The question is whether the bloc can come up with a strategy that convinces skeptical financial markets while keeping debt on a downward path.

For many months, the mantra has been that struggling euro zone countries must reduce budget deficits and carry out deep structural reforms – to labor markets, pension systems and via privatizations – to boost competition and stimulate growth.

The problem is that cutting spending and overhauling economies when they are already contracting tends to create a downward spiral, with the slowdown deepening and deficits becoming ever harder to reduce as a proportion of output.

What is more, the structural reforms EU policymakers are demanding – and which the likes of Italy, Spain, Greece and Portugal are battling to implement – can take years to deliver a growth benefit, while in the short-run they tend to lead to social and political upheaval.

What the EU needs instead, economists and many policymakers agree, are measures that can stimulate growth more immediately in a region responsible for a fifth of global output.

As one EU official responsible for advising leaders on how to combat the crisis succinctly put it: Enough of the debt fetishism, its time for a proper stimulus.

Nobel-prize winning economist Joseph Stiglitz added his voice to the debate last week, calling Europes debt consolidation strategy suicidal and pointing out that a pure austerity program had never restored health.

During a debate in Vienna, he urged wealthier EU countries such as Germany to boost investment in infrastructure, education and technology, which could deliver returns much greater than the cost of capital.

I hope … the debate will be what are the things we can do to promote growth rather than how do we strangle each other together, he said.

A focus on investment is attractive. While Italy was left unscathed after deferring its balanced budget goal by a year, the punishment meted out to Spain by the bond market, driving its borrowing costs higher since it raised its 2012 deficit target, shows significant loosening of fiscal policy is fraught with danger.

Even if governments were seriously contemplating significantly relaxing fiscal policy, such a change of tack would be counter-productive, said Deutsche Bank analysts Mark Wall and Gilles Moec.

NECESSARY BUT INSUFFICIENT

In recent days the bare bones of a strategy for stimulating growth have started to come together, with the intention of launching it at an EU leaders summit in late June.

The main focus is on increasing the capital of the European Investment Bank, the EUs long-term lending arm, to allow it to make bigger investments in infrastructure projects and related areas across the EUs 27 member countries.

The EIB financed EU projects worth around 70 billion euros in 2010, with the lending made on the basis of relatively small paid-in capital. By boosting the paid-in capital by only 10 billion euros ($13.2 billion), the banks lending could be greatly leveraged, delivering extra investment of up to 180 billion euros.

Olli Rehn, the European commissioner for economic and monetary affairs, set out a proposal along those lines to EU member states earlier this month and the idea will be discussed by ministers in mid-May. Officials say the EIB, which has resisted the move in the past, is now prepared to go along.

I made a call on EU member states to increase the capital of the EIB, which would be the most convincing way of providing funding for necessary investment in infrastructure and innovation in Europe, Rehn told Reuters in a recent interview.

We dont have the luxury of time until the crisis is over. We need additional capital for the EIB for investment now, he said.

Such an initiative could help revive growth at the margins but it does not look like a game changer.

Put it against the more than 1 trillion euros created by the European Central Bank – which may have averted a credit crunch but has done little to revive a euro zone economy poised to slide back into recession – and the numbers look small.

Complementing austerity with some federally-funded investment schemes is becoming consensual, but we dont expect any quick sizeable effect on growth, the Deutsche Bank analysts said.

At the same time, the European Commission, the EUs executive, is exploring ways of redirecting EU structural funds, which are paid to poorer member states to help them improve their infrastructure, to deliver a quicker growth lift.

The EUs long-term budget set aside nearly 350 billion euros for structural and cohesion funds between 2007-2013, but only a fraction of that – a few billion – is likely to be redirected under the Commissions plan, which is still taking shape.

The Commission on Monday sought to play down what it called highly speculative figures about how much could be set aside for infrastructure investment, and said it remained focused on deficit reduction at the same time.

We are not talking about an alternative to fiscal consolidation, Commission spokeswoman Pia Ahrenkilde-Hansen told reporters. The issue is not either fiscal consolidation or growth, we need both.

Politically, there is no prospect of giving euro zone members much leeway on debt just as new fiscal rules to ensure deficits are kept to a common minimum are being established.

The fiscal pact is likely to remain broadly intact but, the path of deficit reduction is likely to be eased a little, said David Mackie, economist at JPMorgan in London.

He too predicted an expanded role for the European Investment Bank and more aggressive use of EU structural funds.

POLITICS IN PLAY

While it remains to be seen what EU leaders can come up with – and there is little at this stage to buoy financial markets to – there is certainly pressure to shift the rhetoric towards a more pro-growth agenda.

In the past week, governments in the Netherlands and Romania added to the long list of administrations that have been toppled while pursuing austerity drives.

With Francois Hollande, the growth-focused Socialist challenger, expected to win the run-off against Nicolas Sarkozy in the French presidential election on May 6, the moment is ripe for leaders to shift tack.

European Central Bank President Mario Draghi has talked about a growth compact and at the weekend, German Chancellor Angela Merkel backed a boost in EIB capital, although she also reiterated the need for fiscal consolidation and structural reforms.

Herman Van Rompuy, the president of the European Council and chairman of EU summits, wrote to EU leaders last week urging them to find common ground on a range of issues that could offer an economic stimulus, including energy efficiency and a single European patent, an agreement blocked for nearly 30 years.

The emphasis should now shift increasingly to prioritizing measures that can boost growth and jobs and a return to sustainable growth, he wrote, adding that it may be necessary to hold an informal summit in the coming weeks to maintain momentum between now and the next planned summit on June 28-29.

Officials indicate that extra gathering is likely to be held at the very end of May or the first day of June, leaving leaders four weeks to flesh out their growth-boosting ideas.

(Writing by Luke Baker, editing by Mike Peacock)

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Rationale

The CreditWatch placement follows the announcement that French-based multi-utility GDF SUEZ
SA (A/Stable/A-1), which currently holds 70% of IPR, offered to purchase the remaining 30%
stake.

GDF SUEZs offer reinforces our view of IPR as a core asset for the vertically integrated
French utility and our belief that it is increasingly integrating into its parents business
mix.

The BBB- rating on IPR currently benefits from one notch of uplift for parent support.
Based on our criteria on parent-subsidiary links, we see increasing financial support from GDF
SUEZ and could therefore equalize our rating on IPR with that on its parent.

Liquidity

We assess IPRs liquidity position as adequate under our criteria. We estimate that
planned cash resources–mainly comprising available cash, committed credit lines, and our
assessment of funds from operations (FFO)–will cover planned cash outlays by more than 1.2X
over the next 12 months.

Our assessment of IPRs cash resources includes:

– Cash available of more than EUR4 billion on Dec. 31, 2011, of which 30% is held at the
parent company level and the rest at the subsidiary level.

– Our estimate of about EUR3 billion from FFO.

In addition, IPR benefits from credit lines extended by its parent GDF SUEZ for a total
amount of EUR1.6 billion at year-end 2011. This liquidity pack does not include another facility
granted by GDF SUEZ–the so-called tranche A–which covers all IPRs budgeted expenditures.

Cash outlays over the next 12 months mainly comprise:

– Our assessment of capital expenditures (capex) of EUR3.0 billion, of which EUR0.5 billion
earmarked for maintainance capex.

– Debt maturities amounting to EUR1.6 billion, including nonrecourse debt.

– Our assessment of shareholder distribution and potential acquisitions totaling EUR1
billion.

We understand that IPRs liquidity is increasingly managed at the GDF SUEZ level.

CreditWatch

We aim to resolve the CreditWatch placement within the next three months, after receiving
more information on GDF SUEZs buy-out offer. We will assess the effect of IPRs increasing
integration into the larger and currently higher-rated GDF SUEZ group.

Should the minority buy-out offer go through, we would upgrade IPR and consider equalizing
our rating on IPR with that on GDF SUEZ. Under our criteria on parent-subsidiary links, the
range of parent support we could factor into our ratings on IPR could vary substantially. Our
view of full parent support and the consequent equalization of the rating on IPR with those on
GDF SUEZ would depend on what we considered to be the complete integration of IPR into its
parent company. We would base our assessment on IPRs full debt consolidation with GDF SUEZ, our
expectation of additional investments from the parent as evidenced by GDF SUEZs buy-out offer,
and the centralization of IPRs liquidity management, risk management, and investment decisions
at the GDF SUEZ level.

However, should the minority buyout not be completed, we would consider affirming the
ratings on IPR. We would reassess the benefits IPR enjoys in terms of financial flexibility and
risk management policies owing to GDF SUEZs controlling stake. In this context, we would review
the potential for incorporating stronger parent support into our corporate credit and issue
ratings on IPR.

We will also assess the effect of IPRs increased integration into GDF SUEZ on the senior
unsecured debt issued or guaranteed by IPR; namely, the BB+ issue ratings on the senior
unsecured notes issued by International Power Finance (2010) PLC, International Power Finance
(Jersey) II Ltd., International Power Finance (Jersey) III Ltd., and International Power Finance
(Jersey) Ltd. We currently see these notes as structurally subordinated to debt issued at the
operating company level (mainly significant amounts of project finance debt).

Related Criteria And Research

– Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Sept.
28, 2011

– 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

– Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, May 27, 2009

– Corporate Criteria–Parent/Subsidiary Links; General Principles; Subsidiaries/Joint
Ventures/Nonrecourse Projects; Finance Subsidiaries; Rating Link to Parent, Oct 28, 2004

– Use Of CreditWatch And Outlooks, Sept. 14, 2009

– Credit FAQ: Whats Behind Standard Poors Investment-Grade Rating On International
Power PLC?, Feb. 3, 2012

Ratings List

Ratings Affirmed; CreditWatch/Outlook Action

To From

International Power PLC

Corporate Credit Rating BBB-/Watch Pos/– BBB-/Stable/–

International Power Finance (2010) PLC

Senior Unsecured BB+/Watch Pos BB+

International Power Finance (Jersey) II Ltd.

Senior Unsecured BB+/Watch Pos BB+

International Power Finance (Jersey) III Ltd.

Senior Unsecured BB+/Watch Pos BB+

International Power Finance (Jersey) Ltd.

Senior Unsecured BB+/Watch Pos BB+

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The Senate will vote tomorrow on a bill that would allow the department to garnish offenders wages to recoup that money. The legislation passed the House on a voice vote in February, and a Senate committee that heard the bill last week is unanimously recommending the full Senate pass it tomorrow.

Holy guacamole, was Sen. Andy Sanborns first reaction last week when department officials put the total amount of overpayments for the last decade at $22 million. Of that $6.7 million is due to fraud and would be targeted by the bill.

The House raised a bunch of issues (recently) about welfare fraud, Sanborn said. This seems to be a much more definable problem. It needs to have the light shone on it and something needs to be done about it.

The state Department of Employment Security agreed and requested the legislation, said Commissioner Tara Reardon. Staff already pursues reimbursement in a variety of ways, including court action. The department just won a felony conviction against a man who collected $12,000 in unemployment over 55 weeks while working both a full-time and part-time job.

But there are far more cases than prosecutors to handle them, plus a court can order payment but still struggle to make a person pay their debt. Garnishing wages would give the department a bit more power, Reardon said.

We have lots of tools we use to go after any kind of overpayment, she said. Our favorite is just working with someone to make a payment plan. But we do bring people to court sometimes and we place liens on property. But we need a stronger tool, and wage garnishment is definitely an aggressive way.

The $22 million in overpayments on the agencys books dates back at least 10 years. Reardon said it can be divided into two categories: the $6.7 million fraudulently collected by people intentionally deceiving the department about income, and the rest of the money, which was paid out because of errors or missing information.

The department attempts to collect both.

Examples of the latter include claimants who confuse their net income and gross income when filing paperwork or those who misunderstand how to date their last pay period. Other problems arise because the department relies on employers to confirm or dispute a persons reasons for being unemployed.

For example, if an employer tarries in telling the state that the employee was fired, not laid off, the department investigates but is obligated under federal law to continue paying the unemployment claim during the inquiry. The same is true if the department learns after the fact that the employee was given severance pay but did not claim it on his unemployment claim.

The department often cant discover a fraudulent claim until the persons new employer reports their new wages to the state. All employers are supposed to file new hire reports, but many dont, Reardon said. Beginning in September, a new computer system will make it easier for the department to quickly identify double-dippers, she said.

Dan Feltes, an attorney with New Hampshire Legal Assistance, worked closely on the drafting of the legislation to ensure that those accused of fraud can appeal an administrative conviction to a district court judge. Feltes also asked that alleged fraudsters get a warning before their employer is asked to dock their wages so they can set up a payment plan.

Feltes and Reardon acknowledged $22 million is a huge sum – but one they say should be considered in context.

It represents at least 10 years of claims, and its about 5 percent of the $561 million the department has paid in unemployment over the last two years alone. Currently, the department is processing 14,000 unemployment claims a week. At the departments peak in March 2002, that number was 40,000 a week.

Reardon has 32 employees verifying those claims, and their success rate is better than those in several other states.

Louisiana improper payment rate over the last three years was about 40 percent, according to numbers from the US Department of Labor. New Mexicos was 27 percent. Vermont and Massachusetts report rates close to New Hampshires, but Maines was 13 percent.

Broken down, the numbers reveal that claimants alone were responsible for 61 percent of those overpayments, according to the federal numbers. The agency alone caused 11 percent of the erroneous payments, and employers alone were responsible for 2 percent. The parties together were responsible for the rest.

The department has court action pending against several claimants who it alleges collected huge amounts of unemployment under fraudulent means.

bull;A person who was working as a caretaker collected $32,000 in unemployment over 92 weeks.

bull;A substitute teacher collected $19,000 unemployment for 46 weeks while working.

bull;A sales representative who worked more than 40 hours a week claimed to be earning nothing for 29 of those weeks and collected $13,000 in unemployment.

bull;A machinist collected $17,000 over 68 weeks while working full time.

The ability to garnish wages would help the department recoup money from the many cases that cant get to court because county prosecutors have a full case load already.

If the legislation becomes law, a person would be notified before their paycheck was docked and given a chance to arrange a payment plan with the department. And the unemployment compensation would be taken only after other garnishments for child support or alimony were docked.

(Annmarie Timmins can be reached at 369-3323, atimmins@cmonitor.com or on Twitter @annmarietimmins.)

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Audrey was an employee at Major Health Insurer (MHI), through which she had health insurance coverage. She was a single parent with a troubled teenaged son. She checked her son into Calming Meadows Psychiatric Hospital. When MHI processed the insurance claim, they sent a $35,000 benefit check directly to Audrey rather than the Calming Meadows. Instead of signing the check over to Calming Meadows, Audrey got the idea to keep the money herself. She called an attorney named Brian, whose response was, “cash the check, bring me $10,000, and I’ll tell you how to spend the rest.” Which she did, then subsequently filed for bankruptcy.

Audrey had no problem getting the debt owed Calming Meadows discharged in bankruptcy. No criminal investigation was conducted. MHI took no employment action against Audrey.

1. Did Brian act ethically?
2. Did Audrey get off easy?

Delicious! This looks more than a little bit like a law school exam or a bar exam question. I think the melding of bankruptcy and legal ethics is not something that would likely come up in either format, but for those of you thinking about law school, this is a reasonable facsimile of the sort of thing you’d be doing there to earn your grades.

The answers are no and no, but maybe not for the reasons that seem immediately obvious.

Because the first question focuses on legal ethics, we need to understand the legal issues raised by the services Brian renders to Audrey. That means I have to answer question two before I can answer question one. We should also do a bit of filtering through facts at the threshold.

1. Sifting Through The Facts, With Tangents

MHI is both Audrey’s employer and her insurer. As her employer, MHI took no adverse action against Audrey. That means that we are not really concerned with the fact that MHI is Audrey’s employer.

Now, had adverse employment action been taken against Audrey, that would raise some interesting and murky issues. Audrey has a right, under Federal statutory law and likely also under the Constitution (Bankruptcy Clause of Article I and Petition Clause of the First Amendment), to seek bankruptcy relief. Can a private employer take an adverse employment action against an employee for the exercise of her legal rights? The answer, I think, is It stinks if they do, but yes. For a deeper exploration of those issues, I reference a prior post by Will Truman (originally here).

So, as an insurer, MHI owes Audrey a duty to promptly and objectively process all claims made of coverage, and to extend coverage where it actually applies. Here, the nature of the policy is such that MHI recognizes and extends coverage for Audrey’s son’s inpatient psychological care at Calming Meadows. So its duties as an insurer are discharged upon writing the check for Calming Meadows’ services. Calming Meadows is not a party to the contract of insurance; MHI as insurer owes Audrey these duties with respect to coverage and benefits, but in most states, it does not owe those duties to Calming Meadows. In some states, Calming Meadows is considered a third party beneficiary of the contract of insurance, and has a claim as a third-party beneficiary to the money. But I’ll follow the majority rule here, which is that Calming Meadows is a stranger to that contract and not entitled to money from MHI. Calming Meadows is entitled to money from Audrey, though.

So, as phrased, question two asks, Did Audrey get off easy? I interpret this to mean Did Audrey benefit from this series of events? The answer to that question is a matter of perspective, to some extent.

2. The Fruits of Audrey’s Bankruptcy

One of the first questions lawyers (in the US, at least) ask when bankruptcy comes up is which chapter?

Briefly, a bankruptcy under Chapter 7 is one in which the debtor’s assets are consolidated into what is called a bankruptcy estate, administered by a third-party trustee who is appointed by the court. The trustee assesses all of the debtor’s debts, liquidates the assets, and then proportionally uses the proceeds of the liquidation to pay down the debts, and then the balance on the debts are discharged, meaning the creditors may take no further action to enforce the debts (with a few exceptions). Under Chapter 7, certain kinds of debts like student loans are non-dischargeable, and certain assets are exempt from inclusion in the estate.

Chapter 11 is a bankruptcy in which the structure of debt repayment schedules are rewritten. Sometimes the bottom line of the debts are written down, but more typically what gets written down are ongoing obligations, interest rates, and the length and frequency of payments. Creditors in Chapter 11 cases usually get at least the bulk of the principal back. The debtor, not the trustee, remains in possession and control of the assets of the bankruptcy estate, although the court exercises a lot of supervision over how the estate’s assets are used. These are expensive procedures and often do not result in discharges.

You may have heard a lot about Chapter 13 bankruptcies as hybrids between Chapter 7 and Chapter 11 filings. Chapter 13 bankruptcies only really work when the debtor has a reliable, steady source of income (that is, a regular job). The debtor, the creditors, and the court agree on a partial repayment schedule, usually between thirty to seventy cents on the dollar, and if the debtor completes the payment schedule, the remaining debts are discharged. As a matter of practical reality, a debtor who loses her job or other source of income will not be able to make payments under the plan, and something like two-thirds of all Chapter 13 filers never even submit a plan in the first place, with the result that over nineteen out of twenty Chapter 13 filings fail.

From the facts, it appears that Audrey got a discharge, meaning it’s not a Chapter 11, and she got it with no problem, which pretty much rules out a Chapter 13. So that means it was a liquidation bankruptcy, a Chapter 7. Chapter 7 cases can take one of two forms: assets and no-assets. In a debtor-with assets case, the total value of the bankruptcy estate exceeds the total debts, so there is money left over which (after the trustee’s fees) is returned to the debtor. As you might imagine, these are somewhat uncommon; if the debtor had sufficient assets to meet her debts, she wouldn’t be filing for bankruptcy in the first place. This sort of thing is useful if the debtor wants to retire her debts but her assets are locked up in some way that she can’t get at them easily, or a few other sorts of scenarios. A no-asset Chapter 7 bankruptcy is the much more typical scenario: the debtor owes more than she has or is likely to get. The creditors take pennies on the dollar and have to live with it.

Now, if this is an asseted bankruptcy, then all of Audrey’s non-exempt assets got thrown into the estate, liquidated, and the money was used to pay off all of her debts. The $35,000 insurance proceeds are, sure enough, an asset that would be difficult to exempt. The $35,000 owed to Calming Meadows is, sure enough, a debt that would be scheduled for payment out of the Chapter 7 estate.

If we’re in the world of an asseted bankruptcy, then there must have been more assets than the $35,000 in insurance proceeds that were liquidated. If it happened that after liquidation of all the assets and satisfaction of all the debts, there happened to be $25,000 left over, then good on for Audrey — she got $25,000 back out of her asseted Chapter 7 bankruptcy and everything is totally kosher. Such a scenario would not be particularly interesting from a legal, moral, or ethical perspective. Few people would argue in that circumstance that she ought to get the $25,000 back.

In order for the question to be interesting, and to meet the implied fact from the hypothetical that Calming Meadows wound up not getting its fee in exchange for its services, we’ve got to be in a no-asset situation. Audrey’s total assets, including the insurance proceeds, had to have been less than her total debts, including the bill from Calming Meadows. Note that in this situation, Calming Meadows gets more than nothing — possibly only pennies on the dollar, but it gets something.

Having not had its full bill satisfied, though, Calming Meadows almost certainly discontinues treatment of Audrey’s son. He will then be left without the mental health care that the hypo leads us to believe he actually needs. Add to the debits column of this transaction, then, Audrey having to either find and pay for an alternative source of mental health care for her son, or living with the fact that her son has an untreated mental health issue. That would be a big debit.

Also in the debit column would be the damage done to Audrey’s credit rating by the bankruptcy. Most credit bureaus stop reporting bankruptcies after seven years; at least one of the major bureaus has extended the reporting to ten years. Audrey is going to have a hard time getting a credit card with any substantial limits or interest rates below 20% for the next seven to ten years. She will have difficulty securing credit of any kind. It will not be impossible, though; some credit card companies like to issue cards to recent bankrupts because they can’t file again for seven years.

In the other column, we have $25,000. Remember, $10,000 of the $35,000 in insurance proceeds went to Brian. Presumably, that’s his fee for filing the bankruptcy (more about that below). The question to the floor becomes: Does $25,000 in her pocket adequately compensate Audrey for allowing the mental health of her son to go untreated, and severely damaging her credit rating?

Others might work the calculus differently and produce a different result.  But in my opinion, the answer is that this is a rather bad trade. I think that over the long haul, this is going to turn out to be rather expensive money for Audrey. Audrey should have known that going in to the transaction, and if she didn’t, her lawyer should have educated her. Which brings us to

3. Brian’s Legal Ethics

 Turning our attention to the lawyer Brian, we must first distinguish between ethics and morals. As I define those terms, ethics are formal, described rules that govern the conduct of an attorney (or some other professional). Morals, by contrast address issues of right and wrong, good and evil, justifiable or unjustifiable behavior. Morals are calculated according to a calculus of utilitarianism, deontology, or as is becoming fashionable on these pages, a neo-Aristotelean sense of virtue ethics.

Ultimately, I will leave evaluating the morality of what is going on to the Reader. In my opinion, nearly all reasonable moral calculi effectively strike a balance between the intent-driven analysis of deontology and the outcome-driven analysis of utilitarianism, but reasonable people may disagree on this point.

I’ll point out, though, that at least in my community there are people who think that bankruptcy is inherently immoral — one should pay one’s debts, one should make good on one’s promises, and bankruptcy offers a legally-sanctioned means to avoid those obligations, and the attorneys who make bankruptcy happen are, in the view of those who value these sorts of obligation-dessert calculations, aiders and abettors of that immoral conduct. As I point out below, though, while there may be some moral question on the individual level when it comes to bankruptcy, I think that when one steps away from the micro-analysis of an individual action, a society has an obligation to provide a reasonable measure of bankruptcy relief from both an intent and outcome perspective — and it benefits from so doing.

The question on the floor is not whether what Brian has done is moral, it’s whether what he has done is ethical. For this, we have more objective ways to evaluate Brian’s conduct. Ethics, being formal rules, are described in formal language. Most states in the United States have adopted variants on the ABA Model Rules of Professional Conduct (formerly called the Model Code of Ethics), and nearly all states look to the Model Rules for at least guidance when their own legal ethical codes are ambiguous.

Brian’s conduct raises two threshold ethical issues for me. First, in the hypo, he is depicted as at least partially initiating the scheme to use the bankruptcy to enable Audrey to pocket the insurance money. Second, he demands $10,000 for himself, which I presume to be his attorney’s fee for rendering services as Audrey’s legal advisor and representative in the Chapter 7 bankruptcy. I assume that neither Audrey nor Brian is cheating — they are not concealing assets or inflating debts in the mandatory schedules filed along with the Chapter 7 petition.

If that is true, I do not see that Brian is advising or assisting in a violation of the law. Audrey has a legal right to file bankruptcy, and Brian is advising her about how to go about exercising that right. Presumably, Brian is experience and competent enough to arrange things so that what I’m assuming is Audrey’s no-asset Chapter 7 bankruptcy winds up with her putting $25,000 in her pocket. As I’m about to explain, this is likely going to be a long game if that’s the result, so Brian’s expertise is a significant factor. But the intent, plan, and result are all legal — they all pass muster under the overseeing and likely skeptical eyes of the trustee and the judge, so the result is legal. Brian has advised Audrey in how to use the legal system to her best advantage, something that is not only not prohibited by most rules of legal ethics, but indeed encouraged as a hallmark of competence.

In order to get this result, Brian needs to be cognizant of at least two things. First, under the Bankruptcy Code, all transactions that occurred within the six months leading up to the bankruptcy filing are subject to scrutiny and reversal by the trustee. If Audrey cashed the insurance check within six months of her filing, then the bankruptcy trustee is going to look at it and try to figure out what happened to the money. If the trustee thinks the use of the money was untoward or improper, he will reverse the transaction, taking the money from whoever it was paid to. If Audrey used the $25,000 to pay a debt, the trustee will probably leave it alone.

If the money sat, unused, in Audrey’s bank account (or in Brian’s trust account on Audrey’s behalf) for more than six months, then the cashing of the check won’t be looked at but the disposal of the money will be. If it’s still sitting there, then it’s a liquid asset and will be confiscated by the trustee as part of the estate. So I can only assume that Audrey used the $25,000 to pay down other debts. Nothing else makes sense.

This is particularly interesting when considering that some debts are dischargeable and some not. If Audrey used the money to pay down or pay off a student loan, or certain kinds of tort judgments, then that’s a legitimate use of the money. After all, a debtor is entitled to favor one creditor over another. Rationally, a creditor might favor a creditor who gets higher rates of interest than those who charge lower rates (among other reasons to favor one creditor over another with limited funds), but if bankruptcy is in the picture, it makes more sense to pay down debts that are not dischargeable. There is nothing unethical about Brian advising Audrey to favor one creditor over another. Audrey could pay $25,000 to her student loan company and nothing to her revolving account credit card, for instance, and that would be pretty much OK.

But the hypo suggests that Audrey pockets the money, rather than using it to pay off debts. That means that when creating the mandatory schedules of assets and debts, Brian is working the Chapter 7 exemptions aggressively on behalf of his client. Recall that above, I indicated that some assets go into the Chapter 7 estate and some do not. Some exemptions are standard nationwide, but the bulk of those exemptions vary from state to state, because they derive from the kinds of assets that the particular state’s law protects from enforcement of judgments. Now, the hypo does not indicate which state the filing occurs in, and I’m not aware of any state that allows a liquid asset exemption of $35,000, which is what would seem to be needed here.

So somehow, Brian has learned how to navigate and structure things such that $35,000 of liquid assets are either subject to an exemption and exclusion from the bankruptcy estate, or as permissible expenses from the estate. I guess he’s just that good. Hard for me to believe, but one of the rules of lawyers dealing with hypos is that you can’t change the given facts. And the given facts are that at the end of the bankruptcy, $10,000 goes to Brian and $25,000 goes to Audrey.

Even the relatively generous exemptions of states like California and New York would not seem to allow this result — but this is out of my area of expertise and maybe Brian is just that good. So is $10,000 a reasonable fee for an attorney who is that good? Because a $10,000 fee for filing a Chapter 7 seems like it’s way too much — by a factor of at least five. Most bankruptcy attorneys I know charge between $1,500 and $2,000 for a no-asset Chapter 7. They must declare their fee on the petition, and they are paid out of estate funds. A fee above the market rate for the area is almost certain to elicit close scrutiny by both the trustee and the judge. So if Brian declares a fee of $10,000 for filing a no-asset Chapter 7, he’s going to need to justify that fee, which raises the ethical issue that takes us to Model Rule 1.5.

That rule tells us that Brian may not charge an unreasonable fee. Factors to be considered in evaluating the reasonableness of Brian’s fee are, along with my analysis of each in italics:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (Chapter 7′s are so routine they are administered by paralegals, and the exemptions are very standardized. Brian may be very, very clever, though; but all the same, this suggests the fee is too high.)
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer (Again, the bulk of the work is done by paralegals and the most time-consuming thing Brian will have to do will likely consist of a single hearing before the trustee, so this fee seems too high to me.);
(3) the fee customarily charged in the locality for similar legal services (I’m not aware of attorneys anywhere charging more than a third of this fee for this service, although I suppose that it’s possible I’m ignorant of what’s going on in other parts of the country than Southern California.);
(4) the amount involved and the results obtained (Audrey walking away with $25,000 liquid in her pocket is an almost unimaginably fantastic result to a no-asset Chapter 7, meriting a higher fee than is otherwise indicated.);
(5) the time limitations imposed by the client or by the circumstances (None present in the hypo, so no factor suggesting a higher fee based on time pressure);
(6) the nature and length of the professional relationship with the client (Chapter 7 cases are ones involving little client contact and the hypo indicates that there was no previous professional relationship between Audrey and Brian, suggesting a lower fee is appropriate);
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services (As indicated above, apparently Brian is a really, really good lawyer to work through the schedules and exemptions to produce this result, potentially justifying a higher-than-standard fee.); and
(8) whether the fee is fixed or contingent (Brian’s fee is fixed, and pre-negotiated, with both parties knowing the stakes; a contingent fee is variable and since the variability of a fee represents financial risk to the attorney, higher fees are justified in a contingent-fee situation).

The only fact suggesting a higher-than-usual fee is Brian’s unbelievably good result; this is relevant to two of the eight Rule 1.5 factors. With six factors suggesting adherence to the market rate of about $2,000 and two factors suggesting a higher rate, I doubt that if I were the judge I would approve a fee of more than about twice the regular rate. Brian would have to be very, very persuasive indeed in justifying his $10,000 fee to me.

I conclude that Brian has charged an unreasonably high fee in violation of Rule 1.5, notwithstanding the concededly fantastic result he’s obtained for his client.

I also question whether he’s provided complete enough advice to his client. As I noted above in analyzing whether Audrey got off easy, the lasting impact of a bankruptcy filing is significant and real, in this case she’s looking at leaving her son’s mental health issue (one serious enough to need inpatient care) without treatment. Model Rule 2.1 describes Brian’s duties in rendering advice to his client:

In representing a client, a lawyer shall exercise independent professional judgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social and political factors, that may be relevant to the client’s situation.

I should hope that it is beyond debate that the issue of discontinuing her son’s mental health treatment is a moral, economic and social factor that is relevant to Audrey’s situation. Now, the rule says that Brian may refer to this in rendering advice, not that he must do so. So a good argument exists that if Brian doesn’t say, Audrey, you know this means that your son’s mental health issue is going to go without professional therapy from here on out, then maybe he hasn’t behaved unethically. But mandatory language applies to the first sentence of the rule requires that he give Audrey candid advice about the lasting effects of bankruptcy, something that an attorney in his position could not help but at least be aware of. This is particularly true after the 2005 bankruptcy reform legislation, requiring that the attorney and the debtor both certify in their filing that the debtor has obtained counseling about credit, which must include a discussion of what bankruptcy does to one’s credit. Brian must also assess the situation and render advice independently, meaning from a point of view that is not self-interested (that is, aimed at maximizing his fee) and one that is not driven by Audrey’s subjective concerns (maybe one of her creditors is her ex-husband or some other enemy).

As I indicate above, in my opinion, filing a Chapter 7 bankruptcy for the purpose of pocketing $25,000 is not a very good idea for the typical client. I suppose someone whose credit is already totally shot, someone who is under a mountain of other debt, someone whose future financial prospects are dim without the bankruptcy, that might be someone for whom such a maneuver might be within the realm of reason. But we know that Audrey has a good job with MHI, so her financial prospects are at least fair-to-moderate. In the hypo, Brian advises the bankruptcy anyway, and seemingly for the purpose of charging a fee for his services which (as demonstrated above) is unconscionably high. This is not independent and candid advice.

Model Rule 7.3, which addresses when and under what circumstances an attorney may approach a prospective client regarding legal services, is not implicated here because Audrey initiated the contact with Brian, not the other way around. Having received an inquiry about his services, rather than solicited Audrey as a client, Brian is free to propose to Audrey such services as he believes he is competent to render. Competence is not Brian’s problem — indeed, it seems to me Brian is some kind of super-lawyer to get a result like this without cheating. His problem is that his fee is too high and it’s possible his client didn’t really understand what she was doing when she agreed to his plan — although it could be that she never really cared, having decided before calling Brian that she was going to try to pocket the insurance money.

4. Conclusion

I find it interesting in passing that we are concerned about the practical effect of this chain of events to the debtor Audrey (did she succeed?), but as to the attorney Brian, we are concerned about his ethics (did he do the right thing?).

In answering these questions, I have assumed that both Audrey and Brian have been truthful and complied with the black letter of the law. If either of them lied to the court, all bets are off — and if they get caught, they’ll be in all kinds of big trouble. Nothing in the hypo suggests that such a thing has happened and if it did, it wouldn’t be a very interesting hypo.

So did Brian the lawyer act unethically? No, because he charged Audrey an unconscionably high fee for his service and it appears that there is a serious possibility that he did not render Audrey complete enough advice to enable her to reach a good decision. The decision to file Chapter 7 and escape the debt owed to Calming Meadows is Audrey’s, not Brian’s, so Brian is not responsible for the either ethics or morals of that decision. Also, Brian giving Audrey advice enabling her to game the bankruptcy system and pocket the $25,000, if it actually works, is not unethical; I see no evidence that Brian has advised or facilitated committing a fraud upon the court (although if that did happen, we’re dealing with a very different sort of animal). Whether it is moral for either Audrey or Brian to do this is an open question.

Now, did Audrey get off easily? Well, she gets a short-term gain of whatever is left over from the $25,000 after taxes; let’s rough that out at about $20,000 net. But in exchange for this, she gets to see her troubled son kicked out of a mental health program that presumably was doing him some good, and shouldering seven to ten years of a Chapter 7 bankruptcy clouding her credit. I certainly wouldn’t make that trade for a net of $20K. It only makes sense for Audrey to file Chapter 7 if there is a lot of other unpayable, dischargeable debt that also goes away with the discharge — in which case, her primary motive for the bankruptcy is discharging the other debt.

Congratulations again, Randy; see you in the NCAA pool next year.

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Investors rushed to buy low-valued shares during yesterday afternoons session, rescuing both stock indices from another losing day.

On the HCM City Stock Exchange, the VN-Index closed yesterday up 0.1 per cent at 465.65 points. Both market volume and value increased 33 per cent, totalling 88.3 million shares worth a combined VND1.36 trillion (US$64.5 million).

Gainers largely outnumered losers by 156-79 with 69 codes hitting the ceiling prices. Many fell in the morning but rose to the ceiling in the afternoon, most of which were real estate shares including Hoang Anh Gia Lai (HAG), Tu Liem Urban Development (NTL), Ba Ria – Vung Tau House Development (HDC), Development Investment Construction (DIG) and Investment and Trading of Real Estate (ITC).

Over half of the 30 leading shares in market value and liquidity gains pushed the VN30 Index up 0.24 per cent to 534.89 points.

SACOM Development and Investment Corp (SAM) was still the most active stock in the afternoon with 3.3 million shares traded, surging 4.71 per cent to VND8,900.

The sense of precaution shadowed the market in the morning session but the slight corrections in the past few days after hitting a nearly one-year high strengthened the belief that another upward trend was taking shape, analysts of FPT Securities Co wrote on the companys website yesterday.

The petrol price hike and low CPI did not affect the market much. Analysts said the most important issue now was money flow. If money was not withdrawn abruptly from the market, the uptrend would likely be sustained, but not massively in all stocks as before.

On the Ha Noi Stock Exchange, the HNX-Index earned another 0.98 per cent to close yesterday at 78.57 on a turnover of VND733 billion ($35 million), up 20 per cent from Mondays total value.

Advancers almost doubled decliners with PetroVietnam Construction (PVX), the most active stock with over 6 million shares exchanged, rising 1.75 per cent to close at VND11,600.

Foreign investors were net sellers on both exchanges yesterday, unloading a combined VND33.5 billion ($1.6 million) worth of shares.

Da River diverted for dam project

The Da River has been officially closed for the first phase of construction on the Lai Chau Hydropower Plant in the provinces Muong Te District.

Electricity Viet Nam (EVN) is the investor in the 1,200-MW project, worth VND35.7 trillion (US$1.8 billion). Construction began early last year for completion in 2017.

Deputy Prime Minister Hoang Trung Hai announced the closure at a ceremony yesterday, while praising the efforts of EVN, builders and local authorities.

There would be many things to do following the river closure, Hai said. He asked the project managers to complete flood prevention work and resettlement of residents in affected areas.

EVN general director Pham Le Thanh said at the ceremony that the plant would add a huge amount of electricity to the national grid, provide water for northern provinces in the dry season and boost the socio-economic development of Lai Chau and its neighbour Dien Bien.

It was estimated that more than 1,700 affected households would be relocated to new areas.

The second river closure is scheduled to take place in November and the first turbine is scheduled to go online in 2016. The plant has a reservoir of over 1,200cu m. It is expected to provide an average 4,670 million kWh annually.

Nokia starts work on manufacturing facility in Vietnam

Nokia yesterday kicked off the development of its manufacturing facility in Vietnam, to serve the growing demand for mobile phones all over the world.

Located in Vietnam-Singapore Industrial Park (VSIP) in the northern province of Bac Ninh, the Nokia Vietnam manufacturing facility is being developed on an area of 17 hectares. Nokia expects to start the operations of this factory in early 2013.

The event is one step further in reaffirming Nokias long term commitment to the Vietnam market, under Nokias strategy to connect the next billion people to information and the Internet, the company stated.

We highly appreciate Nokias efforts in making this commitment a reality, which contributes to the growth of foreign investment in Vietnam in general and in Bac Ninh in particular,” said Nguyen Nhan Chien, President of Peoples Committee of Bac Ninh province.

“We also hope this will bring up not only economic value, but also other social benefits for the country like job creation and community knowledge enhancement on information technology alike.

Mary McDowell, Executive Vice President, Mobile Phones, Nokia, said: Thanks to the valued support from the Vietnamese government, our manufacturing program in Vietnam has been progressing well. The new Nokia manufacturing plant will produce and provide new devices for compelling and affordable, localized mobile experiences, particularly in the growth markets.

Nokia is also committed to extending our positive reputation as an employer and as a corporate citizen. We expect to attract competent and energetic employees from the local skilled labor force. And in turn, employees at our new factory can expect a state-of-the-art facility and a positive, modern working environment with high professional and ethical standards, continued McDowell.

Nokia currently operates two representative offices in Vietnam: one in Ho Chi Minh City and the other in Hanoi.

In November, 2011, Nokia established a new company, Nokia (Vietnam) LLC, to build and operate the new Vietnam manufacturing facility.

VN businesses in Russia boost bilateral trade

The Vietnam Union of Friendship Organisations (VUFO) and the Vietnam Business Association (VBA) in Russia signed the minutes of cooperation in Russia on April 22.

Under the minutes, the two sides will exchange information about investment environments in Vietnam and Russia , give advices to implement economic, commercial and investment cooperative projects, and support enterprises in doing business in the two countries.

Attending the signing ceremony were Chairman of Vietnam-Russia Friendship Association Dao Trong Thi, Vietnamese Ambassador to Russia Pham Xuan Son, the VBA executive board and a VUFO delegation, which is on a working visit to Russia .

VBA President Tran Dang Chung expressed expectations that VBA members will do their utmost to contribute to the people-to-people activities and the promotion of Vietnam ‘s images in Russia .

He said he hopes to take advantage of the support of Vietnamese agencies and branches in building a long-term legal framework for the Vietnamese community in Russia .

Within the framework of the visit, the VUFO delegation offered flowers at Ho Chi Minh Statue and paid tribute to VILenin mausoleum at the Red Square, in the Russian capital of Moscow on the occasion of his 142nd birth anniversary.

Domestic tours cut prices to woo customers

Nearly twenty travel agencies under the Ho Chi Minh Tourism Association (HTA) have joined hands with national carrier Vietnam Airlines (VNA) to unveil a tourism promotional program targeting domestic tour packages between now and year-end.

VNA will slash airfares by 40 percent for services connecting HCMC and Hanoi, Hai Phong, Da Nang, Phu Quoc, and Da Lat to tour organizers, under the condition that the latter pledge to offer discounted travel packages to promote domestic tourism, according to Nguyen Thi Viet Thu, deputy head of the sales development department.

Specifically, round-trip tickets for the HCMC-Hanoi route will be VND3 million a passenger, while the respective rates for the HCMC-Da Nang and HCMC-Phu Quoc will be VND1.9 million, and VND1.6 million per passenger, she said.

HTA deputy chairwoman Nguyen Thi Khanh said her institution and VNA have selected 19 travel agencies to join in the program, each of which will offer at least six discounted packages.

The participants have booked airfares from VNA, while some have begun to reduce prices for their services since April 20, added Khanh.

“At a time when prices of almost all commodities have shot up, VNA’s lower airfares will greatly encourage tour organizers,” said Tran The Dung, deputy director of The He Tre Travel Co.

“If travel agencies cut their service prices by another 8 – 10 percent, tourism package prices can be reduced by at least 22 percent from the current rates.”

Tran Van Dong, director of Phu Quoc-based Huong Bien travel agency, said he will encourage local hotels and 3- and 4-star resorts to cut accommodation fees by 40 – 50 percent.

These discounted services, plus the lower air ticket prices, will create an impulse for the island’s tourism, he said.

Similarly, Da Nang-based Vitour Co also negotiated with its partners to cut service prices by at least 10 percent to “initially introduce at least six discounted tour at prices 25 – 30 percent lower than usual,” its director Cao Tri Dung said.

“VNA will provide particular assistance to tour organizers to enable them to offer the best prices for tourists,” promised VNA deputy CEO Trinh Hong Quang.

VN deals with global economic challenges

Vietnam should have policies to cope with global economic and financial challenges, said experts at a seminar in Hanoi on April 23.

At the seminar, jointly held by the Vietnamese Finance Ministry, the Asian Development Bank (ADB) and the Korea Asset Management Corporation, experts from Hong Kong, the Republic of Korea and Japan assessed the impacts of the global financial crisis on the economies of Asia in general and Vietnam in particular.

They put forward recommendations on macro-economic policies for Vietnam in the immediate future as well as in the middle term, to deal with global challenges.

They also shared international experience in the restructuring of State-owned enterprises (SOEs) and emphasised the role of asset management companies in improving the capacity and operational efficiency of businesses.

According to Vietnamese Finance Minister Vuong Dinh Hue, despite more satisfactory prospects in the first quarter of 2012, the world economy is still in difficult phase, with many risks and challenges.

ADB Vice Chairman Bindu Lohani said countries with strongly developing domestic markets but not those with huge overseas investments, will soon escape from the current crisis.

Although Vietnam earns large profits from exports to developed countries, the country still needs to pay more attention to domestic and regional demand, he said.

The restructuring of SOEs is also one of the key measures helping Vietnam overcome financial crises, Lohani said, adding that the ADB is joining the Vietnamese Government’s efforts in building strategies to reform SOEs, especially small and medium businesses.

He also stressed that Vietnam should base its economy on domestic resources and have suitable financial tools to implement reforms.

Participants at the seminar said that the satisfactory developments of the world economic and financial situation will create new opportunities and challenges for Vietnam to maintain its macroeconomic stability and economic growth.

In the first quarter of this year, the Vietnamese economy saw satisfactory signals such as a reduced consumption index, stable foreign exchange market, increased exports and a trade surplus of 224 million USD.

ABD forecasts that Vietnam ‘s economic growth will stand at 5.7 percent this year and be more than 6 percent in 2013.

Sembcorp gets OK for Vietnam industrial park, power plant

Singapore industrial conglomerate Sembcorp Industries said on Monday it has obtained approval to proceed with a $337.82 million industrial park and 1,200-megawatt power plant in Vietnam.

A Vietnamese-Singapore joint venture involving Sembcorp will develop the industrial park in Quang Ngai Province in central Vietnam, Sembcorp said in a statement.

The Vietnam-Singapore Industrial Park Quang Ngai will comprise a 600-hectare industrial park as well as a 520-hectare site zoned for commercial and residential development. The park will be the Sembcorp-led consortiums fifth in the country.

The Singapore firm also said its unit Sembcorp Utilities was granted in-principle approval to develop the 1,200-megawatt power plant in Dung Quat Economic Zone in Quang Ngai.

Sembcorp is currently assessing the feasibility of this project, it said.

Sembcorp businesses include oil rig building and ship repair, which come under listed Sembcorp Marine, as well as industrial parks, water and power generation.

New, highly competitive products named

Six more items were officially added to the list of national products of high competitiveness approved by the Prime Minister last week.

Rice of high grade, lifting equipment, network and information security products, vehicle engines, vaccines and products for national security are now considered national products.

Three others were also put in reserve, including catfish processed products, edible and medical mushrooms, and electronic chips.

The list is part of the implementation of the National Product Development Program to 2020, aimed at developing made-in-Vietnam products with advanced technologies.

The program’s goal is to raise the competitiveness of Vietnamese products in the world market in terms of originality, quality, and price, as well as to create higher added value.

To this end, the enhanced application of science and technology plays an important role, according to the program’s Steering Committee.

Vietnam’s forex reserves estimated at $19-20 bln

The foreign exchange reserves of Vietnam have improved significantly, equivalent to the payments for 9 weeks of imports from about 7.5 weeks as of mid-2011, said the government in a recent report.

But the government did not give the specific figure of the country’s forex reserves in the latest socioeconomic report 2011 submitted to the Standing Committee of the National Assembly late last week.

The current forex reserves may range from $19-$20 billion, newswires Vneconomy and Dan Tri quoted some experts, citing the government’s socioeconomic report.

However, according to the International Monetary Fund (IMF) norm, the scale of foreign exchange reserves should reach between 12-14 weeks of imports to be regarded as sufficient.

The norm for the safe rate of forex reserves of the World Bank is 10 weeks.

Earlier, Asian Development Bank (ADB)’s report estimated that the country had nearly $17 billion in foreign currency reserves, equaling to about two months of imports.

The reserves rose by around 25 percent over late 2011 following the active move of the central bank to buy foreign currencies, said ADB.

The State Bank of Vietnam early this month announced that it had used around VND130 trillion to buy $6.23 billion worth of foreign currencies from banking system for the national reserve in the first 3 months of 2012.

The reserves rose by $3.5 billion compared to the rate the ADB announced in mid-2011, said ADB expert Dominic Mellor.

At the Consultative Group’s meeting in June 2011, Nguyen Sinh Hung, then chairman of the country’s National Assembly, said the country targeted to increase its forex reserves to 16 weeks of imports in 2012.

The report also said that in Q1/2012, Vietnam’s international current account balance had positive signs. The country enjoyed a current account surplus of nearly $2 billion this year while it suffered a deficit of $126 million in the same period last year.

The country’s total export turnover in the first 3 months of 2012 continued to reach high growth rate with an estimate of over $24.8 billion, rising 25 percent year on year.
The total import spending in Q1/2012 is estimated at about $24.58 billion, rising 6.1 percent on year.

Thus, in Q1/2012, the country ran a trade surplus of $220 million, equaling to about 0.9 percent of the total export turnover, the best results versus the same period of recent years.

In Q1/2011, the country posted a trade deficit of $3 billion.

However, the report also said that the trade surplus was attributed to not only increasing exports and low imports but also to the declines in investments and processing industry production, resulting in the fall in the country’s demand for importing raw materials, machineries and equipment.

Tay Ninh petitions for duty free mechanism extension

The provincial Peoples Committee has petitioned the Prime Minister extend the duty-free mechanism for travellers who buy goods at Moc Bai Economic Zones duty-free shops to 2018, rather than terminate at the end of the year.

The extension was expected to better facilitate domestic and foreign businesses desiring to invest in the zone, the committee said, adding that the States decision to stop selling duty-free goods in the zone negatively influences its attraction of new investment projects.

Losing broker faces delisting threat

Bao Viet Securities Co (BVS) is conservatively targeting a profit of only VND14.6 billion (US$690,000) this year, BVS vice chairman Le Hai Phong said.

The company posted a loss of VND99 billion ($4.7 million) last year due to the difficulties of the market and weak information technology systems, Phong told the publication Dau tu Chung khoan (Securities Investment). In 2010, the brokerage also lost over VND90 billion ($4.2 million).

Phong said the companys top priority this year was to break this trend and posted a modest profit. Under State Securities Commision regulations, listed firms which post losses three years in a row are asked to delist shares from the stock exchange.

However, the firms leaders were still uncertain about the sustainable rally of the market, which would hinder it from reaching its targets.

If the market stops hitting new lows, our aims can be reached, said company chairman Nguyen Thi Phuc Lam.

The leading task, therefore, was to deploy core technology system to serve risk management, Phong said.

His company has been implementing margin trading and its new system for a week, which is supported by the total of VND750 billion ($35.7 million) in cash and bonds. In the first quarter of this year, the company earned a profit of VND10.4 billion ($490,000), accounting for 71.5 per cent of the year plan. While self-trading revenue declined 47 per cent over the same period last year, other sources of revenue rose around 50 per cent.
Investment bank gets award for long service

The Bank for Investment and Development of Viet Nam (BIDV) received on Sunday the States first-class Independence Order for the second time on the occasion of its 55th anniversary.

It was also presented with the Lao Independence Order and the Royal Order of Cambodia at the ceremony for its contributions to boosting social welfare in the Indochina region.

Speaking at the ceremony, National Assembly Chairman Nguyen Sinh Hung said the Bank for Investment and Development of Viet Nam was a leader in helping Vietnamese enterprises boost investment promotion in other countries.

The bank has also helped encourage Vietnamese trade in Indochina and ASEAN countries, he said.

Besides, BIDV had been actively participating in community activities and social welfare, he said.

The commercial bank, which has been ranked as the best supporter of development in Viet Nam by the United Nations Development Programme, has connections with 1,551 financial institutions internationally and domestically.

BIDV, one of Viet Nams four biggest commercial banks, yesterday officially became a joint stock business, with a charter capital of VND23 trillion (US$1.09 billion).

Thaco takes 51 per cent of Korean special vehicles maker

The countrys largest truck and bus maker Thaco Truong Hai (Thaco) said it had acquired a 51 per cent share in Korean special purpose vehicle maker Soosung.

The US$3.5 million deal will help Thaco to expand its production scope to special purpose vehicles like crane trucks, dump trucks and cement mixer trucks.

According to Thacos general director Tran Ba Duong, Soosung would transfer production technologies as well as production lines and help Thaco to operate more efficiently.

Based in the Korean city of Incheon, Soosong employs 500 people and has an annual sales volume of $10 million.

Thaco recently invested US$104 million on a diesel machine production factory using Hyundai technology in an effort to increase the local content in its products.

The Quang Nam based company sold 32,000 vehicles last year, accounting for 29 per cent of the local automobile market and earning VND11 trillion ($ 527 millions) in revenue.

Retail market potential remains untapped

Vietnams total retail market is forecast to grow at 23 percent annually between now and 2014, offering many opportunities for both domestic and foreign retail businesses, according to a report by AT Kearney.

The report Vietnam Retail Market Forecast to 2014 says that modern retail channels will play a crucial role in future growth, improving their position in the market. Increasing purchasing power and changing lifestyles are some of the key growth drivers in the countrys modern retail market, it says, adding that during the next few years, a short wave of consolidation will emerge as foreign retailers are trying to consolidate their position and accelerate their market penetration.

The modern retail market will be the key distribution channel in Vietnam in the near future due to its huge consumption market of nearly 90 million consumers, AT Kearneys report remarks. Vietnamese consumers shopping habits are changing, with more spending in modern retail outlets due to convenience and health-related issues. Many consumers said that modern retail outlets give them good access to new products, more confidence in food safety, and clean facilities.

Vietnams total retail revenue in 2011 reached nearly VND2 trillion or approximately US$90 billion, an increase of 29.3 percent in comparison with the previous year, and contributing 15-16 percent of the Gross Domestic Products (GDP), a promising figure in the context of decelerated economic growth, according to the Ministry of Industry and Trade (MoIT).

The country currently has 636 supermarkets, 120 commerce centres and over 1,000 convenience stores. Experts says these figures still do not meet the demand. As a result, Vietnams retail market holds many opportunities for both foreign and domestic investors.

Competing with foreign retail businesses will be a big challenge for domestic companies, says MoIT. Leading international retail groups have poured large investments into their business expansions in Vietnam with the aim of gaining the lion’s share. This can be seen through the opening of more outlets and trade centres to compete with local retail businesses.

Leading brands like Metro Cash amp; Carry opened 10 new trade centres in 2011 while Parkson added seven new shopping centres in big cities across Vietnam. Big C invested US$14 million in a new trade centre in the central province of Thanh Hoa late last year, raising its chain in Vietnam to 17, and plans to increase the figure to 29 by 2013. Japans Aeon retail group decided to invest US$101 million in a chain of Jusco trade centres and supermarkets across Vietnam. With initial investment capital of US$80 million, the Republic of Korea (RoK)s E-Mart Group has signed a joint venture with Uamp;I Group to put their first project into operation this year.

Vietnamese retail businesses are also trying their best to stand firm in the local market. Co.op Mart will open six new supermarkets this year, increasing its network to 57 across the country. The electronic retail company dienmay.com plans to open five new stores this year, bringing its total to 12.

By 2020, E-Mart Vietnam will establish a chain of 52 supermarkets and stores in big cities with total investment capital of up to US$1 billion. Phu Thai Group, Itochu Group and Japanese company Family says their store chain has reached 19 since 2009, and they have planed to open 27 new stores this year.

Since the country opened its market to 100 percent foreign retailers in early 2009, with the entry of the likes of Metro Cashamp;Carry and Lotte Mart, modern retail formats are growing more prominent in the country. Some foreign retailers are also expanding their distribution networks to Vietnams rural regions. However, traditional retail channels still dominate the market.

In fact, the local retail network for common goods in general and necessity goods in particular remain poor and weak. Over the past few years, although the State and local businesses have concentrated on upgrading infrastructure and expanding the network, a lack of close co-operation and co-ordination among producers, businesses and localities has led to ineffective goods distribution.

In the face of fierce competition, Vietnamese retailers and distributors will have to come up with strategies to stand firm in the local market.

Hanoi’s export revenue up 4.4 percent in April

Domestic and overseas businesses operating in Hanoi have recorded a total export revenue of US$780.4 million in April this year, up 4.4 percent against last month and 10.4 percent compared with the same period last year.

Of the total, the export turnover of local businesses rose by 4.6 percent and 10 percent, respectively.

These modest figures show a fall in sale by businesses in the capital due to shrinking markets overseas such as the EU, Japan and the US.

In the first four months of this year, Hanoi’s export turnover reached US$2.86 billion, a year on year increase of 2.3 percent, of which the value of exports from local businesses rose by 3 percent.

The increase can be seen on exports such as garments at 5.2 percent and computer components and peripheral devices 29.2 percent.

Bank loans are still inaccessible, say realty firms

Despite the State Bank of Vietnam’s announcement on the loosening of the tightened credit valve targeting the real estate sector a fortnight ago, industry players say loans are still beyond their reach, while their projects remain sluggish.

A number of realty businesses said their loan applications have been rejected by banks for a myriad of reasons.

One such company, Le Thanh Co, was told that its application needs to be approved by the credit committee of the bank’s branch first, and then that of its headquarters.

“Even when it is approved, it will take at least several months to receive the money,” said Nghia.

He added that the company’s project, Le Thanh Twin Towers, is still under construction. Most of the VND500 billion need for the project is sourced from the company itself, and bank loans make up only VND24 billion.

“We only want to borrow another VND50 billion, just in case the market remains frozen,” he explained.

Similarly Le Tan Hoa, CEO of Lilama SHB, said the company badly needs capital to proceed with its two unfinished projects.

“Yet the banks all turned me down, saying they have to wait for guidance from the central bank in offering loans to realty firms,” said Hoa.

“Banks will either refuse to lend you money, or give the excuse that they are restructuring business debts,” said Nguyen Bao Hoang, deputy CEO of Thu Duc Housing Development JSC.

“Some banks require borrowers to have a stable source of revenue to be eligible for loans,” he added.

A bit luckier is Duc Khai JSC, who recently inked a deal with Vietinbank on a credit package offered to customers of the former’s Era Town project in HCMC’s District 7.

Customers will be offered loans worth 70 percent the value of the apartment they are to buy, said the company’s CEO Nguyen Ngoc Lam.

“Vietinbank also promised VND1.2-trillion in credit assistance to speed up the project construction.”

“Real estate prices have reached their bottom over the last few years, providing a good chance for customers like us,” said Thuy Linh, who recently purchased a 70-squar-meter apartment from The Era Town project.

Linh said she was only able to make up her mind when Vietinbank offered the credit help, adding however that she is concerned about the high interest rate.

“If lending interest rates do not go down in the future, it will be a problem for civil servants like us,” she said.

Hoang Anh Tuan, CEO of Tac Dat Tac Vang, said the largest issue for the realty market is weak liquidity.

Thus, customers should be provided with loans to enable them to buy houses, he said.
Though real-estate has been removed from the non-encouraged sectors for lending, interest for this sector still remain high, businesses complained.

“A bank promised to consider lowering the rate for my old loans, but then quickly disappeared,” said Hoang of Thu Duc Housing Co.

Mexico eager to establish trade ties with Vietnam

Mexican businesses are keen to set up trade links with Vietnamese partners, especially in the areas of coffee production and processing, aquaculture and tropical fruit export business.

This was released at a recent seminar entitled “Business in Vietnam” held in Mexico’s Tuxtla Gutierrez and Tapachula cities, drawing the participation of nearly 100 leading businesses from southern Mexico’s Chiapas state involved in the agro-forestry-fishery processing sector.

At the seminar, Vietnamese Ambassador to Mexico Le Thanh Tung and Trade Counselor Hoang Anh Dung briefed Mexican businesses on Vietnam’s present socio-economic development and investment environment.

Ambassador Tung said Vietnam is willing to create the best possible conditions for Mexican businesses to invest in the country with a view to strengthening bilateral cooperation comprehensively.

With two-way trade turnover estimated at US$1.037 billion in 2011, Vietnam is considered a gateway for Mexican businesses to penetrate the Southeast Asian market of approximately 590 million consumers, he said.

During the seminar, Tung met with local authorities, visited the Autonomous University of Chiapas (UNACH) and Mexican coffee and seafood processors and talked to the press about the current Vietnam-Mexico relations.

Chiapas State is located in southern Mexico and bounded to the East by Guatemala with a total area of 75,000 km2 and a population of 5 million. Chiapas has favourable climate conditions for developing the agro-forestry-fishery sector and hydro- and wind power.

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Debt issued by Homer City Funding LLC for the Pennsylvania
plant was reduced by two levels to CC, Samp;P said in a statement
today. That rating, 10 grades below investment quality, means
bonds are “currently highly vulnerable” to default, according
to Samp;P’s definitions.

General Electric Co. (GE)’s GE Capital plans to exchange the
debt for new bonds that allow for interest payments to be made
in cash or additional debt from Oct. 1, 2012, to April 1, 2014,
according to a Securities and Exchange Commission filing
yesterday.

Homer City Funding would be the entity involved in any
prepackaged bankruptcy, according to the SEC filing.

The plant in Homer City, Pennsylvania, is owned by GE
Capital and was leased by Edison Mission Energy. The companies
agreed March 29 to transfer control to GE Capital and estimated
that upgrades needed to meet new environmental regulations may
cost as much as $750 million.

Discussions began after Edison Mission failed to find
outside financing for the improvements. GE Capital hired a unit
of Kiewit Corp. to oversee the work and spent $50 million
through May 1, with as much as $40 million of monthly costs
projected for the rest of 2012, according to the SEC filing.

The $466 million of 8.734 percent notes due in October 2026
fell 0.875 cent to 99.75 cents on the dollar at 4:47 pm in New
York, according to Trace, the bond-price reporting system of the
Financial Industry Regulatory Authority. The yield was 8.763
percent.

To contact the reporter on this story:
Tim Catts in New York at
tcatts1@bloomberg.net

To contact the editor responsible for this story:
Ed Dufner at
edufner@bloomberg.net

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