Metropolitan Bank and Trust Co (Metrobank), the biggest bank in Philippines, may soon be able to get rid of its problem loans following a deal with the US investment bank Lehman Brothers. Under the agreement, Lehman will set up an asset management company (AMC) to absorb Metrobank’s non-performing loans (NPLs).
Alfredo Javellana II, Metrobank’s executive vice-president, says the bank has an estimated 30.95 billion pesos (US$601 million) worth of NPLs as of the third quarter of 2001, or 17.2% of its total portfolio of 179.89 billion pesos. NPLs are loans whose principal and interest have not been paid for three consecutive months.
The Metrobank-Lehman deal comes at a time when the Philippine Government is laying the groundwork for laws to allow the acquisition of NPLs by foreign investors. Among the laws being prepared in the Philippine Congress is one that will allow the establishment of AMCs to take over NPLs.
Javellana says the setting up of the AMC is not dependent upon the passing of this law. “We cannot wait for such a bill,” he notes. “Who knows when it will be passed. Anyway, that bill is just supposed to enhance the values of the NPLs.”
Under a memorandum of understanding (MoU) signed between the two parties in December, Javellana says Lehman is looking to acquire from Metrobank NPLs worth in excess of 15 billion pesos. He declined to disclose the price at which these NPLs will be sold to the AMC.
Javellana says other foreign investment banks have also expressed interest in acquiring Metrobank’s NPLs, but Lehman offered the best package. He notes that Lehman has been very active in acquiring NPLs around the region.
The AMC is just part of Lehman’s commitment to the Philippines as it also signed an MoU with the government to set up a US$1 billion Philippine Recovery Fund to help boost the country’s economy through the acquisition of NPLs, finance mass housing and other programmes. The MoU was signed in Manila on January 12 by Jasjit Bhattal, Asia chief executive of Lehman Brothers, and the Philippine Finance Secretary Jose Isidro Camacho. It was witnessed by President Gloria Macapagal-Arroyo.
Javellana attributes Metrobank’s NPL problems to the Asian financial crisis in 1997, which saw a slew of corporate failures. Other large Philippine banks, including Equitable PCI, Land Bank of the Philippines and the Philippine National Bank, are also said to be looking for strategic partners to solve their problem loans.
The Bangko Sentral ng Pilipinas (central bank) is blaming the rise in NPLs – along with the slowdown in economic activity – for the decline in bank lending, which (compared with the same period a year earlier) fell 3.3% to 1.4 trillion pesos as at the end of October last year.
In a report, it notes that lenders had maintain a prudent lending stance as the NPL ratio of commercial banks during the same period rose by 0.9% from the previous month to 18.8% or 281 billion pesos.
Preference shares represent part of the risk-bearing ownership of the company, although they usually confer on their holders a right to receive the first slice of any dividend that is paid. There is an upper limit on the preference share dividend per share, which is usually defined as a percentage of the nominal value of the share. Preference share dividends are usually paid in full. Preference shares give more sure returns than equities, though they by no means provide certain returns. Preference shares do not usually confer voting rights. Preference shares of many UK companies are traded in the LSE. As with equities, prices of preference shares will vary with investors’ perceptions of future prospects. Generally, preference share prices are less volatile than those of equities, as dividends tend to be fairly stable and usually have an upper limit. For most companies, preference shares do not represent a major source of finance.
Most companies borrow funds on a long-term, occasionally on a perpetual, basis. Costain Group plc, an engineering, construction and land development business, is a relatively rare example of a major UK business that has virtually no borrowings. Lenders enter into a contractual relationship with the company, with the rate of interest, its date of payment, the redemption date (if the loan is redeemable) and amount all being terms of the contract. Many long-term lenders require rather more by way of security for their loan than the rights conferred on any lender under the law of contract. Typically, lenders insist that the principal and sometimes the interest are secured on some specific asset of the borrowing company, frequently land. Such security might confer on lenders a right to seize the asset and sell it to satisfy their claims where repayment of principal or interest payment is overdue. Loan notes (or loan stocks or debentures) are, in the case of many UK companies, traded in the LSE. It is thus possible for someone owed £100 by X plc to sell this debt to another investor who, from the date of the sale, will become entitled to receive interest, and repayment of the principal in due course. Such payment amounts and dates are contractual obligations, so there is less doubt surrounding them than applies to dividends from shares, more particularly where the loan is secured. For this reason the market values of loan notes tend to fluctuate even less than those of preference shares. The relationship between the fixed return elements (preference shares and loan notes), in the long-term financial structure, and the equity is usually referred to as financial gearing or capital gearing (‘leverage’ in the USA). We shall consider in Chapter 11 the reasons why companies have financial gearing.
Raising and repaying long-term finance
A limited company, because it has a separate existence from its shareholders, does not die when they do. The only way in which the company’s death can be brought about is by following the legally defined steps to liquidate (or wind up) the company. Liquidation involves appointing a liquidator to realise the company’s assets, to pay the claimants and formally to lay the company to rest.
The initiative to liquidate the company usually comes from either:
the shareholders, perhaps because the purpose for which the company was formed has been served; or
the company’s creditors (including lenders), where the company is failing to pay its debts. In these circumstances the objective is to stop the company from trading and to ensure that non-cash assets are sold, the proceeds being used to meet (perhaps only partially) the claims of the creditors. This type of liquidation is sometimes referred to colloquially as bankruptcy.
Order of paying claimants
Irrespective of which type of liquidation is involved, the liquidator, having realised all of the non-cash assets, must take great care as to the order in which the claimants are paid. Broadly speaking, the order is:
Secured creditors. These would tend to be loan creditors (those that have lent money to the company). Where the security is on a specified asset or group of assets, the proceeds of disposal of the asset are to be applied to meeting the specific claim. If the proceeds are insufficient, the secured creditors must stand with the unsecured creditors for the shortfall. If the proceeds exceed the amount of the claim, the excess goes into the fund available to unsecured creditors.
Unsecured creditors. This group would usually include most trade payables (those that have supplied goods and services to the business on credit). It would also include any unsecured loan creditors.
In fact, ranking even before the secured creditors come claimants who have preferential rights. These include HM Revenue and Customs (the UK tax authority) for the company’s tax liabilities (if any), and the employees for their wages or salary arrears. Only after the creditors have been paid in full will the balance of the funds be paid out to the shareholders, each ordinary share commanding an equal slice of the funds remaining after the creditors and preference shareholders have had their entitlement. The order of payment of creditors will be of little consequence except where there are insufficient funds to meet all claims. Where this is the case, each class of claim must be met in full before the next class may participate. Although this summary of company regulation is set in a UK context, as was mentioned earlier, virtually all of the world’s free enterprise economies have similar laws surrounding the way in which most businesses are organised.
A striking development of business finance, and of other areas of commercial management, since around 1980 is the use of derivatives. Derivatives are assets or obligations whose value is dependent on some asset from which they are derived. In principle, any asset could be the subject of a derivative. In practice, assets such as commodities (for example, coffee, grain, copper) and financial instruments (for example, shares in companies, loans, foreign currency) are the ones that we tend to encounter as the basis of a derivative.
Ever since the first motor vehicle was produced, inventors, engineers, designers and scientists have striven to improve them using the latest technology and materials. As time has passed, we have seen and experienced many changes in design and development to give us today’s motor vehicles. Learning from those early designs, and with today’s manufacturing skills, vehicle manufacturers can now produce motor vehicles that use very strong but lightweight materials in their structure and drive train. Many innovative materials are also now used in vehicle manufacture, some of which are recyclable, which helps reduce costs and reduces the environmental impact of the industry.
As we now live in a world of electronic technology, the motor vehicle has become a designer’s dream in providing systems that continue to improve the protection of its occupants, provide stability and economy and also take interior comfort to new levels of refinement. Packaged with this, we now have engines and transmissions that are high performance, environmentally friendly and economical to run, giving today’s drivers an exciting all-round driving experience with a very high level of safety. Whatever the level of comfort or performance whether it be tires to Formula 1 high performance traction tires we are in the midst of a motor car renaissance. The following sections outline the fundamentals in vehicle construction and design on which the reader can build their understanding of the latest developments.
At a very early stage in human history people must have realised that the human body was severely limited in terms of the loads it could carry and the distance it could carry them. Furthermore, it is safe to assume that the physical exertion involved was no more to people’s liking then than it is today.
Much progress was achieved through the domestication of suitable animals to enable heavier loads to be carried greater distances, often at greater speeds than people were capable of attaining. There was the added advantage that, as most of the effort was provided by the animal, the people could travel at their ease and in relative comfort.
At first, heavy loads were dragged upon sledges until an early and unknown engineer Invented the wheel. This made it possible to construct crude carts upon which even heavier loads could be carried more easily. The one drawback to the use of wheeled vehicles was – and still is – the necessity of providing a reasonably smooth and hard surface upon which the wheels could run. The development of wheeled vehicles, therefore, Is closely related to the development of roads.
As new materials and manufacturing methods were developed, it became possible to make improvements in vehicles, but as long as animals were the only form of motive power it was not possible to significantly increase loads and speeds. The development of the steam engine during the 18th and 19th centuries led to Its application to the driving of vehicles, and though some of the early attempts were crude and not very successful, several extremely promising carriages were produced. These might have been developed into very practical vehicles had not restrictive legislation forced them off the roads. In any case, the steam engine proved less suited to road vehicles than it did to the railway. It was the successful development of the light, high-speed internal-combustion engine towards the end of the 19th century that really opened up the way to the power-driven road vehicle, and that made possible the development of the modern motor car, truck, bus and coach.
Development of layout
Motor vehicles were developed from horse-drawn carriages – they were, In fact, originally called ‘horseless carriages’ – and naturally owed something of their general form to those carriages. For instance, the system of four wheels arranged one at each end of two transverse axles so that their points of contact with the ground are at the corners of a rectangle (see Figure 1.la) has been used on carts and wagons since time immemorial and is still by far the commonest arrangement. While three wheels are sufficient to give stability, they do not provide so much ‘useful space’ for a given amount of road space taken up (compare Figure l.la with Figure Lib).
The horse was invariably put in front of the cart, to put) it rather than push it, to allow the animal to see where it was going and the driver to keep an eye on the horse. The driver steered the vehicle through shafts attached to a front axle, which could pivot about its centre, and when it came to replacing the horse by an engine, it was natural that front-wheel steering should be retained, at least for a while. It was not long, however, before vehicles with rear-wheel steering were tried, but it was soon found that rear-wheel steering had disadvantages that ruled it out for general use. For example, a vehicle steered by its rear wheels would steer to the right by deflecting its rear end to the left, making it impossible to drive away forwards from a position close to a wall or kerb (see Figure 1.2). A rear-wheel-steered car moving at any speed and coming alongside a wall, kerb, ditch or another vehicle could very easily find itself in a situation in which a collision could not be avoided.
The swivelling axle arrangement is not very satisfactory for powered vehicles, partly because a good deal of space must be left for the axle and wheels to swivel. Also, if one wheel strikes an obstruction, such as a large stone, it is extremely difficult, without the leverage of the long shafts, to prevent the axle swivelling about its pivot, causing the vehicle to swerve off the road. An alternative arrangement, whereby the wheels were carried on stub axles free to pivot at the ends of a fixed axle, had already been used on some horse carriages, and this was soon adopted for motor vehicles.
When it came to using mechanical power to drive vehicles, it was natural that the power should be applied to the non-steerable wheels, since the problem of driving these is simpler than powering the driving wheels which have also to be swivelled for steering purposes. This explains why in the past, rear-wheel drive was universally adopted. The increased load on the rear wheels when climbing hills or accelerating gives a better grip, making rear-wheel drive attractive. Front-wheel drive vehicles lose this advantage, so under these conditions the wheels spin more easily.
Is it the gorgeous raspberry freshness of the Tempranillo grape, turned into joven wine in the mountains of Alava for drinking after Christmas, and made in a manner the Romans would still recognize? Perhaps it’s the peppery spiciness of new American oak matched to the ripe fruit of a distant, long, golden autumn. Or is it the cigar-box subtlety and restrained but irresistible power of a gran reserve from one of the great years as it approaches its maturity?
For all of these reasons and many more, the world in general – northern Europe and America in particular – has grown to love the wines of Rioja. Before you go shouting your mouth off its important to check your Spanish grammar! An unlikely miscegenation of centuries-old rural winemaking tradition and early “new technology” from Bordeaux; sufficient altitude to cool the vineyards; the right mix of clay, chalk, and iron in the soil; and a natural disaster at a conveniently situated border took Rioja wine from the relative obscurity of being merely the best red wine produced in Spain to being one of the world’s greatest wines. This was achieved in the space of a century and a half – relatively quickly in wine terms in the days before the real “new technology” discovered that it could create vineyards from desert and have wine on the shelves in little over three years.
In many ways, it is the gentle evolution of Rioja that has underpinned its success. The style has been fashionable and unfashionable, and then fashionable again; indeed, it probably changed as much in the last quarter of the twentieth century as it did in the second half of the nineteenth, but we do the wine an injustice to think of it as a Victorian conjuring trick. Wine from anywhere in the “Old World” is a product of what nature provides combined with the ingenuity of the local people and, perhaps most importantly of all, the available sources and nature of food available to those people. If we look at the history of this turbulent area (and we shall be doing that in a great deal more detail later on), we can pick out three major factors that govern the way a wine evolves.
The first is climatic. The reason that Bordeaux and Burgundy, at their finest, make wines which are unrivalled in the world is that they are on the northern limit of quality red wine viticulture. The vine’s natural struggles, the microclimatic interstices of the Cote d’Or, and the well-drained, gravelly soils of the Gironde estuary are the foundations of the wine in those few great years when nature really does deliver perfect flowering, sufficient summer rains, a long, hot autumn, and ideal weather for the harvest. Add to this combination tried-and-tested grapes which have grown in the soils of their respective regions perhaps for centuries, plus up to a thousand vintages or more of trial and error in the vineyard and the winery, and you have a formula which can (and occasionally does) produce wines that positively sing with health, vitality, and the sheer joy of quality.
Rioja wine lands
The Rioja wine lands are much further south, and might therefore be expected to form a more reliable source of red wine, year in and year out. Sheltered as they are to the north by the Cantabrian Mountains, the climate is more Continental, with hotter, drier summers and shorter, colder winters. Further south and east in Spain, indeed, the vineyards used to bake in the summer heat as the grapes dried and shrivelled on the vine, but Rioja has the benefit of altitude. Alfaro in the Rioja Baja is 301 metres (988 feet) above sea level: hot, with sandy soils and an ideal climate for the hardy Garnacha grape. Logrono, at the southern boundary of the Rioja Alta, is at 384 metres (1,260 feet); heading northwards from here the land climbs, the soil becomes more complex, and Tempranillo and Graciano start to take over the land from Garnacha and Mazuelo.
Haro is only forty-four kilometres (twenty miles) from Logrono, but its altitude is 479 metres (1,572 feet). Across the river Ebro in the Rioja Alavesa, Laguardia is at 635 metres (2,083 feet); at this height, microclimates became all-important. A good example is the Granja Nuestra Sefiora de Remelluri at Labastida. Tucked right under the mountain range, its vineyards are on three levels just a few metres apart in terms of altitude, but the difference is such that the grapes on each level ripen almost exactly a week apart, so the harvest can be gathered at optimum ripeness with each section collected in turn. A typical Rioja house blend is able to source its grapes from these cool, highland vineyards, the hot, sandy south, and anywhere in between. This has also helped to give the wine consistency – a real benefit in export terms.
The vine’s natural struggles, the microclimatic interstices of the Cote d’Or, and the well-drained, gravelly soils of the Gironde estuary are the foundations of the wine in those few great years when nature really does deliver perfect flowering, sufficient summer rains, a long, hot autumn, and ideal weather for the harvest. Add to this combination tried-and-tested grapes which have grown in the soils of their respective regions perhaps for centuries, plus up to a thousand vintages or more of trial and error in the vineyard and the winery, and you have a formula which can (and occasionally does) produce wines that positively sing with health, vitality, and the sheer joy of quality.
Considering all of these, the regions are just perfect to produce wines of the top-notch qualities. No scope for a doubt obviously. So why being late? Pack up and rush! Rioja is waiting for you!!
International News on Africa by News Service IPS, Chicago Standard Newspapers
Originally posted 6/28/2003
Zambian President, Cabinet Take Pay Cut
LUSAKA, Zambia (IPS/GIN)-Zambia’s President Levy Mwanawasa and his cabinet members have accepted an immediate 30 percent pay cut to help reduce government spending, announced Vice President Nevers Mumba.
The cut-which will reduce the president’s salary from $715 (3,360,000 kwachas) to $500 (2,352,000 kwachas)-comes just months after parliament voted through a pay increase for those now affected.
Now the government’s 2003 budget is facing a $128 million deficit, caused in part by underestimating the impact of pay raises and housing benefits made to public service workers, Vice President Mumba says. He also said that to pay off this deficit, the treasury would either have to print more money-and risk hyper inflation-or borrow from the private sector or IMF. Neither move appeals to the government. And, Mumba says, the deficit could not be sustained by Zambia’s small economy.
The budget deficit constitutes 3 percent of the GDP of Zambia, a country where the average annual wage is $320 and more than three quarters of the population lives on less than $1 per day. Mumba added, ”We will soon announce other measures aimed at reducing government expenditure.”
Rwanda Genocide Suspects Face New Accusations
Rwandan government rearrest 5,770 genocide suspects KIGALI, Rwanda (IRIN)
The Rwandan government has rearrested 5,770 genocide suspects who had been provisionallyreleased in early 2003, an official in the Ministry of Justice told IRIN.
They were rearrested after fresh allegations were made against them, Hannington Tayebwa, head of judicial services in the ministry, said. The allegations were made in two reports by IBUKA, an umbrella organization that groups associations of the 1994 genocide survivors, he said. ”We had to arrest them as we embark on investigations into these new accusations,” he said.
Tayebwa said some who had confessed to killing one person were now being accused of killing more than three. ”We need time to verify these facts,” he added.
The rearrests began in May with 787 being held soon after they left camps where they had undergone three months of reintegration and rehabilitation. The suspects were taken from their homes back to prison, Tayebwa said. They were among 22,567 suspects who completed the training in camps across the country. Most had spent between seven and eight years in prison awaiting trial for genocide-related crimes.
In January, President Paul Kagame issued a decree provisionally releasing up to 25,000 suspects, mainly the elderly and the sick as well as those who were minors during the genocide. Genocide survivor groups had criticized the provisional release of the suspects, saying that those pardoned could intimidate survivors into silence, jeopardizing the planned Gacaca communal courts, due to begin operating shortly.
Program Helps African Girls Fight Sexual Harassment in Schools
NAIROBI (IPS/GIN)-Girls in African schools often face sexual harassment, such as having their grades lowered if they refuse the sexual advances of a male teacher, says Prof. Penina Mlama, executive director of the Nairobi-based Forum for African Women Educationalists (FAWE).
But even though schemes such as FAWE’s ”Tuseme” (”Speak Out”) scheme is helping to protect girls in six African countries, Mlama says that sexual harassment is still ”a very, very serious problem indeed.” ”And to tell you the truth,” she adds, ”it’s getting worse.” The consequences for the girls can include suffering gradeS, an inability to concentrate at school, and, for some, pregnancy and sexually transmitted diseases such as HIV/Aids. FAWE continues to expand its ”Speak Out” program, which currently operates in a number of schools in Kenya, Rwanda, Senegal and Tanzania, and it has recently been started in Gambia and Namibia.
”Speak Out,” says Mlama, aims to empower girls and encourages them to confront and then report teachers who sexually harass them. Although few male teachers are ever prosecuted, she says, ”The cases of sexual harassment have diminished very, very rapidly in the schools where we have these programs.”