Put big annual vacation on a new 0-percent card

With more than 20 years experience in the nonprofit credit counseling industry, Kevin Weeks joined the Financial Counseling Association of America (fcaa.org, @TrustFCAA) as its president Dec. 1, 2014. Weeks has extensive knowledge of both the credit counseling industry and the FCAA organization, having served in leadership positions for three of its member agencies and on the FCAA board of directors. In addition, Weeks is working with FCAA members to help develop a long-term solution to the student loan crisis through the website studentloancounselors.org. Weeks holds a bachelor of science degree in business administration, management information systems from Salem State University.

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Dear Credit Wise,
Hello, I take a big annual vacation with a friend that costs about $4,000 each, not including airfare. She pays her way, I pay mine. I takes some "chiseling away," but I always pay it all back before the next trip. I used to pay it back using the vacation company's eight-month repayment plan, and put the airfare on my credit card. For the past couple years, I've been putting the whole trip on my regular credit card, and paying the interest. My question is this: Would it be wise to open up a 0-percent interest rate card each year to charge this vacation to and get the rewards, seeing as I would be completely paying it off by the time the promotional period would be over? Or should I just continue to use my existing credit card for this? Thank you! -- Taylor

Dear Taylor,
I am impressed with your planning and ability to pay off your vacation every year. A 0-percent interest card would save you money, since you have been paying interest on your balance every year, whether on your regular card or through the vacation company's repayment plan. Because you do pay it off before your next trip, you are probably not paying a great deal in interest. Nevertheless, paying nothing would be even better if you can get it, especially if you can get a card that offers rewards as well.

As you know, promotional periods are limited, so while the card would certainly work for your first year, the terms will likely be changed by time you are ready to take your next vacation. In a survey of 100 cards, CreditCards.com's November 2015 balance transfer survey found the post-promotional rate to be 17.8 percent.

So, yes, this next year, do get a 0-percent balance transfer card, with the best rewards you can find.

But what you asked is whether this is a plan for "each year."

There, I can only give you a maybe. It may work, but it may not. The key factor will be your credit. If you maintain good credit, and the discipline to pay it off before the promotional period ends, go for it.

Every time you open a new account, your credit reports will reflect that change. I suspect your credit is at least in the "good" category, since you are able to handle this vacation charge year after year. In the credit scoring world, having more credit is good for your score. Just be aware that your reports will show the number of inquiries and new accounts; too many of either can affect your score in a mildly negative way. This could, in turn, affect your ability to get a new card the next time around. If you have excellent credit, it won't matter much, as good, on-time payments outweigh other factors.

But if you have credit that isn't so good, don't do it. You'd enter an endless downward spiral in which you apply for a card, get turned down and take a credit score hit, apply again, take another score hit, and so on. 

Whatever you decide to do, I hope you will continue to use your existing credit card as carefully as you have been. I would not suggest you close the account, since older credit is also good for your score. Instead, try to get to the point where you are able to pay your other charges on the card in full each month. This will effectively give you another 0-percent interest card and one whose terms will not expire after a few months. If you pay your card balance in full each month by the due date, you should not incur any interest charges ever. That is a wonderful place to be and I hope you can get to that point.

Be wise with your credit!

See related: Credit card churning crackdown has rewards-chasers worried

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Marijuana businesses find card processing still elusive

Marijuana entrepreneurs who want to process credit card transactions through a bank will have to adopt a key strategy for the time being: Patience.

Despite anecdotal reports that there are banks that are processing the transactions legally, experts say that this solution has been elusive.

"There is no credit card processing to my understanding at this time that is legitimate," says Leslie Bocskor, managing partner at Electrum Partners LLC, a boutique consulting firm in Las Vegas specializing in the marijuana industry, and founding chairman of the Nevada Cannabis Industry Association. As a result, many owners of marijuana businesses must still rely on a cash-only model, which can be difficult because of the risks of robbery, internal theft and record keeping mistakes.

Selling pot is illegal under federal law, though 23 states have legalized medical marijuana. Recreational marijuana use has been legalized the District of Columbia and four states -- Alaska, Colorado, Oregon and Washington.

Nonetheless, most banks in these states have shied away from processing credit card transactions for entrepreneurs whose businesses "touch the plant."

According to a December 2015 survey by the Marijuana Business Daily, about 60 percent of cannabis-related companies don't even have a bank account for their business -- that number rises to 70 percent for companies that handle the plant.

"Everybody I know in the industry has had problems with banking," says Micah Tapman, partner and program manager at CanopyBoulder, a seed stage investment program for startups in the cannabis industry. "They've had to move their banks once, twice, four times." All participants in CanopyBoulder are in ancillary businesses that don't come into direct contact with marijuana, he says.

Congress, courts tackle issue
Change may be coming. One bill that could potentially pave the way for the processing of marijuana transactions by banks, the Marijuana Business Access to Banking Act, is still pending in Congress, after being introduced in April 2015. "It would prevent the Justice Department from using federal funds to keep states from carrying out their own medical marijuana laws," says attorney Michael Halfacre, a counsel in the alcohol and regulated products practice group at the Red Bank, New Jersey, office of law firm Genova Burns.

Everybody I know in the industry has had problems with banking.

-- Micah Tapman
CanopyBoulder

The law would prevent federal banking regulators from ending or limiting the deposit or share insurance of a depository institution because it serves legitimate marijuana-related businesses, or from prohibiting, penalizing or otherwise discouraging the institution from providing these services.

Federal agencies accommodate pot business .
The bill follows two significant government agency decisions. In August 2013, the U. S. Justice Department said it would not try to challenge state laws that allow for the medical and recreational use of marijuana, as long as these laws didn't conflict with eight new federal enforcement policies, such as preventing the distribution of marijuana to minors.

Then in February 2014, the U. S. Department of Treasury issued a memo saying it would allow banks to serve cannabis businesses under certain conditions and rules -- such as verifying that the business is licensed and registered as required -- but few banks are doing so.

At the moment, though, the regulatory climate remains unfavorable to marijuana processing by banks, say experts.

. But federal court delivers a setback
In a landmark decision, a U. S. district judge on Jan. 5 rejected a lawsuit by Denver-based Fourth Corner Credit Union against the Federal Reserve Bank of Kansas City. In July 2015, the Fed had denied the credit union, whose sole focus is cannabis businesses, a "master account" because of the nature of its business. A master account would let it open up and interact with other financial institutions.

The judge in the case admitted current laws are confusing, but said the court could not use its powers "to issue an order that would facilitate criminal activity."

Banks fear anti-money laundering compliance
Beyond the conflict between state and federal laws, many existing banks fear the administrative burden of working with firms in the pot industry, says CanopyBoulder's Tapman.

"It's not really a legality issue, per se," he says. "The real issue is one of regulation." He says contrary to popular opinion that the banks are afraid of being prosecuted for money laundering, "They are primarily concerned about having to respond all the time to FinCen Financial Crimes Enforcement Network."

FinCen is a branch of the U. S. Department of the Treasury that is charged with protecting the financial system from illicit use and money laundering. Banks must report any suspicious activity to FinCen, which would include any transactions involving marijuana businesses, because it is still federally illegal, Tapman says.

"If they were to provide merchant services to a dispensary, every single transaction would need to be reported as a suspicious activity, because it's part of a criminal enterprise," he says.

In Tapman's experience, businesses whose names suggest a connection to the cannabis industry are at a real disadvantage in obtaining banking services. "We had a company that was going to be called Cannagrow," Tapman says. "They weren't going to touch the plant. The bank said no. They went and changed the name of the company and opened a new account somewhere else. It was a learning experience. One of our pieces of advice is don't name your company 'canna' anything."

When banks are willing to take a chance on working with marijuana businesses at all, they charge high prices for it, according to Tapman. He is aware of banks charging $2,000 a month for a bank account. "I've heard of several of them," he says. "I don't want to name names."

Credit card processing rare, opaque
Another obstacle has been the stance of big credit card companies.

"Currently, neither Visa nor MasterCard nor American Express will allow PIN-debit or credit card transactions by a merchant in the U. S. that is declaring itself as a legal cannabis retailer," says Electrum Partners' Bocskor. "So, if anybody is currently doing it, it is likely they are currently using a provider who is either miscategorizing what the business is or running it through an offshore processor where there is some type of lack of clarity, as well. By the letter of the law, those are dicey. They present a lot of risk."

As a result, banks are averse to processing credit card transactions for marijuana businesses. Currently, say industry experts, there are no sponsoring banks -- also known as acquiring banks -- accepting cannabis transactions. Sponsoring banks have obtained membership in Visa or MasterCard. Processors must form a relationship with a sponsoring bank to get access to these networks.

While there are some marijuana businesses processing credit cards, it is through credit card processing firms, known as Independent Sales Organizations (ISOs), which are likely hiding the nature of these businesses, according to Jeff Foster, co-founder of Boca Raton, Florida-based Jane. Jane sells kiosks intended to reduce cash theft at dispensaries by having the customer pay directly into a secure kiosk instead of to a human cashier.

The bottom line is they are miscoding transactions.

-- Jeff Foster
Co-founder, Jane

"The obvious question, if there are no sponsor banks accepting these transactions and the only way to process credit card transactions is through sponsor banks, is 'How are dispensaries processing credit cards?'" Foster says. "The bottom line is they are miscoding transactions."

A dispensary could potentially process transactions through the Merchant Category Code (MCC) for miscellaneous retail or use the code for a flower shop, hair salon or some other retail business with a similar sized average ticket and sales volume -- about 200 transactions on a weekday and 250 to 300 on weekends, Foster says. "The average ticket in a marijuana dispensary is around $70," Foster says.

Dispensary owners may not know the miscoding is taking place, he says. "I've talked to lots and lots of dispensary owners who have taken credit cards," says Foster. "Less than 10 percent had any idea that something was going on that shouldn't be going on. It's the ISOs selling the credit card processing that are doing a disservice to the dispensary owners and to the industry. They are telling them things like, 'Yes the bank knows all about it. We can't tell you who the bank is.'"

He says his company's kiosks only take cash. "We don't know of any way to meet the legal and regulatory burden of accepting credit cards in the U. S. for cannabis transactions right now," he says.

New solutions
Some new solutions are developing. Bocskor says that "closed-loop payment systems" are evolving. These are private debit card networks, where customers can get a card. "I've been hearing a lot of people talking about it," says Bocskor.

"The Marijuana Show," an online reality show where marijuana entrepreneurs compete "Shark Tank" style, has partnered with an investment bank to offer what founder Wendy Robbins says is processing credit cards via banks for dispensaries, growers and producers of edibles in states where marijuana is legal. The banks can process Visa, MasterCard and Discover cards, she says.

Asked via text message how the transactions were coded, Robbins responded, "Sorry can't share that." She said her credit card processor has operated for more than a year with 75 terminals. "All of them are still operating," she said.

Robbins declined to share the company's annual revenue. She would not say how many customers she has but says the business, concentrated in Colorado and Seattle, Washington, is "growing daily."

See related: Payment options budding for legal marijuana businesses, Credit cards: our moral guardians, 10 things you can't (easily) buy with credit cards

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Why do people pay high annual fees on credit cards?

Tony Mecia is a business journalist who writes for a number of trade and general-interest publications. He writes "Cashing In," a weekly column about credit card rewards programs, for CreditCards.com

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Dear Cashing In,
Are there any real benefits of having a credit card that comes with a high annual fee? Why would anyone pay hundreds of dollars to carry a credit card? -- Carol

Dear Carol,
To answer your question, it helps to take a quick look at how credit cards have evolved over time.

Although the first versions of what we think of as credit cards began appearing in the 1940s and '50s, by 1970, there were still fewer than 1 in 5 American households that had one. It was still a relatively new concept that allowed people to avoid carrying huge sums of cash or writing checks, which at the time were not widely accepted when traveling away from home. 

You used the card, the merchant gave you what you bought, and the bill arrived later. That was the appeal.

Fast forward to today. Roughly three-quarters of Americans have credit cards. Those that have cards have an average of nearly four cards. There are several hundred million cards in circulation. The idea isn't as novel as it once was. 

This short lesson in credit card history is meant to illustrate how much our concept of credit cards has changed over time.

Today, with so many cards in circulation, issuers have to find a way to differentiate their cards from those of competitors. Maybe it is through lower interest rates or more reasonable fees, or a really cool card design, or outstanding customer service. 

However, those potentially distinguishing features don't mean a lot to many people. If you pay off your bill every month, a card's interest rate does not matter to you.

Card issuers have found that one way to distinguish their cards is by offering rewards. They forge partnerships with airlines and hotels, and offer frequent traveler points. They dangle cash-back on purchases, perhaps with greater rewards in certain categories. 

Those rewards can cost card companies a lot of money. But they also entice consumers to flock to their cards. And the card companies have discovered that people will pay annual fees to receive some of these rewards, because the value of the rewards to the consumer can be higher than the annual fees.

For instance, there are high-end reward cards that come with access to airport lounges that have annual fees less than the cost of a year's membership to the airport lounge alone. A lot of cards with annual fees come with sign-up bonuses of airline miles that can be used for flights that would cost much more than the card's annual fee. And there are some reward cards with more modest rewards that have no annual fee. Most of the top-end reward cards require excellent credit. 

If you're just looking for a plain-vanilla credit card to charge purchases, there are plenty of cards like that. If you don't pay off your credit card bill every month, then you should find a card with a low interest rate.

But if you pay off your bills and have strong credit, it can pay to look at rewards cards -- even those with annual fees. Not everybody is interested in airline lounges and elite travel perks, which come with cards that cost hundreds a year. But there are plenty of cards with more modest annual fees that can be worth exploring.

See related: Getting started with rewards cards

Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers. We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

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UPDATE 1-Puerto Rico governor blasts U.S. Congress as lawmakers delay debt action

(Adds details on legislative action, quotes from lawmakers, background)

By Susan Heavey

WASHINGTON Dec 18 Puerto Rico's governor on Friday lambasted Congress for failing to act on its debt crisis even as U. S. House of Representatives lawmakers pledged to address the island's fiscal woes early next year after they return to Washington from a holiday break.

The House is expected to hold a Jan. 5 hearing on the U. S. territory's financial problems but its next debt payment is due Jan. 1.

"Despite being fully aware of and warned about Puerto Rico's fiscal and economic crisis, Congress decided today not to assist the 3.5 million American citizens of Puerto Rico," Governor Alejandro García-Padilla said in a statement.

The commonwealth faces a payment on Jan. 1 on debt of about $1 billion.

Democrats tried but failed to address the crisis in sweeping spending and tax legislation before Congress this week.

In a last-ditch effort earlier on Friday, U. S. House Democratic leader Nancy Pelosi sought to rush a bill aiding Puerto Rico onto the House floor but was blocked by Republicans, who control the chamber. She said she would advance a 90-day "stay of liability" in early 2016.

Lawmakers are expected to adjourn for the year as soon as Friday after passing the spending and tax package.

"We also must take action on Puerto Rico. It should've been in this bill," House Democratic Whip Steny Hoyer told reporters after the passage of the larger spending bill.

The latest political wrangling comes as Puerto Rico continues to grapple with $72 billion of debt and a faltering economy. It is trying to restructure its borrowings, but García-Padilla said default is likely again.

The Obama administration has backed "common sense" efforts for the island, although the White House has said it does not support a bailout.

Pelosi said Republican House Speaker Paul Ryan pledged to hold the hearing as soon as the chamber comes back Jan. 5.

Still, it is unclear how congressional action after Jan. 1 would help.

"We believe it is unlikely, at least in the near term, that bankruptcy authorization would be extended to Puerto Rico," said

David Hitchcock, senior director at Standard & Poor's in New York. "Significant financial assistance . might also be difficult but it is not impossible".

"Anything that would happen in March, obviously would not be able to help them with their January 1st payment," he added.

If Congress does not act, its governor said, "this fiscal crisis will soon become a humanitarian crisis." (Reporting by Richard Cowan, Susan Heavey, Megan Cassella, Daniel Bases and Patricia Zengerle; Editing by Jeffrey Benkoe, Diane Craft)

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Caesars creditors accuse U.S. bankruptcy lawyer of misleading judge

CHICAGO/WILMINGTON, Del Oct 22 One of the top restructuring attorneys in America allegedly misled a judge and should be disqualified from handling parts of the huge Caesars Entertainment casino bankruptcy, according to a court filing by junior bondholders.

The allegation adds to the bitterness of the $18 billion bankruptcy, which has pitted the private equity owners of Caesars Entertainment Corp against the junior creditors of the company's operating unit.

In a late Wednesday court filing, junior creditors said they had unearthed evidence that they said showed James Sprayregen of Kirkland & Ellis, which represents the bankrupt operating unit CEOC, misled the court about potential conflicts.

"It has now come to light that what Kirkland told this court was, at best, incomplete and misleading," said the filing, referring to Sprayregen's testimony earlier this year.

The junior creditors are represented by a team of lawyers from Jones Day, led by Bruce Bennett. Sprayregen and Bennett were adversaries in the bankruptcy of the city of Detroit.

Kirkland, which has handled many of the biggest corporate bankruptcies in recent years, was not immediately available to comment.

Jones Day has asked U. S. Bankruptcy Judge Benjamin Goldgar to address the matter at a hearing on Nov. 18.

Goldgar has already approved the hiring of Kirkland over a previous objection by junior creditors. Goldgar could decline to revisit the issue, or consider the request to disqualify some of Kirkland's retention.

"These disputes are quite rare in this context," said Jonathan Lipson, a professor at Temple University School of Law in Philadelphia. "It's a high-stakes move by Jones Day."

Junior creditors have been trying to prove that the Caesars parent and affiliate transferred the best properties out of the operating unit, which the junior creditors have said amounted to asset stripping.

A special governance committee of the bankrupt operating unit's board investigated the asset transfers and found them "problematic" and "constructively fraudulent," according to the filing by junior creditors.

Rather than taking legal action over those asset transfers, the operating unit's full board authorized a New York lawsuit to have the transfers declared legal. That would protect the parent company that now owns those top resorts at the expense of the operating unit, and the operating unit's creditors.

Junior creditors said new evidence came to light that showed Sprayregen misled the court this year when he testified that Kirkland had nothing to do with the New York lawsuit. (Writing by Tom Hals; Editing by Christian Plumb)

.

UPDATE 1-Russian support for VEB bank ready by year-end -chairman

* State support to VEB estimated at 1.2 trln rbls

* Decision expected by year-end

* VEB to soften terms on some of Olympic loans (Adds details, quotes, background)

By Darya Korsunskaya

MOSCOW, Dec 22 Measures to support Russia's state development bank VEB should be prepared by the year-end, its chairman said on Tuesday, the latest move by the state to bolster the domestic financing system.

The government is considering support for VEB worth 1.2 trillion roubles ($16.85 billion) to help the bank, hit by Western sanctions over Moscow's role in the Ukraine crisis, to deal with bad loans and repay external debt.

VEB was heavily involved in the financing of the 2014 Winter Olympics in Sochi, among other large state-backed projects.

On Tuesday, VEB's supervisory board chaired by Prime Minister Dmitry Medvedev discussed ways to help the development bank, support that is in addition to around 1 trillion roubles already provided to the banking system since late last year.

Vladimir Dmitriev, VEB's chairman, said the focus of the meeting was on the "willingness and the need" by the state to give a maximum support to VEB from the point of view of liquidity, issues related to its balance sheet as well as the redemption of its external and internal debt next year.

"The state realises that if it is giving certain orders, the state should split with the bank the responsibility for funding such operations and give other forms of support if needed," Dmitriev said. He did not elaborate.

Some of the previously cited options were issuing domestic treasury bonds, so-called OFZs, removing problematic assets from VEB, selling off some of VEB's assets and other ways to support the bank.

Dmitriev said the board has approved decisions to restructure VEB's loans related to some Olympic venues. He did not name the borrowers or venues of the most expensive games in history, which cost some $50 billion.

"The point of these decisions is to improve the financial situation of (Olympic) investors and to extend decisions related to cash sweeps until July 2017, again, not to worsen financial and economic situation of our borrowers," Dmitriev said.

Cash sweeps assume that a borrower is using a surplus of cash to repay debt rather than to distribute the funds in the form of dividends.

A source taking part in discussions on VEB's bailout said that under the scheme announced by Dmitriev, a grace period on some of Olympic loans owed to VEB would be extended.

($1 = 71.2000 roubles) (Reporting by Darya Korsunskaya; writing by Katya Golubkova; editing by Dmitry Solovyov and David Evans)

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San Bernardino, struck by attack, aims to keep bankruptcy on track

SAN BERNARDINO, Calif./LOS ANGELES Dec 11 A key San Bernardino bondholder and opponent of the California city's proposed plan to exit bankruptcy offered this week to delay some proceedings in the case after last week's devastating attack.

Luxembourg-based bank EEPK, at odds with the city over its proposal to pay a penny on the dollar for nearly $50 million in pension obligation bonds, offered to push back a key hearing set for later this month.

"I would fully understand if the city has more important things to do at the moment," said Vincent Marriott III, the Ballard Spahr LLP attorney representing EEPK.

The city, now in its fourth year of navigating a thorny municipal bankruptcy, declined the offer in order to keep the case on track.

"We're anxious to implement the bankruptcy plan, because all components of the plan actually result in an improvement to the city's fiscal situation and our ability to provide services," City Attorney Gary Saenz told Reuters this week. "We want to keep moving forward."

Last week's shooting thrust San Bernardino's police force into the national spotlight, as its chief and officers responded to what the FBI considers an act of terrorism, possibly inspired by Islamic State, and one of the deadliest armed attacks on U. S. soil in several years.

It would be an enormous challenge to any police force, let alone one as stretched as that of San Bernardino, a municipality of 210,000 residents that today is one of the most thinly policed U. S. cities of its size, Saenz said.

San Bernardino's police budget has been cut 15 percent to $59.9 million for the current fiscal year from the $70 million spent the year before the city went into bankruptcy in August 2012.

The bankruptcy, among the longest running in U. S. history, was the result of the 2008 financial and housing foreclosure crises as well as years of budget mismanagement. While other areas of the country have solidly rebounded from the recession, San Bernardino has been much slower to bounce back and remains among the poorest cities of its size in California.

The city's police have gone from about 350 sworn officers in 2009 to 290. The city has also slashed police pensions and overtime and wants to introduce a salary cap.

Overall, total city spending this year is down nearly 20 percent to $212.3 million, compared to $264.6 million in 2011.

CITY STRUGGLES WITH SAFETY

Residents worry that their city is not safe. An online survey conducted by the city earlier this year asked residents to rate how likely they would recommend their city to a friend. Only 1.49 percent gave the highest rating, a 10, with 31 percent giving the lowest score. The vast majority, or 89 percent, said the main reason for not recommending the city was due to safety.

The 14 fatalities in last week's shootings by Syed Rizwan Farook and Tashfeen Malik brought the number of homicides this year in San Bernardino to approximately 40, near the 42 investigated by city's police last year.

One reason the city is eager to have its plan for exiting bankruptcy quickly approved by U. S. Bankruptcy Court Judge Meredith Jury is that it would boost spending on police by $10 million and add 50 officers to the department.

"Before we put a deal in place with the city, morale was eroding and really terrible," said Ron Oliner, attorney representing San Bernardino Police Officers Association.

"Long-time sworn officers were looking for jobs in other cities," he added. "As a result of making the deal with us, the police union reports far less attrition. The stability that has come with the contract has resulted in more folks staying with the force."

San Bernardino's fire department, which played a key role in responding to last week's attack, has also taken a hit during the bankruptcy.

The city's fire budget dropped 17 percent to $30.6 million this year from $37 million spend in the 2011-12 fiscal year. Concerned over the lack of stability, an estimated 15-17 firefighters have left in the last three years for other departments.

Acting Fire Chief Tom Hannemann said he expects a plan to annex the city's fire department into San Bernardino County would go forward despite the attack and it would not result in any reduction in services.

Even if the city is not asking for delays in bankruptcy proceedings as a result of last week's attack, it is hoping for understanding. Saenz said he hopes creditors will be "a little softer in terms of their approach and a little less aggressive, that could be helpful to our city."

"That may be the kind of humanistic approach that may develop," he added.

But EEPK does not plan to drop its challenge.

"Our position in the case has been that the city can treat pension obligation bonds better than it proposes to and still provide adequate level of services," Marriott said.

(Additional reporting by Alexandria Sage in San Bernardino and Jim Christie in San Francisco; Editing by Sue Horton and Mary Milliken)

.

Puerto Rico 'very unlikely' to avoid Jan.1 default - governor

n">Dec 22 Puerto Rico's governor Alejandro Garcia Padilla said on Tuesday it is "very, very unlikely" there will be no default on debt due Jan. 1 and that the U. S. territory was evaluating which bonds are to be paid.

"Making a total payment will be (very unlikely)," Garcia Padilla told reporters at an event in San Juan. "If a partial payment is to be done, which bonds should be paid? It is an evaluation that we are doing."

Puerto Rico first defaulted on its debt in August and has warned that more defaults are coming. It has an upcoming debt payment of around $1 billion due Jan. 1.

"It is very, very unlikely there is no default," Garcia Padilla said. "Very unlikely. In full or part." (Reporting by a contributor in San Juan; Editing by James Dalgleish; writing by Megan Davies)

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UPDATE 1-Champion buys Quebec iron ore mine for Cliffs at deep discount

(New throughout)

By Susan Taylor

TORONTO Dec 11 Champion Iron Mine said Friday it will buy a Quebec iron ore mine for C$10.5 million ($7.65 million), just a sliver of the C$4.9 billion that Cliffs Natural Resources paid in 2011, when metal prices surged on booming Chinese demand.

The downturn in bulk commodities allowed Champion to negotiate a "competitive" bid, said Chief Executive Michael O'Keeffe in a statement, including C$10.5 million in cash, C$41.7 million for environmental reclamation and about C$1.1 million for bonds.

Champion shares jumped 30 percent after the announcement to 19.5 Canadian cents on the Toronto Stock Exchange, while Cliffs stock dipped 4.1 percent to $2.09 on New York.

The Bloom Lake mine and related rail assets, along with Quinto Mining Corp mineral claims, are being sold under Cliffs' restructuring of Canadian operations, which gave it creditor protection. The acquisition, subject to court approval, is expected to close in the first quarter of 2016.

Cliffs acquired the mine from Consolidated Thompson Iron Mines in 2011, a deal once seen as a key driver of its future growth. Iron ore prices, approaching $200 a tonne at the time, are now at a decade low of $38.

Cleveland-based Cliffs had planned to expand capacity and reduce operating costs, but slumping iron ore prices and cooling demand for the steel-making material were exacerbated by higher-than-expected operating and capital costs.

Just one year after the acquisition, Cliffs took a $1 billion writedown on the deal and in late 2014, recorded a $4.5 billion write down for Bloom Lake assets.

The iron ore and coal miner filed for creditor protection of its Canadian arm in January, after moving to cease production at the mine when it failed to find a minority stake buyer. ($1 = 1.3729 Canadian dollars) (Reporting by Susan Taylor; Editing by James Dalgleish)

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UPDATE 1-Spain's Abengoa, creditors put Abengoa Yield share sale on hold

(Adds quotes, context)

By Carlos Ruano and Jose Elias Rodriguez

MADRID Dec 10 Spanish engineering group Abengoa and creditor banks agreed on Thursday to put on hold an option of selling shares in its Abengoa Yield business as a means of raising money, two banking sources briefed on the talks said.

Abengoa, trying to avoid becoming Spain's biggest-ever bankruptcy, is negotiating a multi-million-euro lifeline with creditor banks which have asked the company to guarantee it with assets.

Having struggled with big debts for more than a year, Abengoa triggered pre-insolvency proceedings last month after a key investor backed away from a plan to inject new cash.

The engineering and renewable energy group has agreed to look for financial investors willing to inject emergency funds, although creditor banks will consider putting up 100 million euros ($109 million) in cash if Abengoa cannot find alternative funding in coming days, the sources, speaking on condition of anonymity, said.

Banks' total exposure to Abengoa stands at around 20.2 billion euros ($22.10 billion), including financing for projects, a source familiar with the matter said at the end of September.

Banks had been pressing Abengoa - which has biofuel and solar-heated power plants in the United States - to sell assets immediately, including a 47 percent stake in U. S.-listed Abengoa Yield.

But at a meeting on Thursday between Abengoa, creditor banks and KPMG, which advises the banks, that idea was put on hold, the sources said.

"Abengoa explained that the partial sale (of Abengoa's stake) in Abengoa Yield might cause a rapid loss in value (of the Yield shares)," one banking source said.

There were also concerns that, by selling a portion of its stake, Abengoa would miss out on the premium that a potential sale of its entire stake would fetch.

Abengoa is now expected to try and tap hedge funds or other financial investors for funds.

"If in the coming days, there is no progress in this search, the banks would consider a (cash) injection to deal with immediate needs of around 100 million euros," the source said.

Abengoa declined to comment.

Banks are still insisting on guarantees before they provide any fresh cash, the source said. Bondholders are also willing to inject fresh capital in Abengoa if the bank lenders stump up emergency funds first, LPC, a Thomson Reuters loan market news service, reported.

The deadline for Abengoa to come up with the emergency cash injection, needed to cover a Christmas payment to staff and urgent supplier payments, is seen as around Dec. 20, which is also the date of Spain's general election.

While Abengoa's difficulties have not had a significant political impact so far, this might change if they lead to job losses. The group employs 24,000 people worldwide, 7,000 of them in Spain. ($1 = 0.9138 euros) (Additional reporting by Angus Berwick, writing by Sonya Dowsett and Adrian Croft. Editing by Jane Merriman)

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Creditor banks to inject 113 mln euros into Abengoa - sources

MADRID Dec 23 Creditor banks of Spanish energy and engineering firm Abengoa have agreed to inject 113 million euros ($123 million) into the debt-laden company, two sources familiar with the matter said on Wednesday.

The lenders will receive shares in Abengoa Yield worth more than double of the loan as a guarantee, the sources also said, adding that Spain's official credit institute would also participate in the loan with 8.7 million euros. ($1 = 0.9153 euros) (Reporting by Jose Elias Rodriguez and Jesus Aguado; Writing by Julien Toyer; Editing by Paul Day)

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India govt to push for bankruptcy law in Parliament in next 3 days-finmin

MUMBAI The government will push for a bankruptcy law in parliament in the remaining three days of the winter session, Finance Minister Arun Jaitley said on Saturday, hoping to end a political deadlock.

"I am going to be pushing for the insolvency and the bankruptcy law before Parliament in the next three days," the minister said in a speech at an industry event in New Delhi, calling the next three sessions "crucial" for passing key bills.

(Reporting by Neha Dasgupta; Editing by Ed Davies)

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INSIGHT- Hidden in plain sight: Big risks at failed Third Avenue fund were clear to some

BOSTON In the months before the blowup of Third Avenue's junk bond fund in early December, investors and financial advisors called the New York-based investment company to voice their concerns about the growing percentage of hard-to-trade, illiquid assets in the fund's portfolio.

"I would call up and they would say, 'We're under control, we have plenty of cash,'" said Richard Berse, president of Northstar Financial Advisors Inc in New Jersey. But Berse, who had as much as $2.5 million in client money in the fund, got burned. Less than a month after his last call to Third Avenue Management LLC, the $789 million Focused Credit Fund abruptly blocked investor withdrawals and announced on Dec. 9 it would liquidate the fund's assets. The extent of the losses are unclear. Brad Alford, chief investment officer of Alpha Capital Management in Atlanta, also said he told Third Avenue the fund was too volatile because it was holding too much in illiquid assets. "I just became very uncomfortable with it," said Alford, who pulled out of the fund this summer.

The biggest mutual fund blowup since the 2008 financial crisis underscores how difficult it can be to rein in a mutual fund taking outsized risks compared with its peers, even though Focused Credit officially had many overseers. The U. S. Securities and Exchange Commission, which is now investigating the fund’s meltdown, did not get involved until it was clear Third Avenue’s only recourse was to liquidate the fund, according to people familiar with the situation. Executives at Third Avenue and its parent company, Affiliated Managers Group Inc, declined to comment or did not respond to several requests to comment for this story. When compared with other junk bond funds, Focused Credit carried an elevated amount of risk. The fund disclosed, for example, that its so-called Level 3 assets, or securities that are hard to value and trade, were 20 percent of assets at the end of July. That was higher than any other U. S. junk bond fund with at least $500 million in assets, according to a Reuters analysis of fund disclosures.

And the fund had 76 percent of its portfolio exposed to very low rated "CCC+" rated securities and below, compared with a median level of 22 percent among similar junk funds, according to analysts at Citigroup. Launched in 2009, Focused Credit found its way into the portfolios of mom-and-pop investors, pension plans and nonprofits, fund disclosures show. It differed from other junk bond funds because it favored creditor claims and stock warrants tied to companies going through bankruptcy.

One of its biggest investors was Boston-based Fidelity Investments' Strategic Advisers Income Opportunities Fund, which had a $128 million stake at the end of October. Fidelity declined to comment on the fund’s current exposure.

Graystone Consulting, Morgan Stanley's independent adviser to institutional and wealthy clients, originally recommended the fund in 2014 via a due diligence report that clearly highlighted the fund’s liquidity risks, Morgan Stanley spokesman James Wiggins said. Graystone then produced an updated assessment in 2015 in which liquidity risk is also highlighted, he added. “Graystone stands behind its review process. Third Avenue has a strong track record as an investment manager and has found historical success in illiquid instruments,” Wiggins said.

BLUNT AND AUTOCRATIC

Third Avenue, led by long-time chief executive David Barse, did not recognize the danger the fund was in until it was too late. In fact, fund management team members discussed internally that they believed the fund still could ride out a storm of redemptions less than 90 days before the fund's collapse, said former and current employees who requested anonymity. Inside Third Avenue, some of the company's 100 or so employees were unsettled by Barse's management style, which they saw as blunt and autocratic, according to interviews with about a dozen former and current Third Avenue employees. Perhaps most importantly, Barse's hard-charging personality made it hard for subordinates to bring him bad news, these sources said. In recent years, some even complained to AMG, the parent company of Third Avenue, but Barse, who had led the firm more than two decades, remained firmly in control.

Barse sometimes berated employees in front of colleagues, reducing them to tears, according to the current and former employees. In the months before Focused Credit's collapse, key people jumped ship as the fund hemorrhaged assets, declining to less than $1 billion from more than $3 billion in 2014. Three of Focused Credit's eight-member team, for example, left during the first half of 2015, according to current and former Third Avenue employees. Barse, 53, did not return messages seeking comment. He made a positive impression in some circles. Barse is a trustee of Brooklyn Law School, where he graduated in 1987. The chair of the school’s board, Stuart Subotnick, said he didn’t know what to make of the criticism. “David is a tough guy. I would imagine there are a lot of guys in that business who are jealous of him or don’t like him, and this was an opportunity to dump on him,” Subotnick said. AMG Chairman Sean Healey, who declined comment for this story through a spokeswoman, personally got involved in the discussions that led to what the two sides ultimately described as Barse's mutually agreed departure from the firm after the junk bond fund's demise, according to people familiar with the situation. Under Barse's direction, assets at Third Avenue peaked at $26 billion in 2006, but by the time of his departure managed assets had dwindled to about $8 billion. And investment advisory fees at the firm's flagship Value Fund were just $22 million in the fiscal year ending Oct. 31, 2014, down 77 percent from $97.2 million in fiscal 2007, fund disclosures show. "I hope you appreciate that David and everything he stood for are being disassociated from the fund," said Martin Shubik, an 89-year-old Yale University economist who is an independent director for the Focused Credit Fund.

Five of the fund's six other independent directors did not return messages or referred questions to Jim Hall, Third Avenue's general counsel, Hall did not return messages seeking comment. The sixth director could not be reached.

DEAN OF DISTRESSED INVESTING

The board charged with oversight of Third Avenue's five mutual funds, including Focused Credit, largely allowed Barse and his top lieutenants to run operations as they saw fit. That's according to past and current employees who had direct knowledge of interactions between Barse's team and independent fund board directors.

Some mutual fund experts criticize outside directors, in general, for not challenging investment company management teams. It’s not uncommon, for example, for some directors at large mutual fund companies to sit on the boards of dozens of funds and to receive fees from each in what critics call a cozy rubber stamping operation for management. "People know what side their bread is buttered on," said Alan Palmiter, a Wake Forest University professor who studies the fund industry.

Founded in 1986 by Martin Whitman, now 91, Third Avenue prides itself on finding deep value in beaten-up securities. "Cheap and safe" is the company's guiding principle. Whitman, considered the dean of American distressed investing, remains chairman and a portfolio manager at Third Avenue. He did not return messages seeking comment. Whitman, Barse and other top executives sold their controlling stake to AMG in 2002. But day-to-day operations did not change. A cornerstone of AMG’s approach is operational autonomy and independence, allowing principals such as Barse to run fund operations.

"That's their business model and if they change it, no one would ever sell to them again," said billionaire investor Mario Gabelli, who founded fund management firm GAMCO in 1977.

(Reporting By Tim McLaughlin, Ross Kerber and Svea Herbst-Bayliss; Editing by Martin Howell)

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Poland's Pekao to pay $59 mln for SK Bank's bankruptcy fund

WARSAW Nov 25 Bank Pekao SA, Poland's No.2 lender, will have to pay about 234 million zlotys ($58.6 million) into a state bank guarantee fund to cover the bankruptcy of small lender SK Bank, the bank said late on Tuesday.

The UniCredit's Polish unit said the fee will have an impact on its results in the fourth quarter of this year.

Poland's KNF financial regulator submitted a bankruptcy filing on Monday for SK Bank, which has about 3.5 billion zlotys of assets. Under Polish law, other banks have to cover the liabilities of failed peers.

In a separate statement, Millennium, the Portuguese BCP's Polish arm, said its contribution to the fund would amount at around 106 million zlotys.

Pekao and Millennium's announcements followed those by other Polish lenders, including the biggest, PKO BP. ($1 = 3.9943 zlotys) (Reporting by Agnieszka Barteczko; Editing by Anand Basu)

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Moody's downgrades Puerto Rico PFC debt

n">Dec 22 Moody's said on Tuesday it downgraded $1.09 billion of Puerto Rico's Public Finance Corporation (PFC) debt to C from Ca, noting the "diminishing recovery prospects" for the securities given repeated missed payments and bondholders' limited legal resource.

Puerto Rico in August defaulted for the first time, paying only $628,000 of a $58 million payment due on its PFC bonds.

"Widespread losses affecting all of the commonwealth's debt still appear likely," said Moody's, adding that general obligation and certain other obligations with stronger legal foundations would "likely yield substantially higher principal and interest recovery".

(Reporting by Megan Davies)

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UPDATE 1-Puerto Rico governor's campaign announcement likely to come Monday

SAN JUAN Puerto Rico's governor will address the island on Monday, his press secretary tweeted on Saturday, and local media reported that he will not seek reelection as the island battles economic crisis and $72 billion in debt.

Governor Alejandro Garcia Padilla "will offer a message to the country" on Monday afternoon, Public Affairs Secretary Jesus Manuel Ortiz tweeted in Spanish.

The governor had been scheduled to reveal by the end of this week whether he would seek a second four-year term in next November's election, and some local media had reported earlier on Saturday that an announcement would come on Sunday.

Ortiz's tweet, published Saturday night, suggests it will come Monday, and a source close to the matter told Reuters he expects Monday's announcement to be about candidacy.

Garcia Padilla is expected not to seek reelection as Puerto Rico struggles with ongoing recession. Local media outlets, including Caribbean Business and El Vocero, reported on Saturday that the governor would announce that he will not run.

The U. S. territory on Jan. 1 owes $332 million of debt backed by constitutional guarantees, which it has said it can only afford if it begins defaulting on other debt. Garcia Padilla has called for concessions from bondholders, but has faced resistance to cuts on repayments.

The governor has lobbied U. S. federal lawmakers to pass legislation making it easier for Puerto Rico to restructure its debt, but federal intervention is not seen as likely this year.

In the meantime, Garcia Padilla is battling low public approval ratings, icy relations with the island's creditors, eroding support within his own Popular Democratic party, and a federal investigation into whether people in his administration exchanged favors for campaign donations.

In Garcia Padilla's absence, his former secretary of state, David Bernier, is expected to launch a campaign as a Popular Democratic party candidate.

Leading candidates from the rival New Progressive Party (PNP) - which is generally more creditor-friendly - include Pedro Pierluisi, the island's non-voting representative in Congress, and Ricky Rossello, a lobbyist and son of a popular ex-governor.

(Reporting by Nick Brown; Editing by David Gregorio)

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UPDATE 1-Puerto Rico 'very unlikely' to avoid Jan.1 default - governor

n" readability="58">Dec 22 Puerto Rico's governor Alejandro Garcia Padilla said on Tuesday it is "very, very unlikely" there will be no default on debt due Jan. 1 and that the U. S. territory was evaluating which bonds are to be paid.

"Making a total payment will be (very unlikely)," Garcia Padilla told reporters at an event in San Juan. "If a partial payment is to be done, which bonds should be paid? It is an evaluation that we are doing."

Puerto Rico first defaulted on its debt in August and has warned that more defaults are coming. It has an upcoming debt payment of around $1 billion due Jan. 1.

"It is very, very unlikely there is no default," Garcia Padilla said. "Very unlikely. In full or part."

Puerto Rico officials have given clear warnings of defaults. Garcia Padilla said earlier in December that the island "will default in January or in May," and Melba Acosta, president of the island's Government Development Bank (GDB) was quoted in local media last Friday saying the island is expected to default on a Jan. 1 payment on its Infrastructure Finance Authority (PRIFA) bonds.

Garcia Padilla on Dec. 1 granted the U. S. territory power to take revenues from public agencies such as the highways agency HTA, PRIFA and its convention center district authority via "clawbacks".

While the HTA and convention center have said in filings that they expect interest due Jan. 1 will be paid in full from funds in deposit, PRIFA has only said that funds on deposit would be applied to the Jan. 1 payment.

"There are obligations that already have funds. Those that already have enough funds will be paid," Garcia Padilla said on Tuesday.

Garcia Padilla said he was "trying to come up with the largest quantity possible to pay the most possible."

He added that he has an obligation to make payments if Puerto Rico has money - otherwise the island would face litigation from creditors.

"If I have the money, and I don't use it to pay the government's obligations, then we lose the case in court in two seconds," Garcia Padilla said. "Because if the money is there, I have to use it to pay." (Reporting by a contributor in San Juan; writing by Megan Davies; Editing by James Dalgleish and Diane Craft)

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Abengoa Mexico says to default on local coupon payments

MEXICO CITY Dec 10 The Mexican unit of struggling Spanish company Abengoa said on Thursday it will default on coupon payments for two issues of short term tradeable certificates.

In a brief statement, the engineering and renewable energy group said it would default on coupons for the 00315 and 00415 issues of its so-called certificados bursatiles. It did not divulge the sum of money involved, or when they had been due for payment.

Abengoa, trying to avoid becoming Spain's biggest-ever bankruptcy, is negotiating a multi-million-euro lifeline with creditor banks which have asked the company to guarantee it with assets.

Abengoa and creditor banks agreed on Thursday to put on hold an option of selling shares in its Abengoa Yield business as a means of raising money, two banking sources briefed on the talks said. (Reporting by Mexico City Newsroom; Editing by Dave Graham)

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Abengoa begins insolvency proceedings after failed accord with Gonvarri

MADRID Nov 25 Spain's Abengoa said on Wednesday it has started talks with creditors on insolvency proceedings after investors Gonvarri backed away from a plan to inject around 350 million euros ($374 million) in to the company.

Trading in Abengoa was suspended by the stock market regulator until 1000 GMT. ($1 = 0.9369 euros) (Reporting by Robert Hetz; Writing by Paul Day)

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Stada resolves legal dispute with Serbia's Velefarm

FRANKFURT Dec 18 German drugmaker Stada said on Friday it had resolved a legal dispute with Serbian drug wholesale group Velefarm, with both sides waiving claims against each other.

The insolvency administrator of Velefarm had sued Stada for 54.2 million euros last year, demanding that certain agreements reached in 2010 and 2011 between Stada and Velefarm to be declared invalid.

Velefarm in 2010 was no longer able to pay Stada in Serbia, one of Stada's largest markets, which led to a debt restructuring contract between the two sides.

Stada said on Friday the insolvency administrator had waived the 54.2 million euro claim. In return, Stada subsidiary Hemofarm waived most of a single-digit million euro claim against Velefarm, which Stada already fully impaired in 2010. (Reporting by Maria Sheahan; Editing by Arno Schuetze)

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Largest Dutch department store V&D granted creditor protection

AMSTERDAM Dec 23 Vroom & Dreesman, the largest Dutch department store chain, has been granted protection from creditors after failed efforts to turn the troubled business around, the company said on Wednesday.

V&D, with 10,000 employees at 62 stores across the Netherlands, has struggled to cut costs after posting losses in 2014. (Reporting by Anthony Deutsch; editing by Jason Neely)

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