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Portugal Says Some Town Halls May Need to Restructure Their Debt - (www.bloomberg.com) Some of Portugal’s municipalities may need to restructure their debt once the government determines the exact amount they owe, a spokesman for Parliamentary Affairs Minister Miguel Relvas said. “We are waiting to find out the overall debt figure,” Antonio Vale said in a phone interview from Lisbon today. “It may be possible that some town halls restructure their debt.” Portugal is cutting back on money transfers to town halls, while encouraging local administrations to merge as part of a plan to save money and comply with the terms of a 78 billion- euro ($102 billion) bailout from the European Union and the International Monetary Fund. “Most town halls are healthy,” said Vale. He said the government will first determine the total debt held by the country’s 308 town halls before it comes up with a plan to deal with each municipality on a case-by-case basis.
Exclusive: Falcone mulls voluntary bankruptcy for LightSquared - (www.reuters.com) Hedge fund manager Philip Falcone said in an interview on Wednesday he is "seriously considering" filing a voluntary bankruptcy for LightSquared, the struggling telecom startup in which his Harbinger Capital Partners is the majority owner. Falcone said a bankruptcy is one of several options he is considering as he tries to find a way to salvage the company, which reported a $427 million net loss during the first nine months of 2011, and keep its creditors at bay. He said a bankruptcy would allow the company time to find a way to deal with communications interference issues that have arisen with the planned buildout of a nationwide wireless broadband network.
Spain Not Greece Is the Real Test for the European Union - (www.bloomberg.com) The decisive test of the euro area’s plans for economic recovery was never Greece but Spain, and the European Union shows every sign of failing it. The Spanish government’s new austerity plan hasn’t won investors’ confidence, and this creates a threat not just to Spain but to the whole EU. Europe’s governments need to change course before it’s too late. An auction of Spanish bonds on Wednesday was the first verdict on Spain’s new budget. It didn’t go well. Demand was poor and prices fell. The country’s borrowing costs rose with 10 year bond yields in the secondary market hitting 5.7 percent, the highest since the beginning of the year. The premium over German government bonds increased to nearly four percentage points, the highest since November. The problem is not that Spain’s new austerity plan is too timid. Just the opposite: Under EU orders, Spain is promising what might be the tightest fiscal squeeze that it or any other European economy has ever faced.
Bank-Supported Muni Market Faces ‘Headwinds,’ Moody’s Says - (www.bloomberg.com) The market for bank-supported municipal debt, including variable-rate demand bonds, may face “headwinds” this year because of possible cuts in bank ratings, Moody’s Investors Service said. Top short-term ratings for both Bank of America Corp. and Citigroup Inc. (C) are under review for a downgrade, according to the credit-rating company. Losing the top grade may cause interest rates on $34.7 billion of municipal bonds to spike as money-market funds redeem the debt and dealers can’t resell it, Moody’s said in an e-mailed statement. “Issuers whose remarketings fail or who are unable to arrange extensions or replacements for expiring support facilities may face severe cash-flow pressure as they confront higher interest cost and accelerated amortization,” Moody’s said in the report.
Student Debt Collectors Are Incentivized to Violate Federal-Aid Laws, Reports - (www.nytimes.com) People who have defaulted on their student loans are sometimes forced into paying back more per month than they can afford — and more than the federal government requires — because private debt collectors are given incentives to violate federal-aid laws, Bloomberg reported this week. With $67 billion of student loans in default, the Education Department is turning to an army of private debt-collection companies to put the squeeze on borrowers. Working on commissions that totaled about $1 billion last year, these government contractors face growing complaints that they are violating federal laws by insisting on stiff payments, even when borrowers’ incomes make them eligible for leniency. ‘Boiler Room’: Education Department contracts — featuring commissions of as much as 20 percent of recoveries — encourage collectors to insist on high payments. Former debt collectors said they worked in a “boiler-room” environment, where they could earn bonuses of thousands of dollars a month, restaurant gift cards and even trips to foreign resorts if they collected enough from borrowers.
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