Archive for Europe

Investors take up hedge risk in high speed Spain-France project. // What could go wrong?

To the chagrin of a creditor group that includes Avenue Capital Group, BlueMountain Capital Management and Neuberger Berman, the rescue of a troubled very high speed passenger railroad whose loans they bet on has failed to materialize.

The group bet on a funding to save a premier advertised Spain to France high speed rail line. TP Ferro was a 2003 joint venture between Spain’s Actividades de Construccion & Servicios SA and Eiffage SA of France. They won a prestige 50-year concession for a 44-kilometer rail line to link Figueres, in Spain, and Perpignan, on the French Mediterranean coast. The goal was to fund that small link to connect Barcelona and Madrid to the rest of Europe’s high-speed train network. What could go wrong?

Quite a bit actually.

Delays and geo-polotical issues with the rail project has left them holding losses in TP Ferro Concesionaria SA. And according to Bloomberg reporters the investors have little recourse promise from the the Governments in Spain and France. Neither government wants to lend a hand to international investors, banks and construction companies.

Avenue, BlueMountain and Neuberger Berman bought some of TP Ferro’s 445 million euros ($492 million) of loans at about 70 cents on the euro last year. Now that is valued at about 50 cents, according to two people familiar with the matter. The rail company filed for insolvency proceedings on July 17 after the governments turned down its bailout requests and an international tribunal rejected its bid for compensation.

WHAT NOW?

If TP Ferro’s debtholders, which also include lenders Banco Bilbao Vizcaya Argentaria SA, ING Groep NV and Bankia SA, fail to reach an agreement with the owners and governments to restructure the debt in court, the working theory is that the company will be liquidated and its concession to operate the railway will end. That would leave TP Ferro with no assets.
Bloomberg notes that about 92 percent of companies that enter insolvency proceedings in Spain are liquidated, according to rating company Axesor’s most recent data.

For a more detailed report log onto Bloomberg and read the entire report “Hedge Funds Near End of the Line for Bailouts on Railway Bet”, by Luca Casiraghi and Katie Linsell.

http://www.bloomberg.com/news/articles/2015-07-28/hedge-funds-near-end-of-the-line-for-bailouts-with-railroad-bet

Bloomberg commentary says: “Greece Should Just Quit”

From Bloomberg, Jul 13, 2015, 5:05:00 PM

” Does Greece belong in the euro area?”

This fundamental question has divided Europe’s governments for months, and still does. The deal just announced only pretends to resolve their disagreement. That’s why it won’t work asserts Bloomberg editors.

To read the entire commentary log onto the Bloomberg site.

I happen to agree with the editors. The entire Greece invitation to originally join the Union and the subsidization of that entrance so far by the Euro organizations is now what we economists call a very large “sunk cost”.

Does Europe really want to throw more money at Greece with a poor expectation of a return?

Why not simply write the debt down to a reasonable level that might some day be paid back by future Greeks? Give then some foreign aid to kick start their own Greek currency and wish them well!

Then — Instead of paying Brussels massive interest payments “forever”, Greece’s leaders can take the lowered debut structure and use the avoided interest payments to begin rebuilding the Greek economy. What a novel idea.

Sort of like America helping Europe rebuild after WW-2 rather than trying to milk the defeated and her war time allies for war reparations. —–

Here is selected text from the Bloomberg published commentary. The terms forced on Prime Minister Alexis Tsipras last weekend have little chance of being accepted, carried out and sustained by this Greek government or its successors. Greece’s parliament may accept them this week because it thinks the alternative is worse — and in the short term, that may be true. In the long term, a deal imposed under extreme duress, and bitterly resented by most Greeks, won’t happen.

Greece is being forced into a deal it will resent for years, and to which it will feel no sense of obligation. Under these circumstances, leaving is the best available choice.

The current approach reached on Sunday makes it theoretically possible for Greece to remain in the euro system, but practically extremely difficult. The terms are so severe that they might well be beyond Tsipras’s power to deliver. Whatever happens in the next few weeks, Greece may still end up leaving the euro system. Exit now will be painful, to be sure. The risks to the rest of Europe aren’t small. But following an exit, Greece will at least be in command of its own future, with nobody else to blame for its setbacks.

The sooner that happens, the better say Bloomberg’s editors.

Tough assertion. Bravo!

To contact the senior editor responsible for Bloomberg View’s editorials: write David Shipley at davidshipley@bloomberg.net.

Can China finance Eurasia Railway One Belt & One Road Strategic Plan?

The mid year 2015 Chinese stock market fundamentals and the overall Chinese structural debt may put a crimp in this debt financing of proposed rail/road foreign projects.

This cited Journal of Commerce report remains extremely optimistic about China’s willingness to write the necessary big foreign investment checks.

Time will tell. Time is always the acid test of any strategy.

Even if financed, these Chinese sponsored rail projects may not see the first trains until well after my death.

But the maps look “cool”.

See the map and JOC story at http://www.joc.com/international-trade-news/investment-floods-china%E2%80%99s-one-belt-one-road-strategy_20150703.html?mgs1=b66dkpfYOY

IS ANYONE PAYING ATTENTION as Chinese Stocks drop these past 3 weeks?

July 2, 2015

Everyone seems fixated about Greece’s future in the euro zone.

Pat the same time, overlooking the economic consequences of a stock market slump on the other side of the world.  CHINESE equities have dropped more than 20% — yet it is causing barely a ripple in global markets!

To read the entire article, go to http://bloom.bg/1em9W1S

China has seen a a 3-week plunge in Chinese equities. Some calculate a massive $2.4 Trillion loss in China market value.  That is calculated as the equivalent of about 10 times Greece’s gross domestic product last year.

How much longer must Chinese stocks continue dropping at this steep pace before the economic shock fears shift away from Greece?

Which economic indicator means more to emerging nation resources and transport infrastructure plans?  Hands down, it would probably be the China drop.

Will Chinese equities recover? Will China’s government step in with a recovery program?

If a bubble burst, how will the global economies react to a China crisis versus all of the attention on Greece?

What is your opinion? Jim

Suez Canal — Quick plan execution will double its capacity in about one third of the expected project timeline

Leadership and focus can make a difference.  This is a good technical news story out of Egypt.  The project was originally expected to take 3 years and be ready by 2017.  Instead, it will be essentially completed in just one years time and dedicated in August this year.

The New Suez Canal (actually an expansion project) is more than 80% complete according to multiple sources. The project is intended to increase the capacity of the channel from the current 49 ships a day to 97 ships a day.  The market target of almost 100 daily ships (half in each direction) will be likely reached by year 2023

The result will be a POSSIBLE 1 DAY SHORTER journey on a 21 to 24 day containership passage between Asia & Northern Europe

Waiting time for entering the canal will be reduced to 3 hours from the current 8 to 11 hours. The actual canal transit times could drop from 18 hours to 11 hours.

COMMERCIAL REVENUE IMPACT

The investment could increase canal revenue from the $5.3-billion generated from the payment of tolls by 16,744 vessels in the 2013/14 financial year to $13.2-billion by year 2023.

The Suez Canal route competes with railways trying to offer price competitive and time competitive blends of container transport between Asia and Europe.  The water route via Suez has ~ a 99% share. Now the Suez sailing times will improve.  The maritime route has a huge price advantage in terms of the price per container moved. versus the railway prices.Suex Canal Asia - Europe route map

http://www.engineeringnews.co.za/article/egypt-eyes-opening-of-new-suez-canal-on-aug-6-2015-06-15 Sent from my iPad

Truck Killer photo – 3 Decades of intermodal rail technology produces market share gain

TRUCK KILLER competitive rail technology captured in a simple one page photo.

With 30 years of market deployment success, the engineering and operational merger by rail executives has given North America a competitive edge against trucks.

The technology  could also give Europe rail freight a WOW success factor. Also in Africa and in Asia.

But who will be the leader to champion this technology?

Who will take the first deployment steps with required corridor investment in clearances and commercial deployment?

In 1983 it was APL ocean carrier and Union Pacific railroad.  Not a government lead project.

It was a private commercial venture.

TRUCK KILLER RAIL TECHNOLOGY conintues to elude Eruope-Asia planners - Jim Blaze

Poor intermodal rail freight German 1st Qtr results suggests strategic issue

A news report tonight in the IRJ from German sources suggests a broader strategic question. What role does proven rail engineering technology offer a better growth future for Europe’s rail freight sector?

Let’s start with what was reported tonight. GERMANY’s railfreight industry has suffered a disappointing start to 2015 says the headlines. Germany’s federal statistics agency Destatis on June 3rd reported the largest decline in first quarter traffic since the height of the financial crisis back in 2009.

Overall rail freight traffic dropped 4.2% compared with the first quarter of 2014 to 88.1 million tonnes’

In the first quarter 2015′ —

International traffic fell 4.9%, —

German domestic traffic declined 2.1%. —

German rail freight intermodal traffic at 1.4 million TEU units was down a significant 12.8%

The posted rail results gives us the chance to ask about the real prospects for rail freight in Germany and Europe. Here is a short discussion

LENGTH TOO SHORT; HEIGHT TOO SHORT; WEIGHT TOO LIGHT

The German rail unit does not have doublestack container capability like the North American railways offer. With better stack train engineering and routes the North American rail companies have seen intermodal growth rates at a pace generally twice the national GDP rate of change — pretty consistently since 2009.

Read more

German rail freight costs “to rise 20% by 2020” | International Railway Journal

For more technical observations on the missed European rail freight market opportunities, see my Facebook posting.

The headline report says that REGULATORY pressures on Europe’s largest rail freight market could drive up operating costs by as much as 20 percent over the next five years, according to a study by the Association of German Transport Companies (VDV).

Read more

Marathon tests operation economics for longer freight trains in Europe

In Europe, the business model and technical allowed train sizes for freight are very different then found in the North American business model. Freight trains in Europe are often less than one quarter the unit train length seen as engineering standards in Mexico, Canada, and the US.

Only in a few places like Sweden and Northern Norway are longer freight bulk cargo unit trains operating as a normal business practice.

The released report on the Marathon project provides an interesting case study of experimental improvements elsewhere in Europe. The news report was authored by Keith Barrow for International Read more