The mystery of the Indian economic recovery

Sen said that under the international best practices, according to the national accounting rules put forth by the International Monetary Fund (IMF) in 2008, countries should treat an increase in indirect tax collections arising from an increase in the underlying tax base differently from those that come from an increase in tax rates. The latter is considered akin to a rise in prices and, hence, has to be deflated. The increase in tax rates by the government over the past year meant the increase in tax collections was predominantly considered to be a price effect. And that pushed down the GDP growth number even though GVA accelerated. And that is why most economists are focusing on the GVA number rather than the GDP number. It shows that there is indeed an economic recovery underway.

The third problem is that the macro numbers do not fit well with the facts on the groundbank credit growth is weak, firms have reported yet another quarter of weak profit growth and investment activity is weak.

There is a big implicit question here: do these measures of economic activity begin to pick up ahead of a recovery, in tandem with a recovery or a few quarters after a recovery? In other words, are they leading, lagging or coincident indicators of economic activity?

Take just one of these variables for now: bank credit. The Reserve Bank of India points out that the weak credit growth numbers mask two developments. First, the decline in global oil prices has pulled down the financing that Indian oil marketing companies need. Second, many companies have moved into the private credit markets to raise money through bonds or commercial paper at interest rates that are lower than what the banks are charging right now. So, the credit growth numbers have to be treated with care.

But there is another important issue involved as well. Does bank credit growth lag the economic recovery? HSBC economists Pranjul Bhandari, Prithviraj Srinivas and Stuti Saksena point out in a recent report that credit-less recoveries are becoming more common across the world. They cite an IMF paper that shows how one in five of the 223 recoveries studied are in fact not accompanied by a rise in credit. More generally, one of the big policy lessons of the past decade is that the financial cycle may move at a different rhythm than the business cycle.

Very similar questions can be raised about the revival in the investment cycle and the growth in corporate profits: should we expect them to recover after the macroeconomic recovery? There is no clear answer.

These three issues can be thought about as smoking guns that have created a smokescreen which obfuscates the true state of the Indian economy. It is for the government to clarify these issues if it wants the private sector to believe that the Indian economy is indeed on the recovery path.

And the last word should best be left to Holmes: You can hellip; never foretell what any one man will do, but you can say with precision what an average number will be up to. Individuals vary, but percentages remain constant. So says the statistician.


Moody’s Downgrades Fairway’s CFR to Caa1

New York, September 28, 2015 — Moodys Investors Service today downgraded Fairway Group Acquisition Companys
(Fairway) Corporate Family Rating to Caa1 from B3. Moodys also
downgraded the rating for Fairways $268 million senior secured
term loan and $40 million senior secured revolving credit facility
to Caa1 from B2. Additionally, Moodys lowered Fairways
speculative grade liquidity rating to SGL- 4 from SGL-2.
The outlook is negative. The Probability of Default Rating was
affirmed at Caa1-PD.

Fairways operating performance and liquidity have deteriorated
to well below our expectations as competitive store openings and increased
promotional activity have resulted in lower profits and declining same
store sales, Moodys Senior Analyst Mickey Chadha stated.
At the current levels of profitability and free cash flow,
the companys current highly leveraged capital structure is unsustainable
and we anticipate that the company will need some form of covenant relief
in the next 12 months, Chadha further stated.


The Caa1 Corporate Family Rating reflects Fairways continued weak operating
results, small scale, weak liquidity, geographic concentration,
weak credit metrics, and Moodys expectation that cash flow
and profitability will continue to be strained as same store sales continue
to decline and competitive pricing pressures continue. Fairways
operations are highly concentrated geographically and the combination
of small scale and close proximity of its stores increase vulnerability
to competitive openings. For example the Whole Foods store opening
on the Upper East Side of Manhattan took market share from the companys
flagship Upper East Side location. The company has also had to
scale back on its aggressive expansion plans partially due to declining
profitability and free cash flow Moodys believes store growth will
be limited to one to two stores a year with new stores having a smaller
footprint with less SKUs. In the past new store openings
have also resulted in cannibalizing sales from older stores, negatively
impacting same store sales. Fairways capital structure remains
highly leveraged. Moodys estimates debt to EBITDA (with
Moodys standard adjustments) to be over 10.0 times. We
expect credit metrics to improve only modestly in the next 12 months as
new stores mature and increase their EBITDA contribution and management
initiatives start to bear fruit. However, this improvement
will be partially offset by margin pressure due to increased competition
and promotional activity. Ratings also reflect Fairways good market
presence, attractive market niche, name recognition and strong
brand equity.

The two notch downgrade in the companys senior secured debt rating
is due to Moodys use of a 50% recovery rate in its Loss
Given Default Model as opposed to a 65% recovery rate previously
used given its all bank debt capital structure. The lower recovery
rate is based on the lower estimated valuation of the company as its top
line and profitability growth has slowed considerably and is much lower
than previously expected. Despite Moodys expectation of
modest improvement in the next 12 months, EBITDA will still be significantly
lower than Moodys original expectations.

The following ratings are downgraded:

Corporate Family Rating at Caa1 from B3

$40 million senior secured revolving credit facility maturing 2017
at Caa1 (LGD3) from B2 (LGD2)

$268 million senior secured term loan maturing 2018 at Caa1 (LGD3)
from B2 (LGD2)

The following ratings are lowered:

Speculative Grade Liquidity rating at SGL-4 from SGL-2

The following ratings are affirmed:

Probability of default rating at Caa1-PD

The negative rating outlook reflects Moodys expectation that the
companys profitability and top-line will continue to be
pressured and that absent any improvement in operating performance the
company will most likely need to issue equity or get some type of relief
from its lenders to avoid covenant violations in the next 12 months.

Ratings could be upgraded if the companys liquidity profile improves
such that it is adequate, financial policies remain benign and same
store sales growth is positive. Quantitatively ratings could be
upgraded if the company demonstrates the ability to achieve and maintain
debt/EBITDA below 7.0 times and maintain EBIT/interest above 1.0

Ratings could be downgraded if liquidity deteriorates, financial
policies become aggressive or the company is unable to improve its operating
performance and avoid covenant violations. Ratings could also be
downgraded if debt/EBITDA and EBIT/interest does not demonstrate a sustained
improvement from current level.

Fairway is a publicly traded grocery store operator with 15 grocery stores
and 4 wine stores in New York, New Jersey and Connecticut.
Sterling Investment Partners owns about 48% of the company.
Revenues totaled $793 million for the LTM period ending June 28,

The principal methodology used in these ratings was the Global Retail
Industry published in June 2011. Please see the Credit Policy page
on for a copy of this methodology.


For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moodys
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support providers credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on

For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating

Please see for any updates on changes to
the lead rating analyst and to the Moodys legal entity that has issued
the rating.

Please see the ratings tab on the issuer/entity page on
for additional regulatory disclosures for each credit rating.

Manoj Chadha
Vice President – Senior Analyst
Corporate Finance Group
Moodys Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Janice Hofferber, CFA
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moodys Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moodys Downgrades Fairways CFR to Caa1


Fitch Rates York CLO-2 Ltd./LLC

NEW YORK–(BUSINESS WIRE)–Fitch Ratings has assigned the following rating to York CLO-2 Ltd./LLC:

— $320,000,000 class A notes AAAsf; Outlook Stable.

Fitch does not rate the class B, C, D, E or subordinated notes.


York CLO-2 Ltd. (issuer) and York CLO-2 LLC (co-issuer), together, York
2, comprise an arbitrage cash flow collateralized loan obligation (CLO)
that will be managed by York CLO Managed Holdings, LLC (York). Net
proceeds will be used to purchase assets to reach a target portfolio of
approximately $500 million of leveraged loans. The CLO will have an
approximately four-year reinvestment period and two-year non-call period.


Sufficient Credit Enhancement: Credit enhancement (CE) of 36% for class
A notes, in addition to excess spread, is sufficient to protect against
portfolio default and recovery rate projections in the AAAsf stress
scenario. The level of CE for class A notes is below the average for
recent CLO issuances; however, cash flow modeling indicates performance
in line with other AAAsf Fitch-rated CLO notes.

B+/B Asset Quality: The average credit quality of the indicative
portfolio is B+/B, which is slightly better relative to recent CLOs.
Issuers rated in the B rating category denote relatively weak credit
quality; however, in Fitchs opinion, class A notes are unlikely to be
affected by the foreseeable level of defaults. Class A notes are robust
against default rates of up to 60.2%.

Strong Recovery Expectations: The indicative portfolio consists of 95.7%
senior secured loans. Approximately 88.2% of the indicative portfolio
has strong recovery prospects or a Fitch-assigned Recovery Rating of
RR2 or higher, and the base case recovery assumption is 76.1%. In
determining the ratings for the class A notes, Fitch stressed the
indicative portfolio by assuming a higher portfolio concentration of
assets with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses, resulting in a 38.5% recovery
rate assumption in Fitchs AAAsf scenario.


Fitch evaluated the structures sensitivity to the potential variability
of key model assumptions, including decreases in recovery rates and
increases in default rates or correlation. Fitch expects the class A
notes to remain investment grade even under the most extreme sensitivity
scenarios. Results under these sensitivity scenarios ranged between
Asf and AAAsf for the class A notes.

Key Rating Drivers and Rating Sensitivities are further described in the
accompanying new issue report, which will be available shortly to
investors on Fitchs website at


No third-party due diligence was provided or reviewed in relation to
this rating action.

The publication of a RWamp;Es appendix is not required for this transaction.

Additional information is available at

Sources of Information:

Sources of information used to assess these ratings were provided by the
arranger, Credit Suisse Securities (USA) LLC, and the public domain.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14
May 2014)

Criteria for Interest Rate Stresses in Structured Finance Transactions
and Covered Bonds (pub. 19 Dec 2014)

Global Rating Criteria for CLOs and Corporate CDOs (pub. 30 Jul 2015)

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

Solicitation Status

Endorsement Policy;detail=31



Avondale life insurance-linked notes affirmed positive by Moody’s

Moodys has affirmed the life insurance-linked notes issued by Avondale Securities SA., which were issued to transfer a block of life insurance risk to the capital markets through securitisation for the Bank of Ireland.

Following on from an upgrade to the Avondale Securities life ILS notes by Standard amp; Poors, Moodys Investors Service has now affirmed the EUR380m Baa1(sf) Class A-1 notes (senior tranche) of Avondale Securities SAs (Avondale) and changed the outlook to positive. Moodys has also affirmed the EUR20m Baa3(sf) Class A-2 notes (junior tranche) of Avondale with a stable outlook.

The EUR400m Avondale life insurance-linked securities transaction had been beleaguered due to the sovereign rating performance of Ireland, putting the notes on and off a negative watch at a number of credit rating agencies over the last few years, due to the sovereign crisis in Europe and its impact on Ireland and its banks.

The Avondale ILS deal allowed the Bank of Ireland to capitalise on the expected value-in-force of a block of life insurance policies, by securitising the risk and selling the notes to investors. However, that meant the tranches of notes were weak-linked to the Bank of Irelands ratings, resulting in a number of actions over the years.

Under a support agreement in the Avondale Securities life ILS deal, the Bank of Ireland is obliged to meet payments due on the notes net of potential tax liabilities and costs from servicing the policies, under certain conditions. It was the Bank of Ireland’s weak credit rating outlook that resulted in a number of downgrades for the Avondale ILS notes.

Now, Moodys has changed the outlook to positive on the Irish sovereign rating and reflects the linkage between the factors that drive the sovereign credit profile economic strength, institutional strength, government financial strength and susceptibility to event risk with that of life insurers such as Bank of Ireland Life and consequently the notes credit profile.

Moodys further explains the situation; Weak investment returns and higher surrender rates (negative persistency) are the main risks affecting the surplus of the securitized book, and therefore the improvement in both factors will lower the risk of losses for the noteholders. The collateralisation of the notes in aggregate improved to 510% at year-end 2014, up from 406% at year-end 2013, and compares well with the 293% at inception in 2007, driven by continued positive economic growth prospects of the Irish economy and largely favourable equity markets.

Originally issued in 2007 by Avondale Securities, a special purpose vehicle set up in Luxembourg by the Bank Of Ireland, the EUR400m of life ILS notes have been under almost constant assessment by rating agencies.

As well as the counterparty credit fears, linked to the sponsor the Bank of Ireland, rating agencies had also expressed a fear that the value in force (VIF) of the book of securities associated with this transaction could have seen a shortfall.

With the economic outlook for Ireland much improved and the collateralisation of the notes looking increasingly positive, previous fears about the value of the assets underlying this securitisation are reducing, hence the positive outlook and affirmation from Moodys.

Also read:

Avondale Securities life insurance-linked notes upgraded by Samp;P.


Richmond: State calls off review of city finances

RICHMOND — After announcing last month that it would conduct a thorough review of the citys finances, the state has now called off its investigation.

The reversal is seen locally as a major victory for a city that has increasingly been under scrutiny over the handling of its finances in recent years.

The state Controllers Office had sent Richmond a letter Aug. 25 that described financial reports provided by the city as false, incomplete or incorrect and called Richmonds ability to provide accurate and reliable information regarding its finances questionable.

Among concerns raised by the state was a finding that at one point during fiscal 2013-14, Richmond had only enough cash to cover the basic costs of running the city for less than 10 days and had expenditures that exceeded revenues by $9.5 million.

The letter set off consternation among Richmond officials, who said inconsistencies in finances were due to unreconciled reports, not evidence of financial mismanagement. On Thursday, the Controllers Office said it was calling off the investigation into discrepancies over financial transaction reports after the city submitted additional information in late September, about a month after it was first alerted about the review.

In a letter to the city, the head of the Controllers Auditors Division said the city did not mention that it had, or was working on, a reconciling document and failed to provide any information for more than three weeks. Without adequate information, auditors could not properly reconcile Richmonds financial reports.


Dubuque woman charged with 4 counts of unlawful use of credit cards

Posted by admin on 10/03/2015 in Cash Advances | Short Link
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A Dubuque woman was arrested Monday on a felony warrant charging four counts of unlawful use of credit cards to make cash advances totaling $9,500.

Rhonda R. Renard, 51, of 825 W. Locust St., still was being held in Dubuque County Jail on Monday afternoon on the felony charges.


Freshers’ alphabet: AM

Posted by admin on 10/03/2015 in Smart Budgeting | Short Link
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You are about to begin one of the greatest journeys of your life. Heed our advice and dont waste the next three years and youll be onto a winner!


If you want to stand a chance of surviving on your own then budgeting is key. And NO, using your food money for booze is not smart budgeting.


If youre catered then this may be a blessing, but its super easy to get hold of a cookbook for cheap and easy eats. Make a shopping list and youre off!


S&P 500 Firms Boost Cash To Highest Level In Decade

Posted by admin on 10/02/2015 in Cash | Short Link
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It looks like the ongoing global economic uncertainty is starting to hit home, as major American firms are starting to pile up cash instead of investing it. A September 24th report from FactSet Insight highlights that the Samp;P 500 (ex-Financials) cash and short-term investments in the second quarter totaled $1.43 trillion, the second highest level in a decade.

As FactSet research analyst Andrew Birstingl notes:This amount reflected 5.5% growth on a year-over-year basis and 3.9% growth quarter-over-quarter. Seven out of nine sectors posted positive year-over-year growth, with the Consumer Discretionary (-0.8%) and Industrials (-0.9%) sectors being the only decliners.

Breakdown of Samp;P 500 2Q 2015 cash balances

FactSet data shows that the IT sector had the largest cash balance ($546.3 billion) in the Samp;P 500 at the end of the second quarter. Five of the top 10 companies in terms of  quarterly cash balance were in this sector: Microsoft Corporation(NASDAQ:MSFT) at $96.5 billion, Google Inc(NASDAQ:GOOG) at $69.8 billion, Cisco Systems, Inc.(NASDAQ:CSCO) Systems at $60.4 billion, Oracle at $54.4 billion and Apple Inc.(NASDAQ:AAPL) at $34.7 billion. The Telecom and Utilities sectors were the leaders in year-over-year growth in 2Q. The Telecom sector, which has historically kept the smallest average cash balance, ended the second quarter with $28.2 billion in cash, a 28.4% increase year over year. The Utilities sector had the smallest cash balance at the end of the quarter with $27.2 billion in cash, a move up of 15.3% year-over-year.


Cash rises above stocks and bonds

Posted by admin on 10/02/2015 in Cash | Short Link
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  • A flat return for cash this year is turning out to be the best bet out there these days, which should send a message to both the Fed and the markets. Watching the liquidity story
  • Despite Fed claims that there isnt enough inflation to justify a rate hike, retirees are feeling higher prices at virtually every turn. Sticker shock from ground beef and eggs
  • Around the bend theres a likely government shutdown that nobody outside of Washington seems to care about. Leaving the political class to bicker amongst themselves
  • Donald Trumps trademark hairdo has become the most sought-after costume this Halloween season. A rare non-comment from Trump


Shift in MFI industry will create space for growth

Posted by admin on 10/02/2015 in Unsecured Lending | Short Link
Comments Off on Shift in MFI industry will create space for growth

As nine microfinance companies, including the eight allotted small finance bank permits and Bandhan that has transitioned to a universal lender, move into banking format, over half of the MFI industry is going through a major change. This shift is being considered as a big opportunity for existing microfinance companies to take their business to the next level in a way similar to the post-Andhra MFI crisis, officials say.

The MFIs that are becoming banks form 56 per cent, 52.8 per cent and 53.4 per cent of gross loan portfolio, incremental disbursement of FY15 and client market share, respectively, as per brokerage firm Emkay Global Financial Services.

While fears float related to competitive advantage of existing NBFC-MFIs getting compromised and the cost of funds benefits that its MFI-to-banks peers can enjoy, this shift in the MFI industry is being perceived by industry insiders as a move that will create space for growth.

M Narayanan, CEO of over a decade-old Madura Microfinance, feels that the cost of operations is not going to come down for small finance banks in a big way. Since microfinance companies have a feet-on-street model where loans are small, existing MFIs will not face any major disadvantage.

“Existing universal lenders are also in this business (microfinance). The direct lending by these entities are at around similar rates to MFIs. Just because they are banks, they are not lending at a lower rate either directly or through BC (business correspondent) model. Once you become a bank, the operational expenditure is not going to come down due to the small ticket size of loans.”

“If MFIs that turn into small finance banks reduce their focus on microfinance, that will become an opportunity for other players in the market like us. While it may not happen immediately, it is a possibility for which we all should gear up,” said Narayanan, who has previously worked at Bank of Madura, GMR Group and ING Vysya Bank, among others.

Ratna Vishwanathan, chief executive officer, MFIN expects existing microfinance companies getting a leg-up from their peers becoming banks. “Banks are a little more guarded about unsecured lending. MFIs are primarily into unsecured lending. MFIs borrow money from banks at commercial rates. The MFIs who will become banks will have to completely re-look at the way they do their risk assessment and business,” said Vishwanathan, also a former bureaucrat.

Deposit taking is not their forte (MFIs becoming banks) as well. “All this will take time. In the meantime, 10-15 MFIs are coming into the market every year. The RBI has also doubled the lending limit for borrowers in micro finance institutions (MFI) to Rs 1 lakh,” said the top official of MFIN, which is the first self-regulatory organisation in the financial services sector recognized by the RBI.

Vineet Rai, chairman and co-founder, Intellecap sees a repeat of 2010 to the existing MFIs. “At that time, the top five institutions went out of the market due to the Andhra MFI crisis. The next five became the top five. Even some which were not among the top list, worked hard to emerge as big MFIs of today. This could happen today.”

So what happens when big MFIs of today become banks? “All the foreign equity investors looking to invest in microfinance will have no choice but to look at the next rung. So, a large amount of foreign capital will flow into these residual entities. This will help them grow and replace the big ones which are going out of the market,” said Vineet, whose company acquired MFI Arohan in September 2012.

“As these MFI institutions become banks, there will be some distraction to bring along structures etc to comply to RBI regulations. The remaining MFIs now have a huge opportunity to scale up and become big,” he added.


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