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Home > Blogs > QFINANCE Editor > A week in the world of business and finance (July 25 - 29, 2011)

A week in the world of business and finance (July 25 - 29, 2011)

Each week QFINANCE will endeavor to bring you some of the biggest news stories from the past five days in finance and business, as well as some of the most fascinating websites and links that have crossed our path. We hope you'll enjoy reading, we hope you'll have a great weekend and we hope that you'll come back each Friday to brush up on your finance and business knowledge.

Monday July 25
At the start of this week, the credit rating agency Moody’s cut Greece’s rating down three notches, from a Caa1 to a Ca, justifying the move by saying that a planned debt swap could suggest that the country was in default. The agency stated “the announced EU programme... implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100%”. The debt swap with private sector lenders was part of a grand bail-out package announced last Thursday by European leaders and the IMF, which was designed to prevent debt contagion to other European economies such as Spain and Italy. Whilst the swap was made to increase Greece’s borrowing terms by up to 30 years, the Institute of International Finance issued a statement last week admitting that the deal would cost private sector creditors roughly 21% of the value of the Greek debts that they currently hold.
Read about Moody's downgrading of Greece in more depth here

On Wednesday, the ratings agency Standard & Poor’s followed suit, cutting Greece’s rating from CC to CCC, saying that the debt restructuring “would amount to a selective default under our ratings methodology”.
Read about S&P's downgrading of Greece in more depth here.
(also notice the lazy use of the same picture for both articles)

Tuesday July 26
In the wake of the disastrous oil spill in the Gulf of Mexico, BP posted disappointing profits for the three months to June 30. The results, which showed the oil giant making profits of $5.3bn (£3.2bn) were said to have been worse than expected, sending BP’s share price plummeting down over morning trading. Higher oil prices, inflated by political problems in oil-producing nations such as Libya, offset lower production, but BP has paid $6.8bn in damages to firms, individuals and government departments since the spill. The production deficit comes from the suspension of drilling in the Gulf of Mexico, the sale of some operations and ongoing maintenance work on some wells.
Read about BP's fall in profits in more depth here

Wednesday July 27
Moody’s cut Cyprus’ credit rating by two notches, fuelling fears that the country may be the next in the Eurozone to suffer the axe of sovereign debt currently hanging over the head of Greece, and thus may require an EU bail-out. Whilst there are plans to reform the country’s finances, Cyprus has suffered power shortages caused by an explosion at a power plant. Also, its bank holds a significant amount of Greek debt, which ties it to the fate of its Mediterranean neighbor. The move follows a downgrading by other credit ratings agencies, Fitch and Standard & Poor’s, and Moody’s has warned that the rating could lower further if Cyprus’ government did not pass planned financial reforms.
Read about Cyprus and the Eurozone debt crisis in more depth here

Thursday July 28
Yesterday it was announced that Verizon Wireless, Verizon Communications’ joint venture with the UK’s Vodafone, will pay a dividend of $10bn (£6.1bn) in January next year. The long-awaited dividend will be the first from Verizon Wireless for over five years, after Verizon Communications blocked dividend payments in what was perceived to be an attempt to muscle Vodafone out of the enterprise. In 2006 Vodafone rejected an offer from Verizon Communications to buy up its 45 per cent stake in the company and now the UK group will receive $4.5bn of the dividend payment approved by Verizon Wireless’ board. Whilst this should boost Vodafone’s free cash flow by 40 per cent, £2bn has been earmarked for a pay-out to its shareholders next February.
Read about Verizon and Vodafone's dividend payment in more depth here

Friday July 29
GDP growth rates for the US were announced earlier today, showing that the economy grew at an annual rate of only 1.3% in the second quarter of this year. Analysts have stated that this is much slower than was expected. Earlier today (or Thursday for American readers) a crucial vote in Congress regarding a Republican bill to raise the US debt ceiling was delayed. Without this, along with spending cuts, the country faces the threat of default. Tuesday August 2nd is the deadline by which the US must raise its debt limit, or else the US government could face funding shortfalls that it would be unable to meet with extra borrowing.
See the US GDP growth rate announcement as it was reported here

Come back next Friday for another report on the world of business and finance.

More useful links that have crossed our path this week:

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For further information on a range of financial and business-related events, click to see our Upcoming Events page.

Tags: bail out , BP , BP oil spill , Congress , credit rating agencies , Cyprus , damages , debt ceiling , debt restructuring , default , dividend , dividend payment , downgrade , EU , European Union , eurozone , Fitch , Greece , Greek debt , Gulf of Mexico , Institute of International Finance , Italy , Libya , Libyan war , Moody's , oil spill , profits , Republican , shareholders , Spain , Standard & Poor's , US , US debt , US economy , Verizon , Vodafone
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