Just over one month ago, Bank of America was handed a fairly ruthless deal. Due to its alleged law violations in dealing with the bankruptcy of Lehman Brothers, the bank will be forced to pay close to $600 million to the failed investment banking firm. It’s a fairly crushing financial blow, even for the multi-trillion dollar bank, but it’s one that’s very unlikely to go ahead without a major fight.
Bank of America are fighting back, claiming that they’re responsible for little of the major currency penalty. The challenge is just one of several being thrown at the failed investment bank – a financial ‘disaster’ that’s been moving in and out of the courts for two years. Lehman has been bankrupt since early September 2008, and is currently working through a business bankruptcy repayment plan.
Although it’s by no means that only American investment bank fighting off bankruptcy – or, in this case, working through bankruptcy – Lehman Brothers has continued to attract more scrutiny when compared to its peers. The ongoing creditor repayment dispute – and, in fact, the issues with Bank of America, could end up spending close to a year in court on appeals, further slowing its case.
Who said bankruptcy was on the way out? While the amount of people filing for bankruptcy, both in the United Kingdom and in the United States, has largely levelled off, the total value of today’s bankruptcy cases appears to be at its highest point in history. A total of $3.2 billion was subject to court management in bankruptcy cases this year – a new record for the United States’ court system.
The amount was split between major business bankruptcy cases and smaller personal bankruptcy proceedings, with many being traded by insurance companies specializing in the field. The value that can be assigned to a bankruptcy case is often quite significant, allowing creditors to release a portion of their claims in a company to creditors, in return for an end to proceedings against it.
As of now, the biggest case currently being traded is that of Lehman Brothers Holding Inc, a major investment bank that fell during the global financial crisis. Other major companies – formerly some of the nation’s biggest and most profitable – have also been involved, including Motors Liquidation Co. – the post-bankruptcy form of the formerly profitable General Motors Corporation automaker.
Ireland’s unusual debt laws could be in for a sudden change. Both public advocates and government officials within Ireland are campaigning for changes to the nation’s debt laws, which are currently a rather unusual relic involving jail time for unpaid debts and other unusual issues. The changes have the potential to dramatically change the nation’s bankruptcy laws also, which are now controversial.
Under Ireland’s current debt laws, borrowers that fail to pay off their debts within their arranged or formal contract period could end up in jail for up to five years. This practice, although rarely a part of other European countries’ judicial systems, is quite common in Ireland. Similar issues include an assortment of severe restrictions on bankruptcy citizens, as well as long-term credit score damage.
The proposed changes could go a long way to improve personal and business bankruptcy laws in the country, which would reduce stress on courts and make business more efficient. Advocates for business in Ireland have been supportive of the new measures, while cautioning regulators to stay sharp on how bankruptcies could affect the country, its businesses, and their operating procedures.
A growing number of economists, both American and international, have joined in criticism of the country’s private Federal Reserve financial organization. Technically a private entity, separate from both the United States Government and its major judicial power, the Federal Reserve has been a key target in economic measures this year, due to its large contributing to declining currency values.
Now, however, ‘Fed’ employees may have more than just criticism to deal with. A series of financial statements from the organization have revealed major structural issues and accounting mishaps – an awful amount of which point towards missing funds and major income issues. Free market activists have called it a dash towards insolvency, with many moderate economists quickly following suit.
While the Fed itself is an unlikely candidate for a lengthy insolvency case, given its immense ties to the public sector and an incredible amount of mutual reliance, it could become an interesting event, particularly for those involved in economics. Business bankruptcy has been a major issue in the US, and a large-scale case such as a Fed insolvency could raise the issue further into the limelight.
For now, the Fed’s ‘stress test’ policies will continue, despite endless criticism from both sides of the political playing field. An additional $600 million worth of securities are due to be purchased, using a variety of funding sources. This exposure to interest rates, combined with a considerable quota of political pressure, could expose more cracks than many economists have been expecting.
It took a surprisingly small upwards shift in the economy to hurt Begbies Traynor‘s profit outlook, a leading insolvency specialist in the United Kingdom. With the economy moving upwards and many of Britain’s formerly troubled businesses now in a state of financial health, are the nation’s corporate financial companies in for a lacklustre quarter?
The answer, it seems, isn’t quite as simple as many believe. Although the economy is improving and a reasonable number of insolvency cases have disappeared from the public eye, insolvency is still at the height of many businesspeople’s’ minds. There’s been an eighteen percent dip in overall cases; a good sign, but not the major downturn that many economists have been predicting this year.
For Real Business Recovery, it’s an interesting situation. The nation’s economy is getting stronger, a very good thing after years of financial turmoil. In fact, it’s now one of Europe’s leading economies, with hiring figures and demand for skilled employees far above many others. We can only hope that this record growth results in stable income for companies – not the turbulence that’s very possible.
Insolvency cases have dipped seven percent this quarter, down a total of eighteen percent from this time last year. Is is Britain’s ‘return to financial health?’ Possibly, however, it’s important to think of the long-term effects that any major economic shift can result in.
Internet search engine and news hub Yahoo has announced yet more redundancies, the fourth time it has done so in the past three years.
The company announced this week that it will be making 600 of its 14,100 jobs redundant, a cut of 4% in its workforce just before Christmas.
Even more difficult to swallow for its employees will be the fact that the job losses come as Google announced a 10% pay rise for all of its employees.
“Today’s personnel changes are part of our ongoing strategy to best position Yahoo for revenue growth and margin expansion, and to support our strategy to deliver differentiated products to the marketplace,” Yahoo said via a statement.
While Google’s revenues have grown to 23%, Yahoo has limped behind with just 2% growth.
Yahoo turned down a bid of $47.5bn (£30bn) by Microsoft in 2008 but the combined value of its shares currently stands at $21.6bn.
Maggie Shiels who reports for the BBC on technology from Silicon Valley, in the US, said “The Yahoo job cuts come in stark contrast to what is happening in Silicon Valley as a whole, where companies like Google and Facebook have embarked on an aggressive hiring spree.
“As for the prospects of Yahoo’s CEO Carol Bartz, these cuts are only likely to intensify pressure on her and increase criticism of her role in failing to improve the fortunes of the once mighty internet company.”
“Undoubtedly some of those employees who have been given pink slips are likely to see job offers landing in their email boxes amid a fierce battle for talent in the Valley,” She added.
Over the last three years, Britain’s economy – and by some measures, the global economy – has hit both the highest of highs and the lowest of lows. It’s been on a seemingly constant random course – one that, for many financial analysts and economists, has made it hard to predict greater trends and economic behaviour. To some extent, it’s finally beginning to slow and change into improvement.
But throughout this three-year period of uncertainty and ups and downs, one factor has remained all but completely constant – the amount of individuals and businesses filing for bankruptcy. American and British businesses have continued to file for bankruptcy – or, in the United States, a bankruptcy protection solution – at an increasing pace, one that’s only now beginning to taper off.
On the personal bankruptcy front, things appear to be even worse. The amount of people filing for bankruptcy has increased to the point where November 2010 set a new record – one that certainly wasn’t expected in the wake of economic ‘recovery.’ As with many other macroeconomic events, a change in the economy as a whole isn’t always immediately reflected in improved personal finance.
For the next year, we expect to see a downturn in the amount of personal bankruptcies, although it’s by no means destined to happen. While Britain’s economy, and the spending habits of its people, are on the mend, personal and business bankruptcy remain major issues for much of its population.
The last three years have been problematic for many of the UK’s biggest sports clubs. From football clubs to smaller independent sports organisations, there’s been an astounding amount of financial or otherwise economic concerns in the sports world. Some have been sorted, often through the use of a company voluntary arrangement, although many clubs continue to deal with excessive debts.
Just how did this debt-friendly sports environment occur? How did some of the world’s most well-known sports franchises end up with mountains of debt to their names? The answer, in a state that’s not quite so surprising, is one that isn’t limited to the United Kingdom. Sports clubs throughout the United States have also dealt with similar financial issues due to low earnings and high spending.
Take the Texas Rangers for example, a leading baseball team that’s experienced a flip-style change of owners over the last two years. Or the Buffalo Sabres, a popular hockey team that experienced a severe ownership crisis in 2003. The sports world has, on an on-and-off basis, been plagued by the issues of financial uncertainty, bankruptcy and ownership changes in almost every country.
So while these poor financial situations may appear to be limited to the UK, they’re actually one of several changes affecting the world of sports. From American baseball teams to some of the United Kingdom’s most well-known football clubs, in the uncertain and highly risky world of sports, it can often be the biggest teams and the leading clubs that fall the hardest.
Britain’s leading football clubs may have gained a reputation for thoughtless spending, but it’s their frugal and intelligently planned spending habits that may get them out of the current financial muck we’re in. A new payment scheme from HM Revenue & Customs has encouraged clubs to spend less money on unnecessary expenses, while also supporting greater revenue and spending reporting.
It’s a move that, in many ways, is long overdue in the world of football, where even small clubs can rack up debts extending into the hundreds of millions of pounds. With player salaries to cover and a laundry list of other expenses to deal with, it doesn’t take much to push a club ‘over the edge.’ A big example is England’s Portsmouth FC, which is now involved in a company voluntary arrangement.
Analysts believe that the financial environment could change within twelve months, with many of the country’s largest football clubs entering a period of total financial health. The reason for such a dramatic shift in fortune – quite literally – is simple. While clubs previously spent first and thought about their finances after, today’s football management strategy is grounded in smart spending.
We can only hope that it will result in a long-term change for many of the top football clubs, most of whom continue to spend great amounts of money on player salaries. It will be interesting to see whether or not the players and management will be willing to take a pay cut, all in an effort to help the world of football improve its operating conditions and reframe the focus on the game itself.
Self-made man James Pow may have hit gold in his restructuring of the Scottish fashion and other clothing label Cruise. The company, which has gone through a pre pack administration deal in the last decade, appears to be on track for profits at some point in the next twelve months. This switch in fortune is quite surprising, given the company’s previous financial issues that were quite large.
Pow was brought in to restructure and refocus the clothing label last year, after being spotted as a leader in the fashion and retail clothing industry by a leading head hunter. His decisions appear to have been successful, with the retail chain now changing its strategy and focusing on becoming a profitable enterprise as soon as possible. According to some, that could be within twelve months.
The new Managing Director is regarded as fairly skilled in the art of moving forward following a major financial disaster. By age 23 he had lost both of his parents, setting ambitious goals because of a burning desire to success. With no ‘glass ceiling’ to break through due to parental pressure or a guided course, he managed to move through the corporate ladder at a fairly rapid pace.
Today, it may have landed him in the economic recovery’s top spot. While Cruise is not yet running at a profit, it is on the track for a serious recovery. Should that occur, Pow may have a pleased board of investors and stockholders to report to at the next year’s end.