c.2013 New York Times News Service
c.2013 New York Times News Service
CREDIT SCORES FROM A TEST, NOT A HISTORY
No credit? No problem — just take a test. That’s the message being delivered to small-business owners in developing countries where credit ratings are rare and many potential entrepreneurs keep their money in cash rather than bank accounts. Banks in 16 countries are using a psychometric test to predict whether someone will pay back a loan. The Entrepreneurial Finance Lab’s test has increasingly won the confidence of risk-averse bankers in places where, many economists believe, credit bottlenecks are severely stunting growth. A new partnership with MasterCard has the potential to speed the model’s proliferation.
CHINESE LOCAL GOVERNMENT DEBT UP 13% IN 6 MONTHS
The debt of local governments in China has soared to nearly $3 trillion as the country’s addiction to credit-fueled growth has deepened in recent years, according to the findings of a long-awaited report released Monday by China’s central auditing agency. The National Audit Office found that local governments had accumulated 17.89 trillion renminbi ($2.95 trillion) worth of debt obligations by the end of June, an increase of 12.7 percent from last December. Other reports have estimated local government debt at significantly higher levels, including one issued last week by the Chinese Academy of Social Sciences, which put the figure at about $3.3 trillion.
SINGAPORE LEADS SURGE IN AIRPORT CONSTRUCTION ACROSS ASIA-PACIFIC
Singapore’s gigantic Changi International Airport can handle far more than the 53 million travelers that embarked and departed there this year. Still, Singapore has big plans to expand the airport. Singapore is unusually forward-looking in its approach to expanding what is a lifeline for its economy. But the city-state’s ambitious plans are just the most extreme example of the huge surge in airport construction across Asia. “There really is a lot going on — and there will be a lot more happening in the coming years,” said Angela Gittens, director general of the Airports Council International, a trade group for airports.
FIRE AT SWATCH WORKSHOP CAUSES DELAYS
Swatch Group, the world’s largest watchmaker, said Monday that production of some watch components would be delayed up to two months after a fire destroyed one of its Swiss workshops. Chief Executive Nick Hayek said the damage was limited and the delay would have more of an impact on watchmakers that buy components from his company than on retailers. Hayek estimated the cost of the fire, including production delays, would be 20 million to 25 million Swiss francs, or $23 million to $28 million. The fire broke out Sunday and swept through a workshop at a factory in Grenchen. No one was hurt.
SPAIN TIGHTENS REGULATIONS ON OLIVE OIL
Every morning, people in Madrid cafes enjoy a typical Spanish breakfast, including pouring olive oil out of a generic glass cruet onto toasted bread. The traditional cruet, however, will be replaced by a labeled, sealed and nonreusable bottle or other type of container under stricter oil bottling rules that take effect Wednesday. The new regulations were created mainly to improve food hygiene. Spain acted on its own after Germany and other northern European countries, which consume but do not produce olive oil, blocked a proposal by the European Commission last spring to impose such legislation across the 28-nation European Union.
ITALY RETREATS FROM NATIONALIZING TROUBLED BANK
The Italian government signaled Monday that it had no interest in nationalizing Monte dei Paschi di Siena, the country’s oldest bank, after shareholders overruled bank management this weekend and delayed plans to raise urgently needed cash. A treasury spokesman Monday confirmed reports that the government was not eager to take responsibility for the bank. The government is already dealing with a severe recession and internal political turmoil. Monte dei Paschi shares closed about 1 percent higher Monday, at 17.5 cents, but problems at the bank have the potential to provoke market turmoil in a country suffering from a banking crisis and severe shortage of credit.
COOPER TIRE ENDS MERGER AGREEMENT WITH APOLLO TYRES
What would have been the largest Indian acquisition of a U.S. company has been derailed by problems. Cooper Tire and Rubber Co. said Monday that it had terminated its merger agreement with Apollo Tyres, which had agreed to buy it for $2.5 billion before several setbacks landed the deal in court. The agreement was to expire Tuesday, and Apollo, which wanted to get out of the deal, appears to have stalled long enough to escape what it came to view as a flawed transaction. In a statement, Apollo said, “Cooper’s actions leave Apollo no choice but to pursue legal remedies for Cooper’s detrimental conduct.”
BAIN MAKES A DEAL FOR BOB’S DISCOUNT FURNITURE
Private equity firm Bain Capital announced Monday that it had agreed to buy a majority stake in Bob’s Discount Furniture. The company’s management team will continue to own a “significant stake” in the business, according to a news release announcing the deal. Private equity firm KarpReilly/Apax, which has been a majority owner in Bob’s for the past nine years, will no longer be invested in the company, according to a person close to the transaction who spoke on the condition of anonymity because terms of the deal were not publicly disclosed. Bain’s investment is about $350 million, the person said.
CRACKER BARREL RESPONDS TO ACTIVIST INVESTOR
Cracker Barrel won’t be sold to Sardar Biglari anytime soon. The restaurant chain’s board fired back at Biglari on Monday, saying it plans to continue business as is despite Biglari’s push to put Cracker Barrel on the block. Biglari chided the company’s management in an open letter last week and pushed for a sale, preferably to him. If the board did not “promptly” announce a sale process, Biglari said in a regulatory filing, he would call a special shareholders’ meeting to vote on such a deal. Cracker Barrel has adopted poison pill provisions in the past to prevent Biglari from taking over.
HERTZ ADOPTS ‘POISON PILL’ TO THWART ACTIVIST INVESTORS
Hertz, one of America’s biggest car rental companies, is battening down the hatches. The company has adopted a one-year shareholder rights plan, commonly known as a “poison pill,” to thwart an investor from gaining control of the board. The move, which Hertz attributed to “unusual and substantial activity” in the company’s shares, comes as activist investors are becoming more successful in campaigns to pluck directors of company boards and replace them with their own candidates. The shareholder rights plan would be triggered by any investor acquiring a 10 percent stake or more of the company’s shares.