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Greece taps public sector cash to help cover March needs

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Greece taps public sector cash to help cover March needs
Greece is tapping into the cash reserves of pension funds and public sector entities through repo transactions as it scrambles to cover its funding needs this month, debt officials told Reuters on Tuesday.Shut out of debt markets and with aid from lenders frozen, Athens is in danger of running out of cash in the coming weeks as it faces a 1.5 billion euro loan repayment to the International Monetary Fund this month.The government has sought to calm fears and says it will be able to make the IMF payment and others, but not said how.At least part of the states cash needs for the month will be met by repo transactions in which pension funds and other state entities sitting on cash lend the money to the countrys debt agency through a short-term repurchase agreement for up to 15 days, debt agency officials told Reuters.However, one government official said they could not be used to repay the IMF unless Athens was able to repay the state entities the cash it borrowed from them.Debt officials sought to play the repos as advantageous for both sides, arguing that the funds get a better return on their cash than what is available in the interbank market.”It is not something new, its a tactic that started more than a year ago and is a win-win solution. Its a proposal, we are not twisting anyones arm,” one official said.In such repo transactions, a pension fund or government entity parks cash it does not immediately need at an account at the Bank of Greece, which becomes the counterparty in the deal with the debt agency.The money is lent to the debt agency for one to 15 days against collateral – mostly Greek treasury paper held in its portfolio – and is paid back with interest at expiry.The lender can always opt to roll over the repurchase agreement and continue to earn a higher return than what is available in the interbank market.One source familiar with the matter has previously said Athens could raise up to 3 billion euros through such repos, but that it was not clear how much of that had already been used up by the government.”There is a sum that has already been raised this way,” the debt official said without disclosing specific numbers.Athens – which has monthly needs of about 4.5 billion euros including a wage and pension bill of 1.5 billion euros – is running out of options to fund itself despite striking a deal with the euro zone to extend its bailout by four months.Faced with a steep fall in revenues, it is expected to run out of cash by the end of March, possibly sooner, though the government is trying to assure creditors it will not default.”We are confident that the repayments will be made in full, particularly to the IMF, and there will be liquidity to get us through the end of the four-month period,” Finance Minister Yanis Varoufakis said during a late-night talk show on Greek TV on Monday. “March is sorted.” [Reuters]
[…]

Weak economy set to spur Reserve Bank cash rate cut on Tuesday

Concern about deteriorating economic growth lies behind the Reserve Bank’s determination to cut interest rates, a move most likely at its first board meeting for the year on Tuesday.

A cut in the bank’s cash rate from 2.5 per cent to 2 per cent would bring the standard discounted home loan rate below 5 per cent, knocking $53 off the cost of servicing a $350,000 loan.

Although the latest official figures show Australia’s unemployment rate falling, the Reserve Bank’s preferred measure shows it continuing to climb.

The bank averages the unemployment rate for each quarter and compares it with the average for the previous quarter.

Board members will be told on Tuesday that over the past year the average unemployment rate has climbed from 5.9 per cent to 6 per cent to 6.1 per cent to 6.2 per cent. The averages mean that abstracted from monthly “noise” there has been no let up in the pace at which unemployment is climbing.

The board will be told economic growth figures released since it last met show the annualised pace of growth slipping from 3.6 per cent to 1.6 per cent in the space of six months.

The bank’s previous forecast of rising economic growth published in November is now regarded as out of date and will be revised when new forecasts are issued on Friday.

No lift in business confidence

Board members will be told that neither consumer nor business confidence has lifted since the budget, as would be needed for economic growth to climb back to its long-term trend.

Retail sales are solid but not spectacular, maintained by discounting and weighed down by low wage growth and rising unemployment.

Inflation provides no impediment to cutting rates. The headline rate is now just 1.7 per cent after the collapse in oil prices. Importantly, the bank expects lower oil prices to continue to weigh down on inflation as they feed through into a myriad other prices, something it did not expect late last year when it looked as if the collapse in the oil price would be less severe.

Rather than focusing on the unexpectedly high rate of so-called underlying inflation in the December quarter, the bank is paying special attention to the rate of inflation on so called “non-tradables” – products that are not internationally traded, which is well down on where it was a year ago, reflecting low wage growth and weak consumer demand.

“Tradables” inflation, the rate on products that are internationally traded, is now negative despite the lower dollar.

The bank is minded to cut its cash rate despite doubts about its effectiveness in boosting the economy. It is concerned that another cut may simply reignite the investor housing market and it fears it could fail in its objective of encouraging businesses and consumers to borrow and spend more. While a boost to the economy from the budget would be preferable, it isn’t likely.

Another impediment is the statement the bank released after its December board meeting, saying “the most prudent course is likely to be a period of stability in interest rates”.

The bank believes that enough has changed since December to release it from the commitment. The oil price has collapsed, economic growth has weakened, and the steam has gone out of inflation.

It believes that if it is clear it has to cut rates, there is little point in waiting. And it is also concerned that if it doesn’t cut when it is clear it should, the Australian dollar will head back up after dropping.

Canada has just cut its cash rate to 0.75 per cent. Denmark has just cut its rate to minus 0.5 per cent. The United States is keeping its rate at 0.25 per cent. An Australian cash rate maintained at 2.5 per cent in the face of these moves would give the dollar support the bank would prefer it not to have.

The final decision will up be made by the nine members of the board, including the newly appointed treasury secretary John Fraser, who will meet in Sydney on Tuesday.

If they decide to keep the cash rate at 2.5 per cent in the face of recent developments, they are likely to indicate they intend to cut it soon, in March. But it is more likely that they will cut on Tuesday.

Peter Martin is economics editor of The Age.

Twitter: @1petermartin

The story Weak economy set to spur Reserve Bank cash rate cut on Tuesday first appeared on The Sydney Morning Herald.

[…]

Community Groups Fight For More Protections From Payday Loan …

In an effort to control the damage being done to individuals and communities by payday lenders, community activists rallied outside payday lending storefronts in 10 states Tuesday to increase awareness of the lack of protection many states offer individuals against purveyors of short-term, high-interest loans. National People’s Action (NPA) helped coordinate the protests along with several other organizations.

There were 11 actions across Idaho, Michigan, Colorado, Iowa, Missouri, Kansas, Maine, Minnesota, Illinois and Nevada calling out the toxic effect payday lenders have on communities. Members wore hazmat suits and taped off payday loan stores as part of a grassroots movement that an NPA statement said was in support of the Consumer Financial Protection Bureau (CFPB) providing “stronger protections against devastating loans.”

Thirty-five states across the country authorize some form of payday lending, and federal laws offer very few restrictions on payday lenders. According to an NPA press release, “Each year, payday lenders make more than $10 billion in fees by trapping an estimated 12 million consumers in a cycle of debt, with annual interest rates near 400 percent. Payday lenders have been known to use tactics like threats, harassment and intimidation in order to push customers to take out more loans.”

Payday lenders’ standard operating procedures are designed to bleed people as much as possible, said Liz Ryan Murray, policy director at National People’s Action. “Their business model is making you a loan and when you can’t pay it back they offer you another loan.”

“We’d also like [the CFPB] to look at where the money’s coming from,” she said, noting how payday lenders “pull the money out of people’s checking accounts whether they have it or not.”

Organizations invested in helping affected people and communities are pushing the CFPB to take concrete steps against predatory lenders. The CFPB is expected to make its first decision to regulate the industry in the coming days.

Participating organizations are against anything “that’s going to say maybe its OK or the first couple loans are OK. That can’t be on the table. Especially in those states where it has been effectively stamped out, a rule like that could open the door for them to get back into those states,” Murray said.

“We look at where payday loans are located and they’re highly concentrated in low income communities of color” Murray said. “I think that they’re preying on the most vulnerable, maybe the lowest political clout and they’re often the most desperate people. They deserve good credit just like everyone else. We often call it back-of-the bus credit.”

If you’re interested in learning more about the issue view NPA’s video on payday loans and view photos from Tuesday’s events. Please sign the petition telling CFPB to offer protections against predatory lenders and email alerts on different steps being taken to combat this issue here.

[…]

Protesters speak out against the payday loan industry

Tuesday, January 27, 2015 | 10:00 p.m. CST; updated 11:53 p.m. CST, Tuesday, January 27, 2015

COLUMBIA — Two men in hazardous materials suits approached the Quik Cash at 219 E. Broadway on Tuesday afternoon with a roll of yellow caution tape in their hands.

The men were “quarantining” what they consider a toxic payday loan business, joined by about 10 other consumer advocates and Grass Roots Organizing protesters hoping to incite changes in the practices of the payday loan industry.

The group chanted as cars drove by and honked their support.

“Say no to payday lender lies! They only want their fees to rise! They offer toxic loans to poor and wonder why we say no more!” the protesters shouted.

“We have been working on this issue for a long time,” organizer Robin Acree said. “We wanted to raise attention to the toxic loans in Missouri and the debt trap that they cause. They are taking advantage of a low-income workforce.”

Payday loan businesses such as Quik Cash offer short-term, high-interest loans to walk-in customers who secure the loans with their next paycheck. In 2012, the average 14-day loan issued in Missouri held an average annual percentage rate of approximately 455 percent, according to a state Division of Finance report.

The protesters said the businesses intentionally give loans to people who cannot afford to make the payments, add the high interest rates and continually loan out more money to pay for the original debt when the customer cannot pay.

Missouri caps interest rates at 75 percent for the duration of the loan, but that cap corresponds to an annual percentage rate of 1,950 percent for a 14-day loan.

Acree said she does not want the payday loans industry to do business in Columbia and would rather low-income wages be raised to prevent people from needing the loans.

The Rev. Joseph Wilson spoke at the protest representing Faith Voices of Columbia and told the protesters about his own problems with payday loans. He said he took out a loan for $700 for regular expenses and it took him almost three years and $3,500 to pay it off.

“We were fortunate to get out of it. I had several loans all around town under the stress of trying to get out of it, and I couldn’t,” Wilson said. “It was a trap, and if I’d have known then what I know now, I never would have done it. It’s not set up to get you out.”

Gov. Jay Nixon vetoed a bill last year that would have reduced the interest rate limit to 35 percent for the duration of the loan, or 912 percent on a 14-day loan, and banned loan renewals. But the bill would have also repealed a law limiting loans to six rollovers and allowed extended payment plans.

New bills aiming to reform the payday loan industry entered both houses of the Missouri General Assembly earlier this month.

Senate Bill 187 would prohibit payday loan operators to charge interest and bar renewals on the loans, eliminating the current allowance of six renewals. Under the bill, payday loaners would only be able to charge fees that would be refunded to a borrower when a loan is repaid.

The bill would also extend loan periods to 30, 60 or 90 days from the current 14 and 31-day standards and prohibit lenders from making more than one loan to a single customer.

House Bill 91 would classify any loan less than $750 as a payday loan, up from the current $500 standard. It would allow for two loan renewals, but borrowers would not be allowed to have more than $750 in outstanding loans at one time.

It would also prohibit a lender from making a loan to a customer who already has one unsecured loan.

But the protesters weren’t looking to state legislators for help. They called through a megaphone for Consumer Financial Protection Bureau director Richard Cordray to make the changes that legislation has yet to accomplish.

“Payday loans are toxic! They make me sick! CFPD, show me logic and make rules quick!” they chanted.

Supervising editor is Austin Huguelet.

[…]

Key backer may give up on RadioShack

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NEW YORK (CNNMoney)

A key backer for RadioShack may be giving up.

Just a year ago, Salus Capital (HRG) was the savior behind a $250 million cash injection to help struggling RadioShack (RSH). But that relationship has quickly soured, and on Tuesday, RadioShack said Salus is taking steps to call the loan, which was only formalized one year ago.

The lender continues to be unimpressed with the electronics retailer’s turnaround plan. According to RadioShack, Salus objected in particular to the $120 million cash infusion Radio Shack received in October from one of its largest shareholders. That cash was supposed to help RadioShack hobble through the holiday season.

About seven months after Salus made the loan, it rejected RadioShack’s plan to close 1,100 stores. The company instead closed about 200 locations.

RadioShack reintroduced the plan to close 1,100 more stores in late October, but Salus has yet to respond, according to the retailer.

RadioShack CEO Joe Magnacca called the lender selfish.

“Now, prompted by their narrow self-interest, they appear to be trying to manufacture a problem during the critical holiday shopping season in an effort to get out of a loan on which they have already reaped more than $35 million in fees and interest payments,” he said in a statement.

Magnacca called for Salus to walk back its threat to cancel the loan and instead back the retailer’s turnaround plan. He said the decision hurts “other creditors, the hundreds of communities we serve, the many other businesses we support and the jobs of more than 25,000 hard-working people.”

A Salus spokesman did not have an immediate response.

Related: RadioShack still stuck in the 1980s

Moody’s has warned RadioShack could be out of cash by the end of next year, and even Magnacca admitted the company could be near bankruptcy.

The company’s stock is down more than 70% this year, and dropped just over on 1% Tuesday morning before the news. Trading was halted for the announcement.

First Published: December 2, 2014: 12:30 PM ET

[…]

Pa. needs a loan

U.S. Defense Secretary Chuck Hagel and Army Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff, warned Congress on Tuesday about the looming threat that ISIS poses.

The Islamic State in Iraq and Syria has been brutalizing people in that region…

Read More » […]

American Apparel lender Lion Capital demands $10-million loan be paid

The wealthy playboy behind American Apparel Inc.’s latest crisis isn’t ousted Chief Executive Dov Charney. It’s a London financier named Lyndon Lea.

American Apparel told securities regulators Tuesday that Lea’s private equity firm, Lion Capital, has formally demanded repayment of the nearly $10 million it lent to the Los Angeles retailer, which carries a sky-high annual interest rate of 20%.

A default could throw the company into bankruptcy by triggering demands for repayment on additional debts. Those debts include a $30-million loan from Capital One and $206 million in senior secured notes — a kind of corporate IOU.

“It’s like pulling on a thread of a cheap suit, and the whole thing just falls apart at the seams,” said Craig Johnson, president of consulting firm Customer Growth Partners.

It’s like pulling on a thread of a cheap suit, and the whole thing just falls apart at the seams.- Craig Johnson, president of consulting firm Customer Growth Partners

American Apparel said it doesn’t believe Lion Capital’s claims are valid and may seek damages against the London investment firm for improperly accelerating payment of the loan, according to a filing Tuesday with the Securities and Exchange Commission.

The company’s directors last month voted Charney out as chairman and chief executive, citing misconduct, including allowing the online posting of nude photos of a former employee who was suing him. The board’s vote immediately suspended Charney from his CEO job, pending an ongoing investigation into his behavior, although a 30-day wait is required for termination under his employment contract.

American Apparel argued Tuesday that Lion Capital can’t call in the loan until July 19, when Charney is slated to be officially fired as CEO, according to the filing.

Representatives for Lion Capital and American Apparel declined requests for comment.

The latest turn of events adds even more uncertainty.

lRelated Company TownAmerican Apparel sorry for using Challenger disaster photoSee all related8

American Apparel is seeking permission from other lenders to pay Lion. If it can get that approval, American Apparel said it would be able to pay off the loan.

But the company warned that if those lenders don’t permit the repayment, other defaults may loom, which “could result in a material adverse effect on the company and its business.” Although American Apparel didn’t name Capital One in its filing, it has previously said that its revolving line of credit with that company could be called because of a provision that links it to the Lion loan.

The move by Lion raised speculation that the private equity firm, whose purchases have included luxe shoe brand Jimmy Choo and Bumble Bee Foods, is interested in taking over the troubled retailer instead.

American Apparel’s interim chief executive, John Luttrell, has said that the company is not interested in a sale.

Lion Capital, which holds the right to buy a 12% stake in American Apparel, has been lending money to the company since 2009, when Charney first turned to Lea for a cash infusion.

Its current lending agreement includes an unusual provision that allows Lion to call its loan if Charney leaves his CEO job.

Jerry Reisman, a corporate law expert who has worked with the retail industry, said Charney himself may have pushed for that requirement to be written into the loan deal.

“Perhaps Dov had that clause inserted into the loan agreement as a covenant to make sure the company didn’t fire him,” Reisman said.

A person familiar with the matter said that Lea has been supportive during Charney’s time as CEO and would welcome his reinstatement.

The two men appear to share a taste for headline-making pursuits.

Charney has talked openly about having relationships with employees and has been sued several times for sexual harassment. He has personally photographed women in provocative poses for company advertisements.

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Lea, a former director of American Apparel, has developed a reputation for throwing decadent parties in his California mansion, where sushi reportedly has been served on the bodies of scantily clad women.

Both men are 45, born days apart in January 1969. Both have ties to Canada: Charney was born in Montreal, and Lea went to college at the University of Western Ontario.

Observers say that it’s too early to tell what Lion’s plan is for American Apparel, and whether the investment firm really backs Charney.

Some say the company may be finally throwing in the towel and walking away from a highly risky bet; others say the company may have called in the loan to pressure the board to accept a buyout offer.

“Lion is first and foremost not a lender, they are a private equity firm that makes controlled investments in consumer brands,” said Lloyd Greif, chief executive of investment banking firm Greif & Co. “It’s right up their alley to potentially buy the company.”

The American Apparel board may have few options left.

The company could pursue a bankruptcy, possibly with a buyer already in place to take it over afterward, said Johnson, the consulting firm executive. Other options include trying to sell more shares, liquidating some assets or finding another lender. But Johnson said that, given the chaos, it is highly unlikely a reputable lender would extend a loan.

“Capital One is probably worried about getting out with the money” already lent out, Johnson said. “The question is, is it throwing good money after bad?”

American Apparel could still be saved with funds from Standard General, the New York hedge fund that controls a 43% stake in the company after reaching a deal with Charney.

Standard General said in a letter to investors last week that it plans to introduce new board members and improve the retailer’s management. The firm said it may use its resources to help American Apparel avoid a bankruptcy or liquidation.

But analysts say that scenario is unlikely.

“I would highly doubt that Standard General is in a position to double down the risk by stepping in and effectively taking the place of Lion Capital,” Greif said.

Greif pointed to Standard’s letter as one sign that the firm’s investors didn’t cheer the deal with Charney.

“The only reason you send a letter like that is if they felt compelled to explain their rationale to all of their institutional investors, to explain why they are dealing with a guy like Dov Charney,” Greif said. “That was a defensive posture.”

Even if American Apparel avoids default, it faces other financial problems. The company has lost nearly $270 million in the last four years and is more than $200 million in debt. It will owe bondholders $13.5 million in interest in October.

For his part, Charney has been keeping a relatively low profile. But photos showing a man who appeared to be Charney visiting an American Apparel store in New York popped up Monday on Instagram.

Jen Snow, who snapped the photos of the man wearing a bright blue T-shirt and white pants and shoes, wrote on Instagram that she asked store employees if the man was Charney.

“One nodded ‘yes’ tentatively,” she wrote. “And the other asked me, ‘And how was your day at work?’ with an intonation of palpable discomfort.”

The visit — if it was by Charney — may have violated the terms of his suspension. A termination letter obtained by the social network Whisper said that Charney is not allowed to visit company facilities, including stores or apartments, during his suspension period.

shan.li@latimes.com

andrea.chang@latimes.com

Twitter: @ByShanLi, @byandreachang

Copyright © 2014, Los Angeles Times […]

RBA's stance actually not very stimulatory

WITH all the talk about the record low cash rate, you could be excused for thinking monetary policy is giving the economy a massive boost.

BUT it isn’t.

While the current cash rate is the lowest on record, interest rates generally are not. By the time the RBA’s board meets again next month, the cash rate will have been at 2.5 per cent for two days shy of a year. The statement from RBA governor Glenn Stevens after the meeting on Tuesday made it clear it’s not budging. “On present indications, the most prudent course is likely to be a period of stability in interest rates,” the RBA said. In 55 years covered by records going back to 1959, the cash rate has never been much below three per cent on a sustained basis. So the current sub-three per cent stretch, beginning with a cut from 3.00 per cent to 2.75 per cent in May 2013, is unique. But so was the global financial crisis. It changed the way banks fund their loans and price risk, and prompted new rules making funding more expensive, widening the gap between the cash rate and lending rates. In the decade before money markets went haywire in mid-2007, the gap between the cash rate and banks’ standard variable rate home loan rates averaged 1.8 percentage points. It’s now nearly 3.5. For businesses loans it’s even worse. Before the crisis, the gap between cash and the small business unsecured overdraft rate averaged 3.3 percentage points, according to RBA data. It’s now close to 6.5 points. So, while the cash rate is now 2.7 percentage points below its pre-crisis average, the standard home loan is only about one percentage point below and the small business overdraft is actually higher by nearly half a percentage point. Sure, monetary policy “remains accommodative”, as the RBA’s statement reassured us. But the accelerator is not pressed all the way to the floor. And, considering the fading mining investment boom, tight budget policy, slow wages growth and the high Australian dollar, the chances are that the RBA’s “period of stability” will last quite a few months yet. In fact, the risk that these negatives will not only delay the economy’s eventual return to normal growth but depress it further has not been lost on the futures market. The market has priced the cash rate at slightly less – that’s right, less – than 2.5 per cent right through until mid-2015. That’s not to say the market expects a cut. But it is an acknowledgement that if there is a move in the cash rate over the coming few months, it is more likely to be a cut than a hike, as the RBA fears its policy stance is not doing enough to lift the economy out of its rut.

Originally published as RBA’s stance actually not very stimulatory […]

SC State runs out of cash, wants to tap loan

ORANGEBURG, S.C. (AP) South Carolina State University wants to draw more than $1 million dollars from an emergency loan to pay employees and cover debt payments.

President Thomas Elzey told The State newspaper (http://bit.ly/1m8XRge ) on Tuesday that the school needs at least $1.2 million to make payroll and debt payments for June.

Last month, the Budget and Control Board approved a $6 million loan to pay the school’s oldest unpaid bills. How the school will pay it back is unknown.

Elzey had asked for nearly $14 million to pay bills that began piling up last fall at the state’s only public historically black university. Friday marks the first meeting of a panel including some S.C. State trustees, current and former university presidents to discuss ways to help the school recover financially.

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Information from: The State, http://www.thestate.com

[…]

Just How Much Cash Does Alibaba Have?

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By Alistair Barr alistair.barr@wsj.com Biography CONNECT alistair.barr@wsj.com Biography

Alibaba,the Chinese e-commerce giant which has filed Tuesday to go public in the U.S., had almost $7 billion in cash at the end of last year. But it also has borrowed a lot from banks.

EPA

The company disclosed assets of more than $17 billion and liabilities of almost $12 billion as of Dec. 31, 2013. Cash and cash equivalents totaled $6.71 billion, but non-current bank borrowings stood at $4.86 billion.

In 2013, Alibaba got an $8 billion loan facility from several banks and had borrowed $5 billion of that by the end of the year. In April, the company drew down the remaining $3 billion from the facility, according to the filing.

The company did not say in the filing which banks loaned the money. However, it is common for technology companies planning large IPOs to borrow money from the banks that are underwriting the share sale.

Facebook got a $5 billion line of credit from its IPO banks in 2012, along with a $3 billion bridge loan.

Alibaba has also been on an acquisition spree, acquiring stakes in everything from an online mapping company to a social network site.

On Tuesday, Alibaba listed Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley and Citigroup as its IPO banks.

[…]