were estimated at 28 percent.

Now, he says, “we are way beyond that level and have passed above the 34 percent threshold, totaling approximately 75 to 77 billion euros.”

One senior Greek banker, who spoke on the condition of anonymity, said that he was expecting the E.C.B. to require the top four banks in Greece to raise from 5 billion to 8 billion euros.

Greek officials have said that in such a situation, the banks could tap international markets, as Piraeus and others did successfully earlier this year.

But with nonperforming loans pushing ever higher, and with investors more cautious about investing in risky European banks, securing the needed cash may not be so easy this time around.


©2014 The New York Times News Service

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