IMF approves $36.8 billion loan for Portugal

WASHINGTON (Reuters) – The International Monetary Fund on Friday approved a 26 billion euro ($36.8 billion) loan for Portugal to help the country recover from a debilitating sovereign debt crisis, saying it would immediately disburse 6.1 billion euros to ease investor concerns over the euro zone member's debts.

The IMF said in a statement that total financing to Portugal in 2011 will include about 12.6 billion euros from the IMF and another 25.2 billion euros from the European Union. The funding is part of a joint IMF/EU 78 billion euro ($110 billion) bailout package.

"The financing package is designed to allow Portugal some breathing space from borrowing in the markets while it demonstrates implementation of the policy steps needed to get the economy back on track," the IMF said in a statement.

The financial package was calibrated to allow Portugal to stay out of the market for medium- to long-term bonds for slightly more than two years, IMF Mission Chief Poul Thomsen said.

Under the agreement, Lisbon will have to carry out steep spending cuts, raise taxes, reform its labor and justice systems, and embark on an ambitious privatization scheme.

"The Portuguese authorities have put forward a program that is economically well-balanced and has growth and job creation at its center," said IMF Acting Managing Director John Lipsky.

"It addresses the fundamental problem in Portugal -- low growth -- with a policy mix based on restoring competitiveness through structural reforms, ensuring a balanced fiscal consolidation path, and stabilizing the financial sector," he added.

The deal follows a 110-billion-euro package for Greece last May and an 85-billion-euro program for Ireland in November.

Portugal's arrangement is the first time a country has asked private investors not to sell down their holdings of bonds on a voluntary basis.

The leader of Portugal's opposition Social Democrats, Pedro Passos Coelho, warned on Thursday the country has no room for failure in meeting the austerity measures of the program.

The conditions included in the bailout are expected to contribute to a contraction in the Portuguese economy of 2 percent both this year and next.

"This is not going to be an easy program. There is going to be a difficult period of adjustment," Thomsen said.

The program addresses a lack of competitiveness among businesses in Portugal, he said. It sets a goal of achieving a deficit that is 3 percent of GDP by 2013.

"Even during the good years, before the crisis, Portugal was hardly growing," Thomsen noted.

Portugal's economy is expected to begin expanding again in two years, he said, adding that many of the initiatives are weighted heavily to the early phases of the reforms.

Poulsen said he believes political consensus behind reforms bodes well for the success of measures to reshape the Portuguese economy.

"It's quite striking how most of the key issues, not least on the structural reform side, have broad political support, which to me is one of the encouraging things," he said.

(Additional reporting by Lesley Wroughton; Editing by Diane Craft, Gary Crosse)

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IMF approves 26 billion euro loan for Portugal

WASHINGTON (Reuters) – The International Monetary Fund on Friday approved a 26 billion euro ($37 billion) loan for Portugal to help the country recover from a debilitating sovereign debt crisis, saying it would immediately disburse 6.1 billion euros to ease investor concerns over the euro zone member's debts.

The IMF said in a statement that total financing to Portugal in 2011 will include about 12.6 billion euros from the IMF and another 25.2 billion euros from the European Union. The funding is part of a joint IMF/EU 78 billion euro ($110 billion) bailout package.

"The financing package is designed to allow Portugal some breathing space from borrowing in the markets while it demonstrates implementation of the policy steps needed to get the economy back on track," the IMF said in a statement.

The financial package was calibrated to allow Portugal to stay out of the market for medium- to long-term bonds for slightly more than two years, IMF Mission Chief Poul Thomsen said.

Under the agreement, Lisbon will have to carry out steep spending cuts, raise taxes, reform its labor and justice systems, and embark on an ambitious privatization scheme.

"The Portuguese authorities have put forward a program that is economically well-balanced and has growth and job creation at its center," said IMF Acting Managing Director John Lipsky.

"It addresses the fundamental problem in Portugal -- low growth -- with a policy mix based on restoring competitiveness through structural reforms, ensuring a balanced fiscal consolidation path, and stabilizing the financial sector," he added.

The deal follows a 110-billion-euro package for Greece last May and an 85-billion-euro program for Ireland in November.

Portugal's arrangement is the first time a country has asked private investors not to sell down their holdings of bonds on a voluntary basis.

The leader of Portugal's opposition Social Democrats, Pedro Passos Coelho, warned on Thursday the country has no room for failure in meeting the austerity measures of the program.

The conditions included in the bailout are expected to contribute to a contraction in the Portuguese economy of 2 percent both this year and next.

"This is not going to be an easy program. There is going to be a difficult period of adjustment," Thomsen said.

The program addresses a lack of competitiveness among businesses in Portugal, he said. It sets a goal of achieving a deficit that is 3 percent of GDP by 2013.

"Even during the good years, before the crisis, Portugal was hardly growing," Thomsen noted.

Portugal's economy is expected to begin expanding again in two years, he said, adding that many of the initiatives are weighted heavily to the early phases of the reforms.

Poulsen said he believes political consensus behind reforms bodes well for the success of measures to reshape the Portuguese economy.

"It's quite striking how most of the key issues, not least on the structural reform side, have broad political support, which to me is one of the encouraging things," he said.

(Additional reporting by Lesley Wroughton; Editing by Diane Craft, Gary Crosse)

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Russia dangles $3 billion loan to Belarus

Yuras Karmanau, Associated Press, On Thursday May 19, 2011, 3:35 pm EDT

MINSK, Belarus (AP) -- Russia's finance minister is dangling a $3 billion loan in front of Belarus, saying Thursday that the cash hinges on the crisis-hit neighbor selling off certain national assets.

Belarus is facing a severe downturn, with hard currency reserves plunging 20 percent in the first five months of the year to less than $4 billion, and staple foodstuffs vanishing from stores. Trading restrictions were lifted on Belarusian ruble last month, leading to a 300 percent devaluation against the U.S. dollar.

At a meeting of government of former Soviet nations in the Belarusian capital on Thursday, Russian Finance Minister Alexei Kudrin said his country will decide early next month whether to approve the loan of $3 billion over three years.

"We have a condition," Kudrin said. "In the next three years a certain privatization should be carried out."

Russia is thought to be seeking to capitalize on Belarus' vulnerability by acquiring major stakes in energy assets such as Beltransgas, the state-owned gas pipeline network that supplies domestic homes and forwards the gas to Europe.

Kudrin said talks on Beltransgaz were imminent, and shot a veiled warning that Belarus is in no position to turn Russia down. Kudrin said if Belarus isn't able to raise up to $9 billion via selloffs, it would be forced to turn to the International Monetary Fund, which has loan conditions that Belarus is ill-equipped to meet.

Independent analysts say to save its economy, Belarus is in urgent need of at least $8 billion.

"The authorities need to admit that the politics of recent years were flawed," said Stanislav Bogdanovich, former head of the country's central bank.

Last month, the authorities gave permission to banks to buy and sell the ruble at a rate determined in open trading.

Banks initially responded by raising the U.S. dollar exchange rate for retail transactions by 30 percent, from some 3,000 Belarusian rubles to 4,000 rubles against the dollar. It has since risen to 8,000 rubles to the dollar, giving rise to miles-long lines at currency exchange booths as desperate locals try to squeeze the rapidly diminishing value out of their rubles.

Belarus uses different exchange rates, depending on whether it is banks, private individuals or state companies that are buying the foreign currency. At times the difference between those rates can be up to 30 percent.

For most of his 17 years in power, President Alexander Lukashenko has relied on Russia -- Belarus' main sponsor and ally -- to maintain a quasi-Soviet economy complete with a social safety net that helped maintain his popularity.

But the Russian subsidies have dwindled recently as Moscow pushes for control over Belarus' most prized economic assets, such as oil refineries and chemical plants, in exchange for more loans.

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Deals of the Day: Is Facebook Worth $50 Billion? Survey Says No

Deals of the Day gathers all the biggest news of the morning related to mergers and acquisitions, bankruptcies, financing and private equity. Deal Journal’s homepage is http://blogs.wsj.com/deals. You can see real-time updates of our posts and our favorite deal-related articles on other Web sites through our Twitter feed at http://twitter.com/wsjdealjournal.

BankUnited: As the nation’s banks try to recover from about $493 billion in loan losses, BankUnited is emerging as a case study of how government largess in the wake of the crisis has allowed certain institutions to thrive. [WSJ]

LinkedIn: LinkedIn filed for an initial public offering, pulling back the curtain on social networking as a business and becoming the first in what’s likely to be a string of high-profile IPOs from Internet companies in the coming months. [WSJ]

Survey says…overvalued: Facebook isn?t worth $50 billion, according to a Bloombberg poll of global investors that shows skepticism about Goldman Sachs? recent estimate of the largest social-networking site?s value and concern that a bubble may be forming in the technology sector. [Bloomberg]

Ally: The U.S. Treasury selected Perella Weinberg Partners to advise it on management and the eventual sale of its stake in Ally Financial. [WSJ]

Sara Lee: The company is pushing ahead with plans to separate its two main businesses, after offers from interested buyers came in below the company’s price expectations, people familiar with the matter said. [WSJ]

Verizon-Terremark: Verizon Communications Inc. will pay $1.4 billion to acquire Terremark Worldwide Inc., an operator of data centers, in a move aimed at selling more computing services to business customers. [WSJ]

EMI: Citigroup, which is expected to seize control of EMI Group from beleaguered financier Guy Hands in coming months, has already made contact with parties that could quickly snap up the historic music company?and Mr. Hands himself is even among them. [WSJ]

Merger of Equals? U.S. warehouse and distribution center owner ProLogis is substantially larger than rival AMB Property Corp both in terms of square footage and market value. [Reuters]

BofA: Bank of America intends to give some investment bankers a greater share of their bonuses in cash, the latest Wall Street compensation move irking banking chieftains as they meet in Davos, Switzerland. [WSJ]

AIG: An American International Group business has regained a coveted spot on the sales list of brokerage Edward Jones for a popular retirement product, following a nearly two-year sales suspension. [WSJ]

Hedge fund regulation: Deutsche Bank CEO Josef Ackermann said unregulated financial companies such as hedge funds may pose a systemic risk to the economy if oversight isn?t increased. [Bloomberg]

Buyout Boom: Credit-default swaps on Clear Channel Communications Inc., Univision Communications Inc., Freescale Semiconductor Inc. and former Harrah?s Entertainment Inc., which in February 2009 priced in an average 99.8 percent chance of default, now imply 46.6 percent odds of a collapse. [Bloomberg]

J. Michael Evans: Goldman Sachs plans to promote J. Michael Evans to head the firm’s emerging-markets business world-wide. The move raised speculation that the 1984 Olympic gold medalist could be one of the candidates to run Goldman someday. [WSJ]

FCIC Report: Twelve of the 13 largest U.S. financial institutions “were at risk of failure” at the depth of the 2008 financial crisis, while at least 50 hedge funds tried to capitalize on it, according to a report released Thursday. [WSJ]

Pensions: The global economic crisis has forced policy makers to confront the growing burden that public pension systems are placing on government budgets. [WSJ]

Citi:The giant bank?s bond-trading desk was warned in 2005 that it was taking too much risk, three years before mortgage losses in the unit led to a near collapse of the bank and a $45 billion U.S. bailout. [Bloomberg]

The question of whether a comeback by someone booted out of the securities industry or barred from being an officer or director of a public company crosses the line is renewed by Jason Galanis’s job at a Gerova unit. [WSJ]

Huawei: A U.S. government committee has begun to formally review a small acquisition that Huawei Technologies Co. initially failed to disclose and could render a decision in mid-February, people familiar with the matter said. [WSJ]

Basel III: The new Basel III rules requiring banks to hold more capital are too weak and should be doubled to provide optimal protection against future economic shocks, researchers at the Bank of England have concluded. [FT.com]

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