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A mutual fund heavyweight and the largest public pension fund in the U.S. are clashing over whether public pensions should be protected in municipal bankruptcy, a major test that has implications for workers, investors and distressed cities across the country, the Wall Street Journal reported today. Payments into pension funds are usually considered sacrosanct, but fights are breaking out around the U.S. over who gets priority when a municipality seeks protection from creditors. The latest battle involves the bankruptcy of Stockton, Calif., and pits Franklin Templeton Investments against California Public Employees' Retirement System (CalPERS). The firms disagree on whether Stockton's retirement contributions should be reduced to free up money for a loan repayment. U.S. Bankruptcy Court Judge Christopher Klein could rule on the dispute as early as Tuesday.

State and federal authorities have begun settlement talks with Commerzbank, Germany’s second-largest lender, over the bank’s dealings with Iran and other countries blacklisted by the United States, the New York Times reported today. The bank, which is suspected of transferring money through its American operations on behalf of companies in Iran and Sudan, could strike a settlement deal with the state and federal authorities as soon as this summer. The contours of a settlement, which the authorities have only begun to sketch out, are expected to include at least $500 million in penalties for Commerzbank.

After weeks of intense wrangling, one of American Apparel’s longtime lenders, Lion Capital, has demanded immediate repayment of a $10 million loan it made to the troubled retailer, after negotiations over new terms failed, the New York Times reported today. Although a potential new benefactor, the New York-based investment fund Standard General, has said that it was considering making the repayment on behalf of the company, it was unclear yesterday whether it would take that step or whether American Apparel would pay back the loan some other way. The move by Lion Capital is only the latest turn in a saga that has roiled American Apparel since the board ousted the company’s founder, Dov Charney, last month over concerns about his personal and professional conduct. The loan from Lion Capital, a British private equity firm that once owned Jimmy Choo, was always a precarious arrangement for the American Apparel. It came with a credit card-style 20 percent interest rate, as well as a provision that said if Charney were no longer chief executive, the loan could be called in. Crucially, the loan is also tied to another line of credit. If American Apparel defaults on its loan from Lion, it could cause a default on a $50 million loan from Capital One, should the bank follow Lion’s lead and demand repayment.

The Puerto Rico Electric Power Authority said Monday that it reached agreements with banks allowing it to defer certain payments until the end of the month, giving breathing space to the cash-strapped utility, the Wall Street Journal reported today. The power authority said that it "may delay certain payments currently due until July 31, 2014," according to a news release yesterday. The two lenders, which provide lines of credit for fuel and other expenses, are Citibank and Scotiabank de Puerto Rico. The authority owed the two banks $671 million in obligations between the end of June and mid-August, according to Standard & Poor's Ratings Services. Puerto Rico has about $73 billion in total obligations, including those owed by its so-called public corporations, and has been struggling with unemployment more than twice the national average and a sluggish economy.

As government regulators crack down on the financing of terrorists and drug traffickers, many big banks are abandoning the business of transferring money from the U.S. to other countries, moves that are expected to reverse years of declines in the cost of immigrants sending money home to their families, the New York Times reported today. While Mexico may be most affected — nearly half of the $51.1 billion in remittances sent from the U.S. in 2012 ended up in that country — the banks’ broad retreat over the last year is affecting other countries in Latin America and parts of Africa as well. The banks are being held accountable not only for the customers who directly use their money transfer services but also for their role in collecting remittances from money transmitting companies and wiring them abroad. JPMorgan Chase and Bank of America have scrapped low-cost services that allowed Mexican immigrants to send money to their families across the border. The Spanish bank BBVA is reportedly exploring the sale of its unit that wires money to Mexico and across Latin America. And in perhaps the deepest retrenchment by a bank, Citigroup’s Banamex USA unit has now closed many of its branches in Texas, California and Arizona that catered to Mexicans living in the U.S. and stopped most remittances to Mexico as it faces a federal investigation related to money laundering controls.

Argentina on Friday accused a U.S. judge of being biased in favor of hedge funds that have sued the South American country for full repayment of defaulted bonds, cementing the tough stance it has taken ahead of debt talks set for New York this week, Reuters reported on Friday. A series of rulings by U.S. District Court Judge Thomas Griesa leave Argentina just three weeks to clinch a deal with the funds before falling into another default, which would heap financial stress on its already shrinking economy. The government of President Christina Fernandez denounces the funds as vultures bent on crippling Argentina, Latin America's third largest economy, for the sake of profit. The legal fight stems from Argentina's 2002 default on about $100 billion in bonds. The financial crisis thrust millions of middle-class Argentines into poverty. The economy snapped back from 2003 to 2008 before being weighed down by high inflation and heavy-handed trade and currency controls. More than 92 percent of the country's investors agreed to receive less than 30 cents on the dollar in bond restructurings carried out in 2005 and 2010. A group of funds rebuffed those terms after buying bonds at deep discounts and sued in U.S. federal court demanding 100 cents on the dollar. They won a judgment from Griesa in 2012 for $1.3 billion, and Argentina's appeals have failed.

Federal regulators are looking at commissions that buyout firms receive for helping companies they control get goods and services at discount prices, as part of a stepped-up probe of private-equity fees, the Wall Street Journal reported today. At issue are millions of dollars received by private-equity firms in exchange for steering their portfolio companies into so-called group-purchasing programs, which use the portfolio's buying clout to secure cut-rate prices on items as varied as coffee and personal computers. The Securities and Exchange Commission is concerned that fund investors, which give private-equity firms cash for corporate takeovers and other investments, aren't getting enough information about fees earned by buyout firms for these group-purchasing programs, SEC officials said.

HSBC Holdings PLC's U.S. unit will pay $10 million to settle a civil fraud case with U.S. authorities over alleged false claims for foreclosure-related fees, the Wall Street Journal reported today. The Justice Department said that HSBC admitted to misconduct for not properly overseeing claims made by third-party providers of foreclosure services, which the bank then submitted for reimbursement. "HSBC failed to live up to its legal obligation to monitor and review fees and expenses it was submitting to FHA and Fannie Mae for reimbursement, and in the process, cost the public millions of dollars," Manhattan U.S. Attorney Preet Bharara said. Before 2011, the Justice Department said, HSBC lacked adequate controls over fees and charges from outside parties it then submitted to the Federal Housing Administration for reimbursement. HSBC also failed to oversee the claims process, despite certifying to the agency that it had. Additionally, the bank lacked proper oversight of fees and charges submitted to mortgage-finance giant Fannie Mae, authorities said. (Subscription required.)

BNP Paribas SA sought to allay concerns about its ability to weather a landmark $9 billion settlement with U.S. authorities, saying it has ample cash to cover penalties and faces no urgency to boost its capital cushion, the Wall Street Journal reported today. BNP Paribas Chief Financial Officer Lars Machenil said the French bank was "in no rush" to increase its core tier-one capital ratio — a key measure of a bank's financial health — even after agreeing to pay the record penalties as part of a U.S. sanctions case. BNP Paribas said yesterday that the penalties would shave just a little over half a percentage point from its core tier-one capital ratio, bringing it down to about 10 percent at the end of the second quarter. BNP Paribas, France's largest listed bank by assets, pleaded guilty Monday to breaching U.S. sanctions against Sudan, Iran and other countries. U.S. authorities also imposed a year-long ban on the bank's dollar-clearing functions — primarily related to oil and gas businesses — through its New York branch.

Argentina said Monday night that it will send a delegation to meet with a court-appointed lawyer on July 7 as it tries to resolve a dispute with a small group of creditors that could see the South American country default for a second time in 13 years, the Wall Street Journal reported today. Argentina's long-running battle with hedge funds in U.S. courts entered a critical phase after U.S. District Judge Thomas Griesa on June 27 blocked the country from making $539 million in interest payments that were due on some of its bonds Monday. Argentina will likely default if it can't get that money to bondholders before a 30-day grace period expires in July. The judge has ruled that Argentina must pay the hedge funds that are suing to collect on defaulted bonds at the same time it pays investors who own bonds the country issued after its 2001 default. (Subscription required.)
http://online.wsj.com/articles/argentina-holdouts-have-yet-to-reach-agr…

To learn more about the next steps for Argentina and sovereign debt restructuring, be sure to watch James Millstein’s June 20 presentation, which he made at ABI’s Cross-Border Symposium: http://news.abi.org/videos