Vinashin, Aurora Empowerment, Madoff-Linked Funds: Bankruptcy

Vietnam Shipbuilding Industry Group, the state-owned company with more than $4 billion of debt, asked holders of a local-currency bond it defaulted on in April to write off as much as 90 percent of the money owed, according to a bondholder who met company officials.

Vinashin told creditors at the meeting in Hanoi it is unable to make any loan payments until 2015 at the earliest, Pham Viet Bac, general director of Ho Chi Minh City-based Sabeco Fund Management, which holds 30 billion dong ($1.5 million) of Vinashin bonds, said by phone.

“I’m very disappointed,” said Bac. The shipbuilder also declined to provide a copy of its latest audit, he said. Vinashin failed to pay a 9 percent coupon due on April 13 on a 3 trillion dong, 10-year bond issued in 2007.

Vinashin’s financial difficulties have raised concerns about government support for state-owned companies as it tries to speed up a privatization drive, locally referred to as equitization. Prime Minister Nguyen Tan Dung has also asked police to investigate whether there are any signs of corruption at the shipbuilder.

“I want the company to be transparent to its creditors,” Bac said. “We have the right to know.”

Vinashin Chief Executive Officer Truong Van Tuyen declined to comment when reached by phone at his office. Calls to Chairman Nguyen Ngoc Su weren’t answered.

The shipbuilder also asked foreign lenders for a one-year extension after missing a $60 million principal payment in December for a $600 million loan, Chairman Su said in February. The company hired KPMG to conduct a business review, he said.

The December missed payment showed that government support for banks and state companies isn’t guaranteed, Moody’s Investors Service said in an April 20 report.

Moody’s cut Vietnam’s credit rating one level to B1 on Dec. 15, citing the risk of a balance of payments crisis and Vinashin’s “debt distress.” Standard & Poor’s and Fitch Ratings Ltd. also cut Vietnam’s credit rating last year.

Aurora to Fight Solidarity’s Liquidation Application, Union Says

Aurora Empowerment Systems Ltd., a South African mining company run by a nephew of President Jacob Zuma and a grandson of Nelson Mandela, will contest a liquidation application brought against it by the Solidarity labor union.

Solidarity commented in an e-mailed statement.

UBS Unit’s Madoff Fund Ties Weren’t Disclosed in E&Y Report

A UBS AG unit’s ties to Bernard Madoff’s investment fund weren’t divulged in an auditor report by Ernst & Young LLP to Luxembourg’s regulator.

The 2008 report didn’t mention Bernard L. Madoff Investment Securities LLC in a list of custodians the Zurich-based bank used, according to a copy obtained by Bloomberg News. An agreement existed between UBS Luxembourg SA and Madoff’s firm which allowed the Ponzi scheme operator to be sub-custodian for LuxAlpha Sicav-American Selection, Jean Guill, the Luxembourg finance regulator’s director general, said in an interview.

“As of October 2007, the bank used mainly a network of 16 correspondent banks” which typically also acted as sub-custodians for investment funds, according to the so-called long form report signed in January 2008 by Ernst & Young, UBS Luxembourg’s auditor. The report doesn’t mention Madoff’s firm on a “complete list of correspondent banks” used by UBS for investment funds in its care, including several funds that were found to be tied to Madoff after his arrest in December 2008.

UBS and its local units are defendants in more than 100 lawsuits in Luxembourg filed by investors who lost millions of dollars through the funds, for which it acted as custodian, charged with overseeing and managing deposits and payments to investors. Irving H. Picard, trustee liquidating Madoff’s business, sued the bank last year in U.S. Bankruptcy Court in New York seeking at least $2.5 billion. He claims UBS “actively assisted” in the Ponzi scheme by sponsoring and administrating international feeder funds that invested with Madoff.

Ernst & Young declined to comment.

UBS said it maintains its position that the LuxAlpha fund was created at the request of wealthy clients who wanted a fund that allowed them to continue investing with Madoff and that was made clear to the investors, their advisers and the regulator.

“UBS does not have responsibility to these shareholders for the unfortunate results of the Madoff scandal,” Dominique Gerster, a bank spokesman, said in an e-mail.

According to 2002 rules issued by the Luxembourg regulator, the Commission de Surveillance du Secteur Financier, the long form report auditors submit must be “concise, clear and critical” and provide findings on financial and organizational aspects of collective-investment funds covering their “relationship with the head office, the custodian and the other intermediaries.”

Among a list of investment funds for which UBS’s Luxembourg unit acted as custodian bank as of November 2007, the document lists several Madoff feeder funds, such as the Luxembourg-based LuxAlpha -- which lost 95 percent of its approximately $1.4 billion in assets -- and Luxembourg Investment Fund.

Essar, Astorg Among 6 Companies Interested in A-Tec, Format Says

Essar Group of India, French private equity firm Astorg Partners and Penta Investments Ltd. are among companies potentially interested in bidding for insolvent A-Tec Industries AG, Format magazine reported, without saying where it got the information.

A list of ten interested buyers has been reduced to six, the Vienna-based magazine said. The other three parties are a London investment company and companies from China and India, Format cited an unidentified A-Tec manager as saying.

Should A-Tec fail to find a buyer by June 30, the company will be sold off in parts, according to the report.

Harbinger Says Northern Rock Shares Worth $530 Million

Harbinger Capital Partners, the hedge fund run by billionaire Philip Falcone, said holders of Northern Rock Asset Management Plc’s preferred shares should be paid 322.5 million pounds ($527 million).

The fund owns a “substantial” amount of the shares and asked a London court to reject the determination from a valuation expert appointed by the British government, which now owns the bank, that the shares are worthless.

Mark Phillips, a lawyer for the New York-based fund, said a “fire sale” of the bank’s assets after the U.K. nationalized the lender depleted its value by 4 billion pounds.

“That destroyed the value that had already been there,” Phillips said. Northern Rock was “asset-rich, but cash-poor.”

Northern Rock shares peaked at 1,251 pence in early 2007, before falling to 90 pence on Feb. 15, 2008, when they were suspended. The bank, based in Newcastle, England, was then nationalized, becoming the first U.K. casualty of the credit crunch. Northern Rock nearly collapsed in 2007 after seeking emergency funding from the Bank of England and suffering a run on its deposits.

Andrew Caldwell of BDO International was appointed in September 2008 to value Northern Rock and determine how much shareholders should get back. He said in court filings posted on his website that he determined the amount payable “is nil.”

Harbinger said in court papers the preferred shares were once worth 400 million pounds and, based on expert reports, a reasonable amount of compensation is 322.5 million pounds.

“Nil is utterly unreasonable,” Phillips said.

Northern Rock shareholders including RAB Capital Plc and SRM Global lost a July 2009 court bid for a review of how the equity of the bank would be valued. The U.K. has committed about 1.4 trillion pounds in direct investments, asset insurance and loan underwriting to bolster the nation’s banking system.

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