RPT-Fitch Rates Xinyuan's Notes Final 'B+'

Mon Apr 29, 2013 6:07am EDT

April 29 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned US-listed China-based Xinyuan Real Estate Co., Ltd.'s (Xinyuan) senior unsecured USD200m 13.25% notes a final 'B+' rating. The assignment of the final rating follows the receipt of documents conforming to information already received, and is in line with the expected rating assigned on 18 April 2013.

Key Rating Drivers

Financial strength balances scale: Xinyuan's rating is dependent on its financial strength remaining solid, especially in maintaining sufficient cash to meet short-term debt obligations. Its small scale constrains its business diversity in terms of a narrow product mix, limited geographical spread, and a small number of projects being sold in a year relative to peers. Xinyuan's low EBITDA margin of about 13% on a five-year rolling average basis reflects that it is susceptible to sudden sharp home price swings, such as that in 2008.

Asset-light small homebuilder: Xinyuan's small holding of property development assets gives its creditors less protection in the event of asset liquidation. Its land bank by saleable gross floor area (GFA) of 1.2 million square metres (sqm) at end-2012 was less than the size of similarly rated peers. Even including the new land Xinyuan is close to acquiring, its land bank will still be less than half of that of its peers. Further, its land acquisition strategy will continue to focus on fast-growing second and third tier cities with a concentration on Henan Province. Xinyuan's contracted sales of CNY5.2bn in 2012 were, however, comparable to other 'B+' rated Chinese homebuilders.

Land cost affects margin: Xinyuan's high proportion of land cost versus its selling price kept profit margin low. Land cost has been between 20% and 30% of its average selling price (ASP). This is compared with less than 20% for most Chinese homebuilders. The higher proportion of land cost was in part due to its land being acquired in land auctions and also partly because Xinyuan's fast turnover business model does not allow for much land price appreciation, given the short lead time between land acquisition and the start of presales. However, the company aims to mitigate this by acquiring land plots through negotiated land auctions, whereby land costs may be closer to 20% of ASP.

Healthy credit metrics: Xinyuan has been in a net cash position since 2011. Its low inventory levels are a result of its high asset turnover strategy, thus minimising investments in development properties. The company's 2012 contracted sales/total debt ratio of 2.7x was the highest among Fitch-rated Chinese homebuilders.

Replicating home base success: Xinyuan has developed 24 projects since 2001, 16 of which are in Zhengzhou. Since 2007, Xinyuan has replicated its successful Zhengzhou developments in other cities. This has helped the company to gain new markets in Jinan, Suzhou, Xuzhou, Kunshan and Chengdu; and Xinyuan's business in the first three of these cities continues to expand with growth opportunities.

Undergoing faster expansion: Xinyuan has gone through financial consolidation between 2008 and 2012 in the face of market uncertainty. Its financial strength makes it an attractive strategic partner to local land authorities for participation in early stage land development. This will help Xinyuan undergo a faster pace of land acquisition in Zhengzhou.

Rating Sensitivities

Negative: Future developments that may, individually or collectively, lead to negative rating action include:

- reduction of scale as reflected by a fall in GFA land bank to less than two years

- contracted sales falling below CNY5bn

- net debt/adjusted inventory rising above 25%

- changes to its fast turnover model where contracted sales/gross debt fall below 1.5x

Positive: Positive rating action is not expected in the next 18-24 months due to Xinyuan's small operational scale and lack of business diversification. However, future developments that may, individually or collectively, lead to positive rating action include:

- significant increase in scale as reflected by contracted sales exceeding CNY15bn

- increase in business diversification by geography, by product mix as well as in presence in a greater number of cities

- maintaining a strong financial profile

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Merkel aide says French Socialists' criticisms won't hurt ties

BERLIN, April 29 | Mon Apr 29, 2013 6:10am EDT

BERLIN, April 29 (Reuters) - Angela Merkel's spokesman said on Monday criticism of the German chancellor by French President Francois Hollande's Socialists was not a reflection of the cooperation between the two governments.

"What counts for us is not the parties but working with governments such as the direct cooperation with the French president, prime minister Ayrault and the ministers," Merkel spokesman Steffen Seibert told a news conference.

"We consider German-French cooperation essential," he said, citing French Prime Minister Jean-Marc Ayrault's attempt at the weekend to tone down the criticism contained in a Socialist party document that called the German leader "self-centered".

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UPDATE 1-Italy debt costs hit multi-year lows after govt formed

Mon Apr 29, 2013 6:30am EDT

By Francesca Landini

MILAN, April 29 (Reuters) - Italian benchmark borrowing costs fell to their lowest since October 2010 at auction on Monday, signalling a thumbs-up from investors to the appointment of a new government that ended two months of political stalemate.

The treasury sold all of its planned 3 billion euros ($3.9 billion) of 10-year bonds at 3.94 percent, well below the 4.66 percent it paid at a similar sale one month ago. It also sold 3 billion euros of five-year bonds at 2.84 percent, 0.82 percentage points less than in March.

"The auction went fine, both in terms of demand and especially of yields," said Luca Cazzulani, rate strategist at UniCredit.

Investors did not seem worried that the new administration still needed to clear the hurdle of a parliamentary vote later on Monday, he said.

Others suggested the strong debt sale failed to reflect continuing political tensions and a deep economic crisis that rating agency Moody's warned meant Italy might eventually need to seek a bailout.

"While post-crisis market sentiment towards Italy has never been better, economic conditions have never been worse,..." said Nicholas Spiro, Managing Director of Spiro Sovereign Strategy.

"The disconnect between Italy's bond market and the real economy is likely to increase further in the coming days and weeks."

Centre-left Prime Minister Enrico Letta is expected to win the confidence vote, which is due to start around 1800 GMT.

But with doubts over whether his government will last a full five-year term, Letta is expected to try to pass a few basic reforms quickly, including a change to Italy's much criticised electoral laws and a cut in the size of parliament.

Francesco Garzarelli, strategist at Goldman Sachs, said bond markets had yet to fully price in the composition of Letta's cabinet, notably Bank of Italy Deputy Governor Fabrizio Saccomanni as economy minister.

"This could be seen as an additional positive element as it signals a higher longevity of the new executive than just a few quarters," Garzarelli wrote in a note for clients.

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UPDATE 2-Moody's, S&P settle lawsuits over debt vehicle ratings

Fri Apr 26, 2013 8:18pm EDT

* Rating agencies, Morgan Stanley reach settlements

* Investors said to lose money on structured investments

By Nate Raymond and Jonathan Stempel

NEW YORK, April 26 (Reuters) - Moody's Investors Service and Standard & Poor's on Friday said they have settled two long-running lawsuits seeking to hold them responsible for misleading investors about the safety of risky debt vehicles that they had rated.

The lawsuits had accused Moody's, a unit of Moody's Corp , and S&P, a unit of McGraw-Hill Cos, of negligent misrepresentation over their activities regarding the Cheyne and Rhinebridge structured investment vehicles (SIVs).

Morgan Stanley, which marketed both SIVs and helped structure the Rhinebridge SIV, also settled.

Settlement terms were not disclosed in the cases, which had been brought in 2008 and had sought more than $700 million of damages. Both lawsuits were dismissed with prejudice, meaning they cannot be brought again.

Moody's spokesman Michael Adler, McGraw-Hill spokesman Jason Feuchtwanger and Morgan Stanley spokesman Mark Lake confirmed their companies' respective settlements.

"This settlement allows us to put the significant legal defense and related costs, as well as the distraction, of these very protracted litigations behind us," Adler said.

Feuchtwanger said McGraw-Hill's settlement involved no admission of wrongdoing.

Lawyers for the plaintiff investors did not immediately respond to several requests for comment.

A trial in the Cheyne case had been scheduled for May 6 before U.S. District Judge Shira Scheindlin in Manhattan, who oversaw both lawsuits.

Credit rating agencies have been accused by investors, regulators and politicians of inflating the ratings of risky mortgage-backed and structured securities in a bid to win new business.

Critics said these activities also fueled demand from investors who believed the ratings were objective, but prices collapsed once the risks materialized, helping to trigger the 2008 global financial crisis.

S&P still faces the U.S. Department of Justice's $5 billion civil fraud lawsuit filed in February over its ratings, the government's first major post-crisis action against a credit rating agency. The credit rating agency is trying to dismiss that case.

FIRST AMENDMENT

In the Cheyne and Rhinebridge cases, investors accused rating agencies of collaborating with banks to ensure that SIVs received ratings as high as "triple-A," though much of the underlying collateral was low-quality or subprime mortgage debt.

The Abu Dhabi Commercial Bank, King County in Washington state, and other investors sought $638 million of damages related to losses they claimed to have suffered when the Cheyne SIV went bankrupt in August 2007. The similarly-named firm that managed the SIV did not go bankrupt.

King County and the Iowa Student Loan Liquidity Corp, meanwhile, had been seeking $70 million of damages over Rhinebridge, which had been structured by Germany's IKB Deutsche Industriebank AG and was wound down in August 2008.

IKB settled the Rhinebridge case last year, and credit rating agency Fitch Ratings, a unit of France's Fimalac SA , settled last month.

Among the defenses raised by the rating agencies were that their ratings were opinions that deserved free speech protection under the First Amendment to the U.S. Constitution.

Scheindlin limited that defense in a 2009 ruling, saying that ratings on notes sold to select investors were not "matters of public concern" deserving broad free speech protection.

The government has not hit Moody's and Fitch with lawsuits similar to the case it is pursuing against S&P.

The cases are Abu Dhabi Commercial Bank et al v. Morgan Stanley & Co et al, U.S. District Court, Southern District of New York, No. 08-07508; and King County, Washington et al v. IKB Deutsche Industriebank AG et al in the same court, No. 09-08387.

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Primacy of pensions in city bankruptcy may be issue for U.S. court in July

By Jim Christie

SAN FRANCISCO, April 26 | Fri Apr 26, 2013 8:56pm EDT

SAN FRANCISCO, April 26 (Reuters) - A U.S. judge in July could take up the issue of whether a bankrupt city can shield workers' pensions while inflicting heavy losses on bond holders and other creditors, a lawyer for California's pension fund for public employees said on Friday.

Since filing for bankruptcy last year, the California city of Stockton has made a point of maintaining payments to the California Public Employees' Retirement System, or Calpers, while targeting creditors for steep losses.

Whether Stockton may press on with that approach could be taken up in coming weeks by U.S. Bankruptcy Judge Christopher Klein, who did not take up the matter during a three-day trial last month on Stockton's eligibility for bankruptcy.

Instead, he ruled the city of about 300,000 established it is eligible to proceed with its bankruptcy case and craft a so-called plan of adjustment for its debts.

But Klein at the same time signaled the closely watched role of Calpers in Stockton's bankruptcy case could come into focus when the plan of adjustment emerges.

Stockton aims to file the plan in the third quarter with an eye toward exiting bankruptcy by the end of the year. That means the plan could be put to Klein as early as July, said Michael Gearin, an attorney for Calpers in the Stockton case.

Stockton is the biggest U.S. city to pursue Chapter 9 bankruptcy, a move the city made in the face of a $26 million shortfall that years of steep spending cuts failed to prevent.

CHALLENGING CITY'S PRIORITY

To prop up its budget while pressing its bankruptcy case, Stockton pressed bondholders to swallow major losses, prompting them and the city's bond insurers to challenge the city in court.

Stockton's decision to keep paying into the state pension fund known as Calpers has been hotly disputed by the creditors, who argued in the recent eligibility trial that the city would not be able to repair its finances without tackling its pension expenses.

The creditors include bond insurers Assured Guaranty Corp, Assured Guaranty Municipal Corp and National Public Finance Guarantee Corp. They were joined by Wells Fargo Bank, the Franklin California High Yield Municipal Fund and the Franklin High Yield Tax-Free Income Fund.

Stockton officials say they need to maintain payments to Calpers to retain and recruit city employees and that state law bars the city from impairing payments to the fund.

The officials also say retired Stockton employees will suffer enough under the city's financial restructuring by losing their city-provided medical coverage.

Calpers was sidelined during the eligibility trial but is prepared to defend Stockton's pension payments before Klein.

Marc Levinson, a lawyer for Stockton, said a best case scenario is for the city and its creditors to reach settlements so they are included in an amicable plan of adjustment.

The two sides will be negotiating in confidential talks even as Stockton works on its plan of adjustment, Levinson said, noting he is optimistic about the talks.

"People are going to do their best," he said. "Klein has made it clear at every opportunity that he would like to see negotiations."

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Bond insurer MBIA retains law firm as it looks to avoid takeover -source

By Karen Freifeld and Jessica Dye

NEW YORK, April 26 | Fri Apr 26, 2013 9:13pm EDT

NEW YORK, April 26 (Reuters) - Bond insurer MBIA Inc is working with law firm Weil Gotshal & Manges as it seeks to avoid possible rehabilitation of its structured finance unit by a New York regulator, a source familiar with the matter said Friday.

The Armonk, New York-based company previously disclosed in its annual report in February that its structured finance unit could be forced into liquidation or rehabilitation.

The New York State Department of Financial Services, which regulates New York insurers, has the power to put MBIA into a process known as rehabilitation, by which it can take control of a regulated insurer if it does not have sufficient cash.

MBIA has worked with Weil in the past, another source familiar with the matter said.

The company, which was the largest bond insurer in the United States before the financial crisis, has faced litigation over its 2009 restructuring, which split the company into a municipal guarantee business and a structured finance unit that had suffered heavy losses from mortgages.

Bank of America Corp and other lenders have sought to have that restructuring annulled and sued the company, alleging that it was intended to defraud policy holders. In a March 4 ruling, a New York state judge upheld the restructuring. That ruling is being appealed.

In its annual report in February, MBIA said its structured finance unit could be forced into liquidation or rehabilitation if litigation with Bank of America was not settled. The bond insurer has also blamed its liquidity issues on the bank's refusal to buy back billions of dollars in securitizations that MBIA insured.

"Substantial doubt exists about MBIA Corp's ability to continue as a going concern," the insurer said in a statement at the time.

MBIA is also suing Bank of America's Countrywide unit accusing it of misrepresenting the underwriting on thousands of loans backing some $20 billion in securities it had insured.

Representatives for MBIA and the Department of Financial Services declined to comment Friday evening. Representatives for Weil could not be immediately reached for comment after business hours Friday.

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UPDATE 1-Potash Corp profit rises on higher shipments

Thu Apr 25, 2013 6:39am EDT

* First-qtr EPS $0.63 vs $0.56 year earlier

* Sales volumes rise 78 percent

April 25 (Reuters) - Potash Corporation of Saskatchewan , the world's largest producer of the crop nutrient by capacity, reported a 13 percent rise in first-quarter profit on strong shipments, and said demand will remain robust for the rest of the year.

The company's net profit rose to $556 million, or 63 cents per share, from $491 million, or 56 cents per share, a year earlier.

The Saskatoon, Saskatchewan-based company said sales volumes increased 78 percent in the quarter from a year earlier.

"We had significant growth in our potash performance as global buyers returned to the market in earnest after taking a brief pause late in 2012," Chief Executive Bill Doyle said.

The company said domestic shipments from North American potash producers rose 56 percent.

Potash is a key fertilizer ingredient that farmers use to maximize yields.

With China's early settlement of potash supply contracts and strong demand in Brazil, shipments accelerated during the quarter, the company said.

Canpotex Ltd, the off-shore sales agency for Potash Corp, Mosaic Co and Agrium Inc, signed potash supply contracts with China on Dec. 31 and with India in early February, giving a lift to overseas sales after lengthy holdouts last year.

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EURO GOVT-Italian, Spanish yields rise on profit-taking

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Thu Apr 25, 2013 6:39am EDT

  * Investors cash in on Italian, Spanish bond rally      * Bunds considered expensive, vulnerable to correction      * Central bank liquidity to limit fall across assets          By Ana Nicolaci da Costa      LONDON, April 25 (Reuters) - Italian and Spanish bond prices  dipped on Thursday as investors took profit on a week of strong  gains but analysts said the sell-off should be limited by  abundant liquidity from central banks in the financial system.      The European Central Bank's promise to protect the euro with  a bond-buying program has deterred sellers of bonds issued by  the euro zone most indebted governments at the same time as easy  monetary policy globally has raised investors' appetite for  higher-yielding investments.      Downbeat data from Germany has also raised expectations of a  cut in official ECB interest rates as early as next week,  underpinning bonds across the credit spectrum.      "We've seen a very strong rally in the periphery and at some  point the market is looking for some reason to take these  profits," Christian Lenk, strategist at DZ Bank said.      "The Spanish (unemployment) number could be one of the  triggers in combination with comments by (ECB Executive Board  member Joerg) Asmussen that he is doubting the usefulness of  such a cut."      In a series of remarks on Wednesday and Thursday, Asmussen  warned that the benefit of rate cuts for the euro zone's  battered economy, and specifically its struggling periphery,  would be limited.       Ten-year Spanish yields rose 10 basis points  to 4.38 percent as data showing a higher than forecast  unemployment rate in the euro zone's fourth largest economy  highlighted its struggle to generate growth.       Italian yields rose 9 bps to 4.08 percent. The  designation of a new premier looked to have broken two months of  political deadlock but there are concerns that the differences  within a probable future coalition will make it hard to  implement growth-boosting, deficit-cutting reforms.            VULNERABLE BUNDS      German Bund futures, which have also recently benefited from  rate cut bets, were vulnerable to a correction, analysts said.       "Most of this rate excitement and the expectation for a 25  basis points' lower refinancing rate should be in the price by  now," said Rainer Guntermann, strategist at Commerzbank.      "Here the market needs further bullish impetus. It may risk  a corrective move from here but very short term, maybe just for  today."      Higher-than-expected British gross domestic product numbers  also gave investors an excuse to cash in on earlier price gains.  Bunds were last up 2 ticks on the day at 146.21, having  dipped in and out of negative territory in early trade.      Patrick Jacq, rate strategist at BNP Paribas, said German  debt was too expensive at current levels and there was room for  10-year yields to rise to 1.30 percent from 1.23  percent currently.       "At the moment I am relatively short of the Bund," Jacq  said. The June contract hit a high this week.  

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IMF, ECB square off in Europe austerity debate

By Marc Jones and Huw Jones

LONDON, April 25 | Thu Apr 25, 2013 6:51am EDT

LONDON, April 25 (Reuters) - A heated debate about Europe's austerity drive flared back into life on Thursday with leading IMF and European Central Bank officials sharply at odds and Angela Merkel declaring that Germany required higher interest rates.

With the threat of the currency bloc's break-up receding, some euro zone officials are saying now is the time to throttle back on debt-cutting drives because calmer financial markets will not react badly.

The International Monetary Fund is also pushing that prescription - for both the euro zone and Britain - but Germany and the ECB are opposed.

"There is ... a risk that Europe could fall into stagnation, which would have very serious implications for households, companies, banks and other bedrock institutions," IMF First Deputy Managing Director David Lipton told a conference in London.

"To decisively avoid that dangerous downside, policymakers must act now to strengthen the prospects for growth," he said.

But at the same conference, the Economist's Bellwether Europe Summit, ECB Executive Board member Joerg Asmussen urged governments to push on with budget consolidation and reforms.

"Delaying fiscal consolidation is not an easy way out. If it were, we would have taken it," Asmussen said.

"Delaying fiscal consolidation is no free lunch. It means higher debt levels. And this has real costs in the euro area where public debts are already very high," he said.

The ECB is expected to cut interest rates next week, although a quarter-point reduction is unlikely to lift the euro zone economy out of recession.

"It will probably require additional unconventional measures from the ECB," Lipton said, while Asmussen said monetary policy was not an "all-purpose weapon".

Further clouding the debate, German Chancellor Angela Merkel said if monetary policy were set for her country alone, rates would have to rise.

"The ECB is in a difficult position. For Germany it would actually have to raise rates slightly at the moment, but for other countries it would have to do even more for more liquidity to be made available," she said at a banking conference, in an unusually outspoken comment on central bank policy.

Survey evidence this week suggested even the German economy is struggling, however, and its economy ministry forecast growth of just 0.5 percent this year.

MORE LEEWAY

Rhetoric aside, the EU is expected next month to give struggling countries like France and Spain longer to meet their deficit-cutting targets.

European Commission President Jose Manuel Barroso has said austerity had reached its natural limits of popular support and the bloc's economics czar, Olli Rehn, said the pace of debt-cutting was slowing.

Rehn will preside over May's decision on member states' deficit targets. Spanish figures showing unemployment topping 6 million and more than half the country's youth out of work showed the kind of pain crisis-hit parts of the currency bloc are experiencing.

"We have been clear that the pace of fiscal adjustment should take into account each country-specific economic situation," Rehn told a conference in Brussels. "The pace of fiscal consolidation is now already slowing down in Europe."

But any relaxation is likely to be limited, and economists warn that the euro zone crisis will only be over once a robust banking union has been established.

Berlin is baulking at joint euro zone mechanisms to underpin weak banks.

The ECB said on Thursday that financial markets had calmed since its pledge to do whatever it took to save the euro but could be put into a new tailspin if there were signs of banking union plans stalling.

Germany, Europe's largest economy, fears such a scheme would leave its taxpayers footing the bill for mistakes made by banks in other countries, and Merkel reaffirmed her opposition to a Europe-wide bank deposit guarantee.

"The worst of the fiscal tightening is definitely behind us because they can't afford to be so aggressive given economies are already in recession," said Annalisa Piazza, market economist at Newedge Strategy.

"But they need to find the right balance. They can't afford to be too loose on fiscal policy either."

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UPDATE 1-Italy's two-year borrowing costs tumble to euro-era low

Wed Apr 24, 2013 6:14am EDT

By Francesca Landini

MILAN, April 24 (Reuters) - Italy's two-year debt costs fell on Wednesday to their lowest level since European Monetary Union in 1999 as the expected appointment of a new prime minister looked set to end two months of post-election deadlock.

Bets the European Central Bank will cut interest rates as soon as next week are also fuelling a hunt for yield that is benefiting Italian and Spanish debt.

"The auction outcome is really strong as the funding costs for Italy fell sharply," said Luca Cazzulani, rate strategist at UniCredit.

The treasury sold 2.5 billion euros of two-year zero-coupon bonds, paying a yield of 1.17 percent, much lower than the 1.75 percent it paid at a similar sale one month ago.

Rome issued also 0.75 billion euros of inflation-linked bonds maturing on September 15, 2023, reaching the total top-planned amount for the sale.

Italian President Giorgio Napolitano called Enrico Letta, deputy head of the centre-left Democratic Party, to a meeting on Wednesday in a move widely seen as a prelude to asking Letta to form a new government.

"Hefty redemptions helped the sale, but the Italian debt market is underpinned today mainly by the expectation a new government will be formed soon," said Sergio Capaldi, strategist at Intesa Sanpaolo.

The new coalition government, which could take office in a matter of days, would be backed primarily by rivals on the centre-left and centre-right, the same parties that had refused to cut a deal after the Feb. 25 elections.

Hopes that the impasse would soon be over triggered a rally in the bond market, driving yields on 10-year Italian government bonds below 4 percent on Tuesday, to the lowest levels in two years and a half.

A monthly German Ifo survey of economic sentiment that fell well short of expectations meanwhile bolstered expectations that an interest rate cut by the ECB may come soon.

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UniCredit goes live with Tier 2 bond amid peripheral rally

Wed Apr 24, 2013 6:17am EDT

* Books for UniCredit Tier 2 subordinated bond top USD2bn

* Guidance tightened to 6.5%

By Aimee Donnellan

LONDON, April 24 (IFR) - Italy's UniCredit, rated Baa2/BBB+/BBB+, has opened books on a US dollar-denominated Tier 2 bond, its first subordinated benchmark issue in six months, as it seeks to capitalise on a widespread peripheral rally.

The new Reg S deal, with expected ratings of Baa3/BBB/BBB, was announced late on Tuesday. Bookrunners BNP Paribas, Citi and UniCredit set price talk on Wednesday morning at 6.625% area and later tightened that to 6.5% area as books grew to more than USD2bn.

Books are expected to go subject at short notice, with pricing later today.

The bond will have a one time call in five years, and coupons will reset with no step-up if that call is not exercised.

Bankers close to the deal said it was difficult to estimate an accurate new issue premium mainly because the issuer's last deal was not only in euros but also had a bullet structure.

"We calculated the relative value between euro and dollars for UniCredit because it doesn't have a 10NC5-year that would be a relevant marker," said a syndicate banker.

As pricing references, the leads looked to UniCredit's last subordinated bond issue - a EUR1.25bn 10-year bullet transaction which priced in October and was tapped by EUR250m in December - as well as to other outstanding Tier 2 euro and dollar paper.

The 6.95% October 2022 bond, which printed at mid-swaps plus 510bp on the back of EUR4bn of orders, was bid at mid-swaps plus 466bp on Wednesday morning.

UniCredit's 6% 2017 US dollar Tier 2 bond, meanwhile, was bid at mid-swaps plus 450bp on the bid side pre-announcement.

ABN AMRO's 6.25% USD1.5bn 10NC5 transaction was also referenced, another banker on the deal said. That 2022 bond was bid at mid-swaps plus 342bp on Wednesday morning, having priced at 545bp over mid-swaps in September last year.

TIMED TO PERFECTION

UniCredit has a relatively strong track record in opportunistic deals. Its October issue was the first eurozone peripheral bank subordinated bond to price in over a year.

With its latest issue, UniCredit is likely to attract demand from Asian retail investors that have proven receptive to European issuers that provide higher yield in this low rate environment.

The deal also coincides with a strong rally in 10-year Italian government yields after President Giorgio Napolitano gained a second term which reduced the likelihood of another election in the country this summer.

Italian 10-year yields fell to 3.93% at one point on Tuesday - the first time they have broken below 4% since September 2010. Those yields were at 4.95% following the country's election stalemate at the end of February and the subsequent Cyprus fiasco.

Irish and Spanish 10-years also rallied sharply on Tuesday, although yields are off their lows in Wednesday trading.

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UPDATE 2-Italy president calls centre-left official Letta

Wed Apr 24, 2013 6:18am EDT

* Centre-left official Letta called to palace

* Broad coalition expected to take office in next few days

* Democratic Party fractured after factional infighting

By Paolo Biondi

ROME, April 24 (Reuters) - Italian President Giorgio Napolitano called Enrico Letta, deputy head of the centre-left Democratic Party, to the Quirinale Palace, indicating he was likely to be asked to form a new coalition government.

The new government, which could take office in a matter of days, would be backed primarily by the rival centre-left and centre-right groupings, which had hitherto refused to cut a deal following inconclusive elections in late February.

Formation of a government would end two months of damaging political impasse in Italy and send a signal to markets that the country might at last be ready to make a start on much-needed reforms.

Letta, the nephew of former prime minister Silvio Berlusconi's long-time chief of staff Gianni Letta, is considered a moderate. He is close to former party leader Pier Luigi Bersani, who resigned at the weekend after rebels sabotaged him in the voting for a new president, which ended with Napolitano being re-elected.

Berlusconi's People of Freedom (PDL) party, Letta's PD and the centrist Civic Choice movement of outgoing premier Mario Monti have all said they will cooperate with whomever Napolitano chooses.

"Given the crisis the country finds itself in, the country needs a strong, a durable government that can make important decisions," Berlusconi said after meeting Napolitano.

Letta said on Tuesday his party would back any government committed to tackling the "social-economic emergency," and enacting serious political reform, including changes to a dysfunctional electoral law considered largely responsible for the two-month long political stalemate.

In February's general election, the centre-left narrowly won a majority in the lower house but failed to win control of the Senate and was not able to form a government.

Hopes that the deadlock would soon be over have given a further boost to financial markets, with the yield on 10-year Italian government bonds dropping below 4 percent and the spread, or risk premium over German bonds, narrowing.

Italy's economy has been the most sluggish in Europe for more than a decade and mired in a deep recession since the middle of 2011, with no recovery in sight.

POLITICAL "IRRESPONSIBILITY"

Napolitano angrily scolded the parties on Monday when he was inaugurated for an unprecedented second term, berating them for their "irresponsibility" in prolonging the political stalemate for nearly two months.

He threatened to resign unless the parties agreed to cooperate and find some middle ground on reforms.

The PD has emerged the most scarred from the crisis and its fractures could threaten the stability of the next government given the hostility among many in the party to any deal with Berlusconi, their enemy for almost two decades.

Deep internal divisions worsened when Bersani was unable to make a government deal with either Berlusconi's centre-right or the shock new third political force, Beppe Grillo's 5-Star Movement.

Berlusconi has capitalised on the centre-left's woes. One poll gave the centre-right a clear lead of around 8 points.

The anti-establishment 5-Star Movement, which won a quarter of the vote and speaks for millions of Italians disillusioned with an entire political class, told Napolitano it would sit in opposition and may support specific reforms.

The Left Ecology Freedom party (SEL), a partner of the PD in the February election, and Berlusconi's allies in the Northern League also said they would not join a coalition led by Amato.

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DuPont profit doubles on higher sales of agricultural products

April 23 | Tue Apr 23, 2013 6:12am EDT

April 23 (Reuters) - Chemicals maker DuPont's quarterly profit more than doubled, helped by higher demand for agricultural chemicals and seeds ahead of the spring planting season in North America.

The company's profit rose to $3.35 billion, or $3.58 per share, in the first quarter, from $1.49 billion, or $1.58 per share, a year earlier.

Net sales rose marginally to $10.4 billion.

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CIT posts first-quarter profit as debt charges fall

April 23 | Tue Apr 23, 2013 6:37am EDT

April 23 (Reuters) - CIT Group Inc reported a quarterly profit compared with a loss from the year earlier as the small-business lender cut its spending on the servicing of long-term debt.

Net income was $162.6 million, or 81 cents per share, in the first quarter, compared with a loss of $427 million, or $2.13 per share, a year earlier.

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TREASURIES-Global growth concerns lift U.S. bonds

LONDON, April 23 | Tue Apr 23, 2013 6:50am EDT

LONDON, April 23 (Reuters) - U.S. Treasuries were higher on Tuesday, pushing 10-year yields to 4-1/2 month lows after data showed a slowdown in business activity in China and Germany, fuelling concerns about the global growth outlook.

Treasuries followed German bonds higher after Markit's flash German composite Purchasing Managers' Index (PMI), which measures both manufacturing and service sectors, shrank for the first time in five months in April.

This came after figures showing China's big factory sector dipped in April, signalling the world's second biggest economy could struggle in the second quarter, and a report on Monday revealing a dip in the U.S. housing market.

"It's a global growth story. China's weaker data, Germany in a reversal of form had very weak manufacturing and services PMI and that's giving Treasuries a bid here," a trader said.

The U.S. 10-year T-note was up 9/32 in price to yield 1.664 percent, its lowest since mid-December 2012 and down 3 basis points from late U.S. trade on Monday.

Although Treasury yields briefly rose on Monday as the re-election of Italian President Giorgio Napolitano raised hopes for the formation of a new government, reducing safe-haven bids for bonds, concerns about the softening U.S. economic picture overwhelmed the market in the end.

A string of weak data, including payrolls earlier this month, and a recent fall in commodity prices have fanned expectations U.S. inflation could slow further, killing chances of the Federal Reserve tapering its bond buying programme soon.

Treasuries yields were expected to remain subdued, and could even fall towards early December lows if U.S. new home sales figures for March due at 1400 GMT maintain the downbeat trend.

"The market is in relatively good shape despite the fact that equities are positive in Europe. The focus continues to be on the recent run of weak data," the same trader said.

"A lot of guys had sold against the 1.68 percent (10-year yield level reached after U.S. non-farm payrolls) and now they are short and they need to claw back so the path is possibly towards lower yields. We might be target 1.62 percent again." (Reporting by Emelia Sithole-Matarise/editing by Chris Pizzey, London MPG Desk, +44 (0)207 542-4441)

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TREASURIES-U.S. yields rise as investors prepare for new supply

LONDON, April 22 | Mon Apr 22, 2013 6:28am EDT

LONDON, April 22 (Reuters) - U.S. government bond prices fell on Monday in Europe, retreating from last week's four-month highs as investors made room for $99 billion in new supply to be auctioned later this week.

Demand for low-risk instruments was also weakened by a rally in the euro zone's lower-rated debt markets following the re-election of Italy's president.

The move raised the prospect of an end to the country's two-month old political stalemate, although doubts remained whether that can include a lasting reform-minded government.

Benchmark 10-year U.S. T-note yields were 2.6 basis points higher on the day at 1.7306 percent, off a four-month low of 1.6730 percent hit last Wednesday on the back of a series of weaker-than-expected U.S. economic data.

"We had a good rally in the past few weeks ... (but) we're going to have a lot of supply this week and that's adding a bit of pressure," said Nick Stamenkovic, bond strategist at RIA Capital Markets.

He saw yields trapped in a narrow 1.70-1.80 percent range in the near-term, with more disappointing data releases needed to break below the recent lows.

Data due this week include figures on March sales of existing and new homes on Monday and Tuesday respectively, durable goods orders on Wednesday, new jobless claims on Thursday and advance figures on first quarter gross domestic product growth due on Friday.

Some analysts warn against betting that weak data could send yields much lower and keep them there.

"There is potential for fixed income yields to squeeze lower still if the data flow support such a move but we would caution that this move back into prior ranges may not be sustainable except in the most extreme negative macro outcomes," Charles Diebel, head of macro strategy at Lloyds, said in a note.

"Selling rallies seems appropriate in core fixed income but given the macro data run, it should be (U.S. Treasuries) that eventually underperform and back up to higher yields."

T-note futures were 6/32 lower at 132-26/32.

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UPDATE 1-UK launches sale of uranium enrichment firm Urenco

Mon Apr 22, 2013 6:30am EDT

* Urenco sale set in motion

* Process to last months because of non-proliferation concerns

* Westinghouse, Areva, Cameco, Canadian fund cited as buyers

LONDON, April 22 (Reuters) - The British government said on Monday it will proceed with selling some or all of its 33 percent stake in uranium enrichment company Urenco.

Three countries hold equal stakes in the world's second-largest nuclear fuel vendor - the UK, the Netherlands and Germany, whose stake is held by utilities E.ON and RWE.

The company is estimated to be worth around 10 billion euros ($13.08 billion) and several buyers have been reported to be ready to bid for a stake.

These include reactor builder Westinghouse,, French nuclear group Areva, Canadian uranium producer Cameco Corp and the Canada Pension Plan Investment Board (CPPIB).

"The decision to proceed towards a sale comes after the government secured agreement from its Dutch and German partners," Britain's business ministry said in a statement.

The ministry added that the scale and timing of any sale had not yet been determined.

"Any sale will only be concluded if the government is satisfied that the UK's security and non-proliferation interests can be protected and that value for money is achieved for the UK taxpayer," the ministry said.

Any buyers will have to be approved by the three owners, as stipulated by the Almelo treaty that governs Urenco's shareholder structure and is aimed at preventing Urenco's top-secret uranium enrichment centrifuge technology falling in the wrong hands.

Negotiations are expected to last months.

A banker involved in the Urenco talks told Reuters last week he expects the deal to be concluded by year-end.

Morgan Stanley is advising the UK government on the sale.

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UPDATE 2-Brazil's Bradesco misses profit estimate as revenue declines

Mon Apr 22, 2013 6:30am EDT

* Recurring profit rises 3.4 percent, missing poll estimate

* Profit rises in face of cuts in provisions, expenses

* Net interest margin falls for fourth straight quarter

By Guillermo Parra-Bernal

SAO PAULO, April 22 (Reuters) - Banco Bradesco SA's first-quarter earnings missed analyst estimates as efforts by Brazil's second-largest private-sector bank to cut bad loan provisions and expenses failed to offset declines in interest and fee income.

Earnings excluding one-time items, or recurring profit, rose 3.4 percent to 2.943 billion reais ($1.46 billion) from the fourth quarter of last year, Osasco, Brazil-based Bradesco said in a statement on Monday. A Thomson Reuters poll of 10 analysts showed an average estimate of 2.98 billion reais.

Revenue after average interest charged on loans fell for the fourth straight quarter, and new credit showed a slight expansion. The lender underwrote 17 percent less in insurance premiums, and revenue from financial services slipped 1.6 percent, in a sign that the industry is struggling to recover from two years of subpar economic growth.

Return on equity rose to 19.5 percent, the first increase in the indicator in four quarters. This beat the analysts' forecast of 17.1 percent.

Net interest margin, or the average interest rate Bradesco charges on loans, fell for the fourth straight quarter, to 7.2 percent due to a decline in market interest rates coupled with a change in the loan book mix, the bank said in the statement.

The drop indicates growing caution among private-sector lenders as Brazil's economy enters what could be the third consecutive year of below-trend growth. Bradesco is reining in disbursements in riskier segments like auto loans and focusing on mortgages and paycheck-deductible lending, areas where interest rates tend to be lower but defaults less likely.

Bradesco's loan book stood at 391.68 billion reais on March 31, up 1.6 percent on a quarterly basis, but a tad below the analysts' estimate of 392.4 billion reais. On an annual basis, lending rose 11.6 percent, below the lender's forecast of credit growth between 13 percent and 17 percent this year.

Interest income fell 1.6 percent, while income from trading of securities plummeted 54 percent from the prior quarter. Fee income, or revenue stemming from financial and wealth management advisory as well as nonlending financial services, dropped for the first quarter in seven.

Bradesco trimmed provisions for bad loans after defaults fell slightly in the quarter. Loans in arrears for 90 days or more, a benchmark measure of delinquencies, slid to 4 percent of Bradesco's total loan book from 4.1 percent in the fourth quarter and below analysts' estimates of 4.1 percent.

Provisions fell by 3.1 percent on a quarterly basis to 3.11 billion reais, their lowest since the last quarter of 2011, the bank said. Analysts had forecast 3.17 billion reais.

Management will discuss results in a conference call later in the day.

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ECB rate cut effectiveness limited, still possible if backed by data-Asmussen

WASHINGTON, April 20 | Sat Apr 20, 2013 3:49pm EDT

WASHINGTON, April 20 (Reuters) - The European Central Bank could cut interest rates further, if data justified such a move, but the effectiveness of rate cuts is limited because they are not passed on to the economy in the same way in all parts of the euro zone, ECB board member Joerg Asmussen said.

Responding to a question in a panel on the sidelines of the International Monetary Fund annual spring meeting, Asmussen said ECB monetary policy was already very accommodative. The bank's main lending rate is at a record low of 0.75 percent.

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UPDATE 2-Action needed to boost confidence in global economy, IMF says

Sat Apr 20, 2013 5:39pm EDT

* Finance leaders warn on over-reliance on monetary policy

* China says rich nation policies could be harmful

* IMFC recommits to avoid competitive forex devaluations

* IMF to look at impact of unconventional policies

By Lesley Wroughton and Krista Hughes

WASHINGTON, April 20 (Reuters) - Global finance officials on Saturday said monetary policy alone was not enough to restore confidence in the shaky global economy as they urged countries to take other steps to reinvigorate growth and create jobs.

"We need to act decisively to nurture a sustainable recovery and restore the resilience of the global economy," the International Monetary Fund's steering committee said at the conclusion of the world lender's spring meeting.

Central banks in the biggest economies should continue their accommodative monetary policies amid an uneven and weak economic recovery, the International Monetary and Financial Committee said in a communique.

Easy-money initiatives alone, however, cannot be counted upon to provide sufficient stimulus, it said as it called for "credible" plans to tighten budgets over time and structural reforms to make economies more productive.

"The commodity that is in shortest supply now is confidence," Singaporean Finance Minister Tharman Shanmugaratnam, chairman of the IMFC, told a news conference.

But in order to shore-up confidence, a range of policy actions were needed to nurse the recovery, he said.

"There is strong and common recognition that achieving growth and jobs cannot rest on one policy alone - there is no single bullet that will get us to normal growth and some normality with regard to jobs," said Tharman.

MINDING THE CENTRAL BANKS

Aggressive stimulus from central banks in the United States, Britain, the euro zone and now Japan has so far failed to spark a reliable recovery, and questions are already being raised over how much more monetary policy can - or should - do.

The head of China's central bank, Zhou Xiaochuan, told the IMF panel that "the marginal benefits and costs" of central bank policies in rich nations needed to be re-evaluated.

"Unconventional monetary policies alone cannot solve the structural problems faced by advanced economies," he said.

IMF Managing Director Christine Lagarde told reporters the extraordinary efforts by these central banks were appropriate for now, but acknowledged the concerns of emerging countries about the potential for destabilizing capital flows and upward pressure on their currencies.

"We affirm our commitment to refrain from competitive devaluations and any form of trade and investment protectionism," the IMFC said, echoing a line from a communique issued on Friday by the Group of 20 leading economies.

Worries nations may try to seek a trade advantage by lowering the value of their currencies have been heightened by Japan's recent efforts to overcome years of deflation.

The Bank of Japan earlier this month pledged to pump $1.4 trillion into its economy, some of which is expected to find its way into emerging markets. In the days following the BOJ's announcement, for example, the Mexican peso jumped 2.5 percent against the dollar to its strongest level in 20 months.

Lagarde said the IMF would step up its efforts to monitor the spillover effects on emerging nations from the extraordinary monetary easing in the developed world to guard against the risk of asset bubbles forming in poorer countries.

"Prolonged easing could exacerbate the financial vulnerabilities and affect the stability of the international monetary system," Zhou warned the IMF committee.

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Rich political novice the favorite to win Paraguayan presidency

By Daniela Desantis and Hilary Burke

ASUNCION, April 21 | Sun Apr 21, 2013 12:59am EDT

ASUNCION, April 21 (Reuters) - Paraguayans go to the polls on Sunday in a presidential election that could return the center-right Colorado Party to power less than a year after the nation's leftist leader was impeached.

Millionaire businessman Horacio Cartes, 56, is the Colorado Party candidate and front-runner in the race, most polls show. A political novice, he vows to reform his party, which was tainted by corruption during its 60-year reign through 2008.

His main rival is Efrain Alegre, a 50-year-old lawyer and career politician in the ruling center-right Liberal Party, which took over the presidency after withdrawing support for President Fernando Lugo and clearing the way for his impeachment in June.

Congress ousted Lugo, a leftist and former Roman Catholic bishop, after finding him guilty of mishandling a botched land eviction that killed 17 police officers and peasant farmers. Some of Paraguay's neighbors saw the two-day trial as tantamount to a coup and imposed diplomatic sanctions on the South American nation.

"They're all the same to me, the Colorados, the Liberals, Lugo's people. I used to have faith in politicians but I don't anymore. What we need is jobs and they promise that but never deliver," said Evelia Benitez, a 38-year-old street vendor in the capital Asuncion.

Nearly 40 percent of Paraguay's 6.6 million people are poor. Located in the heart of the continent, the country relies on soybean and beef exports, but is also notorious for contraband trade and illicit financing.

One of Paraguay's wealthiest men, Cartes made his fortune in the financial and tobacco industries. Rivals have tried to link him to drug running and money laundering, but he has never been convicted of a crime and denies any wrongdoing.

Brash and outspoken, Cartes won support for his candidacy even though he never voted before joining the Colorado Party in 2009.

Alegre, a more somber politician, led corruption probes in Congress. But his reputation as an honest administrator has been undermined by an investigation into whether he misappropriated state funds while serving as Lugo's public works minister.

Paraguay's current president, Federico Franco, was barred from running in the presidential election under the country's constitution.

"My leadership model is different from the traditional one. My project represents a 'decent Paraguay' versus the 'Paraguay of the mafias,'" Alegre told Reuters in a recent interview.

BUCKING THE TREND

Polls open at 7 a.m. (1100 GMT). There is no second round of balloting so the candidate with the most votes will be declared the winner. Voters also will elect local authorities and members of Congress, with the left expected to gain seats in the divided legislature.

Paraguay will have a center-right government regardless of whether the Colorados or Liberals win, bucking the trend in South America where leftists have made steady gains in recent years. Only Colombia and Chile are ruled by conservatives.

The leftist bloc is especially strong in the Mercosur trade group, whose members include Brazil, Argentina, Uruguay and Venezuela. Mercosur suspended Paraguay after Lugo's impeachment and brought in socialist Venezuela, even though its inclusion was never approved by Paraguay's Congress.

Both Cartes and Alegre have said they would push for Paraguay's full return to Mercosur.

The country's economy has been on a roller-coaster ride and hinges largely on crop weather. It is expected to grow 13 percent this year after a severe drought caused a contraction in 2012, according to central bank forecasts.

Land conflicts have intensified in recent years and clashes occasionally break out between squatters and big landowners, including Brazilian soy farmers who live in Paraguay.

Cartes and Alegre promise to carry out agrarian reform. They also want to attract up to $2.7 billion in private capital to refurbish Paraguay's airports and build new highways, and they have vowed to improve operations at state-run companies.

They also agree that the bloated state bureaucracy, which employs about 10 percent of all workers, needs to be revamped.

"Both candidates have a 1990s sort of vision about administering the state in the sense that they would privatize or give concessions to the private sector, which goes against the grain of what's happening elsewhere in the region," said Guzman Ibarra, a political analyst at Seeds for Democracy, a non-profit group.

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Shut down for manhunt, Boston business takes a hit

By Hilary Russ and Tiziana Barghini

April 19 | Fri Apr 19, 2013 10:16pm EDT

April 19 (Reuters) - As Boston shut down during a day-long manhunt for a suspect in the marathon bombing that culminated on Friday, another cost was added to the human and emotional toll: lost business.

From the postponed baseball game at the Red Sox' beloved Fenwick Park to cancelled classes at Harvard University to empty cubicles at leading fund management firms, the New England city is likely to suffer hundreds of millions of dollars of economic losses for the day people stayed home, according to initial estimates.

"There is an economic cost to the city of Boston in the near term," said David Gergen, a professor at Harvard Kennedy School. He added that the impact would be partially offset when the city resumes its everyday business.

The Boston metropolitan area, which includes nearby Cambridge and Quincy, is the ninth largest in the United States. Its annual gross domestic product is $325 billion, and it produced just under $1 billion in goods and services per day in 2011, according to the most recent data from the U.S. Bureau of Economic Analysis.

That is about 2 percent of the $45 billion in overall U.S. daily economic activity, said Paul Edelstein, director of financial economics at IHS Global Insight in Lexington, a city near Boston.

The total hit from the shutdown could be less than $1 billion, Edelstein said, in part because telecommuting has dampened the impact.

"A lot of work is getting done, some businesses are open and there's going to be a bounce-back from a lot of this down the road," he said, referring to overtime pay for police and other emergency responders working long shifts.

Three people were killed and 176 were injured in Monday's bombings, the worst such attack on U.S. soil since Sept. 11, 2011. In the aftermath, the usually busy Copley Square section of the city of 625,000 was paralyzed as investigators probed for evidence and shellshocked Bostonians and marathoners struggled to make sense of what happened.

Four days later, on Friday, activity in greater Boston ground to a halt as police tracked suspect Dzhokhar Tsarnaev, 19, through the working class Boston suburb of Watertown. Police captured him on Friday night, nearly 24 hours after killing his 26-year-old brother Tamerlan Tsarnaev in a gunfight.

Officials shut mass transit, and Amtrak suspended service between Boston and New York City while the manhunt progressed. Residents were advised to stay put, leaving the city's normally vibrant streets empty.

A slew of concerts and the Bruins hockey game were postponed, while restaurants and shops were shuttered.

Still, at least a few businesses were open, including Yummy House Chinese Restaurant on Beacon Street in Brookline. In Cambridge, near the apartment of the Tsarnaev brothers, Troy & Anthony's Barbershop was packed - in defiance of a police request for all businesses to close.

Boston is rated triple-A by Fitch Ratings, one of three main Wall Street credit rating agencies and analyst Kevin Dolan doesn't expect the deadly events to have a financial impact.

"It's very hard to tell, but the revenue loss to the city, or the economy, is probably close to zero," said Chris Mier of Loop Capital in Chicago.

Harvard's Gergen is convinced the city will bounce back.

"I think there is going to be a silver lining to these terrible days," he said. "I bet next year's marathon draws many more people than this year's."

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Saudi's SABIC says reviewing global growth outlook

RIYADH, April 20 | Sat Apr 20, 2013 3:43am EDT

RIYADH, April 20 (Reuters) - Saudi Basic Industries Corp (SABIC), the world's biggest petrochemicals group, is reviewing its global growth outlook, especially in light of the weak economic situation in Europe, chief executive Mohamed al-Mady said on Saturday.

He was speaking at a news conference after SABIC said on Thursday that it planned to cut 1,050 jobs in Europe and close some operations there because lower consumer spending had hit demand.

"SABIC does not do this because it wants to lay off people or shut down any plants. It does this because the situation demands it," Mady said.

However, he described Europe as a "special case" and said the continent would remain a very important market for the company, even in bad times.

Mady said he could not predict global petrochemical prices for this year but thought 2013 would be similar to 2012, with improvement in prices occurring after 2013.

Earlier on Saturday, SABIC said it posted a 10 percent year-on-year fall in its first-quarter net profit.

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German finmin wants investors involved in future bailouts-report

BERLIN, April 20 | Sat Apr 20, 2013 6:25am EDT

BERLIN, April 20 (Reuters) - Germany's finance minister said investors must be involved in future bank rescues in crisis states but added Cyprus, where a bailout is imposing losses on depositors, was still a unique case, a German magazine reported on Saturday.

Asked whether the charge on depositors in Cypriot banks was a one-off case, Schaeuble said: "The involvement of owners, bondholders and uninsured depositors has to be the norm if a financial institution runs into trouble," according to Wirtschaftswoche.

"Otherwise we will never get a grip on the moral hazard problem whereby banks which do risky business make big profits but then burden the general public with their losses when they fail," he was quoted as saying.

"That cannot be allowed."

Last month Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, said Cyprus' rescue programme represented a new template for resolving euro zone banking problems and other countries may have to restructure their banking sectors.

His comments unnerved markets and he later put out a statement that Cyprus was a specific case, that plans were tailor-made for each situation and no models or templates were used.

Schaeuble was quoted as saying Dijsselbloem had been unfairly pilloried for his comments.

"But he said Cyprus could be a 'template' for the future. Financial markets misunderstood that, thinking there was a risk of Cyprus happening elsewhere. But that is not the case because Cyprus is a very unique case."

Cyprus and international lenders decided that depositors who had more than 100,000 euros in the two biggest Cypriot banks would lose some of their money to contribute to the recapitalization of the institutions, along with shareholders and bondholders.

Earlier this week a European Commission document showed they stood to lose up to 8.3 billion euros through the restructuring of the two institutions.

Schaeuble said Cyprus would get 10 billion euros in aid, adding that it would not get any more because otherwise the island's debt sustainability would not be guaranteed.

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UPDATE 1-German court to hear case against ESM, ECB bond-buying in June

Fri Apr 19, 2013 6:38am EDT

BERLIN, April 19 (Reuters) - Germany's Constitutional Court said on Friday it would hold a public hearing on complaints against the euro zone's bailout fund, the European Stability Mechanism (ESM), and the European Central Bank's bond-buying programme on June 11 and 12.

The complaints, seven in total, reflect German unease about the mounting costs of dealing with the three-year debt crisis and fears that the ECB bond-buying programme may violate the taboo against direct central bank financing of state budgets.

The court based in Karlsruhe, southwestern Germany, ruled in a preliminary verdict last September that the ESM did not violate German law and could go ahead, though it insisted on veto rights for the German parliament.

That same month, the ECB announced plans to buy "unlimited" amounts of bonds from stricken euro zone states to reduce their borrowing costs, provided they sign up to strict reform programmes from the ESM rescue fund.

The ECB has not yet activated the programme as struggling euro zone states, already implementing tough austerity measures, are reluctant to accept the onerous conditions of the programme, but the pledge alone has been sufficient to bring down their borrowing costs over recent months.

Constitutional law expert Gunnar Beck said he did not expect Karlsruhe to uphold the complaints, given its past record on not blocking moves towards European integration, despite the legal concerns over the bond-buying programme.

"There is no doubt that the EU treaties ... rule out bond purchases whenever they might facilitate state financing through the printing press and allow indebted states to obtain better rates than they would otherwise," said Beck, a German lawyer and academic now based at London University.

"There is no historic precedent where the German constitutional court has directly challenged the German government over an issue of European policy," said Beck, a longtime critic of the euro zone bailouts.

"I have no doubt the court will (submit to the government's wishes) in one form or another when it comes to the ECB bond purchases," he added.

The court will not give a final verdict on the complaints at the June hearings.

Political analysts say a verdict is unlikely before Germany's September election when Chancellor Angela Merkel, her popularity boosted by what voters see as her competent handling of the euro zone crisis, is expected to win a third four-year term.

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RPT-Fitch: CDS Implied Ratings More Volatile Than Fundamental IDRs

Fri Apr 19, 2013 6:40am EDT

April 19 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings highlights in a new report that the market typically rates well-performing companies higher and worse-performing names lower than Fitch, with CDS-implied ratings (CDS IRs) being more volatile than Fitch's Issuer Default Ratings (IDRs). CDS IRs are more affected by market overreaction and the impact of changing market sentiment. The impact is more severe for small firms than for large ones.

CDS IRs are also higher at the extremes of the rating scale compared with IDRs by an average of one notch at end-2012, although this differential slightly converged compared with early 2011 when the difference was two notches. IDRs are centred around an average rating of 'BBB'/'BBB+' with a bell-shaped distribution around this mean, whilst CDS IRs for the same sample of names are more evenly distributed throughout the rating scale.

However, the market punishes peripheral corporates, as it is less forgiving of companies operating in the periphery of the eurozone - given current uncertainty regarding its unified future and weak market outlooks. Corporate CDS spreads continue to trade wide of weaker peripheral sovereign spreads. Utilities companies Portugal Telecom SGPS SA (BBB/Negative) and EDP-Energias de Portugal, S.A. (BBB-/Negative) have differences of six and five notches respectively, while Spanish telecoms giant, Telefonica SA's (BBB+/Negative) CDS IR is four notches below its IDR.

Notable sector disparities exist, with pharmaceutical and beverage companies benefitting from less perceived market volatility and stable cash flows, driving higher CDS IRs relative to Fitch IDRs in these sectors - by an average of three rating levels. By contrast, Fitch takes a slightly more pessimistic view on the pharmaceutical sector on the back of an impending patent cliff and expected favourable shareholder remuneration practices over the medium term.

Technology and metal and mining firms such as Motorola Solutions Inc, (BBB/Stable), Pitney Bowes Inc (BBB-/Negative), BHP Billiton Plc/Limited (A+/Stable) and Vale S.A. (BBB+/Stable) have lower CDS IRs than their fundamentals suggest - at an average CDS IR one notch below the average IDR. This is a function of cyclical commodity prices for metals and mining firms driving greater volatility in CDS prices and Fitch's through-the-cycle rating approach.

The full report, ''CDS Implied Ratings Versus Fitch Fundamentals" is available at fitchratings.com or by clicking on the link below.

Link to Fitch Ratings' Report: CDS Implied Ratings Versus Fitch Fundamentals

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Germany, IMF used atomic bomb to shoot pigeon, says Cyprus negotiator

NICOSIA, April 19 | Fri Apr 19, 2013 6:41am EDT

NICOSIA, April 19 (Reuters) - One of Cyprus's most senior civil servants has likened his country's treatment by Germany and the IMF to the shooting of a pigeon with an atomic bomb, saying they had destroyed an economic system that worked.

Christos Patsalides, permanent secretary of Cyprus's Ministry of Finance, also described the international lenders as "forces of occupation" that cared nothing for human rights.

Patsalides took part in the recent bailout negotiations between Cyprus and the European Union and International Monetary Fund.

He was speaking to a judicial inquiry which started an investigation on Friday into the circumstances that led to the economic meltdown of one of the euro zone's smallest economies.

Patsalides told the inquiry that an "unrelenting" team of technocrats had dispensed savage fiscal punishment to cash-starved Cyprus

"With the imposition of Germany and the IMF ... they shot a pigeon with an atomic bomb," he said.

Many Cypriots saw their life savings vanish in March when authorities imposed losses on uninsured deposits in two of Cyprus's banks - Popular and Bank of Cyprus - which were badly stung by an EU-sanctioned writedown on Greek sovereign bonds.

The depositor losses - which also hit overseas depositors, many from Russia - were part of Cyprus's contribution ensure it received a 10 billion euro bailout from the EU and IMF.

Asked whether forcing losses on depositors was compatible with their individual rights, Patsalides replied: "When you are dealing with forces of occupation, they don't talk about human rights."

Cyprus, which had modelled itself as an offshore financial services centre for lack of any other resources, now faces a grim future with its reputation in tatters and its economy deep in recession.

"They destroyed an economic system that worked," Patsalides said. "Yes, we have our shortcomings, but the magnitude of the punishment is far greater than the size of the problem."

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RPT-Fitch Maintains Rosneft on RWN; Upgrades TNK-BP to 'BBB', on RWN

Thu Apr 18, 2013 6:30am EDT

April 18 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has maintained OJSC OC Rosneft's (Rosneft) Long-term foreign and local currency Issuer Default Ratings (IDR) of 'BBB' on Rating Watch Negative (RWN). Simultaneously, Fitch has upgraded TNK-BP International Ltd.'s (TNK-BP) Long-term foreign and local currency IDRs to 'BBB' from 'BBB-' and maintained them on RWN. A full list of rating actions is at the end of this press release.

In October 2012, Fitch placed Rosneft's ratings on RWN following the company's announced acquisition of a 100% stake in TNK-BP, Russia's third-largest oil company. In March 2013, Rosneft closed the deal for the total consideration of USD44bn in cash and 12.84% in treasury shares, for which it raised nearly USD37bn in new borrowings.

Fitch will resolve the RWN once it obtains comfort that Rosneft's funds from operations (FFO) net leverage will not exceed 2.5x on a sustained basis in 2013-2015. For that, the agency would need to ascertain that Rosneft's consolidated capex will not rise significantly above the pre-acquisition levels of each Rosneft and TNK-BP.

KEY RATING DRIVERS

Acquisition Drives Leverage Up:

To finance the acquisition of TNK-BP, Rosneft raised nearly USD37bn in new borrowings including two syndicated loans and loan participation notes (LPNs). Fitch forecasts that Rosneft's post-acquisition FFO net adjusted leverage will increase to about 2.5x by 2015, up from 1.5x in 2012, based on the agency's Brent price assumption of USD100/bbl in 2013, USD92/bbl in 2014 and USD85/bbl in 2015.

Under its conservative rating case, Fitch treats prepayments of up to USD10bn that Rosneft plans to receive from oil traders Glencore and Vitol in exchange for future oil supplies as part of its total indebtedness, even though the deal does not contain any covenants or guarantees on the part of Rosneft. Excluding these prepayments, the agency forecasts Rosneft's FFO net leverage to increase to about 2.2x in 2015.

Capex Under Review:

Rosneft's capex as key for resolving the RWN. The company is currently reviewing its consolidated budget, including capex. The agency currently assumes that Rosneft's capex will not exceed 25% of its net revenues in 2013-2015. However, if the capex is significantly higher leading to net FFO leverage above 2.5x on a sustained basis, Fitch may take a negative rating action on Rosneft.

Improved Post-Acquisition Profile:

Rosneft's operational profile has significantly improved following the acquisition of TNK-BP. Its post-acquisition hydrocarbons output of 4.2m barrels of oil equivalent per day (excluding equity stakes) places it ahead of such majors as Royal Dutch Shell plc ('AA'/Stable), BP plc ('A'/Positive) or ConocoPhillips ('A'/Stable). Rosneft now controls about 40% of Russia's crude production and 30% of its refining capacity. On the other hand, combined Rosneft lags behind global peers in EBITDA generation due to high taxation in Russia.

State Support Incorporated:

Fitch continues to incorporate support from the Russian Federation ('BBB'/Stable), Rosneft's majority shareholder, into Rosneft's ratings. On the other hand, the agency notes that Rosneft's operational scale is now so large that the state might find it challenging to support the company under a stress-case scenario, e.g. if oil prices plummet significantly for a prolonged period of time, as Russia's economy itself heavily depends on oil revenues.

TNK-BP Aligned With Parent:

The upgrade of TNK-BP's IDRs to 'BBB' from 'BBB-' indicates that Fitch has aligned its ratings with those of Rosneft, its new parent. This reflects the fact that Rosneft's LPNs contain a cross-default provision that covers, among other things, indebtedness of principal subsidiaries. We believe TNK-BP is a principal subsidiary of Rosneft under the documentation, and therefore cross-default provisions would fully cover TNK-BP's existing indebtedness including the USD-denominated notes issued by TNK-BP Finance S.A.

RATING SENSITIVITES

To resolve the RWN, Fitch will need to obtain comfort that Rosneft's FFO net leverage will not exceed 2.5x on a sustained basis. Fitch will aim to resolve RWN by mid-2013.

LIQUIDITY AND DEBT STRUCTURE

Syndicated loans to be refinanced: In Q412-Q113 Rosneft raised nearly USD37bn in new borrowings including two syndicated loans and LPNs to finance the acquisition of TNK-BP. A significant portion of the USD31bn syndicated loans are due in 2014-2015. Fitch expects that Rosneft will refinance a large portion of syndicated loans with capital market debt, long-term loans from Russian state-owned banks and/or prepayments for crude oil supplies.

LIST OF RATING ACTIONS

OJSC OC Rosneft

Long-term foreign currency IDR: 'BBB'; maintained on RWN

Long-term local currency IDR: 'BBB'; maintained on RWN

Senior unsecured rating: 'BBB'; maintained on RWN

Rosneft International Finance Limited

Senior unsecured rating: 'BBB'; maintained on RWN

TNK-BP International Inc.

Long-term foreign currency IDR: upgraded to 'BBB'; maintained on RWN

Long-term local currency IDR: upgraded to 'BBB'; maintained on RWN

Short-term foreign currency IDR: 'F3'; maintained on RWN

TNK-BP Finance S.A.

Senior unsecured rating: upgraded to 'BBB'; maintained on RWN

Short-term rating: 'F3'; maintained on RWN

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Update-Moody's concludes review of two Spanish SME ABS backed by loans originated by Banco Mare Nostrum, with no negative action

Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.

NYSE and AMEX quotes delayed by at least 20 minutes. Nasdaq delayed by at least 15 minutes. For a complete list of exchanges and delays, please click here.

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Slovenia mandates foreign banks to explore funding opportunities

By Marja Novak

LJUBLJANA, April 18 | Thu Apr 18, 2013 6:42am EDT

LJUBLJANA, April 18 (Reuters) - Slovenia, which is struggling to avoid an international bailout, has mandated BNP Paribas Deutsche Bank and JPMorgan to explore funding opportunities, the euro zone member's finance ministry said on Thursday.

It said the banks would arrange a series of fixed-income investor meetings in several financial centers from April 22.

"This is not a mandate for a bond issue but for a non-deal related roadshow which will test the possibilities for Slovenia's financing on international capital markets in 2013," Irena Ferkulj, a ministry spokeswoman, told Reuters.

The news came a day after Slovenia issued 1.1 billion euros of 18-month treasury bills, more than double the target, and then repurchased 511 million euros of similar bills that mature in June, thus reducing the sqeeze on its finances.

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Cypriot finance minister sees gold sale within months

NICOSIA, April 17 | Wed Apr 17, 2013 5:06am EDT

NICOSIA, April 17 (Reuters) - Cyprus's finance minister said on Wednesday he anticipated the island nation to sell part of its gold reserves "during the next months", but the final decision rested with the central bank.

Cyprus has to sell some of its gold reserves to raise about 400 million euros to finance its part of a 10 billion euro EU/IMF bailout, according to an assessment of Cypriot financing needs prepared by the European Commission.

The island nation confirmed last week that a sale of its gold reserves was among the options for its contribution towards the rescue package, but ultimate responsibility rested with the central bank.

"In the case of the gold, it's the board of the central bank. It's perfectly understandable.. They have the final say," Finance Minister Harris Georgiades said in an interview with Bloomberg TV.

Georgiades did not elaborate on how much gold Cyprus might sell nor at what price.

Asked if the government had the support of the central bank to go ahead with the sale, Georgiades said: "It's something that will be examined soon, I hope."

A central bank spokeswoman said last week the sale of gold reserves was not presently on the board's agenda.

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Russia's Putin threatens to sack officials over social spending

Wed Apr 17, 2013 5:10am EDT

* Putin's pre-election pledges dented by tight budget

* Speculation of strained relations with PM Medvedev

By Alexei Anishchuk

MOSCOW, April 17 (Reuters) - President Vladimir Putin threatened to sack senior officials over a failure to carry out his orders on social spending in a warning to Prime Minister Dmitry Medvedev's government.

Unofficial video footage released on Wednesday showed Putin berating officials at a meeting on housing attended by several ministers including Finance Minister Anton Siluanov and Deputy Prime Minister Dmitry Kozak.

In the footage, published online shortly before Medvedev started a speech to parliament on the economy, Putin called for more action to fulfil his pledges on social spending intended to improve the lives of millions of Russians.

"If we don't do it, we will need to acknowledge that either I work inefficiently or you work badly and you will need to resign," he was seen telling Tuesday's meeting in the southern town of Elista.

"I would like to draw your attention to the fact that I am currently inclined towards the second scenario," he said. "I don't want any misunderstandings and I want us to talk honestly."

The comments were made after the president requested cameras be turned off at the meeting, but the video appeared on the Lifenews.ru website which has close ties to the Kremlin.

The remarks follow months of speculation that Putin's relations with Medvedev are strained and that the prime minister might be dismissed. Government and Kremlin officials have dismissed the speculation.

A professionally produced video by an anonymous filmmaker was posted on YouTube earlier this year which used archive footage and apparently recent interviews to present Medvedev as weak and ready to surrender Russian interests to a conniving United States. The word "treason" is uttered by a narrator.

Putin's spokesman, Dmitry Peskov, confirmed the authenticity of the latest footage of the president chastising officials, but told RIA news agency the remarks were addressed to regional leaders at the meeting rather than the ministers present.

Medvedev's spokeswoman, Natalia Timakova, declined to comment.

Putin, who replaced Medvedev as president last May after four years as prime minister, pledged to spend heavily on social needs after facing the biggest protests since he first rose to power in 2000.

He reprimanded three ministers last year for not enforcing his social spending plans. One of the officials, Regional Development Minister Oleg Govorun, resigned shortly afterwards.

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France eyes structural budget balance by 2017 -minister

PARIS, April 17 | Wed Apr 17, 2013 5:41am EDT

PARIS, April 17 (Reuters) - France's government aims to balance its public finances by 2017 in structural terms, Finance Minister Pierre Moscovici told Le Monde newspaper on Wednesday.

"We are not giving up on anything," Moscovici said in an interview published shortly before the government was due to publish budget targets for the next few years.

"The government target is still to return to structural balance by 2017, secure the strongest possible economic growth and turn around the jobless trend from the end of 2013."

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UPDATE 1-German investor morale erodes on euro zone, global fears

Tue Apr 16, 2013 6:21am EDT

* ZEW chief cites delay in bank union, euro uncertainty

* China slowdown weighing on global outlook

* German export sectors like autos showing weakness

By Eva Kuehnen and Sakari Suoninen

MANNHEIM, Germany, April 16 (Reuters) - German analyst and investor sentiment fell sharply in April, hit by fears that a deterioration of the euro zone crisis and a global slowdown, led by a weakening China, could take a heavy toll on Europe's biggest economy.

The Mannheim-based ZEW think tank said on Tuesday its monthly poll of economic sentiment fell to 36.3 points from 48.5 in March. The reading undershot a Reuters poll forecast of 42.0 and sent the euro down against the dollar.

"There is increasing evidence that there are growth risks," ZEW President Clemens Fuest said.

"There has been some disappointing data coming from China, from U.S. labour markets, from German exports. There have been some doubts about the strength of the recovery and some people think there is now confirmation of that."

He pointed to a particularly strong decline in export-related industries in Germany, such as the automotive sector.

Long resilient to the euro zone crisis, Germany's economy slowed in 2012 and output shrank by 0.6 percent in the final quarter. But economists expect it to avoid recession and to have returned to weak growth in the first three months of this year.

Still, weak data in recent weeks has raised fears that Europe's powerhouse may be faltering. Imports and exports fell sharply in February, and industrial output has been lacklustre.

A significant slowdown in Germany could be a headache for conservative Angela Merkel who hopes to clinch a third term as chancellor in an election in September.

"The chickens are coming home to roost for economic confidence in Germany," said David Brown of New View Economics.

"The problems are starting to pile up for business, with the debt crisis in Cyprus, euro zone recession and slowdown in China all taking a greater toll on sentiment," he said, adding confidence that German businesss could shrug off downside risks was looking increasingly misplaced.

In addition, worries about the euro zone crisis have resurfaced with the focus on Portugal, which is having to rethink some austerity policies after a constitutional court ruling and Cyprus, which is being bailed out after a messy debate over how hard to hit depositors in its banks. Italy also faces political uncertainty after an inconclusive election result.

In what appeared to be a dig at the German government, Fuest also said one underestimated risk factor was the debate about a banking union in Europe.

"These decisions are routinely postponed," Fuest said. "These decisions do raise some doubts about the ability of the periphery countries to address the weakness of their financial sectors."

Germany, backed by allies like Austria, has called for a change in EU treaties to allow for a so-called banking union, raising questions about how fast it can be implemented.

The ZEW index was based on a survey of 243 analysts and investors conducted between April 2 and 15, ZEW said. The institute said the indicator was hovering at its third highest mark in the last two years, despite the April decline.

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