American Students Score Below Average In Financial Literacy

Where will you find the most financially literate 15-year-olds in the world? Not Wall Street, nor Silicon Valley, despite all its tech wunderkinds.

Try Shanghai, China.

There, students scored 603 points on an assessment run by the Programme for International Student Assessment (PISA) by the Organization for Economic Cooperation and Development (OECD). The average was 500, and the United States’ mean was 492. That put it slightly below the average of the the 13 OECD countries and economies assessed; among all 18 countries and economies included, the US ranked between 8 and 12. The other countries and economies whose students, in addition to Shanghai’s, scored above the OECD average were Australia, the Flemish Community of Belgium, the Czech Republic, Estonia, New Zealand and Poland.

The US also ranked below average in the percentage of students who reached a baseline level of financial literacy — almost 18% of American students couldn’t perform basic financial literacy tasks, compared with 15.3% of OECD countries. Baseline financial literacy is being able to recognize the difference between needs and wants, make simple decisions on everyday spending and recognize the purpose of everyday financial documents such as an invoice.

Just 9.4% of American students is a top performer in financial literacy, similar to the OECD average of 9.7%. These students can, for instance, calculate the balance on a bank statement and understand the implication of income-tax brackets.

Scores were about the same between American boys and girls, but socioeconomic status was associated with about 17% of the variation in student performance. In the U.S, having one parent in a skilled occupation such as midwife, software engineer, was associated with a 56-point higher score in financial literacy, compared with students whose parents worked in semi-skilled or elementary occupations such as farmhand or machine operator. Similarly, students with at least one parent working in a finance-related occupation performs better by 62 points than students of similar socioeconomic status with parents and other fields.

Students with a bank account scored 37 points higher, on average, then students without, but the advantage disappeared when socioeconomic status was taking into account. Just one in three students less well off socioeconomically has a bank account, compared with 70% of advantaged students.

Ashima Ltd signs term sheet for settlement of secured debt

Ashima Ltd has signed a term sheet for settlement of secured debt, with one of its secured lenders, namely Asset Reconstruction Company (India) Limited (ARCIL). It envisages payment of settlement amount in phases over a period of time.

As per the terms, ARCIL has rights to terminate the settlement arrangement and forfeit the amount paid by the Company upon occurrence of any of the events of default listed in the term sheet.

In absence of any sufficient internal accruals and the companys net worth being negative, the financial commitments given by the company to ARCIL would require raising resources through additional debt or equity.

The financial settlement with ARCIL amounts to less than 60% of the total secured debt of the Company and the rest of the debt needs yet to be settled by the Company.

Shares of ASHIMA LTD. was last trading in BSE at Rs.6.92 as compared to the previous close of Rs. 6.97. The total number of shares traded during the day was 10699 in over 31 trades.

The stock hit an intraday high of Rs. 7.31 and intraday low of 6.92. The net turnover during the day was Rs. 75081.

The Long Road Ahead for DryShips Inc.

The shipping sector has put in a solid performance during the past year or so. However, DryShips (NASDAQ: DRYS) , one of the sectors biggest players, has missed out on much of the rally.

Surprisingly, even after reporting a good set of first quarter results, DryShips is still lagging its peers, although this poor performance can be traced back to one factor; debt.

Good first quarter
For the first quarter DryShips reported a net loss of $34.6 million, or $0.08 per share. Analysts were expecting the company to break even for the quarter.  These results included a $32.6 million, or $0.08 per share non-cash write off charge associated with the full refinancing of Ocean Rigs (NASDAQ: ORIG) $500.0 million 9.5% senior unsecured notes. Excluding this cost, the company would have reported a net loss of $15.2 million, or $0.04 per share.

Despite this loss, DryShips results did contain some good news. For example, the companys drybulk segment reported a 17% rise in time charter revenues and a 3% rise in voyage days. In addition, DryShips tanker segment really outperformed, reporting a near 100% rise in time charter revenues, drop in operating expenses and rise in voyage days.

Meanwhile, Ocean Rig UDW Inc, DryShips majority-owned offshore drilling subsidiary reported a 47% rise in sales. This rise in sales spurred Oceans Board of Directors to declare a quarterly cash dividend of $0.19 per common share. Overall group operating costs increased by 25%.

Whats more, DryShips reported an operating profit for the period. However, the company was thrown into a loss by crippling interest costs, which amounted to $114 million, for the period, 1.3x operating income.

Debt is a concern
There is no denying that debt is DryShips main concern going forward. The companys debt stood at a total of $6 billion at the end of the first quarter, up around $500 million quarter over quarter.

However, the company has vowed to do something about this. The refinancing of Oceans $500.0 million 9.5% senior unsecured notes was a major step in this plan. While not directly beneficial to DryShips, low interest costs for Ocean will be reflected through higher dividend payouts to DryShips. The notes were refinanced at 7.25%, which should save the company just under $10 million per annum in interest costs .

DryShips is working to reduce its debt in several ways.

Firstly, the company is cancelling its delayed Chinese newbuildings, several Panamax vessels which were slated to be delivered this year. . Secondly, with ship prices rising, DryShips is looking to refinance its fleet, hopefully achieving a lower rate of interest as the loan-to-value rate falls.

As far as maturities are concerned, DryShips has a convertible bond maturing this year with loan maturities of $72 million, $138 million and $68 million for 2014, 2015 and 2016, respectively. The firm is taking proactive measures to potentially refinance certain facilities ahead of maturity. These measures include the refinancing of facilities and possible addition of extra debt to pay off existing issues.   .

Of course, if these measures fail, the company still has the ability to issue shares into the market for immediate cash. During the first quarter DryShips sold approximately 22.2 million common shares, at an average share price of $4.14 per share, resulting in net proceeds of $90 million. Management is trying to avoid this option, as they are fully aware of the implications to shareholders.

Ocean Rig
Still, DryShips is beginning to profit from its investment in Ocean. DryShips received a $15 million dividend from the subsidiary during the first quarter and further payouts should follow.

DryShips owns around 60% of Ocean Rig and management is trying to unlock value from the offshore driller by converting some, if not all of Oceans assets into an Master Limited Partnership structure. Hopefully, this should help DryShips in its quest to reduce debt.

Luckily, Oceans fleet of nine 6th and 7th generation ultra-deepwater drillships is one of the most advanced fleets in the offshore drilling business. Its easy to see why the company has a $5.4 billion contract backlog. An additional two drilling units are being delivered to the company next year.

With a sector leading fleet, Oceans income is soaring, great news for DryShips. For the first quarter Oceans income totalled $31.1 million on an adjusted basis. Revenue for the period jumped around 50% year over year, and similarly, operating income rose by 90%.

On average, for fiscal 2014 Wall Street analysts expect Ocean to report earnings of $1.56, rising to $2.30 during 2015 . Based on the first quarter dividend of $0.19 per share, Ocean should be able to pay $0.76 in dividends to DryShips this year, or maybe more, adding roughly $60 million to DryShips bottom line — a much needed income boost .

Of course, DryShips always has the option to sell its 60% share of Ocean to repay debt, although this is likely to be a last resort.

Foolish summary
Even after a solid first quarter, DryShips remains underwater, constrained by its overwhelming debt pile and crippling interest payments. However, the companys management is working hard to remedy the situation and DryShips investment in OceanRig is just starting to yield results and boost overall income.

The next few months, or even quarters will be crucial to DryShips. If the company can put in place a plan to lower debt and interest costs, the company should return to profitability. On the other hand, if DryShips continues to struggle with its debt load, more shares could be issued to meet the companys cash flow requirements, diluting existing holders and leading to more uncertainty.

New Frontiers in Foreclosing on Banks

This summer, American Bancorp in St. Paul, Minn., and FMB Bancshares in Lakeland, Ga., were each forced into involuntary bankruptcy by trust-preferred creditors. Both companies had reached the end of their 20-quarter deferral periods owing millions of dollars in unpaid debt and interest.

Speculation has since centered on whether hundreds of other bank holding companies reaching the end of their deferral periods will also be forced to auction their banks.  Often overlooked in this discussion are the holding companies that have issued debt secured by the stock of their subsidiary banks. The same factors that are motivating trust-preferred creditors to force auctions will likely drive secured creditors to do the same, creating additional opportunities for deal-hungry acquirers.

Until recently, it was unclear how creditors would react following the expiration of trust-preferred securities deferral periods. Bank holding companies had previously attempted to sell off their assets in voluntary bankruptcy auctions, known as 363 sales, with mediocre results: no other bidders had emerged to challenge the initial offer.  However, recent 363 bankruptcy auctions for Metropolitan National Bank, Park Cities Bank, 1st Mariner Bank and Idaho Banking have been successful for creditors, with multiple bidders driving up prices. 

Moreover, while many creditors feared that bankruptcies could risk the health of the subsidiary bank through bank runs or other crises of confidence, such crises have not materialized. It is now clear that the worm has turned: trust-preferred creditors view bankruptcy auctions favorably.  Indeed, the ratings organization Fitch has opined that involuntary bankruptcies can add value for creditors.

For similar reasons, secured creditors are likely to conclude that forced auctions will be their best avenue for recovering outstanding debt.  Under the Uniform Commercial Code, a secured lender foreclosing on its bank stock collateral must sell the bank stock in a “commercially reasonable” manner—typically an auction, with the bank going to the highest bidder. Any value realized in excess of the debt goes to the holding company debtor to benefit unsecured creditors or, secondarily, stockholders. Just in May, for example, a secured lender foreclosed on the stock of Advantage Bank in Loveland, Colo., and began a foreclosure auction.

Like bankruptcy auctions, foreclosure auctions allow the purchaser to acquire the bank without acquiring its holding companys debt. The UCC includes a number of other provisions that protect value for good-faith purchasers.

However, foreclosure auctions can also be risky because there is no acquisition agreement between the buyer and the foreclosing lender or the debtor. This means that the buyer of bank stock sold in a foreclosure auction is unlikely to have the benefit of contractual warranties, negative covenants, closing conditions and other provisions typically included in acquisition agreements to protect the buyer. Because of the limited warranties, it is of paramount importance that buyers do thorough due diligence on the bank and the bank stock collateral. Buyers should protect themselves by ensuring that the auctioned stock represents all of the banks outstanding stock and that the lender has a valid and legal security interest in the bank stock securing its loan.

A bank stock foreclosure auction may present a unique buying opportunity for an opportunistic buyer, especially one who is familiar with the bank in question.  Meanwhile, managers of holding companies facing looming debt deadlines would be well-advised to act early to work with creditors for repayment extensions or to restructure payment terms. If thats not possible, indebted holding companies should coordinate with secured lenders to facilitate an auction process that is most likely to obtain the best value.

Joel Rappoport and Joe Scibilia are partners at Kilpatrick Townsend. Joel Rappoport advises financial institutions and their holding companies and other public and private entities in structuring, negotiating and executing complex corporate transactions. Joe Scibilia leads the firm’s leveraged finance practice.

 

 

Steelmaker Severstal Sells 2 US Plants for $2.3 Billion

Russias Severstal said on Monday it had agreed to sell its two US steel plants for $2.3 billion, withdrawing from the US market at a time of rising tension between Russia and the West and turning its focus to its domestic business.

The company said it would sell subsidiaries Severstal Columbus in Mississippi to Steel Dynamics and Severstal Dearborn in Michigan to AK Steel Corporation, sales that could allow the steelmaker to pay an extra dividend and reduce debt.

Severstal, Russias second-biggest steel producer, said in May that it was considering a range of strategic options for its plants in Mississippi and Michigan, which produce steel products mainly for the automotive sector, having earlier divested steel plants in Maryland, Ohio and West Virginia.

The sale comes as tensions between Russia and the West grow over Moscows involvement in the Ukraine crisis, which has already resulted in a series of sanctions against Russian companies and individuals and may lead to further sanctions.

Severstal, controlled by Russian billionaire Alexei Mordashov, said that politics did not influence its decision to sell its US businesses but some analysts think the situation may have weighed on the final decision and the timing of the sale.

The political sentiment could have pushed them to do it because it is safer for them to stay away from the US market, said a London-based analyst, who declined to be named due to the sensitivity of the subject.

Severstal North America made up about 30 percent of the groups revenue.

The Russian steelmaker embarked on a series of international acquisitions in the early 2000s, near the peak of the cycle for steel and commodities. In the last couple of years, however, its focus has switched from international growth to its higher margin domestic Russian steel market.

Large steelmakers, including ArcelorMittal, Tata Steel and ThyssenKrupp, have been cutting production, jobs and idling or selling plants in the last few years in response to oversupply, weaker steel prices and sluggish demand.

The Russian domestic business is more profitable than other parts of the business and thats why other parts, such as the US branch, have lost some their appeal, said Credit Suisse analyst Semyon Mironov. On top of that the US part of the business has always traded at higher valuations that the Russian part so, from the shareholders perspective, if you can get a better price because of the geography, why not sell it.

Some analysts, however, say selling assets in the United States, a market that they see recovering in the next few years, is a questionable strategy.

The sale has been talked about for quite a while but these assets are in pretty good shape, they are free-cash-flow positive so there was no rush for a sale, said VTB Capital analyst Vadim Astapovich.

The sale will improve their total margin because the US assets are lower margin than the Russian ones but every penny counts and these assets are still money making.

Debt Cut or Special Dividend

Although the company was already pretty financially solid, having reduced its debt from a peak of $8.3 billion in 2008 to $4.8 billion in 2013, according to Thomson Reuters data, analysts said the cash it will obtain from the sale will allow it to reduce debt further or to pay a special dividend.

The company is targeting a reduction of it debt/EBITDA, which reflects how leveraged a company is, to below 1.5, from 1.7 in the first quarter of this year.

The deal could reduce Severstals net debt to EBITDA to 1.3 times. hellip; However, we do not rule out the company paying special dividends, as deleveraging is not a pressing issue at this point, VTB Capital said in a note.

The closing of the deal is not subject to any financing conditions and is expected by the end of 2014, it said.

Last week, Severstal said it had agreed to sell Pennsylvania-based metallurgical coal producer PBS Coals to Canadas Corsa Coal for an enterprise value of $140 million.

Moscow-traded shares in Severstal were up 1.42 percent by 9:55 am GMT, outperforming a broader market index which was down 1.34 percent.

See also:

Severstal Sells US-Based PBS Coals toCanadas Corsa Coals

Experian Automotive: VIO Analysis Shows Consumers Driving Older-Model …

SCHAUMBURG, Ill. Experian Automotive has reported that the percentage of older vehicles on the road has reached its highest level since 2009. According to Experian Automotives most recent Automotive Market Trends analysis, vehicles pre-dating the 2001 model year made up more than 28.3 percent of all vehicles on the road during the first quarter of 2014, up from 22.1 percent six years earlier.

Auto companies have been seeing the benefits from consumers coming back to market due to pent up demand following the recession. However, its clear that more and more consumers continue to drive older-model vehicles, said Melinda Zabritski, Experian Automotives senior director of automotive credit. While the growth in early model vehicles on the road is slowing, getting the most out of the vehicle they purchase still appears to be top of mind for consumers.

During the first quarter of 2014, the top model year 2000 and older vehicle makes and models are the Ford F-150, Chevrolet Silverado 1500, Honda Accord, Toyota Camry, Ford Ranger and Honda Civic.

Additional data from the analysis shows that consumers were purchasing entry-level crossover utility vehicles (CUV) more than any other vehicle segment. During the first quarter of 2014, the entry-level CUV segment surpassed full-size pickup trucks as the top vehicle segment among new registrations. This marks the first time in 10 years that a CUV was the top registered vehicle segment (the only two segments to achieve this title in the past 10 years were full-size pickups and small economy cars).

From a make-and-model perspective, the top five CUVs registered during the quarter were the Ford Escape, Honda CR-V, Chevrolet Equinox, Toyota RAV4 and Nissan Rogue.

The top five new vehicle models registered across all segments in Q1 2014 were the Ford F-150, Toyota Camry, Nissan Altima, Chevrolet Silverado 1500 and the Honda Accord. Regionally, the F-150 was the top new vehicle model in the Western, Midwest and South regions, while the Honda CR-V was the top model in the Northeast region.

Other findings include:

* The total number of vehicles on the road remained unchanged (247.4 million) in Q1 2014 compared to the previous year
* Alternative-power vehicles made up nearly 1.3 percent of all vehicles on the road in Q1 2014
* On average, 6.5 percent of all vehicles between model years 2011 and 2014 have a turbocharged/supercharged engine, compared to 3.4 percent of all vehicles between model years 2000 and 2010
* In the first quarter of 2014, new vehicles accounted for 27 percent of all registrations, remaining flat from last year
* Imports made up more than 52 percent of all new vehicle registrations in Q1 2014, up from 51.8 percent the previous year
* In Q1 2014, the top five manufacturers for new registrations were General Motors, Ford, Toyota, Chrysler and Nissan

Experian will share the complete findings from the Q1 2014 Automotive Market Trends analysis in a webinar taking place at 11 am Pacific time/1 pm Central time/2 pm Eastern time on June 19. To register for the webinar, visit http://bit.ly/1l5A9U4.

Millennium Park built ‘the Chicago Way’

Once it was built, the city found it did not even have enough money to operate the park, despite help from the private sector, so Daley borrowed nearly $30 million just to keep it running loans taxpayers continue to pay back.

Thats not the only ongoing financial burden related to Millennium Park, which officially opened 10 years ago Wednesday. Taxpayers also could be on the hook for $58 million related to the lease of those parking garages because of how the Daley administration put together the deal.

Meanwhile, the city is paying a team of lawyers as it tries to back out of a sweetheart deal with the operators of Park Grill, a restaurant at the park. Investors included a Daley friend and a city contractor. The restaurant pays $250,000 a year in rent, while getting free garbage pickup, water and gas. It also pays no property taxes. Mayor Rahm Emanuel is battling in court to void that deal.

In classic Chicago fashion, there also was a contract that led to prison terms for three people: a Park District official who pleaded guilty to taking bribes for $8 million in landscaping work at the park and other district properties, the company owner who bribed her and a company executive.

It was all vintage Daley: The goal was laudable, but the execution was messy, said Dick Simpson, a former alderman who now is a political science professor at the University of Illinois at Chicago.

There was a lot that in the Daley administration a lot of the ideas were good ideas, but they were implemented in whats called the Chicago Way, said Simpson, who cited as another example Daleys bulldozing of Meigs Field in the middle of the night to create a nature park. There were insiders, there was clout, there was corruption. And it was done in a way that cost more than it should have.

Jacquelyn Heard, a spokeswoman for Daley, declined comment for this story.

As he approached the end of his first decade in office, Daley announced that he wanted to transform a derelict railroad yard considered a blot on the downtown he had worked to beautify into a 24-acre park with an outdoor stage facing a great lawn. The plan included a 300-seat indoor theater and a reflecting pool that would double as an ice rink in winter.

At the time, Daley said $120 million of the projected $150 million cost would be covered by parking fees from a new below-ground garage. Private donations would take care of the rest.

As construction began, costs soared as the plans expanded and the work proved far more complex than anticipated. The host of add-ons included the famous Cloud Gate sculpture known as The Bean and an innovative fountain with video sculptures.

Within 15 months of his 1998 announcement, Daleys City Hall had issued $170 million in bonds. Three months later, all of that money was spent.

As costs soared, Daleys City Hall drew down funds from a special property tax district adjacent to the park, despite his pledge to put no tax money into the park. Eventually, more than $95 million in tax increment finance district funds went to pay for Millennium Park.

By 2004, the wealthy financial backers Daley enlisted had pumped $200 million into the parks construction and put in another $20 million for an endowment to help maintain the park.

The money Daley borrowed was supposed to be repaid with fees from the garage beneath the park. By 2006, it was clear they would not cover the cost the city had paid nearly $10 million from a reserve fund to cover the difference.

Faced with a large debt on his signature project, Daley leased the garage beneath the park and three other Park District-owned downtown parking garages to a Morgan Stanley investment company for 99 years. Morgan Stanley was then free to raise parking rates as high as it saw fit. In exchange, the city got a onetime payment of $563 million.

Daley took nearly $208 million out of that windfall to pay off the bonds issued to build the garage and part of the park. The rest went to the Park District.

As part of the 2006 lease, the city agreed to not allow public parking in the surrounding area. But three years later, it granted Standard Parking a public garage license beneath the Aqua tower, which led to a $57.8 million arbitration judgment against the city that was later upheld in court. The city is appealing.

China’s Shanxi Coal sues company at centre of Qingdao scandal

* Lawsuit suggests scandal at Qingdao port hitting other
sectors

* Shanxi Coal says owed $177 mln in payments guaranteed by
Decheng Mining and its parent

* StanChart (HKSE: 2888-OL.HK – news) says has about $250 mln in commodity-related
exposure around port

By Fayen Wong and Chen Aizhu

SHANGHAI/BEIJING, June 27 (Reuters) – Chinas Shanxi Coal
International Energy Group said it was suing the company at the
centre of the alleged metals financing fraud at Qingdao port and
its parent for over $177 million in missed payments the two had
guaranteed, a move that suggests the scandal is starting to
affect other sectors in China.

Shanxi Coal said in a statement to the Shanghai
Stock Exchange on Thursday it was suing three clients over the
missed payments as well as Decheng Mining and its parent,
Dezheng Resources, and another firm that had acted as
guarantors.

No one at Decheng Mining or Dezheng Resources was
immediately available for comment.

Shares in Shanxi Coal were down 3.76 percent at 3.58 yuan at
midday on Friday, after falling as much as 4.3 percent earlier.

Chinese authorities are investigating Decheng Mining over
the alleged duplication of warehouse receipts at Chinas
third-largest port to obtain multiple loans secured against a
single cargo of metal. Decheng Mining has not commented on the
probe.

As details of the potential fraud become clearer, the
possible exposure of various parties to Decheng and its parent
could amount to around $2.8 billion, according to an aggregation
of amounts contained in company statements and Chinese media.

Standard Chartered (HKSE: 2888.HK – news) , a major foreign provider of
commodity financing deals, said on Thursday it had about $250
million worth of commodity-related exposure around Qingdao port,
although not all of that was at risk.

That is across multiple clients, multiple locations,
multiple types of facilities, not all of which will be
affected, Chief Executive Peter Sands said on a conference
call.

Shanxi Coal said that of the total it was owed, $120.4
million was in dollars and the rest in yuan.

The Qingdao scandal has rattled global metals markets,
reflecting market fears about business practices in China and
worries that the probe could extend to other ports and prompt a
crackdown on using metal as collateral for finance.

This incident illustrates the risks commodity financing and
the practice of inter-company loans pose to the real economy
said Li Ji, a coal analyst at Galaxy Futures Brokerage.

Authorities have not yet disclosed the amount of metal
involved in the Decheng financing probe, but sources familiar
with the matter said it was about 20,000 tonnes of copper,
nearly 100,000 tonnes of aluminium ingots and about 200,000
tonnes of alumina, the raw material for aluminium production.
That quantity of metal would be worth about $390 million at
current prices.

Earlier this month, Chinas CITIC Resources Holding Ltd
said a court was unable to secure more than 100,000
tonnes of alumina it stored at Qingdao port, estimated to be
worth $43 million.

In a further sign of irregularities in Chinas commodity
financing market, the National Audit Office said this week that
Chinese gold processing firms had used falsified gold
transactions to borrow 94.4 billion yuan ($15.2 billion) from
banks.

The audit report covered a period beginning in 2012 and did
not specify an end date. It did not identify any companies or
banks.

Spot checks on 25 companies that process bullion, such as
jewellers, showed they made a combined profit of more than 900
million yuan by using the bank loans to take advantage of the
difference between onshore and offshore interest rates, as well
the appreciation of the Chinese currency, the report said.

(Additional reporting by Ruby Lian and Melanie Burton; Writing
by Dean Yates; Editing by Raju Gopalakrishnan)