/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/100217.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Wednesday, February 17, 2010, Vol. 11, No. 033 Headlines E S T O N I A BALTIC PANEL: Owner Sues Two SEB Estonian Units Over Bankruptcy F I N L A N D COPTERLINE OY: Unprofitable Operations Prompt Insolvency Filing G E R M A N Y ALERIS INTERNATIONAL: German Unit Files to Restructure Debt MAX TWO: S&P Puts 'BB-'Rated EUR100MM Senior Notes on Watch Neg. TUI AG: Net Loss Narrows to EUR103MM on Lower Admin. Expenses I R E L A N D BLACK SHORE: Owner Consents to EUR2.7MM Summary Judgment Order COCO FINANCE: S&P Downgrades Rating on Class E Notes to 'B+' COGNOTEC HOLDINGS: Bought by First Derivatives in US$4.7MM Deal EUROCONNECT ISSUER: S&P Junks Rating on Class D Notes From 'BB' SEA FORT: Fitch Affirms Rating on EUR15MM Class E Notes at 'BB' I T A L Y IT HOLDING: Industrial Creditors Mull Debt-For-Equity Swap MARIELLA BURANI: Receives "Concrete" Interest From New Investors N E T H E R L A N D S HARBOURMASTER CAPITAL: Fitch Downgrades Ratings on 27 Tranches N O R W A Y INTEROIL EXPLORATION: Bankruptcy Sought; In Talks for Funding TERRA INDUSTRIES: Yara May Benefit From Planned Buy, S&P Says S L O V A K R E P U B L I C * SLOVAK REPUBLIC: Bankruptcy Proceedings Up 40% in 2009 S P A I N AYT COLATERALES: Fitch Downgrades Rating on Class D Notes to 'B' BBVA CONSUMO: Fitch Downgrades Ratings on Three Transactions U K R A I N E RODOVID BANK: Moody's Confirms Deposit Ratings at 'Caa2' U N I T E D K I N G D O M ETIQUETTE FORMAL: Bought Out of Administration in Pre-Pack Deal HSH DELAWARE: Wants Barlow Lyde as United Kingdom Counsel PROVIDENT INSURANCE: S&P Gives Positive Outlook; Keeps BB+ Rating SHIMLA PINKS: Parent Company Placed Into Administration VIRGIN MEDIA: Has Strong Broadband Offering, Fitch Says X X X X X X X X * Fitch Says European LBOs Still Face Medium-term Default Risk ********* ============= E S T O N I A ============= BALTIC PANEL: Owner Sues Two SEB Estonian Units Over Bankruptcy --------------------------------------------------------------- Ott Ummelas at Bloomberg News reports that OU Grove Invest, an Estonian property developer, has sued two Estonian units of Stockholm-based lender SEB AB over the handling of production problems at bankrupt OU Baltic Panel Group. Bloomberg relates said in an e-mailed statement Monday the Estonian property developer now claims EEK1.49 billion (US$130 million) from AS SEB Pank and AS SEB Liising, saying the two companies caused the financial difficulties that led to bankruptcy. "Baltic Panel Group, established by OU Grove Invest in 2005 for plywood production, lost both its investments and the company as a result of the forcible intervention of SEB Pank and SEB Liising in the management of the company," Bloomberg quoted Erki Kergandberg, attorney at law, representing OU Grove Invest, as saying. Bloomberg recalls an Estonian court in May 2008 declared the bankruptcy of Baltic Panel Group, a plywood maker in Kohila, northern Estonia, owned by Grove, citing liquidity issues at the plant. ============= F I N L A N D ============= COPTERLINE OY: Unprofitable Operations Prompt Insolvency Filing --------------------------------------------------------------- Toomas Hobemagi at Baltic Business News reports that Copterline Oy said it had filed for insolvency. According to the report, Pekka Jaatinen, Copterline's managing director, said its flight operations were no longer profitable. The report recalls Copterline had been struggling since one of its aircraft crashed in the Gulf of Finland in 2005, killing all 12 passengers and two crew. On August 10, 2005 a Sikorsky S-76 crashed into the sea near Tallinn three to four minutes after taking off, killing 14 people, the report recounts. Copterline re-opened Tallinn-Helsinki route in April 2008, but stopped regular helicopter services between Helsinki and Tallinn in December 2008, laying off personnel working with scheduled Helsinki-Tallinn services, the report relates. The demand for the route that was re-opened in April was about 50% lower than what was necessary to make it profitable, the report says citing CEO Kaj Takolander. Headquartered in Helsinki, Finland, Copterline Oy -- http://www.copterline.com/en-- operates emergency and medical service helicopters in three bases, in Varkaus, Vaasa and Oulu. The company uses four Eurocopter 135 helicopters for the operation. ============= G E R M A N Y ============= ALERIS INTERNATIONAL: German Unit Files to Restructure Debt ----------------------------------------------------------- Aleris Deutschland Holding GmbH filed with the U.S. Bankruptcy Court for the District of Delaware a petition under Chapter 11 of the Bankruptcy Code on February 5, 2010. ADH was organized under the laws of Germany on March 22, 2006, as a limited liability company and is a non-operating holding company. ADH is a direct wholly owned subsidiary of Aleris Recycling Holding B.V., a Netherlands limited liability company, and an indirect wholly owned subsidiary of Aleris International, Inc. ADH directly and indirectly owns stock of certain German and Belgium subsidiaries that produce rolled and extruded aluminum products. ADH has no employees, and its primary assets are its interests in its subsidiaries. ADH maintains a balance bank account at Key Bank, N.A., in Cleveland, Ohio. ADH is obligated as a borrower under that certain Term Loan Agreement, dated as of August 1, 2006, as amended, with various financial institutions and other persons from time to time as lenders, and Deutsche Bank, as administrative agent. Specifically, the Prepetition Term Loan Agreements provided ADH with a credit facility of EUR297 million, which is guaranteed by the U.S.-based Debtors and certain non-debtor international affiliates. As of February 12 2009, the Europeran Term Loan Facility was fully drawn. On the U.S. Petition Date, a "Conversion Event" under the Prepetition Term Loan Agreements was triggered, resulting in the outstanding loans under the European Term Loan Facility becoming approximately EUR56 million and $311 million based on the EUR297 million drawn. The U.S. Debtors have been engaged in negotiations with the holders of the European Term Loan Facility to restructure the European Term Loan Facility as part of their emergence from Chapter 11. In connection with that restructuring, ADH commenced its Chapter 11 case. About Aleris International Aleris International, Inc., produces and sells aluminum rolled and extruded products. Aleris operates primarily through two reportable business segments: (i) global rolled and extruded products and (ii) global recycling. Headquartered in Beachwood, Ohio, a suburb of Cleveland, the Company operates over 40 production facilities in North America, Europe, South America and Asia, and employs approximately 8,400 employees. Aleris operates 27 production facilities in the United States with eight production facilities that provided rolled and extruded aluminum products and 19 recycling production plants. Aleris International, Inc., aka IMCO Recycling Inc., and various affiliates filed for bankruptcy on February 12, 2009 (Bankr. D. Del. Case No. 09-10478). The Hon. Brendan Linehan Shannon presides over the cases. Stephen Karotkin, Esq., and Debra A. Dandeneau, Esq., at Weil, Gotshal & Manges LLP in New York, serve as lead counsel for the Debtors. L. Katherine Good, Esq., and Paul Noble Heath, Esq., at Richards, Layton & Finger, P.A. In Wilmington, Delaware, serves as local counsel. Moelis & Company LLC, acts as financial advisors; Alvarez & Marsal LLC as restructuring advisors, and Kurtzman Carson Consultants LLC as claims and noticing agent for the Debtors. As of December 31, 2008, the Debtors had total assets of US$4,168,700,000; and total debts of US$3,978,699,000. Bankruptcy Creditors' Service, Inc., publishes Aleris International Bankruptcy News. The newsletter tracks the chapter 11 proceeding undertaken by Aleris International, Inc. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945- 7000) MAX TWO: S&P Puts 'BB-'Rated EUR100MM Senior Notes on Watch Neg. ---------------------------------------------------------------- Standard & Poor's Ratings Services said that it placed its 'BB-' long-term debt rating on the EUR100 million senior secured notes due 2024 issued by German wind power project Max Two Ltd. on CreditWatch with negative implications. The rating was subsequently suspended. The rating suspension reflects S&P's belief that there is insufficient information available to maintain surveillance of its rating opinion at this time. "The CreditWatch placement reflects S&P's view that the wind park's financial performance remains subpar because of lower-than- expected revenues," said Standard & Poor's credit analyst Timon Binder. "S&P believes that poor wind conditions in 2009, particularly in December, could have caused MTL's cash flows to be materially lower than expected. In S&P's view, the cash flows of one or more wind farms within MTL's portfolio may have fallen to a level that would trigger a dividend lock-up, indicating that the original assumptions for the project have not been achieved. S&P understand from management that the average performance of MTL's wind farms in 2009 was about 10% below projections. "S&P is suspending the rating on MTL because of the delay, and what S&P consider to be insufficiency and uncertainty of financial information provided by EnergieKontor, the operator of all the wind farms. S&P believes the delay creates uncertainty regarding the company's actual financial situation, with an unknown effect on credit quality." Standard & Poor's may suspend a rating, in certain circumstances, if it expects to reinstate the rating in the future. The rating suspension does not imply that MTL is not servicing its obligations or that company's operations have deteriorated, but rather that the company has failed to provide what S&P consider important information. S&P would reinstate the rating if S&P see that S&P has received comprehensive, reliable and transparent information by mid-March 2010, and evidence of an improved response time. S&P believes S&P could receive more complete information over the next few weeks, which S&P expects would enable us to reinstate the rating and resolve the CreditWatch within the first quarter of 2010. Conversely, if S&P continue to lack sufficient information, S&P would consider withdrawing the rating. TUI AG: Net Loss Narrows to EUR103MM on Lower Admin. Expenses ------------------------------------------------------------- Holger Elfes at Bloomberg News reports that TUI AG said in an e-mailed statement Monday its net loss narrowed to EUR103 million (US$134 million) in the three months through December 2009 compared with EUR155 million a year earlier, citing lower administration costs following the partial disposal of the Hapag- Lloyd container line. According to Bloomberg, TUI's administration expenses were reduced to EUR313 million from EUR362 million a year earlier after the sale of its majority in Hapag. TUI also paid less for debt because it had receipts from the sale of 57% of the container line, Bloomberg notes. The loss before interest, taxes and amortization at Hapag widened to EUR21 million from EUR8 million, Bloomberg says. The company holds its annual general meeting on Feb. 17 and will ask shareholders for support against Norwegian shipping billionaire John Fredriksen, who is calling for a special audit regarding the partial disposal of Hapag, Bloomberg discloses. TUI AG -- http://www.tui-group.com/en/-- is a Germany-based company mainly engaged in the tourism sector, focusing on the markets of Central, Northern and Western Europe. TUI owns a network of travel agencies and tour operators, including air tours, Thomson, First Choice and TUI Deutschland. It also operates several airlines, including Corsairfly, Thomsonfly and First Choice Airways, among others. The Company is structured into three segments: TUI Travel, TUI Hotels and Resorts, and Cruises. TUI Travel comprises the Company's distribution, tour operating, airline and incoming activities and services over 30 million customers in 180 countries. The TUI Hotels and Resorts division offers a portfolio of 238 hotels, located in Spain, Greece, Egypt, France, Turkey, Tunisia, the Balearics and the Caribbean, among others. The Cruises sector comprises Hapag-Lloyd Kreuzfahrten GmbH and TUI Cruises which provide luxury cruises, and cruises within the German-speaking countries, respectively. * * * As reported in the Troubled Company Reporter-Europe on Sept. 21, 2009, Moody's Investors Service lowered the Corporate Family Rating and Probability of Default Rating of TUI AG to Caa1 from B3. At the same time, the unsecured rating and the subordinated rating were lowered from Caa1 to Caa2 and from Caa2 to Caa3, respectively. Moody's said the outlook is negative. ============= I R E L A N D ============= BLACK SHORE: Owner Consents to EUR2.7MM Summary Judgment Order -------------------------------------------------------------- Mary Carolan at The Irish Times reports that John Sweeney, whose Black Shore Holdings company was wound up last week, has consented to a EUR2.7 million summary judgment order in the Commercial Court over unpaid loans. The report recalls HSBC Private Bank Ireland sought the order arising from a EUR2.7 million loan extended to Mr. Sweeney under a facility letter of December 2007 providing a line of credit to enable him to undertake various investments, subject to approval by the bank. The report relates when the proceedings came before Mr Justice Peter Kelly at the Commercial Court Monday, he was told Mr. Sweeney was consenting to judgment in the sum sought. According to the report, judgment was entered in the amount of EUR2,762,868. Blackshore Holdings comprises Mr. Sweeney's oil, property and hotel interests. COCO FINANCE: S&P Downgrades Rating on Class E Notes to 'B+' ------------------------------------------------------------ Standard & Poor's Ratings Services lowered and removed from CreditWatch negative its credit ratings on six classes of CoCo Finance 2006-1 PLC's EUR282.2 million floating-rate credit-linked notes. S&P lowered its ratings on these tranches following its analysis of the effect that its updated corporate collateralized debt obligation criteria have on these ratings. On Sept. 17, 2009, S&P placed its ratings on 1,626 European cash flow, hybrid, and synthetic CDO transactions on CreditWatch negative, in tandem with the publication of its updated criteria. The rating actions reflect S&P's recalibration of the parameters within its CDO Evaluator model in connection with its criteria update. In its review, S&P considered both the updated criteria and the current credit quality of the portfolio. S&P will include these tranches in its January global synthetic rated overcollateralization report, which will include the SROC ratios for synthetic corporate CDO transactions under its updated criteria. Ratings List CoCo Finance 2006-1 PLC EUR282.2 Million Floating-Rate Credit-Linked Notes Ratings Lowered and Removed From Creditwatch Negative Rating ------ Class To From ----- -- ---- A+ AA+ AAA/Watch Neg A A+ AAA/Watch Neg B A AA/Watch Neg C BBB+ A/Watch Neg D BB+ BBB/Watch Neg E B+ BB/Watch Neg COGNOTEC HOLDINGS: Bought by First Derivatives in US$4.7MM Deal --------------------------------------------------------------- The Irish Times reports that Irish software firm First Derivatives has bought Cognotec Holdings Ltd. in a deal worth up to US$4.7 million (EUR3.5 million). According to the report, the terms of the purchase comprise a cash payment of US$4.7 million, US$500,000 of which will be held in escrow pending delivery of certain agreements by the receiver following completion. The purchase will be paid for in cash from the company's existing banking facilities, the report says. Dublin-based Cognotec -- http://www.cognotec.com/-- provides e-commerce solutions to automated foreign exchange and money market dealing systems. It was placed into receivership on January 22, 2010. Cognotec was founded 20 years ago and now has operations in Dublin, London, New York, Singapore and Tokyo. In the year to November 30, 2008 Cognotec generated revenues of US$18.5 million and reported a loss before tax of US$1.8 million. EUROCONNECT ISSUER: S&P Junks Rating on Class D Notes From 'BB' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered and removed from CreditWatch negative its credit ratings on the class A to D notes in EuroConnect Issuer LC 2007-1 Ltd.'s EUR682.75 million credit- linked floating-rate notes. S&P lowered its ratings on these tranches following its analysis of the effect that its updated corporate collateralized debt obligation criteria have on these ratings. On Sept. 17, 2009, S&P placed its ratings on 1,626 European cash flow, hybrid, and synthetic CDO transactions on CreditWatch negative, in tandem with the publication of its updated criteria. The rating actions reflect S&P's recalibration of the parameters within its CDO Evaluator model in connection with its criteria update. In its review, S&P considered both the updated criteria and the current credit quality of the portfolio. S&P will include these tranches in its January global synthetic rated overcollateralization report, which will include the SROC ratios for synthetic corporate CDO transactions under the updated criteria. Ratings List Ratings Lowered and Removed From Creditwatch Negative EuroConnect Issuer LC 2007-1 Ltd. EUR682.75 Million Credit-Linked Floating-Rate Notes Rating ------ Class To From ----- -- ---- A BBB+ AAA/Watch Neg B BB- A+/Watch Neg C B- BBB/Watch Neg D CCC- BB/Watch Neg SEA FORT: Fitch Affirms Rating on EUR15MM Class E Notes at 'BB' --------------------------------------------------------------- Fitch Ratings has affirmed Sea Fort Securities Plc's notes and removed the class A-to-E notes from Rating Watch Negative. Fitch has assigned Stable Outlooks to most classes, except class B which has been assigned a Positive Outlook. The RWN was assigned in August 2009 pending full analysis after the implementation of Fitch revised SME CDO rating criteria for European granular corporate balance-sheet securitizations. The rating actions are: -- EUR35,000,000 MCDS: affirmed at 'AAA'; Outlook Stable; assigned a Loss Severity rating of 'LS-3' -- EUR41,500,000 class A notes (ISIN XS0259821006): affirmed at 'AAA'; removed from RWN; assigned Outlook Stable and 'LS-3' -- EUR22,000,000 class B notes (ISIN XS0259821345): affirmed at 'AA'; removed from RWN; assigned Outlook Positive and 'LS-4' -- EUR14,500,000 class C notes (ISIN XS0259821428): affirmed at 'A'; removed from RWN; assigned Outlook Stable and 'LS-5' -- EUR14,500,000 class D notes (ISIN XS0259821691): affirmed at 'BBB'; removed from RWN; assigned Outlook Stable and 'LS-5' -- EUR15,000,000 class E notes (ISIN XS0259821774): affirmed at 'BB'; removed from RWN; assigned Outlook Stable and 'LS-4' The affirmations reflect the robustness of the transaction and its ability to withstand Fitch's revised view on default probability, recovery and correlation assumptions as detailed in the updated SME CDO rating criteria. The strength of the transaction stems from increased credit enhancement, due to structural de- leveraging, and the strong performance of the portfolio. The Stable Outlook for the MCDS, and class A, C and D notes reflects the high level of headroom within their respective rating categories. The Stable Outlook for the class E notes indicates the strong historic portfolio performance and the prospect of continued portfolio amortization and deleveraging in the structure. The Positive Outlook for the class B notes reflects the agency's expectation that the structure will continue to deleverage quickly over the next 12-18 months, and that the class B notes are likely to be either upgraded or paid-in-full over this period. The portfolio has amortized to 27.3% of the initial portfolio size, or to EUR273 million, from an initial pool of EUR1 billion, which has resulted in the relative CE of all the rated notes increasing significantly since closing. In addition to the deleveraging effect, the portfolio has to-date experienced limited defaults and delinquencies. Since closing there has been just one credit event which occurred in July 2009 on a EUR5 million asset, which equates to 0.5% of the initial portfolio. Current delinquencies are also small, with no asset greater than 90 days delinquent and only 0.6% of the current portfolio 31-to-90 days delinquent. In the analysis undertaken, the originator's internal credit scores and associated probability of default were used to determine the portfolio's loss severity, although where assets were in arrears, adjustments were made to their PD in line with Fitch's new SME criteria to reflect the relative increase in risk. Sensitivity analysis was also conducted around the originator internal scores, where the PD was increased by up to 150%. From a recovery perspective, 19% of the current portfolio is secured by first lien mortgages over real estate with a weighted average LTV of 154%. These assets were treated as secured assets in the analysis with the recovery linked to each loan's current LTV. Of the remaining portfolio, assets were either unsecured or collateralized by a range of security, including life assurance policies, guarantees, floating charges, second lien mortgages or shares in housing companies. All these security types were treated as unsecured assets in the analysis. Looking forward, Fitch expects the notes to rapidly amortize and that ultimately all notes will be paid off in full. However, through the deleveraging process the portfolio will become increasingly concentrated both in terms of obligor and industry exposure. Within a year to 18 months, Fitch expects some of the senior notes to be fully repaid, leaving the mezzanine and junior notes increasingly exposed to, amongst others, the real estate sector and the top five obligors, whose exposures are likely to more than double from their current levels. Fitch expects the excess spread mechanism to only provide marginal benefit. Over this period, moderate increases in arrears are considered likely, however, even the junior notes are expected to remain in a solid position due to deleveraging. Sea Fort Securities Plc is a synthetic securitization of an initial EUR1 billion revolving reference pool of loans and credit facilities granted by Sampo Bank Plc to small- and medium-sized entities, large corporate entities and financial institutions in Finland. Sea Fort Securities Plc is a limited liability special purpose vehicle incorporated under the laws of Ireland. The proceeds from initial issuance remain invested in a 'AAA' Dexia Municipal Agency covered bond. Fitch expects no change in the risk profile related to the Dexia charged asset. ========= I T A L Y ========= IT HOLDING: Industrial Creditors Mull Debt-For-Equity Swap -------------------------------------------=-------------- Armorel Kenna at Bloomberg News reports that IT Holding SpA may receive an offer by the end of the month from suppliers owed as much as EUR200 million (US$270 million) in unpaid bills. Bloomberg relates a spokeswoman for Milan-based Athena Consorzio said in an e-mail Monday that the firm plans to set up a new company, funded by a group of financial investors, to buy the whole group, including IT Holding's Ferre and Malo brands and its Ittierre SpA production unit. According to Bloomberg, under the plan, IT Holding's industrial creditors would swap their debt for equity in the company. Not all of the suppliers have joined the consortium, Bloomberg notes. "The industrial creditors have an extra interest in resolving their lost credit as their own survival depends on what happens to IT Holding," Bloomberg quoted Athena as saying in the e-mail. At least 10 financial partners are interested in the project, Bloomberg says citing Athena. As reported by the Troubled Company Reporter-Europe, Bloomberg said IT Holding was granted bankruptcy protection in February 2009 along with all of its units after failing to make payments to lenders and suppliers. About IT Holding SpA Based in Milan, Italy, IT Holding SpA (BIT:ITH) -- http://www.itholding.com/-- operates in the luxury goods market. The company and its subsidiaries design, produce and distribute apparel, accessories, eyewear and perfumes. Its brand portfolio embraces: owned brands, Gianfranco Ferre, Malo, Exte, as well as licensed brands, Versace Jeans Couture, Versace Sport, Just Cavalli, C'N'C Costume National and Galliano. The company's production facilities are located in Italy. IT Holding SpA has a worldwide distribution network, including 39 directly operated stores, 274 monobrand stores and over 6,000 department and specialty stores. In order to be present in the most significant markets, IT Holding SpA has dedicated market companies: ITTIERRE SpA, ITTIERRE France SA, ITTIERRE Moden GmbH, IT USA HOLDING Inc and IT Asia Pacific Limited, among others. MARIELLA BURANI: Receives "Concrete" Interest From New Investors ---------------------------------------------------------------- Armorel Kenna at Bloomberg News reports that Mariella Burani Fashion Group SpA Chief Executive Officer Gabriele Fontanesi told Il Sole 24 Ore in an interview that the company has received "concrete" interest from new investors. According to Bloomberg, Mr. Fontanesi, as cited by the Italian newspaper, said he preferred reaching an agreement with creditors rather than going through bankruptcy protection because it would keep the fashion company "intact". The company may reach an accord this week with banks on restructuring the debt of its Antichi Pellettieri unit, Bloomberg says citing Il Sole. As reported by the Troubled Company Reporter-Europe on Feb. 16, 2010, Bloomberg News said Mariella Burani has decided to seek for bankruptcy after it didn't receive funds to cover EUR70 million (US$95 million) in losses. Bloomberg disclosed a court in the northern city of Reggio Emilia notified the group on Feb. 12 that it met requirements for bankruptcy protection and set a March 16 hearing with the Industry Ministry. According to Bloomberg, labor unions for the fashion group, which employs more than 2,000 workers, favor bankruptcy protection under the so-called Marzano Law and are due to meet with Industry Minister Claudio Scajola on Feb. 18. Mariella Burani Fashion Group SpA -- http://www.mariellaburani.it/ -- is an Italy-based company, operating in the fashion market. It designs, produces and distributes a range of apparel, knitwear, leather accessories, jewelry and footwear. The Company divides its operation into four divisions: Clothing Division, Leather Division, Digital Fashion and Fashion Jewellery. The Company's brand portfolio comprises the Company's own brands, such as Mariella Burani, Rene Lezard, Amuleti J, Blossom Burani, Ter et Bantine, Braccialini, FrancescoBiasia, Baldinini, Coccinelle, Sebastian, Facco Gioielli, Valente, Rosato and Calgaro, among others, and the licensed brands: Vivienne Westwood (Anglomania), Emmanuel Ungaro (Fuchsia), Alviero Martini, Thierry Mugler (Mugler), Patrizia Pepe (bimbo), Missoni, Warner Bros, Miss Sixty, Sweet Years, Gherardini e John Galliano, among others. Among the subsidiaries there are: Mariella Burani Retail Srl, Antichi Pelletteri SpA, Coccinelle Store France SA and Mandarina Duck Gmbh. ===================== N E T H E R L A N D S ===================== HARBOURMASTER CAPITAL: Fitch Downgrades Ratings on 27 Tranches -------------------------------------------------------------- Fitch Ratings has downgraded 27 tranches and affirmed 15 tranches from five collateralized loan obligations of leveraged loans managed by Harbourmaster Capital Limited and advised by Harbourmaster Capital Management Limited. In addition, the agency has placed one tranche on Rating Watch Negative, maintained the Rating Watch Negative status for 32 tranches, whilst nine of the affirmed tranches have Stable Outlook. Fitch has also assigned 32 Loss Severity Ratings. The five affected CLOs are Harbourmaster CLO 7 B.V., Harbourmaster CLO 8 B.V., Harbourmaster CLO 9 B.V., Harbourmaster CLO 10 B.V. and Harbourmaster Pro-Rata CLO 3 B.V. The rating actions address performance concerns, following a clustering of defaults during the summer of 2009 which were compounded by continued negative rating migration in the European leveraged loan market. Thirty three tranches are on RWN as these five transactions are affected by uncertainty on the treatment of defaulted assets for the purpose of the over-collateralization and interest coverage tests. If the clarification of the "Defaulted Collateral Obligations" definition results in no haircut being applied to the notional of defaulted obligations for the purpose of calculating OC and IC ratios, the resolution of the RWN would likely lead to a downgrade by a rating category or less. In its analysis for the rating actions taken, Fitch assumed that obligors that have defaulted on their obligations are marked at their market values or recovery estimates for the purpose of calculating the coverage tests. In addition, cash that was diverted into suspense accounts due to the uncertainty on the treatment of defaulted assets was assumed to be used to cure the coverage tests in the agency's analysis. The rating actions reflect leveraged loan defaults and increasing 'CCC'-rated asset exposure in the portfolios. Fitch employed its global rating criteria for corporate CDOs to analyze the quality of the underlying assets. In accordance with the agency's cash flow analysis criteria, Fitch also modeled the transactions' priority of payments including relevant structural features such as the excess spread-trapping mechanism and coverage tests. Although some credit protection remains for the downgraded notes, they are highly dependent on portfolio recovery prospects. Harbourmaster 7 has had eight defaults to date that represent 7.1% of the target par amount of the transaction. In addition, 13.8% of the portfolio is rated 'CCC' or lower. As a result of portfolio defaults, the credit enhancement of all tranches has reduced since closing. The affirmation of the class A1 notes reflects the robust CE driven by OC and excess spread. If assets that have defaulted on their obligations are treated as "defaulted collateral obligations" EUR1.8 million of interest proceeds currently held in a suspense account would be used to partially redeem B2 and a further EUR1.8 million of interest proceeds would be reserved for the acquisition of additional assets due to the breach of the additional coverage test. In addition, in June 2009, EUR2.1 million of interest proceeds were used to partially redeem class B2 and EUR2.1 million of interest proceeds were reserved for the acquisition of additional assets. The downgrades of the class A2, class A3, class A4, and class B1 notes reflect their reduced protection following the portfolio defaults as well as the increased loss expectations resulting from negative portfolio migration. Class B2 was downgraded in February 2009 and has been affirmed. Harbourmaster 8 has had seven defaults to date that represent 9.2% of the target par amount of the transaction. In addition, 15.1% of the portfolio is rated 'CCC' or lower. As a result of portfolio defaults, the credit enhancement of all tranches has reduced since closing. The affirmation of the class A1 notes reflects the robust CE driven by OC and excess spread. If assets that have defaulted on their obligations are treated as "defaulted collateral obligations" a total of EUR3.2 million of interest proceeds currently held in a suspense account would be used to partially redeem class A1. The downgrades of the class A2, class B, class C and class D notes reflect their reduced protection following the portfolio defaults as well as the increased loss expectations resulting from negative portfolio migration. Class E was downgraded in March 2009 and has been affirmed. Harbourmaster 9 has had six defaults to date that represent 7.5% of the target par amount of the transaction. In addition, 9.2% of the portfolio is rated 'CCC' or lower. As a result of portfolio defaults, the CE of all tranches has reduced since closing. The affirmation of the class A1-T and A1-VF notes reflects the robust CE driven by OC and excess spread. In July 2009, EUR1 million of interest proceeds were used to partially redeem class E and EUR1 million of interest proceeds were reserved for the acquisition of additional assets due to the breach of the additional coverage test. The downgrades of the class A2, class B, class C, class D and class E notes reflect their reduced protection following the portfolio defaults as well as the increased loss expectations resulting from negative portfolio migration. Harbourmaster 10 has had five defaults to date that represent 5.6% of the target par amount of the transaction. In addition, 5.6% of the portfolio is rated 'CCC' or lower. As a result of portfolio defaults, the CE of all tranches has reduced since closing. The affirmation of the class X, class A1, class A2 and class A3 notes reflects the robust CE driven by OC and excess spread. If assets that have defaulted on their obligations are treated as "defaulted collateral obligations", a total of 2.1m of interest proceeds collected in a suspense account over the last three payment dates would be used to partially redeem class A1. The downgrades of the class A4, class B1 and class B2 notes reflect their reduced protection following the portfolio defaults as well as the increased loss expectations resulting from negative portfolio migration. In Fitch's view, Harbourmaster Pro-Rata 3 has had six defaults to date that represent 9.9% of the target par amount of the transaction. This includes one obligor that is classified as a current pay obligation as per the transaction documents. In addition, 12.1% of the portfolio is rated 'CCC' or lower. As a result of portfolio defaults, the CE of all tranches has reduced since closing. The affirmation of the class A1-T, class A1-VF and class A2 notes reflects the robust CE driven by OC and excess spread. The downgrades of the class A3, class A4, class B1 and class B2 notes reflect their reduced protection following the portfolio defaults as well as the increased loss expectations resulting from negative portfolio migration. Harbourmaster 7, Harbourmaster 9 and Harbourmaster Pro-Rata 3 have in total nine combination notes rated by Fitch. The rating actions on these combination notes are driven by the rating actions on the underlying rated components of the combination notes, except for class S1 of Harbourmaster Pro-Rata 3 which is credit-linked to the rating assigned to the sovereign debt of the French Republic. =========== N O R W A Y =========== INTEROIL EXPLORATION: Bankruptcy Sought; In Talks for Funding ------------------------------------------------------------- Marianne Stigset at Bloomberg News reports that Interoil Exploration and Production ASA said the proposal from Norsk Tillitsmann ASA to authorize the reimbursement of bondholder funding and the filing of a petition for bankruptcy, if so instructed by the Instructing Bondholders, was adopted according to the voting requirements of the bond agreement. According to Bloomberg, Interoil will dispute any future filing for bankruptcy and is working with several local and international banks to secure refinancing and repayment of all outstanding debt. Interoil Exploration & Production ASA -- http://www.interoil.no/ -- is an international independent petroleum company with headquarters in Oslo. The company is engaged in the acquisition, exploration, development and operation of oil and natural gas properties. Interoil E&P serves as operator or active license partner in several production and exploration assets in Peru, Colombia, Ghana and Angola. TERRA INDUSTRIES: Yara May Benefit From Planned Buy, S&P Says ------------------------------------------------------------- Standard & Poor's Ratings Services said that it placed the 'BBB' long-term and 'A-2' short-term corporate credit ratings on Norway- based fertilizer distributor and producer Yara International ASA on CreditWatch with negative implications. Yara announced that it plans to acquire U.S.-based nitrogen producer Terra Industries Inc. (BB/Stable/--) for an estimated total consideration of US$4.7 billion. "The additional debt burden of the transaction will, in S&P's view, strain Yara's already weakened financial risk profile, even though S&P anticipate that the transaction will be over 50% equity financed," said Standard & Poor's credit analyst Sophia Dedemadis. Yara's reported interest bearing debt at year-end 2009 was Norwegian krone (NOK) 17 billion. The total consideration for the acquisition is US$4.7 billion, including Terra's existing debt of bonds totaling US$600 million due 2019. This figure does not include cash on Terra's balance sheet at the time of close. If completed, the acquisition should diversify Yara's global production assets. However the company's exposure to the volatile nitrogen segment will also increase. In 2010 S&P anticipate a significant improvement in nitrogen fertilizer pricing and volumes from 2009 levels. However, the consequent improvement in Yara's operating performance may not be sufficient to support the current rating. For fiscal year-end 2009, Yara reported revenues of NOK61.4 billion and operating cash flows of NOK11.9 billion, supported by large working capital inflows of NOK14.8 billion, mostly from inventory. The company's unadjusted funds from operations was negative, although it generated reported free operating cash flow of approximately NOK5.8 billion. More positively, Yara should benefit from Terra's position as a leading player in the U.S. nitrogen market, with a large portion of domestic nitrogen capacity and well-located nitrogen facilities. The acquisition would expand Yara's access to the central U.S. and provide good logistics in the area. Furthermore, Terra has historically generated good operating margins, which are currently in the high 20% range. Standard & Poor's aims to resolve the CreditWatch placement on completion of the Terra acquisition which Yara expects to occur within the next four months. "As part of the CreditWatch resolution, S&P will be meeting with management and discussing, in detail, the group's financial policy, business strategy and capital structure specifically in the context of the Terra acquisition and Yara's strategy for reaching its growth target of 10% of the global market," said Ms. Dedemadis. "S&P will also review the operating performance, synergies, and organic growth prospects of the proposed combined entity." S&P could affirm the ratings if Yara were able to demonstrate a satisfactory plan to achieve and sustain credit metrics commensurate with an "Intermediate" financial risk profile by early to mid 2011 -- taking into account any potential further acquisitions. Such an affirmation could, however, be accompanied by a negative outlook considering the low financial headroom at the rating. In contrast, S&P could lower the rating by one notch if Yara were unable to demonstrate a clear path toward restoring its credit metrics and achieving its growth targets in a measured fashion. ============================= S L O V A K R E P U B L I C ============================= * SLOVAK REPUBLIC: Bankruptcy Proceedings Up 40% in 2009 -------------------------------------------------------- The Slovak Spectator reports that the bankruptcy proceedings in Slovakia increased by 40% in 2009. Citing the SITA newswire, the report says district courts in Slovakia opened 600 bankruptcy proceedings last year, up 39.9% from the previous year. Robert Kicina, the executive director of the Business Alliance of Slovakia, Robert Kicina, attributed the increase of initiated and declared bankruptcy proceedings to the economic crisis, which has adversely affected the economic situation of most businesses in Slovakia, the report notes. According to the report, Justice Ministry data show that the number of declared receivership proceedings rose as well, by 10% to 276 last year. The report, citing SITA, discloses the courts register an increase in the number of completed bankruptcy proceedings as well which rose 44% to 288. Last year, the courts received a total of 1,060 proposals to declare a company bankrupt, the report relates. Compared with 2008, their number rose by 26%, the report notes. The report recalls in 2009, firms showed more interest in having their economic problems resolved via restructuring. In 2008 the courts registered 15 requests for restructuring and in 2009 the number grew to 78, the report states. Courts allowed 58 restructuring processes, the report says. ========= S P A I N ========= AYT COLATERALES: Fitch Downgrades Rating on Class D Notes to 'B' ---------------------------------------------------------------- Fitch Ratings has downgraded AyT Colaterales Global Hipotecario, FTA Serie AyT Colaterales Global Hipotecario CCM I's class B, C and D notes. Fitch has simultaneously revised the Outlook of the class A notes to Negative from Stable, the remaining notes have Negative Outlooks. A full rating breakdown is provided at the end of this comment. (The Spanish RMBS transaction is comprised of loans originated and serviced by Caja de Ahorros de Castilla la Mancha.) Fitch has downgraded the junior notes of the transaction due to a deterioration in performance. AyT Colaterales CCM I reports on a semi-annual basis and as of the November 2009 interest payment date, the transaction showed a significant deterioration in the performance of the pool. Loans that are three months or greater in arrears increased to 5.11% of the current balance as of November 2009, compared with 1.20% in November 2008. Cumulative defaults are equal to 1.3% of the initial pool balance. No defaulted loans have been sold to date. The excess spread was not sufficient to fully provision for the defaulted loans and the reserve fund had to be drawn on the last three IPDs. The reserve fund currently stands at 72% of the required amount. Total defaults to date have been equal to EUR10.4 million, of which only EUR2.5 million was absorbed by excess spread. The Negative Outlook reflects the possible further deterioration of the pool and likely reserve fund draws which will reduce the credit enhancement available for all notes. The pool deterioration to date suggests arrears will continue to grow and further defaults are expected, in addition to uncertainty with regard to the level of potential recoveries based on Fitch's expectation that Spanish house prices will experience price declines of 25%-30% on a peak-to-trough basis. Fitch used its EMEA RMBS surveillance criteria, employing its credit cover multiple methodologies, to assess the level of credit support available to each class of notes with respect to the transactions. The rating actions are: -- Class A (ES 0312273248) affirmed at 'AAA'; Outlook revised to Negative from Stable; assigned Loss Severity rating of 'LS-1' -- Class B (ES 0312273255) downgraded to 'A-' from 'A'; Outlook Negative; assigned 'LS-3' -- Class C (ES 0312273263) downgraded to 'BB' from 'BBB-'; Outlook Negative; assigned 'LS-4' -- Class D (ES 0312273271) downgraded to 'B' from 'BB-'; Outlook Negative; assigned 'LS-5' BBVA CONSUMO: Fitch Downgrades Ratings on Three Transactions ------------------------------------------------------------ Fitch Ratings has downgraded three BBVA transactions following completion of the agency's recent performance review amid wider concerns over a general deterioration in Spanish transactions. The three transactions, BBVA Consumo 1, Fondo de Titulizacion de Activos, BBVA Consumo 2, Fondo de Titulizacion de Activos's and BBVA Autos 2, Fondo de Titulizacion de Activos's were originated by BBVA ('AA-'/'F1+'/Outlook Positive) between late 2005 and 2006, with collateral pools backed by consumer loans or auto loans, or a mix of both assets. The rating actions are: BBVA Consumo 1 -- EUR579.1m class A notes downgraded to 'AA+' from 'AAA'; Outlook Negative; assigned Loss Severity rating 'LS-1' -- EUR28.5m class B notes downgraded to 'BBB' from 'AA'; Outlook Negative; assigned 'LS-3' -- EUR24m class C notes downgraded to 'B' from 'BBB'; Outlook Negative; assigned 'LS-3' BBVA Consumo 2 -- EUR819.4m class A notes downgraded to 'AA' from 'AAA'; Outlook Negative; assigned 'LS-1' -- EUR16.5m class B notes downgraded to 'BBB' from 'AA'; Outlook Negative; assigned 'LS-4' -- EUR42.8m class C notes downgraded to 'B' from 'BBB'; Outlook Negative; assigned 'LS-3' BBVA Autos 2 -- EUR406.4m class A affirmed at 'AAA'; Outlook Stable; assigned 'LS-1' -- EUR20.5m class B downgraded to 'AA-' from 'AA'; Outlook Negative; assigned 'LS-3' -- EUR30m class C downgraded to 'BB' from 'BBB+'; Outlook Negative; assigned 'LS-3' Since Fitch's prior performance review in July 2009, all three transactions have continued to have their reserve funds drawn to provision for potential credit losses, resulting in a continued weakening in the available cushion to the junior and mezzanine tranche. Fitch's cumulative gross default rate increased to 2.4% (base case: 2.07%) for BBVA Consumo 1, 2.6% (1.67%) for BBVA Consumo 2 and 2.6% (1.91%) for BBVA Autos 2 in December 2009. All three transactions have been performing worse than Fitch's initial base case expectations with respect to gross defaults. As recoveries on defaulted receivables have in general fallen significantly below the agency's original expectations, this has lead to increased loss severity across all three BBVA transactions. As a result, Fitch has undertaken to revise its expectations for the default and recovery rate in its forecast model based on the current delinquency trend, particularly for delinquencies of 90+ days and the actual recovery performance to date. Various scenarios have been generated by applying different stress levels for the next 18 months in accordance with the agency's 'EMEA Consumer ABS Rating Criteria'. The implied default rates that have been derived from the delinquency buckets in each transaction range from 3% to 5%, and in each case recoveries of 20% to 40% have been assumed. Although defaults and recoveries remained the principal drivers for the downgrades, other considerations such as pool de-leveraging and seasoning, collateral composition and prepayment have also been incorporated into the analysis. All three transactions benefit from a guaranteed excess spread of between 300bps to 325bps via the swap and Fitch has given full credit in its ratings analysis to this feature. As of January 2010, BBVA Consumo 1 had amortized to 42% of its original balance, BBVA Consumo 2 had amortized to 59% and BBVA Autos 2 had amortized to 46%. ============= U K R A I N E ============= RODOVID BANK: Moody's Confirms Deposit Ratings at 'Caa2' -------------------------------------------------------- Moody's Investors Service has confirmed the Caa2 deposit and B3.ua National Scale Ratings of Rodovid Bank. This confirmation concludes the review of these ratings, which were under review with direction uncertain. Rodovid Bank's E bank financial strength rating -- which was not under review -- remained unchanged with a stable outlook. At the same time, Moody's assigned a developing outlook on the bank's deposit ratings. Rodovid Bank has been under the temporary administration of the Ukrainian central bank (National Bank of Ukraine or NBU) with payments moratorium since Q1 2009 following Rodovid Bank's substantial liquidity and asset quality problems. The rating action takes into account the significant level of uncertainty regarding Rodovid Bank's prospects in the medium term, and the possible extended period that may therefore be required to assess the bank's franchise perspective and its financial position. As previously announced by the Ukrainian government, about UAH6 billion (US$750 million) of deposits have -- since December 2009 -- been transferred to Rodovid Bank from defaulted Ukrprombank. To help Rodovid Bank withstand substantial loan write downs and repay obligations to depositors of Ukrprombank, the government has injected nearly UAH8 billion (US$1 billion) into the bank's capital in 2009. Moody's notes that the already implemented -- and possible further -- recapitalization of the bank by the government increases the likelihood for Rodovid Bank to remain a going concern and return to normal banking operations in the medium term. However, the rating agency believes that the ongoing temporary administration regime coupled with uncertainty regarding the bank's current financial position and operating environment, continue to constrain Rodovid Bank's ratings. Therefore a developing outlook was assigned to the bank's deposit ratings. The previous rating action on Rodovid Bank was implemented on 10 November 2009, when Moody's changed the status of the review of Rodovid Bank's deposit ratings to review with direction uncertain from review for possible downgrade. Headquartered in Kiev, Ukraine, Rodovid Bank reported total assets of UAH16.95 billion (US$2.12 billion) and total equity of UAH4.34 billion (US$ 542 million) in accordance with Ukrainian Accounting Standards at year-end 2009. =========================== U N I T E D K I N G D O M =========================== ETIQUETTE FORMAL: Bought Out of Administration in Pre-Pack Deal --------------------------------------------------------------- James Chapelard at Crain's Manchester Business reports that Etiquette Formal Hire Ltd. has been bought out of administration in a pre-pack deal, saving up to 160 jobs. According to the report, the business has been sold to a new consortium, but previous owners the Novak family have retained a small stake. The report says the majority will be held by Philip Day, chief executive of the Edinburgh Woollen Mill (Group) Ltd. and Peter Lucas, chief executive of Speciality Retail Group, which owns Youngs Hire. The value of the deal was not disclosed, the report notes. The report recalls administrators from Grant Thornton were appointed on February 2 after a drop in sales caused financial problems for the firm. Etiquette has suffered because of the decline in corporate hospitality during the recession, the report relates. Etiquette Formal Hire Ltd. supplies morning suits and evening wear to retailers. HSH DELAWARE: Wants Barlow Lyde as United Kingdom Counsel --------------------------------------------------------- HSH Delaware GP LLC, et al., have asked for permission from the U.S. Bankruptcy Court for the District of Delaware to employ Barlow Lyde & Gilbert LLP as United Kingdom counsel, nunc pro tunc to the commencement date. BLG will advise the Debtors on any English law issues arising following the Debtors' commencement of the Chapter 11 cases including providing support in connection with ongoing proceedings. Timothy Simon Strong, a partner in BLG, says that the firm will be paid based on the hourly rates of its personnel: Timothy Strong GBP500 Dorothy Herman GBP375 Trainee Solicitor GBP135 Paralegal/Litigation Associate GBP135 Mr. Strong assures the Court that BLG is "disinterested" as that term is defined in Section 101(14) of the Bankruptcy Code. By separate applications, the Debtors are seeking to employ and retain Richards, Layton & Finger, P.A., as counsel to the Debtors; Walkers Global as Cayman Islands counsel to the Debtors; and McCarthy Tetrault as Canadian counsel to the Debtors. Due to the complexity and international nature of the Chapter 11 cases, the Debtors submit that it is essential to employ United Kingdom, Canadian and Cayman Islands counsel in order to fully protect the rights of the Debtors. The Chapter 11 cases follow disputes between the Debtors and various lenders under October 19, 2006 Credit Facility Agreements. The governing law of the Credit Facility Agreements is English law. The Debtors' rights and obligations under the agreements may be relevant to the Chapter 11 cases. HSH Delaware GP LLC is based in Wilmington, Delaware. Nine HSH partnerships were created in 2006 to buy a 26% stake in HSH Nordbank AG, the world's largest shipping financier, from WestLB AG for about EUR1.25 billion (US$1.76 billion). The partnerships received unsecured term and revolving loans of EUR375 million from ABN AMRO bank to fund the purchase of HSH Nordbank shares. As reported by the Troubled Company Reporter on September 9, 2009, creditors with claims aggregating US$27.8 million filed a petition to send affiliate HSH Delaware LP to Chapter 7 liquidation (Bankr. D. Del. Case No. 09-13145). Commerzbank AG, Lloyds TSB Bank Plc, ABN Amro Bank NV, Calyon, Royal Bank of Scotland Plc and Landsbanki Islands HF filed the involuntary Chapter 7 petition. HSH Delaware filed for Chapter 11 bankruptcy protection on January 21, 2010 (Bankr. D. Delaware Case No. 10-10187). The Company listed US$100,000,001 to US$500,000,000 in assets and US$100,000,001 to US$500,000,000 in liabilities. HSH Delaware's affiliates -- HSH Delaware L.P.; HSH Luxembourg S.a.r.l.; HSH Luxembourg Coinvest S.a.r.l.; HSH Delaware GP LLC; HSH Alberta I L.P.; HSH Alberta II L.P.; HSH Alberta V L.P.; HSH Coinvest (Alberta) L.P.; JCF HSH (DE) GP LP; HSH Delaware L.P.; HSH Luxembourg S.a.r.l.; and HSH Luxembourg Coinvest S.a.r.l. -- also filed separate Chapter 11 petitions. PROVIDENT INSURANCE: S&P Gives Positive Outlook; Keeps BB+ Rating ----------------------------------------------------------------- Standard & Poor's Ratings Services said that it revised the outlook on its long-term counterparty credit and insurer financial strength ratings on U.K.-based non-life insurer Provident Insurance PLC to positive from stable due to its intended sale by GMAC Inc. In addition, the 'BB+' ratings were affirmed. The ratings on Provident Insurance reflect the impact of the weak credit quality of Provident Insurance's parent, GMAC Inc., offset by Provident Insurance's good stand-alone characteristics. These include its very conservative investments and strong capitalization. These positive factors are diminished, however, by increased industry and underwriting performance pressure. "The positive outlook reflects the possibility that there will no longer be any parental constraint on the ratings on Provident Insurance following its sale," said Standard & Poor's credit analyst Nigel Bond. "S&P could, therefore, raise the ratings on the company by up to two notches to match its stand-alone credit profile." The outlook also continues to reflect S&P's understanding that the company's financial strength will be protected to a significant extent by its supervisor, the U.K. Financial Services Authority. If the sale does not occur, or the financial strength is not adequately protected, it could lead to a negative rating action. SHIMLA PINKS: Parent Company Placed Into Administration ------------------------------------------------------- James Chapelard at Crain's Manchester Business reports that the parent company of Shimla Pinks in Manchester has been placed into administration. According to the report, the Indian restaurant on Dolefield, Crown Square, adjacent to Spinningfields, remains open while Birmingham- based administrators Irwin and Co "explore options" for the business. The insolvency is thought to relate to delays in moving into the adjacent Spinningfields complex, the report says. The report relates administrator Gerald Irwin said the cost of moving had been higher than the directors first anticipated. Shimla Pinks -- http://www.shimlapinks.com/-- is a Birmingham- based Indian cuisine restaurant. VIRGIN MEDIA: Has Strong Broadband Offering, Fitch Says ------------------------------------------------------- Fitch Ratings has amended the version of a comment published earlier to include British Telecommunications plc's ratings. The amended version has also removed reference to BT Group plc's senior unsecured rating. Fitch has affirmed BT Group plc's Long-term Issuer Default Rating at 'BBB' with a Stable Outlook. The agency has also affirmed BT Group's Short-term Issuer Default Rating at 'F2'. Fitch has simultaneously affirmed British Telecommunications plc's Long-term Issuer Default Rating at 'BBB' with a Stable Outlook, its Short- term rating at 'F2' and its senior unsecured rating at 'BBB'. The rating affirmation reflects some visibility and defensiveness in BT's core cash flow stream due to its incumbent domestic fixed- line operations. Although underlying revenue declined by 5% during the nine months ended December 2009 to GBP15.55 billion, adjusted EBITDA has increased over the same period to GBP4.25 billion, driven by the company's cost-cutting efforts. "BT's successful cost saving efforts have given management some time to turnaround the Global Services division and improve the group's competitive position in the UK," says Damien Chew, Director in Fitch's TMT team in London. "However, BT's pension deficit remains a concern and overall growth prospects are likely to be reduced by the anaemic UK economic recovery." Competition in the UK fixed-line telecoms market remains intense, especially for triple-play services. BT has seen an early positive take-up of its internet protocol TV product, BT Vision (9% of its broadband customers), but further attempts to gain market share will likely face stiff competition. Virgin Media Inc ('BB-'/'B' /Positive), whose cable network covers about half of UK households, has a strong broadband offering, and has seen brisk take-up of its high-speed (20Mbit/s and 50Mbit/s) broadband packages and video-on-demand service. British Sky Broadcasting Group plc (rated 'BBB+'/Stable), the pay-TV satellite operator, meanwhile is seeing a strong take-up in demand for its high definition TV service (+482,000 net adds in Q409), and a firm initial response to its fully-unbundled voice and broadband telephony offering. BT is the only European incumbent without a domestic mobile network. Fitch believes that the lack of an infrastructure-based mobile arm may expose BT to competitive challengers who can bundle fixed and mobile offerings more effectively. UK spectrum auctions, expected to take place in H111, may provide BT with the option to purchase radio frequencies to deploy its own mobile service. While this would plug a gap in its product portfolio, such a strategy would likely lead to increased investment and would not be without execution risk. BT's GBP9.0 billion pension deficit remains a source of concern as the company will have to make significant deficit payments into the scheme which is likely to limit deleveraging. The company plans to make pension deficit payments of GBP525 million per annum until December 2011, with further payments in following years if the pension fund's returns do not improve. There is uncertainty surrounding the regulatory scrutiny of the proposed plan, but Fitch notes that these steps have been agreed between BT and the pension trustees. Given the lack of prospects for revenue growth, Fitch is concerned that BT might struggle to deleverage in the medium-term. More challenging market conditions might result in lower profitability and/or higher capital intensity. Specifically, the turnaround of Global Services and the performance of BT Retail in a highly competitive market are critical to maintaining BT's credit profile. Signs of EBITDA, including leavers costs (GBP5.4 billion in the 12 months to December 09), trending down towards GBP5 billion could lead to negative rating action. BT's next debt repayments are for sterling equivalents of GBP2.5 billion in H2FY11, which were covered by cash and short- term investments of GBP1.0 billion at end-December 2009 and GBP2.4 billion of undrawn committed facilities (of which GBP900 million expires in March 2010). =============== X X X X X X X X =============== * Fitch Says European LBOs Still Face Medium-term Default Risk -------------------------------------------------------------- Fitch Ratings says that default rates for European leveraged buyouts are expected to show some stabilization in H2 2010. However, many credits still have unsustainable capital structures and, given the high level of low rated transactions, a second medium- to longer-term wave of defaults in the sector by 2013, when widespread maturities come due, cannot be ruled out. "LBO business plans remain susceptible to the effects of a weak economic recovery, which could lead to stalled de-leveraging and heightened refinancing risks from 2012 onwards when many bullet repayment tranches will start to fall due," said Pablo Mazzini, Senior Director at Fitch's European Leveraged Finance group. Given that the primary leveraged bank loan and securitization markets are constrained to provide funding for leveraged borrowers, medium-term refinancing risk for existing borrowers remains high as they are unlikely to generate sufficient free cash flow to repay debt when maturities come due. Debt amortization for Fitch's portfolio of 293 privately shadow- rated leveraged credits will increase to a yearly aggregate average of EUR48 billion between 2013 and 2016, from a more manageable EUR6.5 billion in 2010. Fitch also estimates that average leverage multiples will remain high by end-2012 at 4.6x (senior)/6.1x (total). For the 157 credits rated 'B-*' and 'CCC*' leverage is expected to be even higher at 5.2x (senior)/7.2x (total). In terms of credit performance, in the last 12 months to January 2010, the ratio of rating downgrades to upgrades declined gradually to 5.7x from a high of 15.9x in LTM at August 2009. Since September 2009, Fitch has recorded 89 affirmations (64% of all rating actions), 31 downgrades (of which 10 were consummated defaults) and 18 upgrades. Positive rating actions were usually driven by a combination of resilient business models generating operating profits, which, combined with early debt redemptions, contributed net de-leveraging progress. Fitch reiterates that the market may bifurcate between resilient credits that continue to deleverage and those that do not, or do so more slowly (see the agency's latest European Leveraged Credit review, published in October 2009 and available at www.fitchratings.com). The share of low ratings remains high in Fitch's European leveraged credit portfolio, implying that legacy capital structures remain unsustainable in the medium- to long- term, notwithstanding recent operating performance stabilization and the expectation of extended economic recovery. Out of 293 shadow- rated credits, 18.2% were rated CCC* (or below) at the end of January 2010, slightly down from 20.1% in September 2009. The proportion of B-* rated (or below) remains at an all-time high of 61%. LTM default rates as of end-Q409 were 7.5% by deal count (versus 1.8% in 2008) and 6.7% by debt volume (2.1% in 2008). Cumulatively, they were 9.3% and 8.7% respectively since the onset of the credit crisis in 2007. Cumulative default rates are likely to rise to 15%-20% by the end of 2010 driven by the share of 'C*' and 'CC*'-rated credits (18 in total) as they are restructured. Fitch expects the rate of defaults to stabilize by end-2010, based on current expectations for the strength of the current economic recovery and potentially enhanced financial flexibility driven by heavy cost restructuring measures across most sectors. Such stabilization is also expected to be helped by timely equity investments from sponsors as they strive to alleviate short-term stresses on credits with proven business models. The question remains whether greater volumes of new money will be required to fund LBO business plans post-recession and, crucially, if this additional funding will be reliant on successful discussions between senior creditors and often out-of-the-money mezzanine and junior debt providers. Meanwhile, risk appetite has returned in the capital markets with record issuance of high-yield bonds (EUR29.3 billion in 2009) and some prospective equity- raisings via IPOs. Notwithstanding the market risk inherent in such funding sources, Fitch warns that not all leveraged credits will necessarily be able to access the capital markets by virtue of their small size and/ or impaired financial performance in the wake of the recession. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than US$3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Thursday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/booksto order any title today. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter -- Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Valerie C. Udtuhan, Marites O. Claro, Rousel Elaine C. Tumanda, Joy A. Agravante and Peter A. Chapman, Editors. Copyright 2010. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$625 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *