Author: shyam

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The corporate debt market (even for the highest rated corporates) has failed to take off. And The reason has very little to do with the availability of capital or the existence of securities and market instruments. It has more to do with the strength of the legal system in India and the existence of strong bankruptcy, insolvency and receivership laws and the effectiveness of their speedy and smooth implementation. What happens when things go bad, and a company or a special purpose entity is unable to meet all its payment obligations, holds the key to the development of a vibrant debt market.

The usury by the Indian banking system exacts a huge toll on Indian companies (borrowers) and significantly reduces the efficiency of the Indian economy. Unless the government is able to put in place the structural changes required to its legal and regulatory systems and ensure their effective implementation, its debt markets will remain underdeveloped, placing its corporations at a disadvantage

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A plunge in recent economic data puts the probability of a double-dip recession above 80%, according to modelling by Bank of America Merrill Lynch released Wednesday, reflecting the toll the U.S. debt downgrade, Europe’s woes and stock market volatility has taken on economic activity.

The recent dismal readings from the Philadelphia Federal Reserve and the University of Michigan were enough for Merrill to raise its overall probability of a contraction in the next year to 40% from 35% at the start of this month.

A survey of manufacturing in the Philadelphia region plunged to its lowest level since March 2009, according to the Fed last week. Consumer confidence is at its lowest level since May 1980, according to a Thomson Reuters/University Michigan survey released on August 12.

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The euro-region debt crisis may deepen as eastern European borrowers who took loans in a strengthening Swiss franc struggle to repay western European banks, UBS Wealth Management said.

Lenders including Unicredit SpA (UCG), Erste Group Bank AG (EBS), Raiffeisen Bank International AG (RBI) and Bayerische Landesbank have 80 billion Swiss francs ($101 billion) of household debt in Hungary, Poland and Croatia, emerging-markets analyst Kilian Reber said.

He assigns a 20% to 30% chance of a stronger franc triggering defaults in eastern Europe and fanning the euro-region debt crisis by forcing western European banks to seek new bailouts.

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