March 30 3:38 PM

Japan Banks May Sell Record Subordinated Bonds, Citigroup Says – (Bloomberg) — Japanese banks may sell a record 2.3 trillion yen ($24.8 billion) of subordinated bonds in the next fiscal year as they refinance debt to meet regulatory requirements, according to Citigroup Inc. Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. are among lenders that will need to sell bonds to replace older notes, whose value as Tier 2 capital declines when they have less than five years to maturity, Katsuhide Takahashi, a credit specialist at Citigroup Global Markets Japan Inc., said in a phone interview from Tokyo.“They would need to refinance them to keep their current capital ratios,” The Basel Committee on Banking Supervision requires lenders to keep capital equal to at least 8 percent of risk-weighted assets, split between Tier 1 capital including stock and Tier 2 capital including subordinated debt with at least five years to maturity.

Lehman Says Unsecured Claims May Fall to $260 Billion (Update3) – (Bloomberg) — Lehman Brothers Holdings Inc., which has been reviewing creditors’ demands for payment, said unsecured claims may fall to $260 billion as it rejects inappropriate claims, from more than $819 billion submitted, according to a regulatory filing today.If Lehman succeeds in trimming the 65,000 claims, there will be more money for the remaining creditors who survive the review. Chief executive officer Bryan Marsal has said he may recover $40 billion to $50 billion from Lehman assets in the next five years. "A review of claims both on a substantive basis and for purposes of plan classification is ongoing," Lehman said in the filing.

Councils free to sue Lehman Bros – The court’s ruling yesterday knocked over a deal that had been recommended by Lehman Brothers Australia, which is in liquidation, under which it would pay the councils between 2.4c and 10c of each dollar for failed investments, while other related Lehman Brothers companies could get all their money back.The High Court decision also means the councils can sue Lehman Brothers in the US to recover their investments. The councils say their funds should never have been used to invest in products, such as collateralised debt obligations sold by Lehman Brothers, as they were outside their investment guidelines. Some councils lost millions of dollars, while others are still holding their investments. About $1.2bn of the controversial Lehman Brothers products were sold to various Australian councils, charities and churches.

Fed’s Evans: Commercial Real-Estate Loans ‘A Key Problem’ – The head of the Chicago Federal Reserve said Tuesday that policymakers would have needed to crack down on U.S. commercial real-estate lending in 2004 or 2005 to head off the current rise in delinquencies, which some observers view as a threat to economic recovery. Charles Evans said the inability to recognize at that time the systemic risks built up through commercial property lending practices highlighted the difficulty regulators faced in identifying and neutralizing potential asset bubbles. "Commercial real-estate loans are a key problem area for the banks in my District,"  Evans used the mounting delinquencies in commercial real-estate loans and derivatives to justify his calls for a more expansive role for the central bank in policymaking in oversight, amid a spirited debate that includes calls for its role to be more narrowly defined.

 Geithner: Commercial real estate loans problematic  Mounting losses from commercial real estate loans will continue to be a problem for the U.S. and especially smaller banks, but it can be managed, Treasury Secretary Timothy Geithner said Monday. Commercial real estate’s still going to be a problem for the country," Geithner said in an interview with CNBC. "But we can manage through this process." Geithner also said the Treasury Department’s announcement that it will begin selling the stake it owns in Citigroup Inc., which could net about $7.5 billion to the government, shows "how far we’ve come" in exiting from the financial bailout program.

Argentina to Pay More Than 10% on Bonds, Marengo Says (Bloomberg) — Argentina’s accelerating inflation and deteriorating finances will undermine President Cristina Fernandez de Kirchner’s goal of selling global bonds with an interest rate below 10 percent, said Silvia Marengo, who helps manage $500 million of debt at Falcon Private Bank in Zurich. Fernandez is seeking funds to help cover a budget deficit that RBS Securities Inc. said will more than double to 1.4 percent of gross domestic product this year from 2009. Inflation will top 20 percent this year, the highest in the region after Venezuela, because of “extremely lax fiscal and monetary policies,” said Alberto Ramos, an economist at Goldman Sachs Group Inc.The government plans to tap global credit markets for the first time since its 2001 debt default after reaching a restructuring accord with holders of about $20 billion of bonds. Economy Minister Amado Boudou, who vowed last week to give defaulted debt holders a final offer by mid-April, said March 25 that the government will sell bonds at a “single digit” interest rate after an agreement is reached.

Corrections chief: Cuts might free 2500 inmates –  Florida’s corrections chief warned Monday that the Senate’s plan to cut prison guard jobs and privatize others could force the release more than 2,500 prisoners before their sentences are up. The main architect of the plan, Senate budget chief JD Alexander, fiercely disputed the charge. He said the plan will make sure prisons have enough funding. "We will not pass a budget that triggers early release," said Alexander, R-Lake Wales. "The amendment we passed went a long way toward making sure we had adequate resources for staffing prisons." The confusion and conflict revolve around Alexander’s proposal to shut down two prisons and privatize another to fill the Blackwater River Correctional Facility, a state-of-the-art private facility close to completion in Santa Rosa County

Fed’s Evans Says Jobless May Exceed 9% at Year-End – (Bloomberg) — Federal Reserve Bank of Chicago President Charles Evans said the U.S. jobless rate may remain higher than 9 percent at the end of this year, underscoring the potential need to keep interest rates low into 2011.  The unemployment rate may be “nine and a quarter” at the end of 2010, and higher than 7 percent at the end of 2011, Evans said in an interview with Bloomberg Television today in Hong Kong. A government report this week may show the rate was 9.7 percent in March, according to the median forecast in a Bloomberg News survey.

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