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The latest data from the Markit PMI survey tells a bleak story in Europe. That is not much of a shock, but it is nonetheless depressing, as there had been some faint hope that there would be stabilization at least. It is this kind of data that is feeding the anti-austerity troops and encouraging those who want to find some way to accelerate stimulus.

While the press and population have been disillusioned when it comes to its assessment of Francois Holland, it is worth questioning why France is so downbeat and critical. It is obvious that there are problems and reason for concern in France but, compared to many of its neighbors, the French are doing far better.

The country has a debt-to-GDP ratio of 90% -- Italy is at 125%, and the US is a little over 100%. The budget deficit is around 3.7% of GDP. While higher than the target set by the Hollande government, Britain is at 7.4%, and the US exceeds 5.5%. Meanwhile, the unemployment rate is uncomfortably high at 10.6%, but Spain is twice that. This is not to say that all is well in France, still the fifth largest economy in the world, but the ferocious sense of despair doesn’t really seem to be justified.

-Armada Corporate Intelligence

A new study by the United Kingdom-based branch of Dun & Bradstreet suggests updates the European Union Late Payments Directive already are having an impact on payment behavior, at least in Britain.

D&B’s statistics noted that British businesses borrowing on terms paid their bills on aggregate two days faster in 2012 than in the previous year. At an average of 17-days late, British businesses’ tardiness on terms reached a record level in 2011, said D&B. Directive updates in the EU, last done in summer 2011, represent an important legal development designed to ensure the payment of business-to-business invoices is conducted within 60 days, and public authority-to-business invoices within 30 days. In theory, it is a win for suppliers. But there some potentially conflicting fallout exists, as D&B noted:

"This legislation makes it easier for businesses to pursue payment, with debtors being forced to incur interest and pay an administration fee if they fail to pay for goods and services within 60 days for business and 30 days for public authorities.  Whilst it will help protect some businesses [suppliers], the updated Directive presents new risks for companies [customers] struggling to manage their finances and pay on time, due to the potential interest liability risk."

In addition, to assume the directive will drastically improve payment habits within the debt-struggling EU may be a bit of a leap of faith. Though talking about the potential for EU-wide changes to bankruptcy/insolvency laws not the Late Payment Directive, a point made by Thomas Voller, an attorney with Germany-based Voller Rechtsanwälte and member of EuroCollectNet, could be considered. This is the case in part because, as Voller put it, there really isn’t all that much unity, from a continuity sense and legal perspective, in the euro zone.

“There is a tendency in the European Law to try to unify the rules and to find a common applicable law for all European states in some areas,” he told NACM for the international bankruptcy-focused article “Moving Targets” in the May edition of Business Credit (available next week). “Obviously, this is extremely difficult, and it works only in some special fields.”

Whether B2B payment is one of those fields perhaps waits to be seen.

-Brian Shappell, CBA, NACM staff writer

Officials from the European Commission will be attending and exhibiting at FCIB’s Annual International Credit and Risk Management Summit at the Corinthia Hotel in Prague next month and will be hosting an information seminar on Late Payment Directive at the same venue following the conclusion of the FCIB conference on May 14 at the same venue.

The European Union tipped its cap to trade finance this week as it adopted Capital Requirements Directive IV (CRD IV), part of its ongoing implementation of the Basel III capital requirements. What's noteworthy about CRD IV is that it recognizes the inherently low risk associated with short-term trade finance transactions, ultimately allowing banks to hold less capital in reserve for these transactions and making it easier for them to provide export financing.

The EU's adoption of CRD IV came on the same day that the International Chamber of Commerce (ICC) released a report on how rare defaults are in trade finance transactions. Specifically, the report found that short-term trade finance transactions have a microscopic .02% default rate, compared to a 0.6% default rate for one-year, single A-rated corporate loans, a comparatively reliable transaction that defaults nearly thirty times as often as trade finance transactions do.

Among other provisions, CRD IV sets a lower credit conversion factor (CCF) for trade financing than previously suggested iterations of the Basel III reforms. For medium/low risk and medium risk off-balance sheet trade finance instruments, the CCF will be 20% and 50%, respectively. This means that banks won't have to keep the entire value of a trade finance transaction in reserve, thereby making this type of financing cheaper for banks to provide.

Advocates cheered the EU's decision. "Amendments agreed [to] by the EU institutions on capital, leverage and liquidity requirements for trade finance recognize the intrinsically safe nature of these products and their importance to companies, consumers and job creation," said Tod Burwell, president and CEO of BAFT-IFSA, an international trade banking association comprised of the Bankers' Association for Finance and Trade, and the International Financial Services Association. "Through these amendments, the European Union has taken significant steps to alleviate the regulatory burden for trade finance and to ensure it remains available and affordable to importers and exporters."

"This is a positive outcome for the real economy, and we ask the G20 and the Basel Committee to recommend that these Basel III changes be adopted in all member jurisdictions around the world," he added.

- Jacob Barron, CICP, NACM staff writer

A credit professional would have to be somewhat asleep at the switch to have missed the often negative news coverage in business publications and mainstream media about the struggles of Best Buy and JCPenny (JCP). The problems faced by the two companies and others like them, albeit to a lesser extent, warrant inclusion of department stores and “big box” retailers as industries to watch. As such, creditors are going to need to be mindful of warning signs coming from companies therein.

JCP’s business model, which featured a failed gamble on a campaign that ended faux discounting and coupons in favor of “real” pricing, and Best Buy’s struggle to overcome powerhouse online retailers like Amazon, and brick-and-mortar competitors like Walmart for market share are the source for their struggles. But an even bigger storm for retailers of this size and profile, as suggested by Bruce Nathan, Esq. of Lowenstein Sandler LLP, potentially looms in the not-too-distant future: rate hikes. Let’s face it, rock-bottom interest rates, and the economic malaise inspiring them, won’t last forever. “If your business model is troubled and you have a lot of debt, that’s going to be one big issue,” said Nathan. “When interest rates go up, the debt has to be refinanced. But a lot of these retail businesses are also badly overleveraged.”

And potential financial problems with such stores could have a domino effect as many of them serve as anchor stores designed to drive more foot traffic to other retailers in malls and shopping centers. Nathan noted that such a domino effect could also impact a commercial real estate sector that has already seen its share of hardships over the last half-decade. “You need to look for the warnings to be able to mitigate your risk,” said Nathan. “You want to be able to anticipate a bankruptcy well before the filing. And there’s so much more information out there now that wasn’t 20 years ago.”

- Brian Shappell, CBA, NACM staff writer
 
Catch Nathan in Bankruptcy Rumblings: Identifying and Mitigating Risk of a Financially Troubled Customer Headed toward Bankruptcy at Credit Congress on May 22. For more information on the event or to register, visit http://creditcongress.nacm.org/. 

On the heels of Mexico doing the same, the United States has come to an agreement with Japan clearing the road for the Asian nation to join the ranks of the Trans-Pacific Partnership, a key cornerstone of several nations’ respective trade agendas.

Still under negotiation, the TPP represents a greater interest in the "Pivot to Asia" in the southeast part of the continent that includes emerging economies like Vietnam, Singapore and Malaysia on the part of the three major North American powers as well as others like Peru and Australia. Nearly half of the upwards of $22 trillion in global economic growth between now and 2020 is expected to be forged in this region. A lack of FTAs is a part of the problem of why imports from North America and other participants in places like Chile and New Zealand have been dropping off there.

For the U.S.’s part, the agreement to allow Japan TPP entry includes, at least temporarily, it maintaining tariffs on Japanese vehicles – while a small percentage is levied on cars, trucks carry a penalty of up to 25% in part because of U.S. lobbies. There are also potential battles brewing between Japan and other nations because of perceptions that it is highly protectionist in certain industries, notably agriculture. In short, the inclusion of Japan in the TPP doesn’t necessarily raise the likelihood of easy adoption of the multilateral trade pact. To wit, several nations including Canada and Australia have yet to support Japan’s inclusion at this time, and its trade officials have voiced what they see as significant concerns.

-Brian Shappell, CBA, NACM staff writer

There are not many viable options for the recovery of Europe, so the pressure is now on France to join the Germans in repairing the damage to the European economy. But, by the looks of the most recent data, that is not something imminent.

The first quarter numbers for France are dismal, perhaps not quite as bad as many first thought likely, but nothing to suggest that France is going to be able to play a major role in the recovery anytime soon. The growth in the first quarter was just 0.1%, a hair above recession. The measures of business and consumer confidence are as low as they have been since the recession started in 2009, and the population has become utterly frustrated and disillusioned with the government of Francois Hollande. The slow growth has coincided with a serious scandal that has been undermining the reputation of a government that sought to set itself above the opposition.

There is no movement within the ranks of the consumer, as spending has diminished to nothing. The French economy is as dependent on the levels of internal consumption as the U.S. This is not a country that thrives on the export sector, as the Germans do. French business has long struggled to compete effectively on the global stage, and that has increased the reliance on the French household over the years. Right now, that household is in retreat on all fronts. There has been a dramatic reduction in the sales of new cars, appliances, clothing and even food.

Solutions to the crisis in France are hard to come by, as neither of the dominant parties perceivably have much to offer. Analysts look at France as too dependent on the internal market, but there is no easy way to make the country globally competitive. To export more effectively, the French would need to lower the cost of doing business, and that means radical labor reforms and regulatory changes that would not be popular in the country. French manufacturers have yet to embrace the world of technology, also limiting their export potential as well. The recovery of the domestic market is all about confidence-building, but this is at a low point for all. Reversing that malaise will require dynamic leadership and few expect to see anything like that from a scandal-ridden French leadership.

-Armada Corporate Intelligence

For more international business credit and economic news, check out this week's edition of eNews, available Thursday late afternoon (EST). NACM's eNews is available via email or through its website (www.nacm.org) inside the "Resources" pulldown bar.

For much of 2011 and 2012, Fitch Ratings tended to be a little quieter and less controversial than its colleagues in the so-called “Big Three” credit ratings agencies. That has changed somewhat this year with some of Fitch’s moves, the latest of which being the first downgrade to a Chinese rating this century.

Though Fitch affirmed China’s Long Term Foreign Currency Issuer Default Rating (IDR) at the top,  'A+’ level, the agency downgraded the Long-Term Local Currency IDR to 'A+' from 'AA-'. It is the first downgrade of a Chinese rating since 1999. The reasoning is an increase of debt-related risk to China’s overall financial stability, according to Fitch’s release:
“Credit has grown significantly faster than GDP since 2009. China experienced the second-fastest expansion of credit in real terms, behind only Qatar, between end-2009 and end-June 2012. The stock of bank credit to the private sector was the third-highest of any Fitch-rated emerging market…Fitch believes total credit in the economy including various forms of "shadow banking" activity may have reached 198% of GDP at end-2012, up from 125% at end-2008.”

Still, for China, the Fitch outlook is set at “stable.” Granted, the agency noted this could all change with a steep and surprising downturn or, perhaps more poignantly, increased volatility among neighbors in the region, whether directly or indirectly involving China.

“The ratings assume there is no significant deterioration of geopolitical risk, for example a conflict between China and Japan or an outbreak of war on the Korean peninsula,” Fitch noted.

-Brian Shappell, CBA, NACM staff writer

MasterCard, the world's second largest credit card network, continues to face allegations of anticompetitive behavior on both sides of the Atlantic.

In addition to navigating the still yet-to-be-fully-approved $7.2 billion class action lawsuit in the U.S., the European Commission announced today that it had opened an investigation into MasterCard's potentially anticompetitive use of transaction fees on merchants. This dovetails with the Commission's ongoing investigation into similarly anticompetitive practices by Visa, which began last July, and the efforts of the eight European Union countries where both card processing giants are either under investigation or facing court proceedings.

The Commission announced that it was focusing particularly on transaction fees levied by MasterCard on payments made by cardholders from countries outside the European Economic Area (EEA), as when a U.S. resident uses their MasterCard to pay for a purchase at a merchant in the EEA, rather than other fees for cross-border transactions within the EEA, which were outlawed in 2007. Furthermore, the Commission said it would be broadly investigating any of MasterCard's related business practices that amplify the risk of anticompetitive behavior, such as the "honor all cards" rule, which requires merchants to accept all or none of MasterCard's payment cards.

"These fees and practices may restrict competition. The inter-bank fees are generally passed on to the merchants, leading to higher overall fees for them," said the Commission. "Ultimately, such behavior is liable to slow down cross-border business and harm EU consumers."

The parallel investigations into Visa and MasterCard's business practices are driven by the Commission's stated goal to create a level playing field for all payment card providers. Ideally, increasing transparency in the way these fees are set and levied will result in rate cuts and lower processing costs for card-accepting merchants.

New regulations on payment card fees are expected to be proposed by the Commission before summer.

- Jacob Barron, CICP, NACM staff writer

Agencies affected by the sequestration budget cuts have had some say as to where the cuts are made. Though no one believes it was the nation's only or best option, this level of flexibility in the sequester's application could help mitigate its effects in certain sectors of the federal government, such as in the Small Business Administration (SBA).

To ensure that the cuts are applied in the most effective way, the House Small Business Committee, chaired by Sam Graves (R-MO), sent a letter this week demanding that the SBA provide more details about how the agency plans "to conduct its core functions in a time of limited budgetary resources."

Graves stressed that the sequester's cuts be directed at programs that are wasteful, rather than at the SBA's core functions of counseling, increasing access to capital and contracting. Specifically, the letter sent from the committee to SBA Chairman Karen Mills requested details on contingency plans that the SBA would implement in the instance that demand for guaranteed loans exceed the funds available in the agency's business loan account. Essentially, Graves wants to make sure that the sequester affects lending less than it affects how the SBA's programs are administered.

In an oversight hearing held earlier in March, Graves' committee cited a Government Accountability Office (GAO) report that identified room for improvement across 52 of the SBA's entrepreneurial assistance programs, most of them geared toward unnecessary or inefficient filing and paperwork requirements. "The ways that these programs are administered could lead to inefficient delivery of services, such as requiring entrepreneurs to fill out applications to multiple agencies with varying program requirements," said William Shear, director of financial markets and community investments at the GAO. "These inefficiencies could compromise the government’s ability to effectively provide the needed services and meet the shared goals of the programs."

Ideally, the sequester cuts do more to clear out the waste in the SBA, rather than make it a less effective source of financing. "As our debt continues to pile up, an important way for us to rein in federal spending is to find ways to get rid of duplication and overlap in federal programs where taxpayer dollars are being wasted or used inefficiently," said Graves. "Rooting out duplication, inefficiency and waste in SBA programs to ensure small businesses are being best served is a goal of this Committee."

The SBA must respond to the committee's requests for contingency plans by April 15.

- Jacob Barron, CICP, NACM staff writer
 

As has been noted many times by NACM and FCIB, commerce in the Middle East is a very intriguing and potentially lucrative pursuit for companies. However, cultural and banking differences, not to mention general unfamiliarity, has rendered some credit department afraid to extend terms to businesses there in part because they don’t have feet on the ground, so to speak. The Dubai Chamber of Commerce and Industry believes businesses in the UAE should capitalize on that and market such expertise, even if the rollout of any widespread effort may be limited…for now. It's a development Western-based businesses should potentially monitor.

A new report from the Dubai Chamber, noting that Islamic Finance is expected to expand globally to about $2 trillion (USD) by 2015, urges business there to export their expertise in things like Middle Eastern business practices and, specifically, how Sharia Law can affect business dealings with those who are complaint. The first wave of a potentially widespread effort of focus would be on companies in regions where significant Muslim population already (Turkey, parts of Southeast Asia, etc.). Still, it would almost surely set the stage for more services to emanate from the Middle East designed for businesses in traditional, Western economic powers as well.

“Dubai banks are potentially well positioned to harness organic growth in these markets where Islamic products can appeal to the predominantly Muslim indigenous population,” the Chamber noted in its release about the study. “However, to compete with conventional international institutions, Dubai’s Islamic finance sector must scale and breach the critical mass required to make products feasible.”

The study also, importantly, noted that the there is a growing young population that still abides by Sharia law that has garnered significant increases in income in recent years.

-Brian Shappell, CBA, NACM staff writer

After reviewing arguments from last week from Stockton, CA officials and creditors’ representatives, a bankruptcy judge has ruled that the struggling city is eligible to file for Chapter 9 bankruptcy. However, the judge did little to immediately clear up other points of contention or explain the basis for how he ruled.

U.S. Bankruptcy Judge Christopher Klein ruled Stockton did meet the threshold, even one heightened by a 2011 change trying to slow potential filings, to officially enter into municipal bankruptcy. However, there was little explanation released publicly Monday to explain the decision nor was there clarity provided on the issue of renegotiating pension terms.

“There’s no explanation yet, just an order held that they were eligible,” said Bruce Nathan, Esq., of Lowenstein Sandler LLP. “It seems unknown what the court based its decision on, as a number of requirements were litigated here. So, it’s vague what the court did other than to say that it holds a Chapter 9 is usable.  It’s almost anti-climatic at this point.”

Arguments wrapped last week in the case, which is one of the first to include potential plans to not only slash retiree and pension benefits, but also short bondholders, creditors and other insurers. Representatives for the city officially filed for Chapter 9 protection in federal court in the state capital of Sacramento in June 2012. Negotiations since that time, mandated by a then-new California state law requiring attempts to work out solutions without court judgments or hastily-considered filings, failed.

Stockton is among many U.S. cities, including several others in California, struggling to get out of crushing debt wrought by expensive union contacts, pension payments and tax base shrinkage caused by the real estate collapse, for which it boasts the nation’s second-highest foreclosure rate.

-Brian Shappell, CBA, NACM staff writer

The negotiations over the Trans-Pacific Partnership – one involving a number of Southeast Asian nations as well as the United States, Canada and Peru, among others – are not going that well, and there is not much reason to assume that this situation will change much. The sticky issue is the same as it often is: agriculture.

The TPP is supposed to bring together the nations of the Pacific in some kind of trade partnership that will advance their respective economies. This is not the first time that there has been an attempt to unite the nations touched by the Pacific and it will doubtless not be the last. Japan is now considering membership, and that is part of what has been roiling trade talks.

There have been some agreements on the most noncontroversial aspects of trade, but the more critical parts have been largely ignored, as there is no consensus on what to do about them. The issue of access for farm output is always a major point of contention, and it has preoccupied the current gathering. Opposition in Japan is coming from the farmers as they are dead against any significant import of food that is grown in Japan, however inefficiently. The U.S. is all for Japan joining, but American farmers (and their lobby) want nothing to do with a trade pact that doesn’t give them access to new markets.

The inclusion of some Latin states on the Pacific border also complicates matters, as U.S. farmers are already pressured by the output from Mexico and Chile and they are not eager to see an expanded level of competition. U.S. issues involving the budget battle also could have an impact on appointment of trade officials and staff as well as willingness to sign onto anything that could lead to more imports in certain categories.

-Armada Corporate Intelligence

The statement made by this month’s Credit Managers' Index, available now at www.nacm.org, was essentially “steady as she goes.” The CMI fell by less than a point from February, with both favorable and unfavorable factor indexes dipping by roughly equal amounts. Some sub-factors showed significant movement, but there was no clear signal from any of the factors as far as financial stress is concerned, or anything to cause much confidence either.

Among areas of concerned is a notable decline in sales levels in March, though it not far off the pace of late 2012. “The main concern is that for the last year, the sales reading has been averaging in the low 60s and now there seems to be a struggle to get there again,” said NACM Economist Chris Kuehl, PhD. On the encouraging side, the new credit applications foretell a desire for expansion on the part of businesses.

“Businesses are starting to more aggressively pursue credit,” said Kuehl. “However, serious issues remain in balancing the desire for more credit and creditworthiness.” He also added that unfavorable factor index statistics indicated there are more companies in distress than was the case a month or two earlier, and that likely reflects the consternation regarding government inactivity on key issues.

Overall, the economist noted that the March CMI is “telling roughly the same story as other economic indicators of late…Nothing is suggesting a return to recession, but neither is there a sure sign of an imminent breakout in the manufacturing or service sectors.”

-NACM staff
For complete March CMI data and analysis, visit http://web.nacm.org/cmi/cmi.asp.

The previously confident, almost boastful bloc of nations known as the BRICs (Brazil, Russia, India and China and recently added South Africa) seem to be making a lot less credible noise at its latest annual summit involving leaders. At least one expert believes it’s foretelling the reality that the bloc was an unnatural fit from the start, and more are coming to that realization.

News coming out of the BRICs meeting has not featured much in the way of firm policy being made other than the establishment of a $100 billion foreign currency pool to shield member nations from wild currency valuation swings caused by other nations struggling with recession or economic malaise. What was expected to be the big news heading into the meeting was a firm agreement to establish a BRICs development bank, one designed to challenge traditional economic powerhouses like the International Monetary Fund. However, reports indicate that some major obstacles have impeded a functional agreement between the BRICs themselves.

Octávio Aronis, an attorney with Brazilian law firm Aronis Advogados with deep involvement in credit and collections, characterized the BRICs as not being a real member bloc in their actions: "...We are all so completely different from each other. They’re four or five countries that are growing, but all with situations and numbers." It's similar to the context of a February NACM interview with Ludovic Subran, chief economist at Euler Hermes, Subran questioning how wise it is to consider them as a grouping or bloc given the many massive differences.

-Brian Shappell, CBA, NACM staff writer
See extended version of this story with more analysis in this week's edition of NACM eNews, available Thursday afternoon via email and at www.nacm.org in the "Resources" pulldown menu.

Less than one year after its lavish opening, Revel AC Inc. has made official its filing for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Camden, NJ. The filing, heavily rumored since last month, was made following a debt-for-equity swap agreement for which secured lenders signed off. The bankruptcy hearing is tentatively slated for mid-May.

Revel, featured as a potential filer just days after NACM’s “Industries to Watch” series highlightied the potential problems that could be caused by a glut of gaming operations in the Eastern United States, saw rumors spread like wildfire that the operator of Atlantic City’s Revel casino/resort property sought high-powered attorneys specializing in bankruptcy filings to look at its finances. Such finances already include $1.5 billion of debt and just over $1 billion in assets at a time when economic growth seems to be easing, in addition to more competitors in neighboring states coming online with legalized gaming operations and the budgets of potential local customers still impacted by the lingering effects of Hurricane Sandy.  

Patrick Spargur, ICCE, credit and collections manager with Bally Technologies, Inc. speculated there could be two or three filings on the part of Atlantic City-based operations alone this year. Creditors selling directly to or downstream from Eastern-based gaming operations in any significant capacity need to be aware of the potential trend.  

-Brian Shappell, CBA, NACM staff writer

Though there may be some budgetary hurdles in the future, this week the Obama Administration took the first step toward a Transatlantic Trade and Investment Partnership (TTIP) with the European Union by notifying Congress of its intent to start negotiations.

Originally teased in last month's State of the Union address, the TTIP has quickly become one of the President's top trade priorities, along with the Trans-Pacific Partnership (TPP), which last week gained a new potential member as Japanese Prime Minister Shinzo Abe announced that Japan hoped to join TPP negotiations in earnest. Taken together, the TTIP and TPP signal an effort by the Obama Administration to build on the United States' existing trade relationships that are already some of the strongest in the world.

In particular, the economic relationship between the U.S. and the EU currently generates goods and services trade flows of about $2.7 billion a day, according to a 2012 estimate. Exporters on both sides of the Atlantic already have few hoops to jump through in order to sell to their cross-ocean counterparts, but since the volume of trade between the U.S. and the EU is already so high, any further reduction in trade barriers could provide exponential increases.

"The decision to launch negotiations on the Transatlantic Trade and Investment Partnership reflects the broadly shared conviction that transatlantic trade and investment can be an even stronger driver of mutual job creation, growth and increased competitiveness," said Demetrios Marantis, Acting U.S. Trade Representative, in his notification letter to Congress. "With average U.S. and EU tariffs already quite low, new and innovative approaches to reducing the adverse impact on transatlantic commerce of non-tariff barriers must be a significant focus of the negotiations."

- Jacob Barron, CICP, NACM staff writer

 

As the Cyprus Parliament rejected almost universally-panned bailout terms that even the ECB’s staunchest supporters were hard pressed to defend, and the aftermath of the ham-handed bank rescue is being felt around the world.

Markets saw a mass sell-off and banks a run on deposits as the ECB’s terms sought to tax deposits within Cypriot banks. Though intended to punish and raise money from what amounts to rich Russian tax-dodgers keeping money there, the average Cyprian would soon find their own formerly unassailable savings coming under a tax, something legally in a gray area, at best, in the EU.  

“It would be very hard to overestimate the damage caused by the weekend decisions by the ECB, Cypriot leaders and leaders of the euro zone,” penned NACM Economist Chris Kuehl, PhD in his daily column for FCIB members. “The decision to rescue the banks of Cyprus on the backs of depositors may have triggered the biggest bank meltdown Europe has yet seen, and it is simply beyond comprehension that the authorities involved in this decision could not have foreseen the reaction. Prior to this decision there was a sense that the powers that be in the ECB, IMF and euro zone at least knew what they were doing, even if their course of action was unpopular. That veneer of confidence has taken some very significant hits.” He added that, short of a reversal, people in other EU countries could find themselves asking: "Why wouldn't they do this to us?"

-Brian Shappell, CBA, NACM staff writer
Extended story will be available in this week's edition of NACM eNews, available Thursday afternoon at www.nacm.org, in the Resources section.
 

It was noted in last week’s edition of new NACM feature “Industries to Watch” that solar producers in the United States were facing issues that included too many players operating in the industry with respect to actual demand. The problems have also been notable in the European Union. Perhaps ironically, the latest solar company in trouble is based in China and was among the key examples of allegations of price dumping and illegal government subsidies that have hurt U.S. and EU-based operations.

Suntech generated the most press about a solar company since the collapse of California-based Solyndra, a firm that garnered millions in U.S. government grants before fraud allegations and financial mismanagement derailed its operations, just before the weekend when it missed its bond payments. Suntech, one of the largest solar manufacturers in the world, has been widely speculated to have experienced a cash crunch likely to spiral into some sort of insolvency-based restructuring in the near future. Such troubles underscore the out-of-balance ratio of solar product manufacturers/service providers and consumers willing to pay for them.

However, the news could actually, in a roundabout way, be helpful for U.S. and EU-based producers. With such a large producer stumbling significantly, that is one more competitor (and an important one) that is potentially out of the saturated pool or at least not in a position to grow market share for a time. Granted, that’s not to say the problems facing solar producers in the U.S. or EU have gone away…far from it.

-Brian Shappell, CBA, NACM staff writer

Despite continually strong export figures, the U.S. trade deficit widened more than expected in January, driven by an uptick in oil imports.

According to the U.S. Commerce Department, the monthly gap between goods and services imported and goods and services exported hit $44.4 billion in January, which was about $2 billion higher than analysts had expected. December's figures were also revised downward, with Commerce lowering the trade deficit from $38.5 billion to $38.1 billion.

The $6.3 billion jump between December and January was the largest increase in the trade deficit since last March, as exports, although still hitting historically high levels, fell by 1.2%. Imports also rose 1.8% to $228.9 billion in January, an increase driven primarily by industrial supplies and materials, the imports of which increased by $4 billion.

Exports of cars, capital goods, consumer goods and food, feeds and beverages marked slight gains, but not enough to offset the slump in exports of industrial supplies and materials. Imports of crude oil increased by more than 13%, from about $22 billion in December to more than $25 billion in January, as the price for a barrel of imported oil dropped to its lowest level since July ($94.08).

On a country by country basis, the U.S. ran trade surpluses in January with Hong Kong ($2.7 billion), Australia ($1.2 billion), Brazil ($900 billion) and Singapore ($700 million), while its goods deficit with China continued to grow, hitting $27.8 billion. Continuing at this pace, the U.S. could break its record annual deficit with China, which hit $315 billion in 2012.

- Jacob Barron, CICP, NACM staff writer

Credit professionals looking for unique financing solutions should see where investors want to put their money. That was just one of the many insights offered during yesterday's FCIB New York International Roundtable, held at the offices of Lowenstein Sandler, LLP. During the event-ending panel, titled "Non-Traditional and Creative Methods for Receivables Management and Working Capital Finance," professionals from the brightest corners of commercial trade financing offered attendees some new ideas on how to approach managing their receivables.

Panelist John Barone of JP Morgan noted that credit professionals often fail to see the big picture in terms of how receivables are securitized and financed, cutting themselves off to a number of financing options. In essence, he made the point that creditors and their companies should look to areas where investors want to put their money, and investors are currently looking to invest in so-called high-yield markets. "When we discuss high-yield we mean any company that is rated BBB or less," said Barone. "If you were to look at a group of European high-yield names and you also look at the default rate and how those names as a portfolio have traded, the spread was astronomical."

Ultimately, the idea is that the greater the risk, the greater the reward, a fact that means greater profits for investors and thus greater access to unique financing solutions for companies looking to finance sales to this area. "Many of the credit professionals that we talk to don't look at this," said Barone. "They analyze those individual customers and they tend to not step back and think about things on a more macro basis. The market for high-yield risk in Europe is growing. Investors are looking to put their capital somewhere and they're looking for something they can also get a yield on their capital." Europe is one place where creditors can hope to increase sales while hedging their risks because investors are more interested in taking the risk of securitizing such transactions with puts and other financing options.

See more about this year's New York Roundtable in today's edition of NACM's eNews. For more information on FCIB's other educational and networking opportunities, click here.

- Jacob Barron, CICP, NACM staff writer