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International Roundup

In Japan, the largest manufacturing bankruptcy in the nation’s history was declared this week as Elpida Memory Inc. found its liabilities in the neighborhood of $5 billion far too great to overcome without restructuring. The computer memory chip manufacturer, once a big part of a booming exporting industry dominated by Japan, has had trouble keeping up with foreign counterparts. The bulk of that competition, driven by lower costs, comes from outfits in South Korea, primarily Samsung.

Also not helping the Elpida and its contemporaries is that its chips are used for computers and laptops, not necessarily the growingly popular smart phones/devices like the iPhone/iPad and similar products. Additionally, the overvalued yen, which has become a bit of a magnate as investors leave the unstable euro, has made it harder for Japanese-based exporters to compete and threatens Japan’s long-held trade strength. As such, Japan, never known as a country where corporate bankruptcies were very likely, could be seeing its fortunes change … and not for the better (see more on this topic in a feature in the latest, March issue of Business Credit Magazine).

In Greece, the ratings agencies have struck again. This time Standard & Poor’s have downgraded Greece into the sovereign credit rating category of “SD” or selective default. Given its troubles, any action of the kind – once thought to be a virtual bomb in the markets – strikes as less than shocking. Said S&P:
“Greece's retroactive insertion of Collective Action Clauses materially changes the original terms of the affected debt and constitutes the launch of what we consider to be a distressed debt restructuring…we believe that the retroactive insertion of CACs will diminish bondholders' bargaining power in an upcoming debt exchange.”

In Ireland, a potential snag in the latest European Union effort to force the tightening of member states’ proverbial belts is emerging. Prime Minister Enda Kenny announced this week that, as per Irish constitutional mandate, a public vote must be held to ratify the proposed EU treaty that calls for tougher debt limits, limits that almost certainly will force more, unpopular austerity in the debt-rattled  nation. For his part, Kenny said he plans to sign the treaty as a show of support he believes, at least in part, is necessary for an ongoing economic recovery for the EU. It is worth noting the neighboring United Kingdom was one of only two members voting against the treaty, but it’s also not on the euro as its primary currency.

Brian Shappell, NACM staff writer