KeNo's Housing and Economic Portal: Thursday September 9 Housing and Economic stories

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Harrisburg To Miss $3.29M Municipal-Bond Payment - (online.wsj.com) Harrisburg, Pa., which is already struggling with a debt load related to an incinerator project, will skip a $3.29 million payment on its general-obligation debt, the second-largest such default this year. "Unfortunately, the City's current financial situation precludes us from making any transfer to fund for these debt service payments at this time," the city's interim chief of staff and business administrator, Robert Kroboth, wrote in a letter dated Aug. 30 to the paying agent, Bank of New York Mellon. Some bearish investors have been bracing for a wave of municipal defaults this year, which has yet to occur. But Harrisburg's actions could be interpreted as an omen, which could weaken municipal bond prices, particularly for Pennsylvania municipalities, said Matt Fabian, managing director at Municipal Market Advisors in Westport, Conn. "It could point to other cities in Pennsylvania and elsewhere running short of payments on their general obligation bonds," Fabian said. Governor Ed Rendell has sent officials to advise the city and discouraged consideration of a municipal bankruptcy, but the state has not offered any direct cash aid to its capital. Still, Fabian expects the impact to be modest on the municipal bond market generally, saying low supply of new tax-free municipal bonds and high demand from investors should support munis. So far, just $886 million of general obligation bonds in a $2.8 trillion municipal bond market this year have seen credit impairments, such as dipping into reserve funds or tapping bond insurance. Bond holders didn't get paid on $32 million of that total, Fabian said. Indeed, the $3.29 million payment on Harrisburg's general obligation refunding bonds series D and F of 1997, which is due Sept. 15, is insured by Ambac Assurance. Ambac officials didn't return calls for comment. The capital city's warning that it will miss a payment on its own debt is a signal that its financial problems are growing beyond a failed incinerator project that led some city officials earlier this year to raise the idea of filing for a rare municipal bankruptcy.

‘Zombie’ Hotels Arise in Ireland as Recession Empties Rooms - (www.bloomberg.com) The Glashaus hotel used to be a symbol of the regeneration of one of Dublin’s toughest neighborhoods. Empty and shuttered, it now represents one of the toughest economies Ireland has ever endured. Developer Liam Carroll opened the boutique hotel in Tallaght in the west of the city three years ago at the height of the country’s decade-long real estate boom. Now, creditors have taken control of much of Carroll’s empire and the Glashaus is closed, as is the nearby 186-room Tallaght Cross Hotel. “It’s a game of last man standing,” said Paul Gallagher, president of the Irish Hotels Federation in Dublin. “When corporate traffic slowed up and the recession took hold, very quickly it became obvious we had an enormous problem.” At least 200 hotels opened during Ireland’s decade-long economic boom, leaving a glut of rooms and mountain of debt as the number of visitors dwindles. While some establishments cut their losses and shut, others are lowering prices to stay in business and avoid repaying tax breaks if they were to close. Irish hotel occupancy slumped to about 54 percent in 2009, the lowest level since the early 1980s, as the economy fell into its worst recession on record, the hotels federation said. In 2007, the height of Ireland’s boom, the figure was 64 percent. Debt Burden: Sixty percent of hotel loans at Allied Irish Banks Plc, the country’s second-largest lender, are classed as “criticized,” either closely watched or in trouble, Managing Director Colm Doherty said Aug. 4. Britain’s Lloyds Banking Group Plc, among the biggest lenders to Irish hotels, said this month it’s pulling out of Ireland.

Supertax on bankers failed, says Darling - (www.ft.com) Alistair Darling admitted on Wednesday that Britain’s controversial supertax on bankers’ bonuses had failed to change the industry’s behaviour over pay as “imaginative” financiers devised ways to avoid it. The former Labour chancellor of the exchequer, who introduced the levy last year amid an unprecedented outcry over bank pay, said he thought it was unlikely that the tax would be reinstated by the current Con-Lib coalition government. However, he warned the industry that it faced equally unpopular reforms unless it was more “sensitive” to the public’s concerns following the worst financial crisis in generations. “I think it will be a one-off thing because, frankly, the very people you are after here are very good at getting out of these things and . . . will find all sorts of imaginative ways of avoiding it in the future,” Mr Darling said at a financial services conference sponsored by Nomura, the Japanese investment bank.

Meat price surge fuels fears of food inflation - (www.ft.com) Global meat prices have hit a 20-year high as robust demand from emerging countries has coincided with a drop in production by exporters such as the US and Australia, fuelling concerns about rising food inflation. The UN Food and Agriculture Organisation’s index of meat prices rose in August to its highest level since 1990, up 16 per cent over the past year, after lamb prices hit a 37-year high, beef prices climbed to a two-year high and the cost of pork and poultry prices rose. “There has been sustained demand from Asia and from the Middle East for both beef and lamb,” said Pedro Arias, a livestock economist at the FAO in Rome, echoing a widely held view in the industry. “But the traders have not been able to satisfy that demand because herds have been curtailed.” The sharp price rises have attracted speculative money to what is otherwise a niche market in Chicago. The number of outstanding contracts at the Chicago Mercantile Exchange for live cattle and lean hogs futures and options – both benchmark derivatives – has jumped by nearly a third since the start of the year. But industry executives, traders and analysts said the increase in prices was not due to the inflows of hot money, but rather supply and demand factors. Meat production has stagnated in top exporting countries as livestock farmers suffered a series of misfortunes from severe droughts in Australia and Latin America, to low prices in the early 2000s and record high feeding costs.

SEC charges fund manager with insider trading - (www.ft.com) A former hedge fund manager and a pharmaceutical executive have agreed to settle federal insider trading charges related to the 2007 takeover of the biotechnology company MedImmune, the Securities and Exchange Commission said Wednesday. Stephen R. Goldfield, 46, who ran the hedge fund firm Imperium Capital Management in Tampa, Fla., was charged with making $13.98 million in illegal profits by trading in MedImmune securities beforeAstraZeneca agreed to acquire the company for more than $15 billion. The S.E.C. also accused James W. Self Jr., 45, Mr. Goldfield’s friend and former classmate at the Wharton business school, of tipping him off about the MedImmune sale process with information he learned as an executive director of business development of a New Jersey pharmaceutical company.