Harbinger Fails In Attack On $1.7B LightSquared Guaranty

By Andrew Scurria

Law360, New York (October 30, 2014, 6:59 PM ET) — The New York bankruptcy judge handling LightSquared Inc.s knotty Chapter 11 case held Thursday that Harbinger Capital Partners LLC, the debtors top equity holder, cannot eliminate a guaranty on $1.7 billion in debt owed to a group of secured lenders.

Ruling from the bench, US Bankruptcy Judge Shelley C. Chapman denied Harbingers request to expunge or zero-out a guaranty claim that an ad hoc group of lenders to the debtors LightSquared LP unit have asserted against the LightSquared Inc. parent company.

The decision marks a setback…

JP Group trying to reduce debt overhang: Lenders

Lenders to the Delhi-based Jaypee Group said on Monday that the Gaur family-promoted infrastructure group was taking steps to reduce leverage in its power projects.

Representatives of about 30 lenders, including IDBI Bank and State Bank of India, had a detailed review meeting on the issue.

Jaypee Power Ventures and JP Associates together had net debt of just over Rs 97,000 crore at the end of March 2014, according to Capitaline data, compiled by the Business Standard Research Bureau.

There could be a delay of one or two months in finalising deals (for asset sales) due to market conditions. But the intent is clear and they#39;re doing efforts to manage things, said the head of corporate banking with a large public sector bank.

In September, JSW Energy and Jaiprakash Power Ventures announced a deal or the full acquisition by the former of three operational plants of the latter the 300 Mw Baspa-II hydro electric unit, the 1,091 Mw Karcham Wangtoo hydro electric unit and the 500 Mw Bina thermal power unit.

Last year, the group had sold its cement unit to UltraTech Cement. It sold Jaypee Cement Corporation, a subsidiary of Jaiprakash Associates, for Rs 3,800 crore.

Anglogold puts mines up for sale as CEO seeks to reduce debt

By Kevin Crowley

Anglogold Ashanti Ltd. put mines up for sale as the world’s third-largest gold producer cuts debt after shareholders balked at a $2.1 billion share sale in September.

The company plans to cut borrowing through “self-help measures,” such as reducing operating expenses and increasing output, AngloGold Chief Executive Officer Srinivasan Venkatakrishnan said today on a conference call from Johannesburg. Its depositary receipts rose the most in almost six years in New York.

“We may also consider a sale or joint venture of an operating asset for value,” he said. “People ask us ‘what do you mean for value?’ It basically means the shop isn’t open for bargain hunters.”

Venkatakrishnan, known as Venkat, is beginning a strategic fight-back after investors rejected a plan to split AngloGold’s South African and international mines, a move that would have required the company to raise $2.1 billion, or a third of its then market value. He wants to reduce net debt by $1 billion, a third of the total, over the next three years.

AngloGold’s American Depositary Receipts rose 22 percent to $10.12 at the close in New York. Earlier they posted the biggest intraday gain since Nov. 21, 2008. In Johannesburg, the shares jumped 12 percent to close at 104.37 rand.

True Potential

Before today’s rebound, AngloGold had declined 45 percent since it announced the plan to split on Sept. 10. Gold has since dropped 6.6 percent to $1,169.80 an ounce as investor demand for safe-haven assets has weakened with signs of an improving US economy and the prospect of tighter monetary policy.

“The share doesn’t reflect what the true potential of the value of the business is and our potential to deliver returns over the longer term,” Venkat said.

The potential sales are in addition to the company seeking joint ventures for its Obuasi mine in Ghana and Colombian assets, which have received numerous expressions of interest, he said. The CEO declined to name assets, saying he didn’t want to “box ourselves in.”

AngloGold had $3 billion of net debt, a ratio of 1.64 times earnings before interest, taxes, depreciation and amortization at Sept. 30, it said today in a statement. That’s higher than South African rivals Gold Fields Ltd. and Harmony Gold Mining Co. but lower than Barrick Gold Corp. and Newmont Mining Corp., the world’s biggest gold miners, the company said, citing data from HSBC Holdings Plc and Bloomberg.

Cutting Costs

The company’s adjusted headline earnings, which exclude one-time items, were $2 million in the three months ended Sept. 30, compared with a loss of $4 million in the previous quarter, the company said. Production increased 2.7 percent to 1.13 million ounces. All-in sustaining costs, which include all operating expenses, fell 2.3 percent to $1,036 an ounce, 10 percent less than a year ago.

AngloGold announced a “significant maiden resource” at Neuvo Chaquiro in Colombia, with a contained metal content of 3.95 million tons of copper, 6.13 million ounces of gold and 85.2 million ounces of silver. It holds 88.5 percent of the project with the remainder owned by Vancouver-based B2Gold Corp.

AngloGold estimates full-year production of 4.35 million ounces to 4.45 million ounces, at the top end of its previous forecast, while all-in sustaining costs are seen at $1,025 an ounce to $1,075 an ounce.

Egypt to Reduce Debt On the Back of New Project

Dana Gas Egypt has concluded a Gas Production Enhancement Agreement (GPEA) with the Egyptian Natural Gas Holding Company (EGAS) and the Egyptian General Petroleum Company (EGPC).

The deal calls for a seven year work programme which will produce about 270 billion cubic feet of natural gas, 8 to 9 million barrels of condensate and 450,000 tons of LPG.

Peak production is expected to occur in 2017 with incremental daily production of over 160 million standard cubic feet of gas and 5,600 barrels of condensate.

The deal was announced at a press conference in Cairo with Sharif Ismail, Egyptian Petroleum Minister, and the Chairman of EGAS, Eng. Khalid Al-Badie, and attended by the Vice-Chairman of Dana Gas, Dr.Tawfeeq Al-Moayed, members of the Dana Gas Board, Mr. Hamid Jafar, Mr.MajidJafar and Mr. Rashid Al-Jarwan as well as the senior management of Dana Gas Egypt led by General Manager, Mark Fenton.

Alston & Bird Partner Named American College of Bankruptcy Fellow

Alston Bird partner Jason Watson and chair of the firm’s Bankruptcy, Workouts Reorganization Group has been selected as a Fellow of the American College of Bankruptcy.

Watson has more than 15 years of experience representing secured lenders in pre-bankruptcy workouts and Chapter 11 bankruptcy cases. In addition to advising several food franchisors in the acquisition of additional stores out of bankruptcy, he has counseled numerous other companies spanning a broad range of industries, including real estate, manufacturing and telecommunications industries.

A frequent speaker and author on a variety of bankruptcy-related topics, Watson is a co-author of the Bankruptcy Litigation Manual, 2013-2014, published by Wolters Kluwer. He’s also a member of the Board of Directors of the Southeastern Bankruptcy Law Institute and a member of the Atlanta Executive Leadership Council for the American Cancer Society and the American Bankruptcy Institute.

Prior to joining Alston Bird, Watson served as a law clerk to the Honorable John T. Laney III, US Bankruptcy Judge for the Middle District of Georgia.

The American College of Bankruptcy is an honorary professional and educational association of bankruptcy and insolvency professionals. Fellows of the College include commercial and consumer bankruptcy attorneys, insolvency accountants, turnaround specialist, law professors, judges and government officials.

U.K. Starts Eurostar Stake-Sale as Osborne Seeks to Cut Debt

The UK government has begun an
auction of Britain’s stake in Channel Tunnel passenger-train
operator Eurostar International Ltd. as it seeks to raise
billions of pounds from asset disposals and reduce public debt.

Chancellor of the Exchequer George Osborne is inviting
expressions of interest from potential buyers of the UK’s 40
percent holding in Eurostar, which is majority owned by France.
Interested parties have until Oct. 31 to respond, and the
government aims to achieve definitive agreements in the first
quarter of 2015, according to a statement from the Treasury.

The disposal is part of a move to offload 20 billion pounds
($32 billion) of assets by 2020, paring Britain’s borrowings and
shifting more companies out of state ownership. Osborne is
seeking to position his Conservatives as the political party of
economic credibility prior to next May’s general election, and
last month said further public-spending cuts or tax increases
are needed in order to balance the budget.

“I am determined that we go on making the decisions to
reform the British economy and tackle our debts,” Osborne said
in the statement. “The sale proceeds would make an important
contribution to the task of reducing the public sector debt.”

The disposal doesn’t include any track assets or involve
Groupe Eurotunnel (GET) SA, a listed company that manages the tunnel
and operates rail shuttles that carry vehicles through it.

Royal Mail (RMG)

The opposition Labour Party said any Eurostar sale should
be put on hold until results of a report into the management of
UK privatizations are received. Business Secretary Vince Cable
asked former Treasury minister and ex-Marks amp; Spencer Group Plc
chairman Paul Myners to lead the review after an outcry over the
valuation of Royal Mail Plc, whose shares closed 38 percent
higher on the first day of trading last October.

The government published its pre-qualification letter on
the Eurostar disposal today and said UBS AG is advising on the
auction, having also helped price and sell Royal Mail. The
country’s net debt totals 1.4 trillion pounds, or almost 80
percent of gross domestic product.

Eurostar, whose core routes link London with Paris and
Brussels, carried 10.1 million passengers in 2013 and had an
operating profit of 54 million pounds on sales of 857 million
pounds. It’s seeking growth via services to more continental
destinations, while facing competition from Deutsche Bahn AG,
Europe’s biggest rail operator, which plans London services.

French Government

The UK is the No. 2 shareholder in Eurostar, with the
French government holding 55 percent via state rail company
SNCF, or Societe Nationale des Chemins de Fer Francais. Belgian
state railway SNCB owns the remaining 5 percent.

Eurostar paid a dividend of 18.6 million pounds to its
owners in 2013, of which the UK received 7.4 million pounds.
In 2012, Britain got a dividend payout of 6.5 million pounds
from a total of 16.3 million pounds.

Labour’s transport spokeswoman, Mary Creagh, said the
National Audit Office should conduct a value-for-money
assessment before any sale, adding: “Eurostar is a national
strategic asset that is set to grow and to return increased
profits to the UK taxpayer.”

The sale will feature a series of bidding rounds, with
interested parties likely to be led by infrastructure, pension
and insurance funds. The Sunday Times newspaper reported this
month that the stake is worth about 300 million pounds, and that
Paris-based Antin Infrastructure Partners and Ardian, the
private-equity firm spun out from AXA Group, are mulling bids.

At the end of the auction, SNCF retains a legal right to
buy the stake at a 15 percent premium to the best bid.

New Fleet

The disposal comes as Eurostar gears up for its biggest
expansion in years, with new e320 trains ordered from Siemens AG (SIE)
due to link London with Amsterdam from December 2016, with stops
in Antwerp, Rotterdam and at Schiphol airport.

At the same time, it faces new competition as Deutsche Bahn
plans services from Germany to London via the Channel Tunnel.
Eurostar is also seeking more transfer customers as the addition
of direct trains to Lyon, Avignon and Aix-en-Provence showcases
options for using its routes in long-distance trips.

The company is meanwhile aiming to expand beyond tunnel
services through a joint bid with the Keolis unit of SNCF for
the right to operate the UK’s East Coast link between London
and Edinburgh.

To contact the reporters on this story:
Scott Hamilton in Washington at
shamilton8@bloomberg.net;
Christopher Jasper in London at
cjasper@bloomberg.net

To contact the editors responsible for this story:
Emma Charlton at
echarlton1@bloomberg.net;
Benedikt Kammel at
bkammel@bloomberg.net
John Simpson, Andrew Atkinson

Ray Rice scandal boosts domestic violence awareness

The attention given to the Ray Rice domestic violence scandal has prompted more victims to seek services, overloading a system that turns down more than 170,000 requests for shelter each year.

When a video of the former Baltimore Ravens’ running back’s actions — knocking his then fiancee and now wife unconscious — was leaked to media last month, it created a firestorm of people sharing their stories of abuse on Twitter with the hashtags #WhyIStayed and #WhyILeft.

“It’s created a huge public dialogue the likes I’ve never seen in 40 years,” said Kim Gandy, president and CEO of the National Network to End Domestic Violence. “So many people are not just revealing that they’ve been victims, but their friends and family are revealing it. That’s just been tremendous because that will make a tremendous difference.”

The sharing appears to have given people in abusive relationships the courage to reach out. Calls to the national hotline increased 85 percent in September from the previous month.

The response is highlighting a problem Gandy and other domestic violence advocates have known about for years: Funding losses and stagnant federal appropriations have left many shelters, especially rural ones, unable to meet the need.

Although shelters across the nation provided 7.7 million shelter nights for domestic violence victims and their families in 2012, there were about 174,450 unmet requests for shelter, according to the Federal Family and Youth Services Bureau.

Patchwork funding

Nancy Neylon describes funding for domestic violence as a patchwork quilt.

As executive director of the Ohio Domestic Violence Network, Neylon interacts with Ohio’s domestic violence shelters, whose funding comes from a $17 fee tacked onto marriage licenses and a $32 fee on filings of annulments, divorces and dissolutions in the counties where they are located.

“For some counties, they only get $10,000, and that doesn’t even buy an advocate (for a year),” Neylon said.

Most other funds come through charitable giving and competitive grants for federal funds. Gandy said funding often comes down to who writes the best grant application, not who has the most need or provides the best services. And groups with the best applications tend to be larger agencies that spend money to hire a grant writer, she added.

“The whole system needs an overhaul in a big way,” Gandy said.

The Ohio Attorney General’s Office has two funds for agencies that serve victims, which includes domestic violence agencies. The funding stream has been steady, about $5.7 million, but recipient amounts have varied.

Another steady funding stream comes from the Family Violence Prevention and Services Act. Funding amounts for states are based on overall population; states determine how to award the money. In Ohio, funds are competitive, require a local match and are capped at $50,000.

Whereas those two funding sources have been stagnant, funding through the Office on Violence Against Women has declined about 12 percent from 2011 to 2012 and another 5 percent in 2013. Recipients are typically coalitions or metropolitan agencies such as the YWCA of Cincinnati, which received one grant in 2013 and two in 2011.

Revenue, services take a hit

While most federal grant funding remained stagnant, Gandy said, other resources, such as community foundations, took a hit during the Great Recession.

When the stock market crashed, it decreased agencies ability to give as much because investment earnings determine the amount available to give.

The recession also made individual donors more cautious because they were unsure whether their jobs would still be around next week, she added.

“There are some places where (funding) came back, but there are some places that are in the hole. Level funding isn’t going to get them out,” Gandy said.

Each September, in preparation for Domestic Violence Awareness Month in October, Gandy’s group conducts a one-day census of domestic violence agencies across the nation. On Sept. 17, 2013, agencies reported they were unable to meet a combined 9,641 requests for services.

Of those unmet requests, 60 percent were for housing. Financial assistance and legal representation were the other primary services shelters reported they could not meet that day.

Funding was cited for the reason women were turned away: 27 percent reported loss of government funding, 20 percent reported not enough staff and 30 percent reported cuts from either private or individual funding sources.

According to The Woodlands’ tax filings, its 2012 revenue was 30 percent less than 2009, but its contributions and grants revenue was 51 percent less.

Part of the revenue decrease came in fiscal year 2011, when The Woodlands lost about $6,400 in state administered funds dedicated to victims of crime.

Tricia Hufford, executive director of The Woodlands, said that, between 2009 and 2012, the agency saw contributions from individuals go down, most likely because of the downturn in the economy.

“Some of the folks that, during the Christmastime, would give us individual contributions, those didn’t happen,” she said.

Donations and contributions have begun increasing again, something Hufford said grant funds have not done.

“For many years, we’ve applied for the same state grant funds,” Hufford said. “The caps on those never increase, but our expenses increase.”

Hufford said that, for the first time this year, the Ohio Attorney General Office’s victims of crime services program allowed agencies to ask for an increase.

While funds for services are available, Hufford said, she hopes that, at some point, there will be more funds available for prevention programs.

The Rice effect

Gandy last week penned a blog for The Hill addressing Congress, saying that, often, the answer to #WhyIStayed was because the shelter was full.

She wants legislators to dedicate more resources and drive the Twitter conversation toward #HowIHelped.

She raised concerns that federal appropriations for Family Violence Prevention and Services Act funds this year are $40 million below the $175 million authorization.

Gandy said the key to getting legislators to listen is for victims to continue sharing their stories.

“You can’t do this 40 years without being an optimist,” Gandy said of what the long-term effect of the Rice incident may be. “I have to believe the public discussion, the realization of the need … will have an impact on (officials) making decision on who and what and when to fund services.”

The publicity is at least spreading awareness and prompted the NFL to plan for education and prevention, an area often cut by struggling domestic violence agencies, Neylon said.

The NFL also gave money to help boost staffing for the national hotline, and Gandy’s group has called on teams to wear purple — the signature color for domestic violence awareness — throughout this month.

Neylon hopes the NFL will continue its interest and embrace domestic violence prevention as a message its players carry to fans, young and old.

“I’m hoping for that kind of social change. That will have even more significant change to me than funding,” Neylon said. “Only time will tell.”

The Advocate’s Bethany Bruner contributed to this report

jison@gannett.com

Twitter: @JonaIson

Domestic violence cases filed

Japanese Taxation of a PE under the AOA Approach

Background

The “Authorized OECD Approach” (“AOA”) rule for taxation of permanent establishments (“PE”) was introduced in Japans 2014 tax reform and will be applied to fiscal year commencing April 1, 2016. The new rule includes changes to source rules, the introduction of transfer pricing to intra-company transactions, and the introduction of the documentation rule on income attributable to a PE.

Source rule

Under the current source rule, Article 138 of the Corporation Tax Law (“CTL”), domestic source income for business income is different from income attributable to a PE. Therefore, foreign source income attributable to a PE is out of scope for corporate income tax. Under the new rule, domestic source income for business income is income attributable to a PE. A foreign corporation is subject to corporate income tax as long as it has income defined in Article 138(1)(i) of the CTL.

According to Article 138(i), domestic source income for business income is defined as follows: “Where a foreign corporation conducts business through a PE, income attributable to the PE with reference to functions performed by the PE, assets owned by the PE, and intra-company transactions etc. assuming that the PE is a separate enterprise conducting business independently of the foreign corporation.”

When calculating income attributable to a PE, new rules will be introduced.

Disallowance of interest expenses corresponding to equity attributable to the PE

Where the equity (net assets) of the PE are lower than the equity of the foreign corporation attributable to the PE, interest expenses on debt of the PE corresponding to the deficiency of equity is disallowed1.

Disallowance of head office expenses allocation

Where the PE takes a tax deduction for head office expenses allocation and documentation of head office expenses allocation is not maintained, that allocation is disallowed.

Foreign tax credit

Where the PE pays foreign taxes on foreign source income, the PE is allowed to take a foreign tax credit within the limit of the corporation tax amount corresponding to the foreign source income2.

Intra-company transactions

Under the current rule, certain intra-company transactions such as intra-company licenses, intra-company loans etc, are not recognized3. Under the new rule, intra- company transactions are recognized. Intra-company transactions are transactions with head office or other offices in the same entity, which would be made between independent enterprises such as transfer of assets, providing services etc.4

Transfer Pricing rule

The Japanese transfer pricing rule has been applicable to transactions between separate legal entities which are related in terms of ownership and other substantive control5. Although the arms length principle is applicable to intra-company transactions, Article 66-4 of the Special Taxation Measures Law (“STML”) does not apply. There are differences between intercompany transactions and intra-company transactions for the statute of limitation, presumptive assessment and documentation requirements for transfer pricing purposes. In light of the tax reform, the transfer pricing rule will become applicable to intra-company transactions in the same way as intercompany transactions. Article 66-4-3 of the STML was introduced as a set of transfer pricing rules applied to intra-company transactions, is identical to Article 66-4 and the same rules for the statute of limitation, presumptive assessment and documentation requirement are applied to intra-company transactions.

Transfer pricing documentation must be submitted without delay when requested. Failure to comply may result in the tax authorities assessing tax by presumptive assessment. Transfer pricing documentation includes documents describing intra- company transactions and documents describing arms length pricing for intra-company transactions.

Documents describing intra-company transactions may include:

o documents describing details of assets and services in intra-company transactions;

o documents describing functions performed and risks assumed by head office etc. and the PE;

o documents describing intangible assets and tangible assets utilized by head office etc. and PE;

o contracts or equivalent documents describing transfer of assets, provision of services or other facts;

o documents describing the method for determining intra-company transactions pricing and negotiations for this;

o documents describing market analysis of intra-company transactions;

o documents describing the business policy of a foreign corporation, businesses of head office etc. and the PE; and

o documents describing other transactions (including other intra-company transactions) closely connected with the intra-company transaction and that transactions contents.

PE transactions documentation

The PE is required to prepare and maintain documentation about transactions with third parties and intra-company transactions7.

Third party transactions documentation8

The PE is required to prepare the following documents describing:

o contents of transactions attributable to the PE (“PE attributable intercompany transactions”);

o details of assets and liabilities the PE and head offices etc utilize for PE attributable intercompany transactions;

o peoples roles on functions (risks) performed and controlled by the PE and head office etc. in PE attributable intercompany transactions, peoples roles and other functions in assets attribution and risks related to these; and

o departments and business of departments engaged in functions performed in PE attributable intercompany transactions.

Intra-company transactions9 documentation

The PE is required to prepare the following:

o orders, contracts, shipping documention, receipts, price estimates, equivalent documents or copies of these describing intra-company transactions such as transfer of assets, provision of services etc. and other information;

o documents describing the details of assets and liabilities the PE and head offices etc utilize for intra company transaction;

o documents describing peoples roles on functions (risks) performed and controlled by the PE and head office etc. in intra-company transactions, peoples roles and other functions in asset attribution and risks related to these;

o documents describing departments and business of departments engaged in intra-company transactions; and

o documents evidencing facts related to intra-company transactions (facts relating to transfer of assets, provision of services or other intra-company transactions).

Actions Required

Under the new AOA rules, compliance requirements for the PE of a foreign corporation have significantly increased. Affected companies are recommended to review the current status of changes and prepare timelines to satisfy requirements in time.

Yoichi Ishizuka,
Head of Tax Grant Thornton, Japan 
Email: yoichi.ishizuka@jp.gt.com 

NOTES

1 Article 142-4 CTL

2 Article 144 CTL

3 Article 176(3)(ii) of the Corporation Tax Law Enforcement Ordinance (“CTLEO”) 

4 Article 138(2) CTLEO

5 Article 66-4 of the Special Taxation Measures Law (“STML”)

6 Article 22-10-3(1) of Special Taxation Measures Law Enforcement Regulation (“STMLER”)

7 Article 146-2 of CTL

8 Article 62-2 of Corporation Tax Law Enforcement Regulation (“CTLER”)

9 Article 62-3 of CTLER

Fake pocket money loan shop opens in north London

A payday lending firm that appears to offer pocket money advances to children has opened in north London.

Not everything is as it seems though, as Pocket Money Loans in Finsbury Park is actually an art installation that aims to highlight the tactics loan firms use to attract customers.

BBC Londons Emilia Papadopoulos spoke to artist Darren Cullen and Christopher Woolard from the Financial Conduct Authority.