/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/100407.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, April 7, 2010, Vol. 11, No. 067 Headlines B U L G A R I A PIRAEUS BANK: Moody's Downgrades Long-Term Local Deposit Rating C Y P R U S REMEDIAL (CYPRUS): Files Schedules of Assets and Liabilities F R A N C E WENDEL SA: Posts EUR918.3 Million Loss in 2009 G E R M A N Y BAYERISCHE LANDESBANK: Fitch Affirms 'B-' Rating on Securities BRENNTAG HOLDING: Moody's Upgrades Corp. Family Rating to 'Ba2' FRESENIUS SE: Fitch Affirms 'BB' Rating; Outlook Stable SUNFILM: Files for Insolvency; In Talks with Lenders TITANEUROPE 2006-2: S&P Junks Ratings on Three Classes of Notes H U N G A R Y MOL HUNGARIAN: S&P Gives Stable Outlook; Affirms 'BB+' Rating I R E L A N D ALLIED IRISH: Moody's Changes Outlook on D BFSR to Positive ALLIED IRISH: Fitch Affirms Rating on Tier 1 Notes at 'CCC' ANGLO IRISH: Fitch Cuts Rating on Lower Tier 2 Sub. Debt to CCC ANGLO IRISH: S&P Downgrades Subordinated Debt Ratings to 'B' BANK OF IRELAND: Moody's Puts D BFSR on Review for Poss. Upgrade BANK OF IRELAND: Fitch Affirms Rating on Tier 1 Notes at 'CCC' CELF LOW: S&P Withdraws 'CC' Rating on Class E and F Notes EBS BUILDING: Moody's Changes Outlook on D BFSR to Positive EBS BUILDING: Fitch Downgrades Rating on Tier 1 Notes to 'CCC' IRISH NATIONWIDE: Moody's Changes Outlook on E+ BFSR to Stable IRISH NATIONWIDE: Fitch Downgrades Individual Rating to 'F' QUINN INSURANCE: Financial Regulator to Oppose Anglo Takeover * IRELAND: Company Failures Up 34% to 469 in First Quarter 2010 I T A L Y 16 UNO: Fitch Downgrades Rating on Class C Notes to 'BB' FASTWEB SPA: Probe Won't Hit Swisscom Revenue in Italy SAFILO SPA: Fitch Upgrades Issuer Default Rating to 'B-' K A Z A K H S T A N ALLIANCE BANK: Debt Restructuring Cues Fitch's Rating Review EURASIAN BANK: Fitch Gives Stable Outlook; Affirms 'B-' Rating KASPI BANK: Fitch Downgrades Issuer Default Rating to 'B-' TEMIRBANK JSC: Creditors Approve Restructuring Plan * KAZAKHSTAN: Moody's Changes Outlook on Rating to Stable L A T V I A MORTGAGE AND LAND: Moody's Maintains Stable Outlook on 'E+' BFSR PAREX BANK: Moody's Changes Outlook on 'B2' Rating to Developing PAREX BANKA: Restructuring Plan Cues Fitch's 'RD' Rating L U X E M B O U R G BREEZE FINANCE: Fitch Downgrades Rating on Class B Notes to 'B' N E T H E R L A N D S ELEPHANT TALK: Posts US$17.3 Million Net Loss for 2009 R U S S I A CB RENAISSANCE: Fitch Upgrades Issuer Default Rating to 'B-' * S&P Changes Outlook on 14 Russian Institutions to Stable S L O V E N I A RENAULT SA: Slovenian Unit Expects Lower Sales in Main Markets T U R K E Y EUROBANK TEKFEN: Moody's Changes Outlook on 'Ba1' Rating to Neg. U K R A I N E * UKRANIAN CITY OF KYIV: Fitch Affirms Long-term Rating at 'B-' U N I T E D K I N G D O M BRITISH AIRWAYS: Misses Deadline to Sign Iberia Merger Agreement BRITISH AIRWAYS: Virgin's Branson Wants EU to Block AMR Alliance CANARY WHARF: Moody's Affirms Rating on Class D2 Notes at 'Ba1' EMI GROUP: Terra Firma May Have to Sell Shares to New Investors INTERNATIONAL PERSONAL: Fitch Assigns 'BB+' Issuer Default Rating IONA CDO: S&P Downgrades Ratings on All US$136.5 Mil. Notes KAUPTHING SINGER: Halabi Declared Bankrupt Over GBP56.3MM Loan LAND OF LEATHER: To Close 19 Remaining Shops; 240 Jobs Affected LNR PROPERTY: S&P Removes Hatfield From Select Servicer List MUSIC GROUND: Shuts Shops; Liquidator to Be Appointed PEARL GROUP: Two Investors to Gain From Phoenix Float PEMBERTON INTERNATIONAL: High Court Orders Liquidation PROMINENT CMBS: S&P Retains Neg. Watch on BB-Rated Class E Notes QINETIQ GROUP: Could Not Afford Lucrative Redundancy Terms TOWERGATE PARTNERSHIP: Moody's Affirms 'B2' Corp. Family Rating TUBE LINES: S&P Corrects Ratings on C and D Subordinated Notes * UK: County Court Judgments v. Businesses Hit Record Levels * UK: Consultation Launched on Pre-Pack Administration Sales X X X X X X X X * S&P Downgrades Ratings on 88 Tranches From 13 European CLO Deals ********* =============== B U L G A R I A =============== PIRAEUS BANK: Moody's Downgrades Long-Term Local Deposit Rating --------------------------------------------------------------- Moody's Investors Service has downgraded the long-term local currency deposit rating of Piraeus Bank Bulgaria AD to Baa3 from Baa2. At the same time, the rating agency has confirmed the bank's short-term local currency deposit rating at Prime-3, and its long- and short-term foreign currency deposit ratings at Baa3/Prime-3. The outlook on all deposit ratings is negative. PBB's D- Bank Financial Strength Rating, mapping to a Baseline Credit Assessment of Ba3, is not affected by this action. This rating action follows Moody's decision to downgrade the BFSR of PBB's Greek parent bank, Piraeus Bank SA, to D+ (negative outlook) from C-. The parent bank's D+ BFSR translates into a BCA of Baa3. PBB's Baa3 long-term local currency deposit rating incorporates a three-notch uplift from its BCA of Ba3, reflecting Moody's assessment of a high probability of support from its parent bank. "Moody's assumption of a high probability and strong willingness of parental support to PBB is underpinned by (i) the strategic importance of the Bulgarian operations to Piraeus Bank Group, (ii) the high funding and operational support from the parent bank to the Bulgarian subsidiary, since inception, and (iii) PBB's small size compared to the group's balance sheet," said Elena Panayiotou, Moody's lead analyst for Bulgarian banks. PBB's long-term foreign currency deposit rating of Baa3 is currently at the same level as its long-term local currency deposit rating and is no longer constrained by the foreign currency deposit ceiling for Bulgaria. Any future downward movement in PBB's local currency rating would therefore prompt a movement in the bank's foreign currency deposit rating. Moody's last rating action on PBB was on March 4, 2010, when the bank's local and foreign currency deposit ratings were placed on review for possible downgrade, in line with the review on the BFSR of the bank's parent. Headquartered in Sofia, Piraeus Bank Bulgaria reported consolidated total assets of BGN3.633 billion (EUR1.858 billion) at the end of December 2009. =========== C Y P R U S =========== REMEDIAL (CYPRUS): Files Schedules of Assets and Liabilities ------------------------------------------------------------ Remedial (Cyprus) Public Company Ltd. filed with the U.S. Bankruptcy Court for the Southern District of New York its schedules of assets and liabilities, disclosing: Name of Schedule Assets Liabilities ---------------- ----------- ----------- A. Real Property US$0 B. Personal Property US$20,820,062 C. Property Claimed as Exempt D. Creditors Holding Secured Claims US$177,164,962 E. Creditors Holding Unsecured Priority Claims US$1,096,953 F. Creditors Holding Unsecured Non-priority Claims US$12,509,539 ----------- ----------- TOTAL US$20,820,062 US$190,771,454 About Remedial (Cyprus) Based in Limassol, Cyprus, Remedial (Cyprus) Public Company owns and operates self-propelled jack up rigs called Elevating Support Vessels. The vessels facilitate offshore well intervention activities and work-over services. Remedial (Cyprus) Public Company Ltd. -- dba Brufani Shipmanagement Limited and Remedial Cyprus Limited -- filed for Chapter 11 bankruptcy protection on February 17, 2010 (Bankr. S.D.N.Y. Case No. 10-10782). Kenneth A. Rosen, Esq., at Lowenstein Sandler, P.C., assists the Company in its restructuring effort. The Company estimated its assets and debts at US$100,000,001 to US$500,000,000. =========== F R A N C E =========== WENDEL SA: Posts EUR918.3 Million Loss in 2009 ---------------------------------------------- Scheherazade Daneshkhu at The Financial Times reports Wendel incurred a net loss of EUR918.3 million in 2009 compared to a net profit of EUR158.1 million in 2008. According to the FT, the loss was mainly due to a EUR1 billion first-half writedown in the value of Saint-Gobain, the construction materials company in which Wendel holds an 18% stake. The FT says Wendel's total debt fell 13% to EUR7.2 billion, helped by EUR1.1 billion raised in disposals last year and the extension of maturity on part of its debt. Credit rating agency Standard & Poor's still rates Wendel as junk, having downgraded its credit rating in October 2008, the FT notes. Wendel SA -- http://www.wendelgroup.com/-- is a France-based investment company. It primarily invests in the industrial and service sector, in France and abroad. As of December 31, 2008, Wendel SA held 100% stakes in Oranje-Nassau, a Dutch group focused on energy production as well as on private equity. Oranje- Nassau's energy sector is active in the exploration, development and production of oil and gas, with the main regions of interest in Europe, Africa and the Middle East, while the private equity sector primarily invests in internationally oriented companies. Wendel SA also held stakes in Bureau Veritas (52%), Materis (76%), Stallergenes (47%), Stahl (48%), Deutsch (89%), Saint-Gobain (18%) and Legrand (31%), as well as various non-strategic listed holdings. ============= G E R M A N Y ============= BAYERISCHE LANDESBANK: Fitch Affirms 'B-' Rating on Securities -------------------------------------------------------------- Fitch Ratings has affirmed Bayerische Landesbank's US$850 million non-cumulative trust preferred securities (XS0290135358), issued through BayernLB Capital Trust I, at 'B-' and removed them from Rating Watch Negative. The removal of the RWN follows Bayerische Landesbank's (rated 'A+'/RWN) announcement that it is now contractually obliged to pay the next coupon on this instrument, due in May 2010. The RWN had signalled potential imminent deferral. The obligation to pay is triggered by the terms of the instrument, according to which payments are deemed to be declared if the bank or any of its subsidiaries declares or makes payments on any capital, dividends or other distributions on any parity securities -- even in the event that Bayerische Landesbank does not report a distributable profit. In this context, Fitch understands that Landesbank Saar (rated 'A+'/RWN) has made distributions on one of its issued instruments, which is considered as parity security and hence triggers the contractual obligation. This dividend pusher also triggered Bayerische Landesbank to pay on the Capital Trust I trust preferred securities in 2009. Bayerische Landesbank is currently undergoing restructuring, and the European Commission is conducting an investigation into the bank due to state aid received. The EC requested the bank not to make any interest or dividend payments on profit participation, hybrid tier 1 capital or silent participations unless it is contractually obliged to do so. At 'B-', Fitch's rating indicates that the agency still sees the possibility of future deferrals. Bayerische Landesbank expects the investigation to be concluded in H110. Bayerische Landesbank's 'A+' rating is based on Fitch's view that there is an extremely high probability that further state support would be provided to the bank in case of need. The RWN reflects the ongoing EC investigation. At end-2008 Bayerische Landesbank received support from the Free State of Bavaria in the form of a EUR4.8 billion risk shield for its ABS portfolio and EUR10 billion in fresh capital. As a result, Bavaria's stake in the bank increased to 94% from 50%, diluting the Association of Bavaria Savings Banks' stake to 6%. For FY09 Bayerische Landesbank reported a net loss of EUR2.6 billion. This was largely driven by a total direct and indirect loss of EUR3.3 billion relating to Hypo Group Alpe Adria, in which Bayerische Landesbank had held a stake of 67% before the latter was sold to the Austrian state at end-2009. BRENNTAG HOLDING: Moody's Upgrades Corp. Family Rating to 'Ba2' --------------------------------------------------------------- Moody's Investors Service has upgraded the Corporate Family and Probability of Default Ratings of Brenntag Holding GmbH to Ba2 from B2. The ratings on the senior secured and senior subordinated loans and notes were upgraded to Ba2 and B1 from B1 and Caa1 respectively. This concludes the review for possible upgrade process initiated by Moody's on February 26, 2010. The upgrade to Ba2 follows the successful placement of 10.5 million of new shares from a capital increase resulting in gross cash proceeds of EUR525 million (before transaction costs) used to repay EUR429 million of mezzanine debt. In addition the existing shareholder of the Brenntag group has accepted to convert EUR702 million of shareholder loans into common equity of the Brenntag group thereby further strengthening the capital structure of the group notwithstanding that Moody's has never included the shareholder loan in the computation of its debt metrics. The credit metrics of Brenntag following the successful Initial Public Offering of the group are commensurate with a Ba2 rating with Net debt / EBITDA estimated at 3.2x and RCF / Net Debt at 18.8%. The credit profile of Brenntag will further benefit from EUR227 million of cash sweep (50% of EUR454 million excess cash flow generated in fiscal year 2009) to be contractually applied to senior debt reduction during the course of fiscal year 2010. Going forward Moody's expects Brenntag to continue to manage its business conservatively with a focus on organic growth and small bolt on acquisitions. Moody's anticipates that Brenntag will continue to slowly consolidate a very fragmented chemicals distribution market with small acquisitions probably not exceeding a total consideration of EUR100 million to EUR150 million per annum. Brenntag has guided the market towards a dividend payout ratio of 30-45% from net income, which can be accommodated under the current rating category. Moody's expects Brenntag to apply discretion in the application of its external growth strategy with a clear aim of financing its acquisitions from generated free cash flows. The stable outlook assigned to the rating is predicated upon the expectations described above. The liquidity position of Brenntag is strong. The issuer had EUR603 million cash on balance sheet at fiscal year-end 2009 and is expected to have EUR658 million of cash post reception of the IPO proceeds and repayment of the mezzanine debt. In addition the company has access to a largely undrawn EUR200 million revolver with satisfactory covenant headroom. It is noted that Brenntag will have to use EUR227 million of cash to repay bank debt (contractually imposed by cash sweep in loan documentation) during the course of fiscal year 2010. Moody's expects Brenntag to cover its main discretionary and non discretionary liquidity requirements (Working Capital, Capex, Dividends) from operating cash flows in FY2010. The last rating action was on February 26, 2010, when all ratings of Brenntag Holding GmbH were put under review for upgrade following the issuer's announcement of its intention to initiate an IPO and apply proceeds to debt reduction. Brenntag, headquartered in Muelheim, Germany, is the world's largest distributor of industrial and specialty chemicals. The group reported revenues of EUR6,365 million and an EBITDA of EUR477 million for the fiscal year ended December 31, 2009. Brenntag has listed on the Frankfurt Stock Exchange on March 29, 2010, and has a free float of approximately 30%. FRESENIUS SE: Fitch Affirms 'BB' Rating; Outlook Stable ------------------------------------------------------- Fitch Ratings has affirmed Germany-based healthcare group Fresenius SE's and Fresenius Medical Care AG & Co. KGaA's ratings at 'BB' with Stable Outlook. The affirmations follow Fresenius SE's planned conversion of its preference shares into ordinary shares and the change of its legal form to a KGaA (partnership limited by shares). "Fitch considers this exercise as neutral to slightly positive, as it will improve the company's flexibility to increase its equity funding of future acquisitions," said Britta Holt, a Director in Fitch's Corporate team. The ratings are supported by Fresenius' number one global position in the non-cyclical and steadily growing dialysis products and services industry, where cash flows are relatively predictable. Due to its vertical integration, Fresenius benefits from cost advantages over its peers, and can build on its reputation for providing technologically advanced products and high-quality services. Negative rating factors include the group's over-reliance on dialysis (accounting for 59% of 2009 group EBITDA, albeit down from 71% in 2005), as well as its significant reliance on the reimbursement policies of governments and private insurers. Organic group sales growth was strong in 2009 at 8%, driven by FMC (+8%), Kabi (+8%) and Fresenius Vamed (+15%). Group cash flow after capex (but before acquisitions and dividends) increased EUR0.5 billion to EUR0.9 billion. This was due to improved profitability (as the group's EBITDA margin increased to 18.5% in 2009 (2008: 17.9%)), solid sales growth, and a EUR0.2 billion reduction in working capital outflow. For 2010, the group expects constant currency sales growth of 7%-9%. During 2009, the group was able to reduce net debt by EUR0.5 billion to EUR7.9 billion, and net debt/EBITDA to 3x from its peak of 3.7x in 2008 resulting from the mostly debt-funded US$4.6 billion acquisition of US generic I.V. drugs maker APP (which closed in September 2008). Fresenius is targeting a net debt/EBITDA ratio of 2.5x-3x by 2010, which corresponds to an estimated lease-adjusted net debt/EBITDAR of 3.3x-3.7x -- a goal which appears realistic to Fitch. The improvement in this debt- protection measure is to be driven by FMC and the high margin APP business. The senior unsecured debt rating of 'BB' for the debt-issuing entities of Fresenius and FMC reflects Fitch's view of average recovery prospects on default. Fresenius SE: -- Long-term IDR affirmed at 'BB'; Outlook Stable -- Short-term IDR affirmed at 'B' -- Senior unsecured debt affirmed at 'BB' -- Senior secured debt affirmed at 'BBB-' Fresenius Finance B.V.: -- Guaranteed senior notes affirmed at 'BB' FMC: -- Long-term IDR affirmed at 'BB'; Outlook Stable -- Short-term IDR affirmed at 'B' -- Senior unsecured debt affirmed at 'BB' -- Senior secured debt affirmed at 'BBB-' Fresenius Medical Care Capital Trusts IV and V: -- Guaranteed subordinated trust preferred securities affirmed at 'B+' Fresenius US Finance II. Inc.: -- Senior unsecured notes affirmed at 'BB' SUNFILM: Files for Insolvency; In Talks with Lenders ---------------------------------------------------- Photovoltaics World reports that Sunfilm has filed for insolvency, citing current conditions and uncertainty regarding the German government's feed-in tariff. According to the report, Sunfilm said current investors "have stopped their financial support," and the company is "in discussions" with lenders. "By filing for insolvency we are aiming for a strategic realignment of the company with a new investor," the report quoted Sunfilm chairman Wolfgang Heinze as saying. Rainer M. Bahr has been appointed as temporary insolvency administrator, the report relates. Sunfilm is a German PV module maker. TITANEUROPE 2006-2: S&P Junks Ratings on Three Classes of Notes --------------------------------------------------------------- Standard & Poor's Ratings Services lowered and removed from CreditWatch negative its credit ratings on TitanEurope 2006-2 PLC's class B to H notes. At the same time, S&P affirmed its ratings on the class A and X notes. The class J notes remain unaffected. This transaction was initially backed by seven loans, all secured on German multifamily housing assets -- approximately 28,000 units in total. Three loans have prepaid and the remaining four loans are scheduled to mature in 2011. The performance of these four loans -- Velvet, Labrador, Petrus, and Margaux -- has been below S&P's expectations. All four loans have breached their debt service coverage ratio covenants, or the covenant has not been tested recently because the servicer has not received the relevant data (the Velvet and Labrador loans). Two loans -- Velvet and Labrador -- are in default and have transferred to special servicing. The two defaulted loans had their properties revalued since closing. The Velvet assets have lost 22% in value, while the Labrador asset value remained stable according to valuations carried out at the end of 2009. Given the covenant breaches and the observed increases in vacancy rates, S&P believes that the rental income has reduced compared with Day 1 with regard to the four loans. In addition, S&P understand that the initial yields for this property type, as observed in the market, have increased since the transaction closed. In S&P's view, those two factors combined negatively affect the properties' current market value, which in turn could reduce the likelihood of a full repayment of the loans. In addition, the requirement of liquidity drawings for the Labrador loan and cash injections by the Margaux and Petrus loan sponsors suggest that the properties do not currently generate sufficient income for the loans to meet their debt service obligations. The downgrades reflect S&P's view of the deterioration in the creditworthiness of the underlying collateral. Ratings List Titan Europe 2006-2 PLC EUR862.169 Million Commercial Mortgage-Backed Floating-Rate Notes Ratings Lowered and Removed From CreditWatch Negative Rating ------ Class To From ----- -- ---- B BBB BBB+/Watch Neg C BBB- BBB/Watch Neg D BB BBB-/Watch Neg E B- BB/Watch Neg F CCC+ B/Watch Neg G CCC B-/Watch Neg H CCC- B-/Watch Neg Ratings Affirmed and Removed From CreditWatch Negative Rating ------ Class To From ----- -- ---- A A A/Watch Neg X A A/Watch Neg ============= H U N G A R Y ============= MOL HUNGARIAN: S&P Gives Stable Outlook; Affirms 'BB+' Rating ------------------------------------------------------------- Standard & Poor's Ratings Services said that it has revised its outlook on Hungary-based integrated oil and gas company MOL Hungarian Oil and Gas PLC to stable from negative. At the same time Standard & Poor's affirmed its 'BB+' long-term corporate credit rating on MOL. "The stable outlook reflects S&P's expectations that industry conditions will improve in 2010 from the 2009 trough year," said Standard & Poor's credit analyst Lucas Sevenin. "S&P has also assumed that MOL will pursue a supportive financial policy with modest shareholder distributions and acquisitions, given material capital expenditure and still challenging refining industry conditions," said Mr. Sevenin. S&P would view a Standard & Poor's-adjusted ratio of FFO to debt of 20%-25% and debt to EBITDA below 3.5x as commensurate with the rating. The outlook revision and rating affirmation reflect these factors: 2009 credit metrics were commensurate with the rating, including S&P's adjusted ratio of FFO to debt in the 20%-25% range, and S&P's adjusted debt-to-EBITDA ratio of 2.8x, which is clearly below S&P's 3.5x guidance; S&P thinks the group's financial policy has been supportive of the current rating, with modest shareholder distributions and acquisitions, and lower capital expenditure (in 2009. Although investment levels are likely to remain significant in 2010-2011 -- S&P assumes Hungarian forint (HUF)340 billion per year, about US$1.8 billion -- S&P does not expect significant acquisitions or shareholder distributions unless market conditions clearly improve and result in much higher free operating cash flow than S&P currently expects; Upstream conditions have already strongly improved, and S&P believes downstream conditions will gradually strengthen in 2010, as demand should further improve in MOL's Eastern European markets; the outlook for middle distillate crack spreads remains challenging, but refining results should pick-up from the stressed levels seen in 2009; and Improving economic prospects compared with the beginning of 2009 in the core countries where the group operates, including Hungary and Croatia. ============= I R E L A N D ============= ALLIED IRISH: Moody's Changes Outlook on D BFSR to Positive ----------------------------------------------------------- Moody's Investors Service took positive rating actions on certain Irish banks following the concerted actions taken by various Irish authorities to strengthen these banks and remove their exposure to the most toxic real estate assets. The announcements included details from the National Asset Management Agency on the discount to be applied on the first tranche of loans to be transferred from banks to NAMA, the announcement from the Irish Government regarding its recapitalization plans for the banking sector, and a statement from the Financial Regulator on its revised (and much stricter) capital requirements. The rating changes are: * Bank of Ireland and ICS Building Society -- the D bank financial strength ratings (BFSR -- mapping to a baseline credit assessment of Ba2) are placed on review for possible upgrade, previously they had a developing outlook. * Allied Irish Banks -- the outlook on the D BFSR is changed to positive from developing. * EBS Building Society -- the outlook on the D BFSR is changed to positive from developing and the non-cumulative tier 1 instruments are downgraded to Caa1 from B3. * Irish Nationwide Building Society -- the outlook on the E+ BFSR (BCA: B3) is changed to stable concluding the review (with uncertain direction) that had been initiated on December 9, 2009. There are no rating implications at the present time for Anglo Irish Bank; its A3/P-1 long- and short term debt and deposit ratings remain under review for possible downgrade, and the E BFSR has a stable outlook at the bottom of that scale. Ross Abercromby, a Vice President and lead analyst for Irish banks at Moody's commented: "Yesterday's announcements by the Irish authorities constitute an important milestone for the Irish banking system. Unless there should be a significant further deterioration in the wider Irish economy, the actions taken by NAMA, the government and the regulator should have put the bank's intrinsic credit profiles on a much more resilient footing. These actions ensure that banks have to clean up their balance sheets, but also need to recapitalize to adequate levels, which the government is ultimately willing to underwrite. This will put the banks in a better position to finance a return to economic growth, which in turn should help avoid a significant further economic deterioration. Overall, this is both positive for banks' intrinsic credit strength as well for the wider economy." Ross Abercromby continued: "The review for possible upgrade for Bank of Ireland and the outlook changes to positive for Allied Irish Banks and EBS Building Society reflect Moody's expectation that the inflection point in these bank's intrinsic credit profile should have been achieved. The debt and deposit ratings for all these banks are primarily driven by the significant amount of systemic support and therefore are not affected by these changes to banks' standalone ratings". Nama-Imposed Discounts Between 35% to 58%, Stress Tests and Subsequent Recapitalization Requirements Are Positive for Banks Yesterday's announcement by NAMA has detailed the discount to book value at which the first tranche of development and property loans will be transferred from the banks to NAMA: The discount ranges between 35% for Bank of Ireland to 58% at Irish Nationwide. This reflects the extremely difficult economic environment in Ireland, the approximate 50% fall in the value of Irish commercial property and the differences in the underwriting and composition of the loan books of the individual entities. Furthermore, the regulator has laid out new capital requirements for Irish banks. These include a target level for core tier 1 capital of 8% after deducting impairments on non-NAMA assets as well as a core-Tier 1 ratio of at least 4% after further deducting hypothetical stress losses through to 2012. Thirdly, the government has announced that while preferring private solutions to the subsequent capital requirements, e.g. via asset sales, public offerings etc, it is willing to underwrite the necessary capital injections to an amount of more than EUR21 billion where necessary. Moody's had already incorporated similar levels of expected losses into the BFSRs of the entities participating in NAMA, which in turn had been a key factor behind the downgrades of the banks' BFSRs to subinvestment-grade levels in April 2009. Overall, these impairments largely correspond to Moody's own base case scenario of expected losses especially when taking into consideration earlier capital injections (EUR 11 billion in 2009 by the Irish government) and exposure reductions by some of the affected banks. Therefore, the primary rating impact of yesterday's combined announcements by NAMA, the government and the regulator is positive for most banks' standalone BFSR. No Impact on Deposit and Senior Debt Ratings Importantly for the bank deposit and senior debt ratings the Irish government continues to be extremely supportive and this is the key factor in the high levels of uplift incorporated into the senior ratings of the banks that range from A1 for Allied Irish and Bank of Ireland to Baa3 (on review with uncertain direction) for Irish Nationwide. Moody's noted that the statement by the Irish government included confirmation that capital will be provided for those institutions who as a result of the transfers to NAMA, loan losses on other assets and the newly announced minimum capital levels required by the Financial Regulator, have a need for capital infusions. Given the differing needs and corporate structures the way in which the capital is injected may differ but Moody's continues to view the government as being extremely supportive. Details on the Rating Actions Review for Upgrade of The BFSR Of Bank Of Ireland Bank of Ireland's D BFSR is placed on review for possible upgrade. The regulator is requiring the bank to raise a further EUR2.7 billion of equity. Bank of Ireland is unlikely to require further capital from the Irish government and has indicated that it will be able to raise capital from private shareholders and through the conversion of an element of the government's preference shares. The review will focus on i) the capital plan of the bank, including the quantum of capital that is raised and the capital structure of the bank post any conversion of the government preference shares, as well as ii) the degree to which the capital injection sufficiently offsets the remaining risks in its books, which will require a more detailed comparison of the performed stresses and impairments to Moody's own stress scenarios. An important part of the review will also be the conclusion of the bank's negotiations with the European Commission over its restructuring plan which has been lodged as a result of the State Aid the bank has received. Moody's also highlights that Bank of Ireland's strong Irish franchise has been relatively unaffected by the crisis and that it still has an element of geographic diversification through its UK operations. The D BFSR of ICS Building Society, BoI's Irish mortgage lending subsidiary, is also placed on review for possible upgrade, in line with its parent. Allied Irish BFSR Outlook Changed to Positive The change in the outlook to positive from developing on the D BFSR of Allied Irish reflects the stronger position that the bank will be in as a result of the capital to be raised. The bank will raise EUR7.4 billion of equity as required by the regulator and this will put the bank in a much improved position. Although the bank's franchise will be more focused on Ireland in the future as the first part of its capital raising will involve the sale of its investments in Poland (Bank Zachodni WBK), the USA (M&T) and its UK subsidiary, Moody's believes it will remain one of the two predominant banks in Ireland. However, the significantly higher degree of impairment in its books as compared to BoI indicates that more fundamental changes to its underwriting and risk culture are required, therefore resulting in a more drawn-out trajectory of improvement. An important element in the positive outlook and overall rating levels of the BFSR and long-term debt ratings is Moody's understanding that if the bank is unable to raise the remaining capital requirement then the bank will be able to convert some or all of the government's EUR3.5 billion preference share investment in the bank. Furthermore, Moody's believes that if further capital was needed beyond the currently envisaged amounts the government would also provide it. EBS Building Society's BFSR Outlook Changed to Positive; Tier 1 Instruments Downgraded to Caa1 From B3 The change in the outlook to positive from developing on the D BFSR of EBS reflects the stronger position that the society will be in as a result of the capital that will be injected. The society is required to raise EUR875 million of equity by the regulator. As detailed by the government there is the potential for an investment in the society by a third party, however if this does not materialize then the capital will be provided by the Irish government. In Moody's opinion EBS has a good franchise in Ireland and the main issue at the society has been the small development loan portfolio. With the transfer to NAMA of these loans and the resulting capital increase the society should be relatively well placed to maintain its position as a key retail financial service provider in Ireland. Moody's notes however that the society will be required to submit a restructuring plan to the European Commission which could result in some further restructuring requirements being imposed. EBS is also involved in potential merger negotiations with Irish Nationwide Building Society and if the merger was to go ahead -- only after INBS has been cleaned up, as Moody's understands -- then an important element of EBS' ratings would be the integration of the smaller society into EBS. The one notch downgrade to Caa1 from B3 on the tier 1 instruments of EBS reflects that as the society will now receive State Aid through the Special Investment Share, Moody's believes that the European Commission will request that the society does not make payments on its Tier 1 capital instruments unless it has a legal obligation to do so. The downgrade of the non-cumulative instruments last year to B3 was based on an expected-loss approach and reflected Moody's assumption that the society would likely omit coupons for at least a two-year period, in line with other European banks that have benefited from substantial State Aid. The further downgrade by one notch to Caa1 incorporates i) the higher level of certainty that EBS will receive State Aid as well as ii) the remaining uncertainty about the bank's financial strength beyond the 2-year time horizon, which also adds uncertainty about future coupon payments. At Caa1, the ratings are aligned with the ratings of comparable securities issued by BoI and AIB. The outlook for the securities is stable reflecting Moody's conservative expected loss assumptions in terms of the likelihood and time horizon of missed coupons, as well as the lower sensitivity of these instruments to the society's intrinsic financial strength. Conclusion of The Review -- Direction Uncertain on the E+ BFSR Of Irish Nationwide The outlook on the E+ BFSR (BCA: B3) of Irish Nationwide is now stable reflecting the EUR2.7 billion capital injection into the society from the Irish government to ensure that it meets its minimum current capital requirements, and Moody's view that support will remain high for this institution. Similar to EBS the members of Irish Nationwide voted to provide the government with a Special Investment Share and this gives the Minister of Finance huge powers and is similar in scope to a nationalization. Importantly the government has stated that its priority is to sell the entity or integrate it into another institution and therefore the Baa3/P-3 bank deposit and senior debt ratings of the institution remain on review -- direction uncertain, pending a sale or merger. If INBS does not merge with EBS, or another entity, in the near future then it is likely that the ratings would be downgraded to non-investment grade, reflecting the higher potential for losses at the end of the two-year guarantee period. This concludes the review on the BFSR that was initiated on December 9, 2009. No Rating Implications At The Present Time For Anglo Irish Bank The bank deposit, senior debt, dated subordinated debt and junior subordinated debt ratings of Anglo Irish all remain on review for possible downgrade despite the announced capital injection of EUR 8.3 billion, as the key rating driver in Moody's view remains the bank's restructuring plan that is currently waiting EU approval. Moody's aims to complete the review of the bank's ratings following the conclusion of the European Commission's assessment of the bank's restructuring plan (See the Press Release "Moody's downgrades to Ba1 Anglo Irish Bank subordinated debt" published on March 1, 2010, for further details.) Irish Life & Permanent (rated A2/P-1/D, negative) is not participating in NAMA as it does not have any development lending and therefore there are no rating implications for the bank. The last rating action on AIB was on December 2, 2009, when the bank's non-cumulative tier 1 securities were downgraded to Caa1 from B3. The last rating action on Anglo Irish Bank was on March 1, 2010, when the dated subordinated debt was downgraded to Ba1 from Baa1 and the review of the bank deposit ratings, the senior debt ratings, the dated subordinated debt rating and the junior subordinated debt rating was maintained. The last rating action on BoI was on January 19, 2009, when the bank's non-cumulative tier 1 securities were downgraded to Caa1 from B3. The last rating action on EBS was on July 7, 2009, when the backed senior debt guaranteed by the Irish government was downgraded to Aa1 (negative outlook) from Aaa (on review for possible downgrade.) The last rating action on Irish Life & Permanent was on February 10, 2010, when the bank's junior subordinated debt rating was downgraded to Ba3 from Ba1 guaranteed by the Irish government was downgraded to Aa1 (negative outlook) from Aaa (on review for possible downgrade.) The last rating action on INBS was on December 9, 2009, when the direction of the review on the Baa3/P-3 bank deposit and senior debt ratings, and the Ba1 subordinated debt rating was changed to direction uncertain from possible downgrade ALLIED IRISH: Fitch Affirms Rating on Tier 1 Notes at 'CCC' ----------------------------------------------------------- Fitch Ratings has affirmed the Short- and Long-term Issuer Default Ratings of Allied Irish Banks plc, Bank of Ireland, EBS Building Society and Irish Nationwide Building Society in the light of the capital requirements and capital injections announced for the Irish banking system by the Minister for Finance. The Short-term IDR of Anglo Irish Bank Corporation was downgraded to 'F1' from 'F1+' and it and the Long-term IDR at 'A-' were placed on Rating Watch Evolving. A full list of ratings is given at the end of this announcement. "The capital position of these five institutions is now clearer and any lingering doubts about the willingness of the Irish state to support its leading credit institutions should have been removed" said Matthew Taylor, Senior Director in Fitch's Financial Institutions' team. "Taking into account also the banks' sale of loans to the National Agency for the Management Assets, to be completed by end-2010, the new shape of at least the two largest institutions is becoming apparent. Major challenges remain but once the proposed capital raising has been completed, the prospects for the sector should be on a surer footing," The Long-term IDRs of the above five institutions are at their Support Rating Floors. The ratings are therefore based on potential or actual support from the state of Ireland. All ratings at AIB and BoI have been affirmed. In particular, the affirmation of the Individual ratings at 'D/E' and 'C/D' respectively reflects Fitch's expectation that the banks have the ability to raise capital and bolster their capitalization without making further demands on the Irish state. AIB -- for which the challenge is greater than it is for BOI -- plans to raise much of the capital necessary through the sale of its UK business (as a result of which AIB Group (UK) plc's 'F1' Short- and 'A-' Long- term IDRs have been placed on RWE), its majority stake in Polish bank BZWBK and its minority stake in American bank M&T Bank Corporation. It also plans to raise capital from shareholders. Any remaining capital shortfall would be met by the government converting some or all of its EUR3.5 billion preference shares into equity, which would probably give the Irish state a majority stake in the bank. BoI proposes to raise fresh capital from private shareholders and will see a portion of the EUR3.5 billion government subscribed preference shares converted into equity, which would increase the government's minority ownership of the bank. The downgrade of the Short-term IDR and the placing of it and the Long-term IDR at Anglo on RWE reflect the proposal to split the bank into a new bank and a legacy asset company. In the event that Anglo becomes the legacy asset company and senior debt remains within the company, the senior debt could become government guaranteed (as was the case with UK-based Northern Rock Asset Management, for example), in which case the IDRs and senior debt ratings could be upgraded. However (and although it is not Fitch's central case, nor is it management's intention for senior debt to be in the legacy asset company), Fitch believes there to be possibility that if senior bondholders are placed in the legacy asset company they could be required to sustain losses. The Support Rating Floor at 'A-' has been placed on RWE and the Support rating at '1' has been placed on Rating Watch Negative (RWN) to reflect the uncertainty about the possible outcome of the restructuring. The Individual rating of Anglo has been affirmed at 'E' to reflect the bank's need for additional capital. The rating of lower Tier 2 subordinated debt has been downgraded to 'CCC' to reflect the expectation that it will reside in the legacy asset company in any restructuring and that there is a material likelihood that it will be required to absorb losses. The Individual ratings of EBS and INBS have been downgraded to 'F' to reflect that, in Fitch's opinion, they would have defaulted if they had not received external support. Both societies will receive capital in excess of their previous capital bases and the Irish state will have economic ownership of them. The Individual Ratings will remain at 'F' for at least one month. At EBS, the rating for senior unsecured debt has been downgraded to 'BBB-' from 'BBB' and the RWE replaced with a Rating Watch Positive (RWP). Fitch considers that senior debtors would be unlikely to benefit from their prior ranking over members deposits in a hypothetical insolvency event. The Tier 1 notes (preference shares and permanent interest bearing shares) of EBS have been downgraded to 'CCC' from 'B' RWN to reflect the increasing possibility that the European Commission may request the society to halt payment of coupons on the notes. The Financial Regulator stated on March 30, 2010 that Irish banks should hold at least 7% equity Tier 1 and at least 8% core tier 1 by end-2010 after taking into account expected loan losses to end- 2012. This approach and the announcement by NAMA of the size of expected losses on the sale of loans by the banks to it required the Minister for Finance to review the capital positions of each institution and, as he had previously promised, provide capital where necessary. Fitch downgraded Ireland's Long-term Foreign and Local Currency Sovereign Issuer Default ratings to 'AA-' in November 2009 with Stable Outlooks, simultaneously noting that Ireland's sovereign ratings were robust to some economic and fiscal disappointments. The Ministry of Finance's announcement on March 30 underlines the potential for higher than expected credit losses within the banks, leading to greater sovereign outlays to recapitalize these institutions. The latter will be offset to some extent by lower government guaranteed NAMA debt issuance, reflecting the application of deeper discounts in recognition of worse than expected asset quality. Nonetheless, Fitch notes that, overall, these stock-flow adjustments will adversely impact the sovereign's balance sheet, raising Fitch's broad measure of general government debt to around 120% of GDP by end-2010, somewhat higher than the agency's previous projections. However, the additional financial restructuring costs leave Ireland's underlying public debt dynamics broadly unchanged. Fitch reiterates its view that it expects NAMA to contribute positively to the re-establishment of financial sector stability. The ratings of the five institutions are shown below. Allied Irish Banks -- Long-term IDR affirmed at 'A-' (A minus); Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual affirmed at 'D/E' -- Support affirmed at '1' -- Support Rating Floor affirmed at 'A-' -- Senior unsecured notes affirmed at 'A-' -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt affirmed at 'BBB+' -- Upper Tier 2 subordinated notes affirmed at 'B' Rating Watch Negative -- Tier 1 notes affirmed at 'CCC' (ISINs: XS0208105055 and XS0257571066) -- Tier 1 notes maintained at 'CCC' Rating Watch Negative (ISIN: XS0120950158) -- Tier 1 notes maintained at 'B' Rating Watch Negative (ISIN: XS0257734037) AIB Bank (CI) Limited -- Long-term IDR affirmed at 'A-' (A minus); Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual affirmed at 'D/E' -- Support affirmed at '1' AIB Group (UK) PLC -- Long-term IDR affirmed at 'A-' (A minus); placed on RWE -- Short-term IDR affirmed at 'F1'; placed on RWE -- Individual affirmed at 'D/E' -- Support affirmed at '1'; placed on RWN Anglo Irish Bank Corporation -- Long-term IDR affirmed at 'A-' (A minus); placed on RWE -- Short-term IDR downgraded to 'F1' from 'F1+' and placed on RWE -- Individual affirmed at 'E' -- Support affirmed at '1' placed on RWN -- Support Rating Floor affirmed at 'A-' placed on RWE -- Senior unsecured notes affirmed at 'A-' placed on RWE -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt downgraded to 'CCC' from 'BBB+' -- Upper Tier 2 subordinated notes affirmed at 'CC' -- Tier 1 notes affirmed at 'C' Anglo Irish Mortgage Bank -- Long-term IDR affirmed at 'A-' (A minus); placed on RWE -- Short-term IDR downgraded to 'F1' from 'F1+' and placed on RWE -- Support at '1' placed on RWN Bank of Ireland -- Long-term IDR affirmed at 'A-' (A minus); Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual affirmed at 'C/D' -- Support affirmed at '1' -- Support Rating Floor affirmed at 'A-' -- Senior unsecured notes affirmed at 'A-' -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt affirmed at 'BBB+' -- Tier 1 notes affirmed at 'CCC' (ISINs: XS0268599999, US055967AA11 and USG12255AA64) -- Tier 1 notes maintained at 'B' Rating Watch Negative (ISINs: XS0125611482 and XS0165122655) EBS Building Society -- Long-term IDR maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Short-term IDR affirmed at 'F2' -- Individual downgraded to 'F' from 'E' -- Support affirmed at '2' -- Support Rating Floor maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Senior unsecured notes downgraded to 'BBB-' from 'BBB'; Rating Watch Positive replaced Rating Watch Evolving -- Sovereign guaranteed notes affirmed at 'AA-' -- Tier 1 notes downgraded to 'CCC' from 'B' and removed from Rating Watch Negative EBS Mortgage Finance -- Long-term IDR maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Short-term IDR affirmed at 'F2' -- Support affirmed at '2' Irish Nationwide Building Society -- Long-term IDR maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Short-term IDR affirmed at 'F2' -- Individual downgraded to 'F' from 'E' -- Support affirmed at '2' -- Support Rating Floor maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Senior unsecured notes maintained at 'BBB-'; Rating Watch Positive -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt maintained at 'BB+'; Rating Watch Evolving ANGLO IRISH: Fitch Cuts Rating on Lower Tier 2 Sub. Debt to CCC --------------------------------------------------------------- Fitch Ratings has affirmed the Short- and Long-term Issuer Default Ratings of Allied Irish Banks plc, Bank of Ireland, EBS Building Society and Irish Nationwide Building Society in the light of the capital requirements and capital injections announced for the Irish banking system by the Minister for Finance. The Short-term IDR of Anglo Irish Bank Corporation was downgraded to 'F1' from 'F1+' and it and the Long-term IDR at 'A-' were placed on Rating Watch Evolving. A full list of ratings is given at the end of this announcement. "The capital position of these five institutions is now clearer and any lingering doubts about the willingness of the Irish state to support its leading credit institutions should have been removed" said Matthew Taylor, Senior Director in Fitch's Financial Institutions' team. "Taking into account also the banks' sale of loans to the National Agency for the Management Assets, to be completed by end-2010, the new shape of at least the two largest institutions is becoming apparent. Major challenges remain but once the proposed capital raising has been completed, the prospects for the sector should be on a surer footing," The Long-term IDRs of the above five institutions are at their Support Rating Floors. The ratings are therefore based on potential or actual support from the state of Ireland. All ratings at AIB and BoI have been affirmed. In particular, the affirmation of the Individual ratings at 'D/E' and 'C/D' respectively reflects Fitch's expectation that the banks have the ability to raise capital and bolster their capitalization without making further demands on the Irish state. AIB -- for which the challenge is greater than it is for BOI -- plans to raise much of the capital necessary through the sale of its UK business (as a result of which AIB Group (UK) plc's 'F1' Short- and 'A-' Long- term IDRs have been placed on RWE), its majority stake in Polish bank BZWBK and its minority stake in American bank M&T Bank Corporation. It also plans to raise capital from shareholders. Any remaining capital shortfall would be met by the government converting some or all of its EUR3.5 billion preference shares into equity, which would probably give the Irish state a majority stake in the bank. BoI proposes to raise fresh capital from private shareholders and will see a portion of the EUR3.5 billion government subscribed preference shares converted into equity, which would increase the government's minority ownership of the bank. The downgrade of the Short-term IDR and the placing of it and the Long-term IDR at Anglo on RWE reflect the proposal to split the bank into a new bank and a legacy asset company. In the event that Anglo becomes the legacy asset company and senior debt remains within the company, the senior debt could become government guaranteed (as was the case with UK-based Northern Rock Asset Management, for example), in which case the IDRs and senior debt ratings could be upgraded. However (and although it is not Fitch's central case, nor is it management's intention for senior debt to be in the legacy asset company), Fitch believes there to be possibility that if senior bondholders are placed in the legacy asset company they could be required to sustain losses. The Support Rating Floor at 'A-' has been placed on RWE and the Support rating at '1' has been placed on Rating Watch Negative (RWN) to reflect the uncertainty about the possible outcome of the restructuring. The Individual rating of Anglo has been affirmed at 'E' to reflect the bank's need for additional capital. The rating of lower Tier 2 subordinated debt has been downgraded to 'CCC' to reflect the expectation that it will reside in the legacy asset company in any restructuring and that there is a material likelihood that it will be required to absorb losses. The Individual ratings of EBS and INBS have been downgraded to 'F' to reflect that, in Fitch's opinion, they would have defaulted if they had not received external support. Both societies will receive capital in excess of their previous capital bases and the Irish state will have economic ownership of them. The Individual Ratings will remain at 'F' for at least one month. At EBS, the rating for senior unsecured debt has been downgraded to 'BBB-' from 'BBB' and the RWE replaced with a Rating Watch Positive (RWP). Fitch considers that senior debtors would be unlikely to benefit from their prior ranking over members deposits in a hypothetical insolvency event. The Tier 1 notes (preference shares and permanent interest bearing shares) of EBS have been downgraded to 'CCC' from 'B' RWN to reflect the increasing possibility that the European Commission may request the society to halt payment of coupons on the notes. The Financial Regulator stated on March 30, 2010 that Irish banks should hold at least 7% equity Tier 1 and at least 8% core tier 1 by end-2010 after taking into account expected loan losses to end- 2012. This approach and the announcement by NAMA of the size of expected losses on the sale of loans by the banks to it required the Minister for Finance to review the capital positions of each institution and, as he had previously promised, provide capital where necessary. Fitch downgraded Ireland's Long-term Foreign and Local Currency Sovereign Issuer Default ratings to 'AA-' in November 2009 with Stable Outlooks, simultaneously noting that Ireland's sovereign ratings were robust to some economic and fiscal disappointments. The Ministry of Finance's announcement on March 30 underlines the potential for higher than expected credit losses within the banks, leading to greater sovereign outlays to recapitalize these institutions. The latter will be offset to some extent by lower government guaranteed NAMA debt issuance, reflecting the application of deeper discounts in recognition of worse than expected asset quality. Nonetheless, Fitch notes that, overall, these stock-flow adjustments will adversely impact the sovereign's balance sheet, raising Fitch's broad measure of general government debt to around 120% of GDP by end-2010, somewhat higher than the agency's previous projections. However, the additional financial restructuring costs leave Ireland's underlying public debt dynamics broadly unchanged. Fitch reiterates its view that it expects NAMA to contribute positively to the re-establishment of financial sector stability. The ratings of the five institutions are shown below. Allied Irish Banks -- Long-term IDR affirmed at 'A-' (A minus); Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual affirmed at 'D/E' -- Support affirmed at '1' -- Support Rating Floor affirmed at 'A-' -- Senior unsecured notes affirmed at 'A-' -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt affirmed at 'BBB+' -- Upper Tier 2 subordinated notes affirmed at 'B' Rating Watch Negative -- Tier 1 notes affirmed at 'CCC' (ISINs: XS0208105055 and XS0257571066) -- Tier 1 notes maintained at 'CCC' Rating Watch Negative (ISIN: XS0120950158) -- Tier 1 notes maintained at 'B' Rating Watch Negative (ISIN: XS0257734037) AIB Bank (CI) Limited -- Long-term IDR affirmed at 'A-' (A minus); Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual affirmed at 'D/E' -- Support affirmed at '1' AIB Group (UK) PLC -- Long-term IDR affirmed at 'A-' (A minus); placed on RWE -- Short-term IDR affirmed at 'F1'; placed on RWE -- Individual affirmed at 'D/E' -- Support affirmed at '1'; placed on RWN Anglo Irish Bank Corporation -- Long-term IDR affirmed at 'A-' (A minus); placed on RWE -- Short-term IDR downgraded to 'F1' from 'F1+' and placed on RWE -- Individual affirmed at 'E' -- Support affirmed at '1' placed on RWN -- Support Rating Floor affirmed at 'A-' placed on RWE -- Senior unsecured notes affirmed at 'A-' placed on RWE -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt downgraded to 'CCC' from 'BBB+' -- Upper Tier 2 subordinated notes affirmed at 'CC' -- Tier 1 notes affirmed at 'C' Anglo Irish Mortgage Bank -- Long-term IDR affirmed at 'A-' (A minus); placed on RWE -- Short-term IDR downgraded to 'F1' from 'F1+' and placed on RWE -- Support at '1' placed on RWN Bank of Ireland -- Long-term IDR affirmed at 'A-' (A minus); Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual affirmed at 'C/D' -- Support affirmed at '1' -- Support Rating Floor affirmed at 'A-' -- Senior unsecured notes affirmed at 'A-' -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt affirmed at 'BBB+' -- Tier 1 notes affirmed at 'CCC' (ISINs: XS0268599999, US055967AA11 and USG12255AA64) -- Tier 1 notes maintained at 'B' Rating Watch Negative (ISINs: XS0125611482 and XS0165122655) EBS Building Society -- Long-term IDR maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Short-term IDR affirmed at 'F2' -- Individual downgraded to 'F' from 'E' -- Support affirmed at '2' -- Support Rating Floor maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Senior unsecured notes downgraded to 'BBB-' from 'BBB'; Rating Watch Positive replaced Rating Watch Evolving -- Sovereign guaranteed notes affirmed at 'AA-' -- Tier 1 notes downgraded to 'CCC' from 'B' and removed from Rating Watch Negative EBS Mortgage Finance -- Long-term IDR maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Short-term IDR affirmed at 'F2' -- Support affirmed at '2' Irish Nationwide Building Society -- Long-term IDR maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Short-term IDR affirmed at 'F2' -- Individual downgraded to 'F' from 'E' -- Support affirmed at '2' -- Support Rating Floor maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Senior unsecured notes maintained at 'BBB-'; Rating Watch Positive -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt maintained at 'BB+'; Rating Watch Evolving ANGLO IRISH: S&P Downgrades Subordinated Debt Ratings to 'B' ------------------------------------------------------------ Standard & Poor's Ratings Services commented on its CreditWatch status of Anglo Irish Bank Corp. Ltd. The 'BBB/A-2' long- and short-term counterparty credit ratings on Anglo remain on CreditWatch with negative implications, where they were placed on Jan. 26, 2010. In addition, S&P lowered the ratings on Anglo's nondeferrable subordinated debt to 'B' from 'BB+'. These rating actions follow several announcements from the government of Ireland (the Republic of Ireland is rated AA/Negative/A-1+) and the Irish Financial Regulator relating to revised capital requirements for the sector and the recapitalization of the Irish banking system, as well as the reporting of the bank's own financial results for the 15 months to Dec. 31, 2009. The Irish government, Anglo's sole shareholder, has announced an additional capital injection of EUR8.3 billion into Anglo, in the form of a promissory note, to offset Anglo's EUR12.8 billion pretax loss. This loss, covering the 15 months to Dec. 31, 2009, after a change in accounting period, was due to loan losses of EUR15.1 billion and strained pre-provision profitability. The reported loss includes the benefit of EUR1.8 billion in gains arising from Anglo's liability management exercise in 2009. "S&P's ratings on Anglo reflect S&P's expectation of ongoing support from the Irish government, as it attempts to rebuild a viable business franchise," said Standard & Poor's credit analyst Claire Curtin. The government has already demonstrated significant support to date, through equity injections and specific funding support. Anglo was in receipt of EUR24 billion of central bank funding at Dec. 31, 2009, of which half related to regular market operations by the European Central Bank, and the balance special funding lines from the Central Bank of Ireland. S&P expects further support in the provision of Anglo's ongoing funding requirements (although these should decline as the bank receives repo-able government bonds through NAMA transfers), as well as the indicated capital support to be provided to ensure Anglo meets its regulatory capital requirements. S&P plans to resolve the CreditWatch placement following the outcome of the European Commission review of Anglo's restructuring plan. S&P understands this may occur in the first half of 2010. When S&P knows the EC's decision, S&P will then assess the expected medium-term financial and business profiles of Anglo, the level of support S&P considers Anglo is likely to receive from the Irish government, as well as Anglo's intentions regarding its various classes of debt instruments. BANK OF IRELAND: Moody's Puts D BFSR on Review for Poss. Upgrade ---------------------------------------------------------------- Moody's Investors Service took positive rating actions on certain Irish banks following the concerted actions taken by various Irish authorities to strengthen these banks and remove their exposure to the most toxic real estate assets. The announcements included details from the National Asset Management Agency on the discount to be applied on the first tranche of loans to be transferred from banks to NAMA, the announcement from the Irish Government regarding its recapitalization plans for the banking sector, and a statement from the Financial Regulator on its revised (and much stricter) capital requirements. The rating changes are: * Bank of Ireland and ICS Building Society -- the D bank financial strength ratings (BFSR -- mapping to a baseline credit assessment of Ba2) are placed on review for possible upgrade, previously they had a developing outlook. * Allied Irish Banks -- the outlook on the D BFSR is changed to positive from developing. * EBS Building Society -- the outlook on the D BFSR is changed to positive from developing and the non-cumulative tier 1 instruments are downgraded to Caa1 from B3. * Irish Nationwide Building Society -- the outlook on the E+ BFSR (BCA: B3) is changed to stable concluding the review (with uncertain direction) that had been initiated on December 9, 2009. There are no rating implications at the present time for Anglo Irish Bank; its A3/P-1 long- and short term debt and deposit ratings remain under review for possible downgrade, and the E BFSR has a stable outlook at the bottom of that scale. Ross Abercromby, a Vice President and lead analyst for Irish banks at Moody's commented: "Yesterday's announcements by the Irish authorities constitute an important milestone for the Irish banking system. Unless there should be a significant further deterioration in the wider Irish economy, the actions taken by NAMA, the government and the regulator should have put the bank's intrinsic credit profiles on a much more resilient footing. These actions ensure that banks have to clean up their balance sheets, but also need to recapitalize to adequate levels, which the government is ultimately willing to underwrite. This will put the banks in a better position to finance a return to economic growth, which in turn should help avoid a significant further economic deterioration. Overall, this is both positive for banks' intrinsic credit strength as well for the wider economy." Ross Abercromby continued: "The review for possible upgrade for Bank of Ireland and the outlook changes to positive for Allied Irish Banks and EBS Building Society reflect Moody's expectation that the inflection point in these bank's intrinsic credit profile should have been achieved. The debt and deposit ratings for all these banks are primarily driven by the significant amount of systemic support and therefore are not affected by these changes to banks' standalone ratings". Nama-Imposed Discounts Between 35% to 58%, Stress Tests and Subsequent Recapitalization Requirements Are Positive for Banks Yesterday's announcement by NAMA has detailed the discount to book value at which the first tranche of development and property loans will be transferred from the banks to NAMA: The discount ranges between 35% for Bank of Ireland to 58% at Irish Nationwide. This reflects the extremely difficult economic environment in Ireland, the approximate 50% fall in the value of Irish commercial property and the differences in the underwriting and composition of the loan books of the individual entities. Furthermore, the regulator has laid out new capital requirements for Irish banks. These include a target level for core tier 1 capital of 8% after deducting impairments on non-NAMA assets as well as a core-Tier 1 ratio of at least 4% after further deducting hypothetical stress losses through to 2012. Thirdly, the government has announced that while preferring private solutions to the subsequent capital requirements, e.g. via asset sales, public offerings etc, it is willing to underwrite the necessary capital injections to an amount of more than EUR21 billion where necessary. Moody's had already incorporated similar levels of expected losses into the BFSRs of the entities participating in NAMA, which in turn had been a key factor behind the downgrades of the banks' BFSRs to subinvestment-grade levels in April 2009. Overall, these impairments largely correspond to Moody's own base case scenario of expected losses especially when taking into consideration earlier capital injections (EUR 11 billion in 2009 by the Irish government) and exposure reductions by some of the affected banks. Therefore, the primary rating impact of yesterday's combined announcements by NAMA, the government and the regulator is positive for most banks' standalone BFSR. No Impact on Deposit and Senior Debt Ratings Importantly for the bank deposit and senior debt ratings the Irish government continues to be extremely supportive and this is the key factor in the high levels of uplift incorporated into the senior ratings of the banks that range from A1 for Allied Irish and Bank of Ireland to Baa3 (on review with uncertain direction) for Irish Nationwide. Moody's noted that the statement by the Irish government included confirmation that capital will be provided for those institutions who as a result of the transfers to NAMA, loan losses on other assets and the newly announced minimum capital levels required by the Financial Regulator, have a need for capital infusions. Given the differing needs and corporate structures the way in which the capital is injected may differ but Moody's continues to view the government as being extremely supportive. Details on the Rating Actions Review for Upgrade of The BFSR Of Bank Of Ireland Bank of Ireland's D BFSR is placed on review for possible upgrade. The regulator is requiring the bank to raise a further EUR2.7 billion of equity. Bank of Ireland is unlikely to require further capital from the Irish government and has indicated that it will be able to raise capital from private shareholders and through the conversion of an element of the government's preference shares. The review will focus on i) the capital plan of the bank, including the quantum of capital that is raised and the capital structure of the bank post any conversion of the government preference shares, as well as ii) the degree to which the capital injection sufficiently offsets the remaining risks in its books, which will require a more detailed comparison of the performed stresses and impairments to Moody's own stress scenarios. An important part of the review will also be the conclusion of the bank's negotiations with the European Commission over its restructuring plan which has been lodged as a result of the State Aid the bank has received. Moody's also highlights that Bank of Ireland's strong Irish franchise has been relatively unaffected by the crisis and that it still has an element of geographic diversification through its UK operations. The D BFSR of ICS Building Society, BoI's Irish mortgage lending subsidiary, is also placed on review for possible upgrade, in line with its parent. Allied Irish BFSR Outlook Changed to Positive The change in the outlook to positive from developing on the D BFSR of Allied Irish reflects the stronger position that the bank will be in as a result of the capital to be raised. The bank will raise EUR7.4 billion of equity as required by the regulator and this will put the bank in a much improved position. Although the bank's franchise will be more focused on Ireland in the future as the first part of its capital raising will involve the sale of its investments in Poland (Bank Zachodni WBK), the USA (M&T) and its UK subsidiary, Moody's believes it will remain one of the two predominant banks in Ireland. However, the significantly higher degree of impairment in its books as compared to BoI indicates that more fundamental changes to its underwriting and risk culture are required, therefore resulting in a more drawn-out trajectory of improvement. An important element in the positive outlook and overall rating levels of the BFSR and long-term debt ratings is Moody's understanding that if the bank is unable to raise the remaining capital requirement then the bank will be able to convert some or all of the government's EUR3.5 billion preference share investment in the bank. Furthermore, Moody's believes that if further capital was needed beyond the currently envisaged amounts the government would also provide it. EBS Building Society's BFSR Outlook Changed to Positive; Tier 1 Instruments Downgraded to Caa1 From B3 The change in the outlook to positive from developing on the D BFSR of EBS reflects the stronger position that the society will be in as a result of the capital that will be injected. The society is required to raise EUR875 million of equity by the regulator. As detailed by the government there is the potential for an investment in the society by a third party, however if this does not materialize then the capital will be provided by the Irish government. In Moody's opinion EBS has a good franchise in Ireland and the main issue at the society has been the small development loan portfolio. With the transfer to NAMA of these loans and the resulting capital increase the society should be relatively well placed to maintain its position as a key retail financial service provider in Ireland. Moody's notes however that the society will be required to submit a restructuring plan to the European Commission which could result in some further restructuring requirements being imposed. EBS is also involved in potential merger negotiations with Irish Nationwide Building Society and if the merger was to go ahead -- only after INBS has been cleaned up, as Moody's understands -- then an important element of EBS' ratings would be the integration of the smaller society into EBS. The one notch downgrade to Caa1 from B3 on the tier 1 instruments of EBS reflects that as the society will now receive State Aid through the Special Investment Share, Moody's believes that the European Commission will request that the society does not make payments on its Tier 1 capital instruments unless it has a legal obligation to do so. The downgrade of the non-cumulative instruments last year to B3 was based on an expected-loss approach and reflected Moody's assumption that the society would likely omit coupons for at least a two-year period, in line with other European banks that have benefited from substantial State Aid. The further downgrade by one notch to Caa1 incorporates i) the higher level of certainty that EBS will receive State Aid as well as ii) the remaining uncertainty about the bank's financial strength beyond the 2-year time horizon, which also adds uncertainty about future coupon payments. At Caa1, the ratings are aligned with the ratings of comparable securities issued by BoI and AIB. The outlook for the securities is stable reflecting Moody's conservative expected loss assumptions in terms of the likelihood and time horizon of missed coupons, as well as the lower sensitivity of these instruments to the society's intrinsic financial strength. Conclusion of The Review -- Direction Uncertain on the E+ BFSR Of Irish Nationwide The outlook on the E+ BFSR (BCA: B3) of Irish Nationwide is now stable reflecting the EUR2.7 billion capital injection into the society from the Irish government to ensure that it meets its minimum current capital requirements, and Moody's view that support will remain high for this institution. Similar to EBS the members of Irish Nationwide voted to provide the government with a Special Investment Share and this gives the Minister of Finance huge powers and is similar in scope to a nationalization. Importantly the government has stated that its priority is to sell the entity or integrate it into another institution and therefore the Baa3/P-3 bank deposit and senior debt ratings of the institution remain on review -- direction uncertain, pending a sale or merger. If INBS does not merge with EBS, or another entity, in the near future then it is likely that the ratings would be downgraded to non-investment grade, reflecting the higher potential for losses at the end of the two-year guarantee period. This concludes the review on the BFSR that was initiated on December 9, 2009. No Rating Implications At The Present Time For Anglo Irish Bank The bank deposit, senior debt, dated subordinated debt and junior subordinated debt ratings of Anglo Irish all remain on review for possible downgrade despite the announced capital injection of EUR 8.3 billion, as the key rating driver in Moody's view remains the bank's restructuring plan that is currently waiting EU approval. Moody's aims to complete the review of the bank's ratings following the conclusion of the European Commission's assessment of the bank's restructuring plan (See the Press Release "Moody's downgrades to Ba1 Anglo Irish Bank subordinated debt" published on March 1, 2010, for further details.) Irish Life & Permanent (rated A2/P-1/D, negative) is not participating in NAMA as it does not have any development lending and therefore there are no rating implications for the bank. The last rating action on AIB was on December 2, 2009, when the bank's non-cumulative tier 1 securities were downgraded to Caa1 from B3. The last rating action on Anglo Irish Bank was on March 1, 2010, when the dated subordinated debt was downgraded to Ba1 from Baa1 and the review of the bank deposit ratings, the senior debt ratings, the dated subordinated debt rating and the junior subordinated debt rating was maintained. The last rating action on BoI was on January 19, 2009, when the bank's non-cumulative tier 1 securities were downgraded to Caa1 from B3. The last rating action on EBS was on July 7, 2009, when the backed senior debt guaranteed by the Irish government was downgraded to Aa1 (negative outlook) from Aaa (on review for possible downgrade.) The last rating action on Irish Life & Permanent was on February 10, 2010, when the bank's junior subordinated debt rating was downgraded to Ba3 from Ba1 guaranteed by the Irish government was downgraded to Aa1 (negative outlook) from Aaa (on review for possible downgrade.) The last rating action on INBS was on December 9, 2009, when the direction of the review on the Baa3/P-3 bank deposit and senior debt ratings, and the Ba1 subordinated debt rating was changed to direction uncertain from possible downgrade BANK OF IRELAND: Fitch Affirms Rating on Tier 1 Notes at 'CCC' -------------------------------------------------------------- Fitch Ratings has affirmed the Short- and Long-term Issuer Default Ratings of Allied Irish Banks plc, Bank of Ireland, EBS Building Society and Irish Nationwide Building Society in the light of the capital requirements and capital injections announced for the Irish banking system by the Minister for Finance. The Short-term IDR of Anglo Irish Bank Corporation was downgraded to 'F1' from 'F1+' and it and the Long-term IDR at 'A-' were placed on Rating Watch Evolving. A full list of ratings is given at the end of this announcement. "The capital position of these five institutions is now clearer and any lingering doubts about the willingness of the Irish state to support its leading credit institutions should have been removed" said Matthew Taylor, Senior Director in Fitch's Financial Institutions' team. "Taking into account also the banks' sale of loans to the National Agency for the Management Assets, to be completed by end-2010, the new shape of at least the two largest institutions is becoming apparent. Major challenges remain but once the proposed capital raising has been completed, the prospects for the sector should be on a surer footing," The Long-term IDRs of the above five institutions are at their Support Rating Floors. The ratings are therefore based on potential or actual support from the state of Ireland. All ratings at AIB and BoI have been affirmed. In particular, the affirmation of the Individual ratings at 'D/E' and 'C/D' respectively reflects Fitch's expectation that the banks have the ability to raise capital and bolster their capitalization without making further demands on the Irish state. AIB -- for which the challenge is greater than it is for BOI -- plans to raise much of the capital necessary through the sale of its UK business (as a result of which AIB Group (UK) plc's 'F1' Short- and 'A-' Long- term IDRs have been placed on RWE), its majority stake in Polish bank BZWBK and its minority stake in American bank M&T Bank Corporation. It also plans to raise capital from shareholders. Any remaining capital shortfall would be met by the government converting some or all of its EUR3.5 billion preference shares into equity, which would probably give the Irish state a majority stake in the bank. BoI proposes to raise fresh capital from private shareholders and will see a portion of the EUR3.5 billion government subscribed preference shares converted into equity, which would increase the government's minority ownership of the bank. The downgrade of the Short-term IDR and the placing of it and the Long-term IDR at Anglo on RWE reflect the proposal to split the bank into a new bank and a legacy asset company. In the event that Anglo becomes the legacy asset company and senior debt remains within the company, the senior debt could become government guaranteed (as was the case with UK-based Northern Rock Asset Management, for example), in which case the IDRs and senior debt ratings could be upgraded. However (and although it is not Fitch's central case, nor is it management's intention for senior debt to be in the legacy asset company), Fitch believes there to be possibility that if senior bondholders are placed in the legacy asset company they could be required to sustain losses. The Support Rating Floor at 'A-' has been placed on RWE and the Support rating at '1' has been placed on Rating Watch Negative (RWN) to reflect the uncertainty about the possible outcome of the restructuring. The Individual rating of Anglo has been affirmed at 'E' to reflect the bank's need for additional capital. The rating of lower Tier 2 subordinated debt has been downgraded to 'CCC' to reflect the expectation that it will reside in the legacy asset company in any restructuring and that there is a material likelihood that it will be required to absorb losses. The Individual ratings of EBS and INBS have been downgraded to 'F' to reflect that, in Fitch's opinion, they would have defaulted if they had not received external support. Both societies will receive capital in excess of their previous capital bases and the Irish state will have economic ownership of them. The Individual Ratings will remain at 'F' for at least one month. At EBS, the rating for senior unsecured debt has been downgraded to 'BBB-' from 'BBB' and the RWE replaced with a Rating Watch Positive (RWP). Fitch considers that senior debtors would be unlikely to benefit from their prior ranking over members deposits in a hypothetical insolvency event. The Tier 1 notes (preference shares and permanent interest bearing shares) of EBS have been downgraded to 'CCC' from 'B' RWN to reflect the increasing possibility that the European Commission may request the society to halt payment of coupons on the notes. The Financial Regulator stated on March 30, 2010 that Irish banks should hold at least 7% equity Tier 1 and at least 8% core tier 1 by end-2010 after taking into account expected loan losses to end- 2012. This approach and the announcement by NAMA of the size of expected losses on the sale of loans by the banks to it required the Minister for Finance to review the capital positions of each institution and, as he had previously promised, provide capital where necessary. Fitch downgraded Ireland's Long-term Foreign and Local Currency Sovereign Issuer Default ratings to 'AA-' in November 2009 with Stable Outlooks, simultaneously noting that Ireland's sovereign ratings were robust to some economic and fiscal disappointments. The Ministry of Finance's announcement on March 30 underlines the potential for higher than expected credit losses within the banks, leading to greater sovereign outlays to recapitalize these institutions. The latter will be offset to some extent by lower government guaranteed NAMA debt issuance, reflecting the application of deeper discounts in recognition of worse than expected asset quality. Nonetheless, Fitch notes that, overall, these stock-flow adjustments will adversely impact the sovereign's balance sheet, raising Fitch's broad measure of general government debt to around 120% of GDP by end-2010, somewhat higher than the agency's previous projections. However, the additional financial restructuring costs leave Ireland's underlying public debt dynamics broadly unchanged. Fitch reiterates its view that it expects NAMA to contribute positively to the re-establishment of financial sector stability. The ratings of the five institutions are shown below. Allied Irish Banks -- Long-term IDR affirmed at 'A-' (A minus); Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual affirmed at 'D/E' -- Support affirmed at '1' -- Support Rating Floor affirmed at 'A-' -- Senior unsecured notes affirmed at 'A-' -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt affirmed at 'BBB+' -- Upper Tier 2 subordinated notes affirmed at 'B' Rating Watch Negative -- Tier 1 notes affirmed at 'CCC' (ISINs: XS0208105055 and XS0257571066) -- Tier 1 notes maintained at 'CCC' Rating Watch Negative (ISIN: XS0120950158) -- Tier 1 notes maintained at 'B' Rating Watch Negative (ISIN: XS0257734037) AIB Bank (CI) Limited -- Long-term IDR affirmed at 'A-' (A minus); Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual affirmed at 'D/E' -- Support affirmed at '1' AIB Group (UK) PLC -- Long-term IDR affirmed at 'A-' (A minus); placed on RWE -- Short-term IDR affirmed at 'F1'; placed on RWE -- Individual affirmed at 'D/E' -- Support affirmed at '1'; placed on RWN Anglo Irish Bank Corporation -- Long-term IDR affirmed at 'A-' (A minus); placed on RWE -- Short-term IDR downgraded to 'F1' from 'F1+' and placed on RWE -- Individual affirmed at 'E' -- Support affirmed at '1' placed on RWN -- Support Rating Floor affirmed at 'A-' placed on RWE -- Senior unsecured notes affirmed at 'A-' placed on RWE -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt downgraded to 'CCC' from 'BBB+' -- Upper Tier 2 subordinated notes affirmed at 'CC' -- Tier 1 notes affirmed at 'C' Anglo Irish Mortgage Bank -- Long-term IDR affirmed at 'A-' (A minus); placed on RWE -- Short-term IDR downgraded to 'F1' from 'F1+' and placed on RWE -- Support at '1' placed on RWN Bank of Ireland -- Long-term IDR affirmed at 'A-' (A minus); Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual affirmed at 'C/D' -- Support affirmed at '1' -- Support Rating Floor affirmed at 'A-' -- Senior unsecured notes affirmed at 'A-' -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt affirmed at 'BBB+' -- Tier 1 notes affirmed at 'CCC' (ISINs: XS0268599999, US055967AA11 and USG12255AA64) -- Tier 1 notes maintained at 'B' Rating Watch Negative (ISINs: XS0125611482 and XS0165122655) EBS Building Society -- Long-term IDR maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Short-term IDR affirmed at 'F2' -- Individual downgraded to 'F' from 'E' -- Support affirmed at '2' -- Support Rating Floor maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Senior unsecured notes downgraded to 'BBB-' from 'BBB'; Rating Watch Positive replaced Rating Watch Evolving -- Sovereign guaranteed notes affirmed at 'AA-' -- Tier 1 notes downgraded to 'CCC' from 'B' and removed from Rating Watch Negative EBS Mortgage Finance -- Long-term IDR maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Short-term IDR affirmed at 'F2' -- Support affirmed at '2' Irish Nationwide Building Society -- Long-term IDR maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Short-term IDR affirmed at 'F2' -- Individual downgraded to 'F' from 'E' -- Support affirmed at '2' -- Support Rating Floor maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Senior unsecured notes maintained at 'BBB-'; Rating Watch Positive -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt maintained at 'BB+'; Rating Watch Evolving CELF LOW: S&P Withdraws 'CC' Rating on Class E and F Notes ---------------------------------------------------------- Standard & Poor's Ratings Services withdrew its 'CC' credit ratings on CELF Low Levered Partners PLC's class E and F notes at the issuer's request. CELF Low Levered Partners is a European cash flow CDO of corporate loans. EBS BUILDING: Moody's Changes Outlook on D BFSR to Positive ----------------------------------------------------------- Moody's Investors Service took positive rating actions on certain Irish banks following the concerted actions taken by various Irish authorities to strengthen these banks and remove their exposure to the most toxic real estate assets. The announcements included details from the National Asset Management Agency on the discount to be applied on the first tranche of loans to be transferred from banks to NAMA, the announcement from the Irish Government regarding its recapitalization plans for the banking sector, and a statement from the Financial Regulator on its revised (and much stricter) capital requirements. The rating changes are: * Bank of Ireland and ICS Building Society -- the D bank financial strength ratings (BFSR -- mapping to a baseline credit assessment of Ba2) are placed on review for possible upgrade, previously they had a developing outlook. * Allied Irish Banks -- the outlook on the D BFSR is changed to positive from developing. * EBS Building Society -- the outlook on the D BFSR is changed to positive from developing and the non-cumulative tier 1 instruments are downgraded to Caa1 from B3. * Irish Nationwide Building Society -- the outlook on the E+ BFSR (BCA: B3) is changed to stable concluding the review (with uncertain direction) that had been initiated on December 9, 2009. There are no rating implications at the present time for Anglo Irish Bank; its A3/P-1 long- and short term debt and deposit ratings remain under review for possible downgrade, and the E BFSR has a stable outlook at the bottom of that scale. Ross Abercromby, a Vice President and lead analyst for Irish banks at Moody's commented: "Yesterday's announcements by the Irish authorities constitute an important milestone for the Irish banking system. Unless there should be a significant further deterioration in the wider Irish economy, the actions taken by NAMA, the government and the regulator should have put the bank's intrinsic credit profiles on a much more resilient footing. These actions ensure that banks have to clean up their balance sheets, but also need to recapitalize to adequate levels, which the government is ultimately willing to underwrite. This will put the banks in a better position to finance a return to economic growth, which in turn should help avoid a significant further economic deterioration. Overall, this is both positive for banks' intrinsic credit strength as well for the wider economy." Ross Abercromby continued: "The review for possible upgrade for Bank of Ireland and the outlook changes to positive for Allied Irish Banks and EBS Building Society reflect Moody's expectation that the inflection point in these bank's intrinsic credit profile should have been achieved. The debt and deposit ratings for all these banks are primarily driven by the significant amount of systemic support and therefore are not affected by these changes to banks' standalone ratings". Nama-Imposed Discounts Between 35% to 58%, Stress Tests and Subsequent Recapitalization Requirements Are Positive for Banks Yesterday's announcement by NAMA has detailed the discount to book value at which the first tranche of development and property loans will be transferred from the banks to NAMA: The discount ranges between 35% for Bank of Ireland to 58% at Irish Nationwide. This reflects the extremely difficult economic environment in Ireland, the approximate 50% fall in the value of Irish commercial property and the differences in the underwriting and composition of the loan books of the individual entities. Furthermore, the regulator has laid out new capital requirements for Irish banks. These include a target level for core tier 1 capital of 8% after deducting impairments on non-NAMA assets as well as a core-Tier 1 ratio of at least 4% after further deducting hypothetical stress losses through to 2012. Thirdly, the government has announced that while preferring private solutions to the subsequent capital requirements, e.g. via asset sales, public offerings etc, it is willing to underwrite the necessary capital injections to an amount of more than EUR21 billion where necessary. Moody's had already incorporated similar levels of expected losses into the BFSRs of the entities participating in NAMA, which in turn had been a key factor behind the downgrades of the banks' BFSRs to subinvestment-grade levels in April 2009. Overall, these impairments largely correspond to Moody's own base case scenario of expected losses especially when taking into consideration earlier capital injections (EUR 11 billion in 2009 by the Irish government) and exposure reductions by some of the affected banks. Therefore, the primary rating impact of yesterday's combined announcements by NAMA, the government and the regulator is positive for most banks' standalone BFSR. No Impact on Deposit and Senior Debt Ratings Importantly for the bank deposit and senior debt ratings the Irish government continues to be extremely supportive and this is the key factor in the high levels of uplift incorporated into the senior ratings of the banks that range from A1 for Allied Irish and Bank of Ireland to Baa3 (on review with uncertain direction) for Irish Nationwide. Moody's noted that the statement by the Irish government included confirmation that capital will be provided for those institutions who as a result of the transfers to NAMA, loan losses on other assets and the newly announced minimum capital levels required by the Financial Regulator, have a need for capital infusions. Given the differing needs and corporate structures the way in which the capital is injected may differ but Moody's continues to view the government as being extremely supportive. Details on the Rating Actions Review for Upgrade of The BFSR Of Bank Of Ireland Bank of Ireland's D BFSR is placed on review for possible upgrade. The regulator is requiring the bank to raise a further EUR2.7 billion of equity. Bank of Ireland is unlikely to require further capital from the Irish government and has indicated that it will be able to raise capital from private shareholders and through the conversion of an element of the government's preference shares. The review will focus on i) the capital plan of the bank, including the quantum of capital that is raised and the capital structure of the bank post any conversion of the government preference shares, as well as ii) the degree to which the capital injection sufficiently offsets the remaining risks in its books, which will require a more detailed comparison of the performed stresses and impairments to Moody's own stress scenarios. An important part of the review will also be the conclusion of the bank's negotiations with the European Commission over its restructuring plan which has been lodged as a result of the State Aid the bank has received. Moody's also highlights that Bank of Ireland's strong Irish franchise has been relatively unaffected by the crisis and that it still has an element of geographic diversification through its UK operations. The D BFSR of ICS Building Society, BoI's Irish mortgage lending subsidiary, is also placed on review for possible upgrade, in line with its parent. Allied Irish BFSR Outlook Changed to Positive The change in the outlook to positive from developing on the D BFSR of Allied Irish reflects the stronger position that the bank will be in as a result of the capital to be raised. The bank will raise EUR7.4 billion of equity as required by the regulator and this will put the bank in a much improved position. Although the bank's franchise will be more focused on Ireland in the future as the first part of its capital raising will involve the sale of its investments in Poland (Bank Zachodni WBK), the USA (M&T) and its UK subsidiary, Moody's believes it will remain one of the two predominant banks in Ireland. However, the significantly higher degree of impairment in its books as compared to BoI indicates that more fundamental changes to its underwriting and risk culture are required, therefore resulting in a more drawn-out trajectory of improvement. An important element in the positive outlook and overall rating levels of the BFSR and long-term debt ratings is Moody's understanding that if the bank is unable to raise the remaining capital requirement then the bank will be able to convert some or all of the government's EUR3.5 billion preference share investment in the bank. Furthermore, Moody's believes that if further capital was needed beyond the currently envisaged amounts the government would also provide it. EBS Building Society's BFSR Outlook Changed to Positive; Tier 1 Instruments Downgraded to Caa1 From B3 The change in the outlook to positive from developing on the D BFSR of EBS reflects the stronger position that the society will be in as a result of the capital that will be injected. The society is required to raise EUR875 million of equity by the regulator. As detailed by the government there is the potential for an investment in the society by a third party, however if this does not materialize then the capital will be provided by the Irish government. In Moody's opinion EBS has a good franchise in Ireland and the main issue at the society has been the small development loan portfolio. With the transfer to NAMA of these loans and the resulting capital increase the society should be relatively well placed to maintain its position as a key retail financial service provider in Ireland. Moody's notes however that the society will be required to submit a restructuring plan to the European Commission which could result in some further restructuring requirements being imposed. EBS is also involved in potential merger negotiations with Irish Nationwide Building Society and if the merger was to go ahead -- only after INBS has been cleaned up, as Moody's understands -- then an important element of EBS' ratings would be the integration of the smaller society into EBS. The one notch downgrade to Caa1 from B3 on the tier 1 instruments of EBS reflects that as the society will now receive State Aid through the Special Investment Share, Moody's believes that the European Commission will request that the society does not make payments on its Tier 1 capital instruments unless it has a legal obligation to do so. The downgrade of the non-cumulative instruments last year to B3 was based on an expected-loss approach and reflected Moody's assumption that the society would likely omit coupons for at least a two-year period, in line with other European banks that have benefited from substantial State Aid. The further downgrade by one notch to Caa1 incorporates i) the higher level of certainty that EBS will receive State Aid as well as ii) the remaining uncertainty about the bank's financial strength beyond the 2-year time horizon, which also adds uncertainty about future coupon payments. At Caa1, the ratings are aligned with the ratings of comparable securities issued by BoI and AIB. The outlook for the securities is stable reflecting Moody's conservative expected loss assumptions in terms of the likelihood and time horizon of missed coupons, as well as the lower sensitivity of these instruments to the society's intrinsic financial strength. Conclusion of The Review -- Direction Uncertain on the E+ BFSR Of Irish Nationwide The outlook on the E+ BFSR (BCA: B3) of Irish Nationwide is now stable reflecting the EUR2.7 billion capital injection into the society from the Irish government to ensure that it meets its minimum current capital requirements, and Moody's view that support will remain high for this institution. Similar to EBS the members of Irish Nationwide voted to provide the government with a Special Investment Share and this gives the Minister of Finance huge powers and is similar in scope to a nationalization. Importantly the government has stated that its priority is to sell the entity or integrate it into another institution and therefore the Baa3/P-3 bank deposit and senior debt ratings of the institution remain on review -- direction uncertain, pending a sale or merger. If INBS does not merge with EBS, or another entity, in the near future then it is likely that the ratings would be downgraded to non-investment grade, reflecting the higher potential for losses at the end of the two-year guarantee period. This concludes the review on the BFSR that was initiated on December 9, 2009. No Rating Implications At The Present Time For Anglo Irish Bank The bank deposit, senior debt, dated subordinated debt and junior subordinated debt ratings of Anglo Irish all remain on review for possible downgrade despite the announced capital injection of EUR 8.3 billion, as the key rating driver in Moody's view remains the bank's restructuring plan that is currently waiting EU approval. Moody's aims to complete the review of the bank's ratings following the conclusion of the European Commission's assessment of the bank's restructuring plan (See the Press Release "Moody's downgrades to Ba1 Anglo Irish Bank subordinated debt" published on March 1, 2010, for further details.) Irish Life & Permanent (rated A2/P-1/D, negative) is not participating in NAMA as it does not have any development lending and therefore there are no rating implications for the bank. The last rating action on AIB was on December 2, 2009, when the bank's non-cumulative tier 1 securities were downgraded to Caa1 from B3. The last rating action on Anglo Irish Bank was on March 1, 2010, when the dated subordinated debt was downgraded to Ba1 from Baa1 and the review of the bank deposit ratings, the senior debt ratings, the dated subordinated debt rating and the junior subordinated debt rating was maintained. The last rating action on BoI was on January 19, 2009, when the bank's non-cumulative tier 1 securities were downgraded to Caa1 from B3. The last rating action on EBS was on July 7, 2009, when the backed senior debt guaranteed by the Irish government was downgraded to Aa1 (negative outlook) from Aaa (on review for possible downgrade.) The last rating action on Irish Life & Permanent was on February 10, 2010, when the bank's junior subordinated debt rating was downgraded to Ba3 from Ba1 guaranteed by the Irish government was downgraded to Aa1 (negative outlook) from Aaa (on review for possible downgrade.) The last rating action on INBS was on December 9, 2009, when the direction of the review on the Baa3/P-3 bank deposit and senior debt ratings, and the Ba1 subordinated debt rating was changed to direction uncertain from possible downgrade EBS BUILDING: Fitch Downgrades Rating on Tier 1 Notes to 'CCC' -------------------------------------------------------------- Fitch Ratings has affirmed the Short- and Long-term Issuer Default Ratings of Allied Irish Banks plc, Bank of Ireland, EBS Building Society and Irish Nationwide Building Society in the light of the capital requirements and capital injections announced for the Irish banking system by the Minister for Finance. The Short-term IDR of Anglo Irish Bank Corporation was downgraded to 'F1' from 'F1+' and it and the Long-term IDR at 'A-' were placed on Rating Watch Evolving. A full list of ratings is given at the end of this announcement. "The capital position of these five institutions is now clearer and any lingering doubts about the willingness of the Irish state to support its leading credit institutions should have been removed" said Matthew Taylor, Senior Director in Fitch's Financial Institutions' team. "Taking into account also the banks' sale of loans to the National Agency for the Management Assets, to be completed by end-2010, the new shape of at least the two largest institutions is becoming apparent. Major challenges remain but once the proposed capital raising has been completed, the prospects for the sector should be on a surer footing," The Long-term IDRs of the above five institutions are at their Support Rating Floors. The ratings are therefore based on potential or actual support from the state of Ireland. All ratings at AIB and BoI have been affirmed. In particular, the affirmation of the Individual ratings at 'D/E' and 'C/D' respectively reflects Fitch's expectation that the banks have the ability to raise capital and bolster their capitalization without making further demands on the Irish state. AIB -- for which the challenge is greater than it is for BOI -- plans to raise much of the capital necessary through the sale of its UK business (as a result of which AIB Group (UK) plc's 'F1' Short- and 'A-' Long- term IDRs have been placed on RWE), its majority stake in Polish bank BZWBK and its minority stake in American bank M&T Bank Corporation. It also plans to raise capital from shareholders. Any remaining capital shortfall would be met by the government converting some or all of its EUR3.5 billion preference shares into equity, which would probably give the Irish state a majority stake in the bank. BoI proposes to raise fresh capital from private shareholders and will see a portion of the EUR3.5 billion government subscribed preference shares converted into equity, which would increase the government's minority ownership of the bank. The downgrade of the Short-term IDR and the placing of it and the Long-term IDR at Anglo on RWE reflect the proposal to split the bank into a new bank and a legacy asset company. In the event that Anglo becomes the legacy asset company and senior debt remains within the company, the senior debt could become government guaranteed (as was the case with UK-based Northern Rock Asset Management, for example), in which case the IDRs and senior debt ratings could be upgraded. However (and although it is not Fitch's central case, nor is it management's intention for senior debt to be in the legacy asset company), Fitch believes there to be possibility that if senior bondholders are placed in the legacy asset company they could be required to sustain losses. The Support Rating Floor at 'A-' has been placed on RWE and the Support rating at '1' has been placed on Rating Watch Negative (RWN) to reflect the uncertainty about the possible outcome of the restructuring. The Individual rating of Anglo has been affirmed at 'E' to reflect the bank's need for additional capital. The rating of lower Tier 2 subordinated debt has been downgraded to 'CCC' to reflect the expectation that it will reside in the legacy asset company in any restructuring and that there is a material likelihood that it will be required to absorb losses. The Individual ratings of EBS and INBS have been downgraded to 'F' to reflect that, in Fitch's opinion, they would have defaulted if they had not received external support. Both societies will receive capital in excess of their previous capital bases and the Irish state will have economic ownership of them. The Individual Ratings will remain at 'F' for at least one month. At EBS, the rating for senior unsecured debt has been downgraded to 'BBB-' from 'BBB' and the RWE replaced with a Rating Watch Positive (RWP). Fitch considers that senior debtors would be unlikely to benefit from their prior ranking over members deposits in a hypothetical insolvency event. The Tier 1 notes (preference shares and permanent interest bearing shares) of EBS have been downgraded to 'CCC' from 'B' RWN to reflect the increasing possibility that the European Commission may request the society to halt payment of coupons on the notes. The Financial Regulator stated on March 30, 2010 that Irish banks should hold at least 7% equity Tier 1 and at least 8% core tier 1 by end-2010 after taking into account expected loan losses to end- 2012. This approach and the announcement by NAMA of the size of expected losses on the sale of loans by the banks to it required the Minister for Finance to review the capital positions of each institution and, as he had previously promised, provide capital where necessary. Fitch downgraded Ireland's Long-term Foreign and Local Currency Sovereign Issuer Default ratings to 'AA-' in November 2009 with Stable Outlooks, simultaneously noting that Ireland's sovereign ratings were robust to some economic and fiscal disappointments. The Ministry of Finance's announcement on March 30 underlines the potential for higher than expected credit losses within the banks, leading to greater sovereign outlays to recapitalize these institutions. The latter will be offset to some extent by lower government guaranteed NAMA debt issuance, reflecting the application of deeper discounts in recognition of worse than expected asset quality. Nonetheless, Fitch notes that, overall, these stock-flow adjustments will adversely impact the sovereign's balance sheet, raising Fitch's broad measure of general government debt to around 120% of GDP by end-2010, somewhat higher than the agency's previous projections. However, the additional financial restructuring costs leave Ireland's underlying public debt dynamics broadly unchanged. Fitch reiterates its view that it expects NAMA to contribute positively to the re-establishment of financial sector stability. The ratings of the five institutions are shown below. Allied Irish Banks -- Long-term IDR affirmed at 'A-' (A minus); Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual affirmed at 'D/E' -- Support affirmed at '1' -- Support Rating Floor affirmed at 'A-' -- Senior unsecured notes affirmed at 'A-' -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt affirmed at 'BBB+' -- Upper Tier 2 subordinated notes affirmed at 'B' Rating Watch Negative -- Tier 1 notes affirmed at 'CCC' (ISINs: XS0208105055 and XS0257571066) -- Tier 1 notes maintained at 'CCC' Rating Watch Negative (ISIN: XS0120950158) -- Tier 1 notes maintained at 'B' Rating Watch Negative (ISIN: XS0257734037) AIB Bank (CI) Limited -- Long-term IDR affirmed at 'A-' (A minus); Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual affirmed at 'D/E' -- Support affirmed at '1' AIB Group (UK) PLC -- Long-term IDR affirmed at 'A-' (A minus); placed on RWE -- Short-term IDR affirmed at 'F1'; placed on RWE -- Individual affirmed at 'D/E' -- Support affirmed at '1'; placed on RWN Anglo Irish Bank Corporation -- Long-term IDR affirmed at 'A-' (A minus); placed on RWE -- Short-term IDR downgraded to 'F1' from 'F1+' and placed on RWE -- Individual affirmed at 'E' -- Support affirmed at '1' placed on RWN -- Support Rating Floor affirmed at 'A-' placed on RWE -- Senior unsecured notes affirmed at 'A-' placed on RWE -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt downgraded to 'CCC' from 'BBB+' -- Upper Tier 2 subordinated notes affirmed at 'CC' -- Tier 1 notes affirmed at 'C' Anglo Irish Mortgage Bank -- Long-term IDR affirmed at 'A-' (A minus); placed on RWE -- Short-term IDR downgraded to 'F1' from 'F1+' and placed on RWE -- Support at '1' placed on RWN Bank of Ireland -- Long-term IDR affirmed at 'A-' (A minus); Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual affirmed at 'C/D' -- Support affirmed at '1' -- Support Rating Floor affirmed at 'A-' -- Senior unsecured notes affirmed at 'A-' -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt affirmed at 'BBB+' -- Tier 1 notes affirmed at 'CCC' (ISINs: XS0268599999, US055967AA11 and USG12255AA64) -- Tier 1 notes maintained at 'B' Rating Watch Negative (ISINs: XS0125611482 and XS0165122655) EBS Building Society -- Long-term IDR maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Short-term IDR affirmed at 'F2' -- Individual downgraded to 'F' from 'E' -- Support affirmed at '2' -- Support Rating Floor maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Senior unsecured notes downgraded to 'BBB-' from 'BBB'; Rating Watch Positive replaced Rating Watch Evolving -- Sovereign guaranteed notes affirmed at 'AA-' -- Tier 1 notes downgraded to 'CCC' from 'B' and removed from Rating Watch Negative EBS Mortgage Finance -- Long-term IDR maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Short-term IDR affirmed at 'F2' -- Support affirmed at '2' Irish Nationwide Building Society -- Long-term IDR maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Short-term IDR affirmed at 'F2' -- Individual downgraded to 'F' from 'E' -- Support affirmed at '2' -- Support Rating Floor maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Senior unsecured notes maintained at 'BBB-'; Rating Watch Positive -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt maintained at 'BB+'; Rating Watch Evolving IRISH NATIONWIDE: Moody's Changes Outlook on E+ BFSR to Stable --------------------------------------------------------------- Moody's Investors Service took positive rating actions on certain Irish banks following the concerted actions taken by various Irish authorities to strengthen these banks and remove their exposure to the most toxic real estate assets. The announcements included details from the National Asset Management Agency on the discount to be applied on the first tranche of loans to be transferred from banks to NAMA, the announcement from the Irish Government regarding its recapitalization plans for the banking sector, and a statement from the Financial Regulator on its revised (and much stricter) capital requirements. The rating changes are: * Bank of Ireland and ICS Building Society -- the D bank financial strength ratings (BFSR -- mapping to a baseline credit assessment of Ba2) are placed on review for possible upgrade, previously they had a developing outlook. * Allied Irish Banks -- the outlook on the D BFSR is changed to positive from developing. * EBS Building Society -- the outlook on the D BFSR is changed to positive from developing and the non-cumulative tier 1 instruments are downgraded to Caa1 from B3. * Irish Nationwide Building Society -- the outlook on the E+ BFSR (BCA: B3) is changed to stable concluding the review (with uncertain direction) that had been initiated on December 9, 2009. There are no rating implications at the present time for Anglo Irish Bank; its A3/P-1 long- and short term debt and deposit ratings remain under review for possible downgrade, and the E BFSR has a stable outlook at the bottom of that scale. Ross Abercromby, a Vice President and lead analyst for Irish banks at Moody's commented: "Yesterday's announcements by the Irish authorities constitute an important milestone for the Irish banking system. Unless there should be a significant further deterioration in the wider Irish economy, the actions taken by NAMA, the government and the regulator should have put the bank's intrinsic credit profiles on a much more resilient footing. These actions ensure that banks have to clean up their balance sheets, but also need to recapitalize to adequate levels, which the government is ultimately willing to underwrite. This will put the banks in a better position to finance a return to economic growth, which in turn should help avoid a significant further economic deterioration. Overall, this is both positive for banks' intrinsic credit strength as well for the wider economy." Ross Abercromby continued: "The review for possible upgrade for Bank of Ireland and the outlook changes to positive for Allied Irish Banks and EBS Building Society reflect Moody's expectation that the inflection point in these bank's intrinsic credit profile should have been achieved. The debt and deposit ratings for all these banks are primarily driven by the significant amount of systemic support and therefore are not affected by these changes to banks' standalone ratings". Nama-Imposed Discounts Between 35% to 58%, Stress Tests and Subsequent Recapitalization Requirements Are Positive for Banks Yesterday's announcement by NAMA has detailed the discount to book value at which the first tranche of development and property loans will be transferred from the banks to NAMA: The discount ranges between 35% for Bank of Ireland to 58% at Irish Nationwide. This reflects the extremely difficult economic environment in Ireland, the approximate 50% fall in the value of Irish commercial property and the differences in the underwriting and composition of the loan books of the individual entities. Furthermore, the regulator has laid out new capital requirements for Irish banks. These include a target level for core tier 1 capital of 8% after deducting impairments on non-NAMA assets as well as a core-Tier 1 ratio of at least 4% after further deducting hypothetical stress losses through to 2012. Thirdly, the government has announced that while preferring private solutions to the subsequent capital requirements, e.g. via asset sales, public offerings etc, it is willing to underwrite the necessary capital injections to an amount of more than EUR21 billion where necessary. Moody's had already incorporated similar levels of expected losses into the BFSRs of the entities participating in NAMA, which in turn had been a key factor behind the downgrades of the banks' BFSRs to subinvestment-grade levels in April 2009. Overall, these impairments largely correspond to Moody's own base case scenario of expected losses especially when taking into consideration earlier capital injections (EUR 11 billion in 2009 by the Irish government) and exposure reductions by some of the affected banks. Therefore, the primary rating impact of yesterday's combined announcements by NAMA, the government and the regulator is positive for most banks' standalone BFSR. No Impact on Deposit and Senior Debt Ratings Importantly for the bank deposit and senior debt ratings the Irish government continues to be extremely supportive and this is the key factor in the high levels of uplift incorporated into the senior ratings of the banks that range from A1 for Allied Irish and Bank of Ireland to Baa3 (on review with uncertain direction) for Irish Nationwide. Moody's noted that the statement by the Irish government included confirmation that capital will be provided for those institutions who as a result of the transfers to NAMA, loan losses on other assets and the newly announced minimum capital levels required by the Financial Regulator, have a need for capital infusions. Given the differing needs and corporate structures the way in which the capital is injected may differ but Moody's continues to view the government as being extremely supportive. Details on the Rating Actions Review for Upgrade of The BFSR Of Bank Of Ireland Bank of Ireland's D BFSR is placed on review for possible upgrade. The regulator is requiring the bank to raise a further EUR2.7 billion of equity. Bank of Ireland is unlikely to require further capital from the Irish government and has indicated that it will be able to raise capital from private shareholders and through the conversion of an element of the government's preference shares. The review will focus on i) the capital plan of the bank, including the quantum of capital that is raised and the capital structure of the bank post any conversion of the government preference shares, as well as ii) the degree to which the capital injection sufficiently offsets the remaining risks in its books, which will require a more detailed comparison of the performed stresses and impairments to Moody's own stress scenarios. An important part of the review will also be the conclusion of the bank's negotiations with the European Commission over its restructuring plan which has been lodged as a result of the State Aid the bank has received. Moody's also highlights that Bank of Ireland's strong Irish franchise has been relatively unaffected by the crisis and that it still has an element of geographic diversification through its UK operations. The D BFSR of ICS Building Society, BoI's Irish mortgage lending subsidiary, is also placed on review for possible upgrade, in line with its parent. Allied Irish BFSR Outlook Changed to Positive The change in the outlook to positive from developing on the D BFSR of Allied Irish reflects the stronger position that the bank will be in as a result of the capital to be raised. The bank will raise EUR7.4 billion of equity as required by the regulator and this will put the bank in a much improved position. Although the bank's franchise will be more focused on Ireland in the future as the first part of its capital raising will involve the sale of its investments in Poland (Bank Zachodni WBK), the USA (M&T) and its UK subsidiary, Moody's believes it will remain one of the two predominant banks in Ireland. However, the significantly higher degree of impairment in its books as compared to BoI indicates that more fundamental changes to its underwriting and risk culture are required, therefore resulting in a more drawn-out trajectory of improvement. An important element in the positive outlook and overall rating levels of the BFSR and long-term debt ratings is Moody's understanding that if the bank is unable to raise the remaining capital requirement then the bank will be able to convert some or all of the government's EUR3.5 billion preference share investment in the bank. Furthermore, Moody's believes that if further capital was needed beyond the currently envisaged amounts the government would also provide it. EBS Building Society's BFSR Outlook Changed to Positive; Tier 1 Instruments Downgraded to Caa1 From B3 The change in the outlook to positive from developing on the D BFSR of EBS reflects the stronger position that the society will be in as a result of the capital that will be injected. The society is required to raise EUR875 million of equity by the regulator. As detailed by the government there is the potential for an investment in the society by a third party, however if this does not materialize then the capital will be provided by the Irish government. In Moody's opinion EBS has a good franchise in Ireland and the main issue at the society has been the small development loan portfolio. With the transfer to NAMA of these loans and the resulting capital increase the society should be relatively well placed to maintain its position as a key retail financial service provider in Ireland. Moody's notes however that the society will be required to submit a restructuring plan to the European Commission which could result in some further restructuring requirements being imposed. EBS is also involved in potential merger negotiations with Irish Nationwide Building Society and if the merger was to go ahead -- only after INBS has been cleaned up, as Moody's understands -- then an important element of EBS' ratings would be the integration of the smaller society into EBS. The one notch downgrade to Caa1 from B3 on the tier 1 instruments of EBS reflects that as the society will now receive State Aid through the Special Investment Share, Moody's believes that the European Commission will request that the society does not make payments on its Tier 1 capital instruments unless it has a legal obligation to do so. The downgrade of the non-cumulative instruments last year to B3 was based on an expected-loss approach and reflected Moody's assumption that the society would likely omit coupons for at least a two-year period, in line with other European banks that have benefited from substantial State Aid. The further downgrade by one notch to Caa1 incorporates i) the higher level of certainty that EBS will receive State Aid as well as ii) the remaining uncertainty about the bank's financial strength beyond the 2-year time horizon, which also adds uncertainty about future coupon payments. At Caa1, the ratings are aligned with the ratings of comparable securities issued by BoI and AIB. The outlook for the securities is stable reflecting Moody's conservative expected loss assumptions in terms of the likelihood and time horizon of missed coupons, as well as the lower sensitivity of these instruments to the society's intrinsic financial strength. Conclusion of The Review -- Direction Uncertain on the E+ BFSR Of Irish Nationwide The outlook on the E+ BFSR (BCA: B3) of Irish Nationwide is now stable reflecting the EUR2.7 billion capital injection into the society from the Irish government to ensure that it meets its minimum current capital requirements, and Moody's view that support will remain high for this institution. Similar to EBS the members of Irish Nationwide voted to provide the government with a Special Investment Share and this gives the Minister of Finance huge powers and is similar in scope to a nationalization. Importantly the government has stated that its priority is to sell the entity or integrate it into another institution and therefore the Baa3/P-3 bank deposit and senior debt ratings of the institution remain on review -- direction uncertain, pending a sale or merger. If INBS does not merge with EBS, or another entity, in the near future then it is likely that the ratings would be downgraded to non-investment grade, reflecting the higher potential for losses at the end of the two-year guarantee period. This concludes the review on the BFSR that was initiated on December 9, 2009. No Rating Implications At The Present Time For Anglo Irish Bank The bank deposit, senior debt, dated subordinated debt and junior subordinated debt ratings of Anglo Irish all remain on review for possible downgrade despite the announced capital injection of EUR 8.3 billion, as the key rating driver in Moody's view remains the bank's restructuring plan that is currently waiting EU approval. Moody's aims to complete the review of the bank's ratings following the conclusion of the European Commission's assessment of the bank's restructuring plan (See the Press Release "Moody's downgrades to Ba1 Anglo Irish Bank subordinated debt" published on March 1, 2010, for further details.) Irish Life & Permanent (rated A2/P-1/D, negative) is not participating in NAMA as it does not have any development lending and therefore there are no rating implications for the bank. The last rating action on AIB was on December 2, 2009, when the bank's non-cumulative tier 1 securities were downgraded to Caa1 from B3. The last rating action on Anglo Irish Bank was on March 1, 2010, when the dated subordinated debt was downgraded to Ba1 from Baa1 and the review of the bank deposit ratings, the senior debt ratings, the dated subordinated debt rating and the junior subordinated debt rating was maintained. The last rating action on BoI was on January 19, 2009, when the bank's non-cumulative tier 1 securities were downgraded to Caa1 from B3. The last rating action on EBS was on July 7, 2009, when the backed senior debt guaranteed by the Irish government was downgraded to Aa1 (negative outlook) from Aaa (on review for possible downgrade.) The last rating action on Irish Life & Permanent was on February 10, 2010, when the bank's junior subordinated debt rating was downgraded to Ba3 from Ba1 guaranteed by the Irish government was downgraded to Aa1 (negative outlook) from Aaa (on review for possible downgrade.) The last rating action on INBS was on December 9, 2009, when the direction of the review on the Baa3/P-3 bank deposit and senior debt ratings, and the Ba1 subordinated debt rating was changed to direction uncertain from possible downgrade. IRISH NATIONWIDE: Fitch Downgrades Individual Rating to 'F' ----------------------------------------------------------- Fitch Ratings has affirmed the Short- and Long-term Issuer Default Ratings of Allied Irish Banks plc, Bank of Ireland, EBS Building Society and Irish Nationwide Building Society in the light of the capital requirements and capital injections announced for the Irish banking system by the Minister for Finance. The Short-term IDR of Anglo Irish Bank Corporation was downgraded to 'F1' from 'F1+' and it and the Long-term IDR at 'A-' were placed on Rating Watch Evolving. A full list of ratings is given at the end of this announcement. "The capital position of these five institutions is now clearer and any lingering doubts about the willingness of the Irish state to support its leading credit institutions should have been removed" said Matthew Taylor, Senior Director in Fitch's Financial Institutions' team. "Taking into account also the banks' sale of loans to the National Agency for the Management Assets, to be completed by end-2010, the new shape of at least the two largest institutions is becoming apparent. Major challenges remain but once the proposed capital raising has been completed, the prospects for the sector should be on a surer footing," The Long-term IDRs of the above five institutions are at their Support Rating Floors. The ratings are therefore based on potential or actual support from the state of Ireland. All ratings at AIB and BoI have been affirmed. In particular, the affirmation of the Individual ratings at 'D/E' and 'C/D' respectively reflects Fitch's expectation that the banks have the ability to raise capital and bolster their capitalization without making further demands on the Irish state. AIB -- for which the challenge is greater than it is for BOI -- plans to raise much of the capital necessary through the sale of its UK business (as a result of which AIB Group (UK) plc's 'F1' Short- and 'A-' Long- term IDRs have been placed on RWE), its majority stake in Polish bank BZWBK and its minority stake in American bank M&T Bank Corporation. It also plans to raise capital from shareholders. Any remaining capital shortfall would be met by the government converting some or all of its EUR3.5 billion preference shares into equity, which would probably give the Irish state a majority stake in the bank. BoI proposes to raise fresh capital from private shareholders and will see a portion of the EUR3.5 billion government subscribed preference shares converted into equity, which would increase the government's minority ownership of the bank. The downgrade of the Short-term IDR and the placing of it and the Long-term IDR at Anglo on RWE reflect the proposal to split the bank into a new bank and a legacy asset company. In the event that Anglo becomes the legacy asset company and senior debt remains within the company, the senior debt could become government guaranteed (as was the case with UK-based Northern Rock Asset Management, for example), in which case the IDRs and senior debt ratings could be upgraded. However (and although it is not Fitch's central case, nor is it management's intention for senior debt to be in the legacy asset company), Fitch believes there to be possibility that if senior bondholders are placed in the legacy asset company they could be required to sustain losses. The Support Rating Floor at 'A-' has been placed on RWE and the Support rating at '1' has been placed on Rating Watch Negative (RWN) to reflect the uncertainty about the possible outcome of the restructuring. The Individual rating of Anglo has been affirmed at 'E' to reflect the bank's need for additional capital. The rating of lower Tier 2 subordinated debt has been downgraded to 'CCC' to reflect the expectation that it will reside in the legacy asset company in any restructuring and that there is a material likelihood that it will be required to absorb losses. The Individual ratings of EBS and INBS have been downgraded to 'F' to reflect that, in Fitch's opinion, they would have defaulted if they had not received external support. Both societies will receive capital in excess of their previous capital bases and the Irish state will have economic ownership of them. The Individual Ratings will remain at 'F' for at least one month. At EBS, the rating for senior unsecured debt has been downgraded to 'BBB-' from 'BBB' and the RWE replaced with a Rating Watch Positive (RWP). Fitch considers that senior debtors would be unlikely to benefit from their prior ranking over members deposits in a hypothetical insolvency event. The Tier 1 notes (preference shares and permanent interest bearing shares) of EBS have been downgraded to 'CCC' from 'B' RWN to reflect the increasing possibility that the European Commission may request the society to halt payment of coupons on the notes. The Financial Regulator stated on March 30, 2010 that Irish banks should hold at least 7% equity Tier 1 and at least 8% core tier 1 by end-2010 after taking into account expected loan losses to end- 2012. This approach and the announcement by NAMA of the size of expected losses on the sale of loans by the banks to it required the Minister for Finance to review the capital positions of each institution and, as he had previously promised, provide capital where necessary. Fitch downgraded Ireland's Long-term Foreign and Local Currency Sovereign Issuer Default ratings to 'AA-' in November 2009 with Stable Outlooks, simultaneously noting that Ireland's sovereign ratings were robust to some economic and fiscal disappointments. The Ministry of Finance's announcement on March 30 underlines the potential for higher than expected credit losses within the banks, leading to greater sovereign outlays to recapitalize these institutions. The latter will be offset to some extent by lower government guaranteed NAMA debt issuance, reflecting the application of deeper discounts in recognition of worse than expected asset quality. Nonetheless, Fitch notes that, overall, these stock-flow adjustments will adversely impact the sovereign's balance sheet, raising Fitch's broad measure of general government debt to around 120% of GDP by end-2010, somewhat higher than the agency's previous projections. However, the additional financial restructuring costs leave Ireland's underlying public debt dynamics broadly unchanged. Fitch reiterates its view that it expects NAMA to contribute positively to the re-establishment of financial sector stability. The ratings of the five institutions are shown below. Allied Irish Banks -- Long-term IDR affirmed at 'A-' (A minus); Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual affirmed at 'D/E' -- Support affirmed at '1' -- Support Rating Floor affirmed at 'A-' -- Senior unsecured notes affirmed at 'A-' -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt affirmed at 'BBB+' -- Upper Tier 2 subordinated notes affirmed at 'B' Rating Watch Negative -- Tier 1 notes affirmed at 'CCC' (ISINs: XS0208105055 and XS0257571066) -- Tier 1 notes maintained at 'CCC' Rating Watch Negative (ISIN: XS0120950158) -- Tier 1 notes maintained at 'B' Rating Watch Negative (ISIN: XS0257734037) AIB Bank (CI) Limited -- Long-term IDR affirmed at 'A-' (A minus); Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual affirmed at 'D/E' -- Support affirmed at '1' AIB Group (UK) PLC -- Long-term IDR affirmed at 'A-' (A minus); placed on RWE -- Short-term IDR affirmed at 'F1'; placed on RWE -- Individual affirmed at 'D/E' -- Support affirmed at '1'; placed on RWN Anglo Irish Bank Corporation -- Long-term IDR affirmed at 'A-' (A minus); placed on RWE -- Short-term IDR downgraded to 'F1' from 'F1+' and placed on RWE -- Individual affirmed at 'E' -- Support affirmed at '1' placed on RWN -- Support Rating Floor affirmed at 'A-' placed on RWE -- Senior unsecured notes affirmed at 'A-' placed on RWE -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt downgraded to 'CCC' from 'BBB+' -- Upper Tier 2 subordinated notes affirmed at 'CC' -- Tier 1 notes affirmed at 'C' Anglo Irish Mortgage Bank -- Long-term IDR affirmed at 'A-' (A minus); placed on RWE -- Short-term IDR downgraded to 'F1' from 'F1+' and placed on RWE -- Support at '1' placed on RWN Bank of Ireland -- Long-term IDR affirmed at 'A-' (A minus); Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual affirmed at 'C/D' -- Support affirmed at '1' -- Support Rating Floor affirmed at 'A-' -- Senior unsecured notes affirmed at 'A-' -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt affirmed at 'BBB+' -- Tier 1 notes affirmed at 'CCC' (ISINs: XS0268599999, US055967AA11 and USG12255AA64) -- Tier 1 notes maintained at 'B' Rating Watch Negative (ISINs: XS0125611482 and XS0165122655) EBS Building Society -- Long-term IDR maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Short-term IDR affirmed at 'F2' -- Individual downgraded to 'F' from 'E' -- Support affirmed at '2' -- Support Rating Floor maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Senior unsecured notes downgraded to 'BBB-' from 'BBB'; Rating Watch Positive replaced Rating Watch Evolving -- Sovereign guaranteed notes affirmed at 'AA-' -- Tier 1 notes downgraded to 'CCC' from 'B' and removed from Rating Watch Negative EBS Mortgage Finance -- Long-term IDR maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Short-term IDR affirmed at 'F2' -- Support affirmed at '2' Irish Nationwide Building Society -- Long-term IDR maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Short-term IDR affirmed at 'F2' -- Individual downgraded to 'F' from 'E' -- Support affirmed at '2' -- Support Rating Floor maintained at 'BBB-' (BBB minus); Rating Watch Positive -- Senior unsecured notes maintained at 'BBB-'; Rating Watch Positive -- Sovereign guaranteed notes affirmed at 'AA-' -- Lower Tier 2 subordinated debt maintained at 'BB+'; Rating Watch Evolving QUINN INSURANCE: Financial Regulator to Oppose Anglo Takeover ------------------------------------------------------------- Geoff Percival at Irish Examiner reports that Ireland's Financial Regulator would oppose any attempt by Anglo Irish Bank to take over Quinn Insurance, as part of a debt-for-equity deal. According to the report, Anglo is owed EUR2.8 billion by Sean Quinn, Quinn Insurance's owner, and is thought to be third in line -- behind bondholders and other banks -- when it comes to recovering loans from the businessman's various companies. It is believed that the Financial Regulator would rather see a company with a stronger balance sheet take over Quinn Insurance, the report states. It is understood that around 20 expressions of interest have been made in relation to either a partial or total takeover of Quinn Insurance; although it is not known whether Anglo was one of those parties, the report notes. As reported by the Troubled Company Reporter-Europe on April 1, 2010, The Times said Irelands' Financial Regulator on March 30 put Quinn Insurance into provisional administration. The Times disclosed joint administrators were appointed to Quinn Insurance by the High Court in Dublin after the regulator expressed concerns about the company's finances and how it was being run. The Times related the regulator said the business would remain open for business and would continue to be run as a going concern under different management. The Times noted the regulator did not disclose the matters being investigated but its counsel told the court that, in recent months, the company had "significantly breached" its solvency ratios. According to The Times, the counsel said the company had gone from a position of having assets over liabilities of some EUR200 million to now having an excess of liabilities of more than EUR200 million. Quinn Insurance has just over 20% of the motor and health insurance market in Ireland. It has more than one million customers in the country. Employing almost 2,800 people in Britain and Ireland, it was founded in 1996 and entered the UK market in 2004, according to The Times. * IRELAND: Company Failures Up 34% to 469 in First Quarter 2010 --------------------------------------------------------------- Colm Keena at The Irish Times reports that there was a 34% increase in the number of companies placed in liquidation, receivership or examinership in Ireland in the first three months of the year when compared with the same period last year. According to the report, figures compiled by the FGS accounting and consultancy firm show 469 companies were placed in liquidation, receivership or examinership in the period compared to 351 in the same period in 2009. The report notes the ongoing contraction in the construction/ property development sector is obvious from the statistics, with the sector accounting for 177 of all failures. Other notable trends include the significant increase in failures in the retail sector from 28 in the first three months of 2009, compared with 76 in the first three months of this year, the report states. "This is due primarily to the inability to pay high rents that were originally struck at the height of the economic boom," the report quoted the firm as saying. ========= I T A L Y ========= 16 UNO: Fitch Downgrades Rating on Class C Notes to 'BB' -------------------------------------------------------- Fitch Ratings has downgraded 16 Uno Finance S.r.l 's class B and class C notes and revised the Outlook on the class A notes to Negative from Stable: -- Class A EUR438.8 million notes affirmed at 'AAA'; Outlook revised to Negative from Stable; assigned Loss Severity 'LS- 1' -- Class B EUR37.7 million notes downgraded to 'BBB' from 'A+'; Outlook Negative; assigned 'LS-4' -- Class C EUR23.3 million notes downgraded to 'BB' from 'A-' Outlook Negative; assigned 'LS-5' The downgrades on the class B and class C notes reflect Fitch's revised loss and recoveries expectations for the transaction, as well as the severe deterioration in the underlying performance of the securitized receivables in the last six months, which is worse than the agency's base case expectations at closing. The affirmation of the class A notes reflects the short expected amortization profile of the notes, with a significant portion of the assets being held as cash in the transactions' issuer principal account (EUR208 million), available for the redemption of the notes on the next interest payment date in June 2010. However, the Outlook has been revised to Negative to reflect the weakened credit quality of the underlying portfolio. The transaction reported significant increases in defaulted assets in both the December 2009 and March 2010 payment dates, of EUR15.9 million and EUR11.4 million respectively, which resulted in an unpaid outstanding principal deficiency ledger of EUR12.4 million in March 2010. Fitch believes that the underlying borrowers of the transaction will continue to be impacted by the overall deterioration in the Italian economic environment, with the transaction likely to continue to see significant defaults in the coming quarters. As a result of this updated view, the agency revised its gross default base case for 16 Uno Finance to 10% from 5.2% and, similarly, also reduced its original recovery assumption to 15% from 23.7% to reflect the changing make-up of the underlying borrowers. Fitch also continues to monitor the situation regarding the transaction's servicers, Carifin Italia SpA and Plusvalore SpA, who are part of Gruppo Delta SpA (Delta), which was placed under special administration by the Bank of Italy in May 2009. Since the start of the special administration Carifin and Plusvalore have been operating their businesses as normal, while the Bank of Italy and the other Italian and foreign banks currently providing Delta with credit lines are discussing a restructuring plan for the group. With respect to the continuity of the servicing operations, the agency takes some comfort from the fact that a back-up servicer, Unicredit Credit Management Bank SpA. (rated 'RSS1-'/'CSS1-'), was appointed at closing. 16 Uno Finance is a securitization of unsecured and secured consumer loan contracts originated in Italy by Carifin Italia SpA and Plusvalore SpA. The transaction finished its 11 month warehousing period in November 2008. Following a subsequent revolving period from November 2008, the transaction will start amortizing on the next payment date, in June 2010. FASTWEB SPA: Probe Won't Hit Swisscom Revenue in Italy ------------------------------------------------------ Naomi Kresge at Bloomberg News reports that Swisscom AG Chief Executive Officer Carsten Schloter told SonntagsZeitung in an interview that the company doesn't expect to lose revenue in Italy because of a probe of its FastWeb SpA unit. According to Bloomberg, Mr. Schloter, who last week took over management of Fastweb from former CEO Stefano Parisi, said first- quarter results were "within the frame of our expectations". Citing Bloomberg News, the Troubled Company Reporter-Europe reported on April 7, 2010, that FastWeb said it revised its 2009 results to a net loss. Bloomberg disclosed the company said in a stock-exchange statement Friday after setting aside EUR70 million (US$94.4 million) to protect the company against a criminal investigation, FastWeb had a net loss of EUR34 million last year. Bloomberg related Mr. Parisi temporarily stepped aside as chief executive officer while investigators probe the company for alleged tax fraud and money laundering. FastWeb said Rome prosecutors won't go ahead with a request to put it into administration as part of the investigation, according to Bloomberg. Fastweb SpA -- http://company.fastweb.it/-- is an Italy-based company engaged in the broadband telecommunications industry. The Company's core activity is focused on the provision of telecommunication networks and services in the main metropolitan areas of Italy and in several smaller cities. Its activates are divided into four business areas: Consumer, intended to retail residential and micro business; Small Medium Enterprise (SME) for small and mid-size companies; Executive, intended to large companies, the public administration and wholesale activities designed for other telecommunications operators, and Network and Systems. Fastweb SpA provides a range of services, including telephony, broadband Internet connectivity, advanced video- communication, virtual private networks, audio and video streaming, digital and interactive television and telesurveillance, among others. In addition, the Company provides mobile telephony services. The Company's subsidiaries include QXN Scpa and e.BisMedia SpA. SAFILO SPA: Fitch Upgrades Issuer Default Rating to 'B-' -------------------------------------------------------- Fitch Ratings has upgraded Italy-based eyewear designer and manufacturer Safilo S.p.A.'s Long-term Issuer Default Rating to 'B-' from 'CC' and removed it from Rating Watch Positive. The Outlook is Negative. This follows the completion of the company's equity recapitalization and amendment and extension of the senior loan facilities. At the same time Fitch has upgraded Safilo Capital International S.A.'s EUR195 million senior notes due 2013 to 'CC' from 'C' -- the Recovery Rating is at 'RR6'. Fitch has withdrawn the 'B-' rating on Safilo's senior secured loan facilities due to the limited information available to the agency in respect of this instrument. "Safilo's rights issue raised EUR257m in gross cash proceeds for the company, significantly improving their liquidity position and enabling some repayment of debt," said Michelle De Angelis, Senior Director in Fitch's Leveraged Finance team. "That said, the company still faces a challenging operating environment and although the new liquidity offers Safilo time and room for maneuver, risks in relation to the recovery of demand, pricing power and financial dividend policy remain, which drive the Negative Outlook." Adjusting for the completion of the recapitalization, Safilo's net debt/EBITDA is estimated at 4.8x (or 5.7x on a lease-adjusted basis), based on FYE09 EBITDA (before extraordinary costs) of EUR65.7 million. In 2009 Safilo's revenues contracted by 11.9% and EBITDA by 48%, reflecting the impact of the global recession on Safilo's relatively high fixed cost base and a compression in selling prices. Safilo's licensed brand portfolio remains broadly intact; however, a significant proportion of Safilo's licensed brands are high-end designers, leaving limited flexibility for price adjustment in response to the current economic environment. The company continues to focus on growth of its house brand Carrera (which typically retails at EUR70-120); Carrera sales grew 20% in 2009, reflecting the expansion of the brand outside its home market, but the relative share of Carrera in Safilo's total sales was not significant enough to avoid an overall 11.9% decline. Fitch believes that Safilo now has sufficient liquidity to allow the company to address these challenges and expects some stabilization or improvement in overall results as the economic recovery gets underway. EBITDA should improve following the disposal of loss-making non-core retail chains to HAL, and sales may benefit from potential greater co-operation with the 4,000 HAL-owned optical stores. However price repositioning referred to above may lead to a more adverse price mix, and there is the possibility of the non-renewal of some non-core licenses. The company has not made any statements with regard to future dividend policy; however, in determining the ratings Fitch has assumed a relatively conservative financial policy will be applied while the company focuses on recovering some of its lost revenues and EBITDA. A more aggressive-than-expected dividend distribution policy which reduces liquidity or increases refinancing risk as the company approaches the maturity of its senior notes in 2013 could put the ratings under pressure. The 'CC'/'RR6' rating for the 2013 senior notes reflects anticipated poor recoveries for noteholders in a default scenario. Although the equity recapitalization has resulted in significantly improved liquidity and some debt reduction, only EUR22 million of the debt reduction is permanent. This is because the newly extended senior facilities include approximately EUR161 million of committed but undrawn facilities which, as was evident during 2008-9, may be drawn down during a period of financial distress, and which rank ahead of the noteholders. Fitch also notes that the completion of the bond tender offer in Q409 included documentary amendments for the noteholders which remove substantially all of the restrictive covenants in the senior notes indentures, thus significantly reducing investor protections. =================== K A Z A K H S T A N =================== ALLIANCE BANK: Debt Restructuring Cues Fitch's Rating Review ------------------------------------------------------------ Fitch Ratings says that it plans to review the ratings of Kazakhstan's Alliance Bank (currently rated Long-term foreign currency IDR 'RD') following the bank's March 30 announcement that it has completed a restructuring of its debts. The agency anticipates completing this review in the next one-to- two months during which it plans to review information to be provided by the bank concerning its current financial position and future plans. Alliance Bank's current ratings are: -- Long-term foreign currency IDR: 'RD' (Restricted Default) -- Short-term foreign currency IDR: 'RD' -- Individual Rating: 'F' -- Support Rating: '5' -- Support Rating Floor: 'No Floor' In Fitch's rating criteria, a bank's standalone risk is reflected in Fitch's Individual ratings and the prospect of external support is reflected in Fitch's Support ratings. Collectively these ratings drive Fitch's Long- and Short-term IDRs. EURASIAN BANK: Fitch Gives Stable Outlook; Affirms 'B-' Rating -------------------------------------------------------------- Fitch Ratings has revised the Outlook of Kazakhstan-based Eurasian Bank to Stable from Negative and affirmed the bank's Long-term Issuer Default Rating at 'B-'. The revision of EBK's Outlook to Stable reflects the bank's now solid loss absorption capacity compared to credit risks faced, following a large KZT9 billion equity injection in Q409. It also factors in the better prospects for the Kazakh economy during the remainder of 2010. Fitch expects Kazakhstan's economy will grown 3% this year compared with a contraction of 1.5% in 2009, which should help to limit further asset quality deterioration. The bank's ratings remain constrained by EBK's weak operating profitability, undiversified funding, still high customer concentrations on both sides of the balance sheet, significant related party business and its plans to grow rapidly during 2010 without attracting further capital injections. The deterioration in asset quality in 2009 was broadly in line with Fitch's assumptions made in 2008, with NPLs (loans overdue by 90 days) rising to 10.7% of the portfolio at end-February 2010 from 4.6% at end-2008; most of the growth in NPLs was reported in H109. The agency expects a continued, albeit slowing, inflow of non-performing loans in 2010, which should, nevertheless, peak during the year given the more favorable outlook for the operating environment. Exposure to the real estate and construction sectors is sizeable, at 33% of the loan book at end-2009, and restructured loans are also significant. However, Fitch notes that accrued interest accounted for a moderate 10.1% of total interest income in 2009 statutory accounts, which is comfortably the lowest ratio among Fitch-rated banks in Kazakhstan. Funding is primarily sourced from customer accounts, which accounted for 81% of liabilities at end-2009. Despite 72% customer account growth in 2009, concentrations and dependence on related parties remain high. At end-2009, liquidity was ample (with liquid assets comprising 30% of total assets), as credit expansion was put on hold pending the bank's recapitalization in Q409, and deposits continued to grow. However, this level of liquid assets is likely to quickly fall with the resumption of loan growth. EBK remains relatively immune to refinancing risk, and has no plans to tap foreign capital markets this year. Shareholder equity injections during 2009 allowed EBK to reserve current problem loans and provided some buffer to absorb potential losses in the current loan portfolio. At end-February 2010, the bank's total regulatory capital ratio was 16.4%, and it could have increased its reserves/loans ratio to 21% without breaching minimum capital requirements. However, looking forward, Fitch believes that capitalization is likely to come under pressure in light of the bank's weak profitability, potential for further NPL recognition and ambitious growth plans. Key to further movements in EBK's ratings will be capitalization levels and liquidity management, as the bank seeks to grow amid the economic recovery. Downward rating pressure could re-emerge should the targeted growth be weakly managed from a credit risk or liquidity management perspective, or should asset quality deterioration on the bank's current portfolio be more severe than is currently anticipated by Fitch. Given the bank's limited track record, narrow franchise, aggressive growth plans and weak performance, upside rating potential is currently limited. The rating actions are: -- Long-term IDR: affirmed at 'B-'; Outlook revised to Stable from Negative -- Short-term IDR: affirmed at 'B' -- Individual Rating: affirmed at 'D/E' -- Support Rating: affirmed at '5' -- Support Rating Floor: affirmed at 'No floor' At end-2009, EBK was Kazakhstan's seventh-largest commercial bank, with 2.8% of banking system assets. The bank is ultimately owned by three local businessmen -- Alijan Ibragimov, Alexander Machkevich and Patokh Chodiev -- who also control a 43.7% stake in the Eurasian Natural Resources Corporation. ENRC is the world's largest stainless and carbon steel raw materials provider with strong regional power production. Kazakhmys Eurasia B.V. and the government, hold a 14.59% and a 19.31% stake in ENRC, respectively In Fitch's rating criteria, a bank's standalone risk is reflected in Fitch's Individual ratings and the prospect of external support is reflected in Fitch's Support ratings. Collectively these ratings drive Fitch's Long- and Short-term IDRs. KASPI BANK: Fitch Downgrades Issuer Default Rating to 'B-' ---------------------------------------------------------- Fitch Ratings has downgraded Kazakhstan-based Kaspi Bank's Long-term Issuer Default Rating to 'B-' from 'B'. The Outlook is Stable. The downgrade reflects the bank's reduced financial flexibility due to tighter capitalization, continuing asset quality deterioration and weak operating profitability in a still challenging operating environment. The ratings remain supported by Kaspi's strong deposit base and low dependence on wholesale markets. Kaspi's financial performance has remained weak, reflecting the severity of local market conditions over the past two years. For 2009, the bank is expected to have slipped into a net loss position under IFRS, mainly due to an increase in credit impairment charges. Pre-impairment profitability has also weakened, due to continuing pressure on the net interest margin from falling interest rates and higher funding costs, as relatively cheap wholesale funding is replaced by more expensive customer deposits. To tackle the profitability challenges, Kaspi embarked on a rapid credit expansion in 2009, taking advantage of strong deposit inflow and widespread client defections from insolvent institutions. Enhanced focus has been placed on high-yield unsecured consumer lending with the aim of reversing the recent decline in margins. Together with the strong growth recorded in the corporate book, this has resulted in a 38% increase in gross loans in 2009. Overall, Fitch views cautiously Kaspi's recent and ongoing business expansion efforts, given the pace of growth, the tightening of capitalization and the still fragile economic recovery in Kazakhstan. Similarly to other Kazakh banks, Fitch believes that, despite some write-offs in the previous two years, a significant amount of impaired exposures remain on Kaspi's balance sheet, as indicated by the current level of NPLs (90-day-overdues, equal to 7% at end- 2009) and the amount of accrued interest (6% of gross loans at end-2009 under local accounts). Although loan impairment reserves accounted for 110% of the reported NPLs, Fitch believes that the bank will likely continue to experience high loan impairment charges, although management's efforts at enhancing pre-impairment operating performance should help to absorb these. Kaspi's capitalization levels have come under pressure as risk- weighted assets increased and profitability was negative. At end- 2009, the tier I and total capital adequacy ratios under Basel I are expected to be 14.6% and 17.5% based on IFRS management accounts, down from 21.3% and 25.5%, respectively, at end-2008. From a regulatory standpoint, Kaspi's regulatory capital ratios provide a smaller safety margin, with the total capital ratio standing at 13% (minimum requirement 10%) at end-Feb 2010, mainly due to the fact that the subsidiary insurance company (accounting for 16% of equity in consolidated IFRS statements) is not consolidated in the local accounts. Positively for its credit profile, Kaspi has recorded some impressive deposit growth of late (53% in 2009). Growth occurred in both the retail and corporate segments, while maturities of deposits have been extended. At end-2009, 48% matured in more than one year and deposits with maturities over two years represent around 42% of all customer accounts. This reduced the bank's non-deposit funding ratio to 31% of liabilities, down from 42% at end-2009, and the ratio is set to fall further after repayment of KZT10 billion local subordinated bonds in 2010. At the same time, Fitch notes that the stability of this incremental deposit base is yet to be demonstrated over time, and that retail term deposits in Kazakhstan can be withdrawn on demand. Kaspi was the 8th-largest commercial bank in Kazakhstan at end- April 2009 with a 2.7% share of the banking system's assets. Kaspi's focus has been on the wide-margin, but potentially high- risk, SME and retail sectors. The bank is controlled by Baring Vostok Capital Partners, a private equity firm which invests in the CIS, which owns a 51% stake in a holding company controlling 96% of Kaspi's shares. Kazakh businessman Vyacheslav Kim holds a 49% stake in the holding company. The rating actions are: -- Long-term foreign currency IDR: downgraded to 'B-' from 'B'; Outlook Stable -- Short-term foreign currency IDR: affirmed at 'B' -- Individual Rating: affirmed at 'D/E' -- Support Rating: affirmed at '5' -- Support Rating Floor: affirmed at 'No Floor' TEMIRBANK JSC: Creditors Approve Restructuring Plan --------------------------------------------------- JSC Temirbank's Restructuring Plan was approved by the requisite majority of Restructuring Creditors at the Creditors' Meeting held in Almaty on March 31, 2010. Restructuring Creditors holding 93.71% of the financial indebtedness voted in favor of the Restructuring Plan, exceeding the two-thirds threshold required under Kazakhstan's bank restructuring law. The Restructuring Plan approved by the Creditors' Meeting was submitted on March 31, 2010, to the Agency of the Republic of Kazakhstan for the Regulation and Supervision of the Financial Market and Financial Organisations for their review. A hearing before the Specialised Financial Court on the approval of the Restructuring Plan is expected to occur shortly after the Agency of the Republic of Kazakhstan for the Regulation and Supervision of the Financial Market and Financial Organisations would have reviewed the Restructuring Plan. All Restructuring Creditors are entitled to appear at this hearing. The exact time and date will be confirmed by an announcement on a Regulatory Information Service, on the Banks' Web site at http://www.temirbank.kz/info/investors/news-- and its English language equivalent, en.temirbank.kz/investors -- and on the Information Agent's Web site -- http://bonds.thomsonretuers.com/temirbank-- at least 14 days in advance of such hearing. The Bank will give not less than 30 days notice of the Restructuring Date. Information on the way in which Restructuring Creditors are to claim their Entitlements is contained in the section headed "Distribution Mechanics" in the Second Supplemental Information Memorandum published on March 11, 2010. Temirbank AO (Temirbank JSC) -- http://en.temirbank.kz/-- is a Kazakhstan-based financial institution rendering a range of services both to corporate and individual clients. Corporate customer services include a cash-settlement services, loans, documentary operations, safe deposit boxes and cash-in-transit service. Retail customer services include deposits, loans, wire transfers, payment processing services, travelers' checks, safe deposit boxes and other services in national and foreign currencies. It also provides the Internet banking services. The Bank operates through 21 branches and 121 centers on banking services on the territory of Kazakhstan. Temirbank AO has one wholly owned subsidiary Temir Capital BV located in the Netherlands. * * * As reported by the Troubled Company Reporter-Europe on Nov. 26, 2009, Standard & Poor's Ratings Services said that it had lowered its long- and short-term counterparty credit ratings on Kazakhstan-based Temirbank JSC to 'D/D' from 'CC/C'. At the same time, the Kazakhstan national scale rating was lowered to 'D' from 'kzCC'. "The downgrade reflects S&P's understanding that the bank, as announced on Nov. 23, 2009, intends to restructure its debt obligations, in what S&P would consider a distressed exchange offer," said Standard & Poor's credit analyst Mikhail Nikitin. S&P said the downgrade follows the bank's having missed interest payments on its senior notes pursuant to Temir Capital B.V.'s US$1.2 billion global medium-term note program and to US$300 million senior notes. S&P understands that the bank also defaulted on the two related-party deposits due to its major shareholder BTA Bank J.S.C. (D/D) on Nov. 6 and 9, 2009. According to S&P, the plan will restructure the bank's international bond guarantees and domestic bonds, certain trade finance-related transactions, and certain related-party obligations of JSC Temirbank. S&P said all retail and commercial deposits (with the exception of certain related-party deposits) and the bank's other operating liabilities will be excluded from restructuring. The rating agency said the bank has stated that National Welfare Fund Samruk-Kazyna will provide it with equity funding and become its majority shareholder upon successful completion of the restructuring. * KAZAKHSTAN: Moody's Changes Outlook on Rating to Stable --------------------------------------------------------- Moody's Investors Service has moved the outlook on Kazakhstan's Baa2 sovereign rating to stable from negative. This move follows growing evidence that the economic downturn is proving shallower than expected, and that the government's credit metrics will emerge relatively unscathed from the country's serious banking crisis. "The government of Kazakhstan has weathered the worst of the crisis in a way consistent with an investment grade rating by protecting its creditworthiness but forcing credit restructuring on to the country's banking system" said Aninda Mitra, a Vice- President and Moody's lead sovereign analyst for the country. At the same time, the country's foreign currency bond ceiling was lowered one notch to Baa2, the same level as the sovereign rating, while the FC bank deposit ceiling was maintained at Ba1. "The alignment of the country's foreign currency bond ceiling with the government's bond rating reflects Moody's view that crisis management in Kazakhstan focuses primarily on protecting the government's balance sheet. It therefore suggests that private debt issuers in foreign currency should seldom be rated higher than the Sovereign." Mr. Mitra added that "the relatively rapid restructuring of external bank debt -- where a large proportion of the burden has been borne by creditors -- characterizes a proactive but highly selective approach by the government to elicit a speedy resolution to banking system distress." "The limitation of large contingent sovereign liabilities thus depends on a high degree of credit ring-fencing," Mr. Mitra writes, "and the accompanying uncertainty about the authorities' support for banks, and private institutions as well as several government-related institutions justifies a more conservative stance on bond and deposit ceilings and support assumptions." "Nevertheless, overall, the Kazakh government's fiscal conservatism has persisted alongside a proactive crisis management framework. "This has enabled authorities to withstand financial shocks, without depending on external assistance or damaging long- term sovereign credit fundamentals," said Mr. Mitra. Moreover, strong medium-term prospects for the oil and gas sector and growing structural linkages with rapidly-growing Asian economies will likely sustain an economic recovery and provide additional liquidity to complement ongoing reforms within the banking sector. Moody's last rating action on Kazakhstan was taken on May 12, 2009, at which time the local currency sovereign rating was lowered to Baa2 from Baa1, and the outlook was changed to negative. =========== L A T V I A =========== MORTGAGE AND LAND: Moody's Maintains Stable Outlook on 'E+' BFSR ---------------------------------------------------------------- Moody's Investors Service has changed the outlook on Mortgage and Land Bank of Latvia's Baa3 long-term foreign currency deposit rating to stable from negative. The rating action followed the change of the outlook on the Latvian government's local and foreign currency ratings of Baa3 to stable from negative. MLBL's short-term Prime-3 ratings and E+ bank financial strength rating were unaffected by this rating action. The E+ bank financial strength rating and B1 Baseline Credit Assessment maintain their stable outlook. The previous negative outlook on MLBL's deposit rating of Baa3 had reflected the negative outlook on the Baa3 local and foreign currency bond ratings of the Latvian government, which is the 100% owner of MLBL. Moody's noted that MLBL's Baa3 long-term deposit rating currently benefits from four notches of uplift from the bank's B1 BCA, given the very high expectation of systemic support. Moody's pointed out that the change of outlook is not driven by a change in the rating agency's view of MLBL's intrinsic financial strength or the probability of systemic support. Moody's added that it will continue to monitor the gradual transformation of the bank into a pure-development bank while phasing out its commercial activities by 2013, and any consequences this may have on MLBL's standalone credit risk profile and probability of systemic support. Moody's last rating action on Mortgage and Land Bank of Latvia was on June 25, 2009, when Moody's confirmed MLBL's long-term foreign currency deposit rating at Baa3 and downgraded its BFSR to E+ with a stable outlook (mapping to a BCA of B1) from D- (mapping to a BCA of Ba3). The outlook on the Baa3 long-term deposit rating was placed on negative, in line with the negative outlook on the Latvian sovereign rating. The Prime-3 short-term rating was confirmed. Mortgage and Land Bank of Latvia is headquartered in Riga, Latvia, and it reported total assets of LVL885 million (EUR1.25 billion) at the end of December 2009. PAREX BANK: Moody's Changes Outlook on 'B2' Rating to Developing ---------------------------------------------------------------- Moody's Investors Service has changed to developing from stable the outlook for Parex Bank's long-term deposit and senior debt ratings of B2 as well as its bank financial strength rating of E. The change in outlook follows the recent approval of the bank's restructuring plan by the Latvian government and uncertainty regarding the final form of Parex Bank. On March 23, 2010, the Latvian government approved a restructuring plan for Parex Bank, which will split part of the current bank's assets and move them into a spin-off bank (new bank). Although the specific details of the spin-off have not yet been finalized, Moody's understands that the new bank will focus on the core Baltic regions, while what remains of Parex Bank (Resolution Bank) will retain non-core assets, specifically non-performing loans and non-resident lending mainly from the CIS region. The assets of the new bank and those remaining in Resolution Bank will be split approximately 65:35. Resolution Bank will be focused on the maximum recovery of resources and will run down its remaining assets in the long-term. The new bank will service all existing client accounts and restart normal lending and deposit activities. This change in the outlook reflects uncertainty associated with the final form of Parex Bank following the restructuring, in particular the specific split of assets and liabilities between the two entities and the level of support from the government that the remaining entity could benefit from. In terms of standalone financial strength rating, based on preliminary information, Moody's believes that the credit risk profile of Resolution Bank could be weaker than that of the current Parex Bank, as a significant portion of its assets relates to non-performing loans, whose final losses could be significant under current economic conditions in Latvia. These concerns would need to be balanced against the level of liquidity and capitalization the bank would be able to count on. The current high level of systemic support included in Parex Bank's long-term ratings (resulting in a two-notch uplift from the bank's BFSR) will also need to be reconsidered to reflect the remaining systemic and/or government support, if any, for the remaining Parex Bank. Moody's understands that all deposits, except for a small portion of state deposits, will automatically be moved to the new bank. This should result in a decrease of systemic support attributed to the remaining bank. Moody's will reassess the ratings when more detailed financial information is available. Moreover, Moody's notes that the restructuring plan needs to fulfill a number of conditions for its materialization, including the approval of the European Commission. Expected timeframe for the completion of the new legal structure is mid-2010. Moody's last rating action on Parex Bank was on July 30, 2009, when the rating agency confirmed Parex Bank's B2 long-term local and foreign currency deposit and debt ratings and placed the ratings on stable outlook. Headquartered in Riga, Latvia, Parex Bank reported preliminary, unaudited total assets of LVL2.6 billion (EUR3.7 billion) at end- December 2009. PAREX BANKA: Restructuring Plan Cues Fitch's 'RD' Rating -------------------------------------------------------- Fitch Ratings says the announced restructuring plan of Parex banka (rated Long-term Issuer Default Rating 'Restricted Default'), would be positive for depositors if it succeeds. The current 'RD' rating reflects the deposit restrictions imposed on the bank, and may be upgraded on completion of the restructuring and the removal of the deposit restrictions. The announced plan envisages spinning off two-thirds of Parex's assets into a 'new' bank, which is expected to be granted a new banking license by the Latvian regulator. The existing 'old' bank will retain the banking license of Parex. The plan has yet to be finalized. Although it has been sanctioned by the Cabinet of Ministers of Latvia, it is still pending approval from the European Commission, expected by July 1, 2010. Fitch notes there is a risk the plan may also be challenged in court by former shareholders or other interested parties. The current version of the plan as Fitch understands it assumes that the 'new' bank will be created as a legally independent entity and will service existing customer accounts. No restrictions, including deposit restrictions, are expected to exist on the operations of the 'new' bank. The 'new' bank will be capitalized by the government and the EBRD and will focus on core Baltics business activities. The 'old' bank will hold approximately a third of Parex's total assets, will preserve its ownership structure and will concentrate on recovering lower-quality financial assets. Parex was the third-largest bank in Latvia by assets with a 11.4% market share at end-2009. Since December 2008, it has been majority-owned by the state. The EBRD became a minority shareholder in 2009 with a 25% + 1 voting shares (20% of total shares). Parex's current ratings are: -- Long-term IDR: 'RD' -- Short-term IDR: 'RD' -- Individual Rating: 'F' -- Support Rating: '5' -- Support Rating Floor: 'NF' -- Senior unsecured: 'CC'/RR4 =================== L U X E M B O U R G =================== BREEZE FINANCE: Fitch Downgrades Rating on Class B Notes to 'B' --------------------------------------------------------------- Fitch Ratings has downgraded Breeze Finance S.A.'s class A and B notes. The Outlooks on both classes of notes are Negative. -- EUR266.1 million class A (XS0294895999) downgraded to 'BB' from 'BBB-'; Outlook Negative -- EUR78.3 million class B (XS0294895726) downgraded to 'B' from 'B+'; Outlook Negative The downgrades reflect Fitch's opinion that the original energy production forecasts somewhat overestimated the portfolio's actually achievable energy yield. This marks a shift from previous reviews as, after approximately three years of operation, Fitch's projections are now primarily based on actual performance rather than on the original forecasts. Energy production during 2009 at 521 GWh was some 12% and 19% lower than the P90 and P50 forecasts respectively. The poor energy yield, together with the diversion of some energy revenues to cover some unbudgeted construction costs, resulted in Breeze 3 fully drawing the class B cash reserve (approximately EUR1.7 million) in order to meet the debt service payments on the class B bonds at the October 2009 payment date. Fitch further notes that weak wind conditions in January 2010 (normally the month with the highest yield) not only make unlikely the replenishment of the class B cash reserve at the forthcoming April payment date, but also put at risk Breeze 3's ability to make the full debt service payment on the class B bonds. Although Fitch understands that the stress the transaction is currently undergoing is the result of extremely weak wind conditions, the agency does not consider the original long term average energy production forecast to offer a fair representation of the actually achievable average output. As a consequence, Fitch revised downwards it base case projections for the transaction as well as its assumptions for the energy output achievable during weak wind years, which represent the basis of the agency's rating analysis for class A notes, bringing the latter in line with the 2009 results. The downgrade of class A notes to 'BB' is driven by the fact that weak wind conditions during the summer months are expected to result in tight financial coverage at the October payments dates. This is the result of the debt repayment profile not taking into consideration the lower energy production, and hence revenues, during the period leading up to the October payment dates and, as already commented by Fitch in the past, materially higher than originally expected operating costs. Class A's exposure to the risk of an insufficiency of funds on a payment date is worsened by the fact that any drawing on the class A cash reserve would be difficult to replenish, as this would occur only after debt service payments (including deferred amounts) on the class B. The downgrade of class B notes to 'B' reflects the considerations above and the view that material default risk is present, but a limited margin of safety remains. Although the rating of class B notes reflects the notes' terms and conditions and, therefore, the possibility to defer interest and principal repayments until the full redemption of class A, only energy production roughly in line with Fitch's base case expectations will allow the full payment of interest and principal on the class B bonds. Fitch notes that the risk of deferral of debt service payments on the class B bonds is high, although, on the positive side, this would effectively result in the class B notes capturing the benefit of the high revenues resulting from years of strong performance, as these would be used to repay deferred amounts and replenish the cash reserves. The Negative Outlooks on both classes of notes reflect Fitch's opinion that uncertainty remains with respect to the transaction's future performance. In particular, further increases in operating costs or a decrease in turbines' technical availability beyond expectations would put further stress on the bonds and may result in negative rating actions. Breeze 3 is a Luxembourg SPV that issued three classes of notes on April 19, 2007 for an aggregate issuance amount of EUR455 million to finance the acquisition and completion of a portfolio of wind farms located in Germany and France, as well as establishing various reserve accounts. The notes will be repaid from the cash flow generated by the sale of the energy produced by the wind farms, mainly under regulated tariffs. ===================== N E T H E R L A N D S ===================== ELEPHANT TALK: Posts US$17.3 Million Net Loss for 2009 ------------------------------------------------------ Elephant Talk Communications, Inc. filed its annual report on Form 10-K, showing a net loss of US$17.3 million on US$43.7 million of revenue for 2009, compared with a net loss of US$16.0 million on US$44.4 million of revenue for 2008. The Company's balance sheet as of December 31, 2009, showed US$24.4 million in assets and US$30.5 million of debts, for a stockholders' deficit of US$6.1 million. BDO Seidman, LLP expressed substantial doubt about the Company's ability to continue as a going concern. The independent auditors noted that the Company incurred a net loss of US$17.4 million, used cash in operations of US$5.4 million and had an accumulated deficit of US$62.3 million. A full-text copy of the annual report is available for free at: http://researcharchives.com/t/s?5e71 Based in Schiphol, The Netherlands, Elephant Talk Communications, Inc. is an international provider of business software and services to the telecommunications and financial services industry. Elephant Talk installs its operating software at the network operating centers of mobile carrier and receives a fee per month per cell phone subscriber on the network. Currently the subscribers are wholesale customers of Vizzavi (a subsidiary of the Vodafone group) in Spain and T-Mobile in the Netherlands. The Company also operates landline telephony services in nine European countries and Bahrain. =========== R U S S I A =========== CB RENAISSANCE: Fitch Upgrades Issuer Default Rating to 'B-' ------------------------------------------------------------ Fitch Ratings has upgraded Russia-based CB Renaissance Capital's Long-term Issuer Default Rating to 'B-' from 'CCC' and removed it from Rating Watch Positive. The Outlook is Stable. At the same time, the agency has assigned Renaissance Consumer Funding Limited's Series 2 US$225 million issue of 13% limited recourse loan participation notes, due in April 2013, a Long-term 'B-' rating and a Recovery Rating 'RR4'. A full list of rating actions is provided at the end of this commentary. The upgrade reflects significant improvements in CBRC's funding maturity profile and, thus, reduced liquidity pressure following the eurobond placement. Fitch estimates that the eurobond issue has increased the bank's liquidity to levels that are almost sufficient to meet its wholesale debt repayments (excluding funds from the Central Bank of Russia) for the rest of 2010 without utilizing cash generated by the loan book. The upgrade also reflects better business prospects due to ongoing diversification of the funding base, including through a recent increase in retail deposits, and anticipated improvements in financial performance driven by new loan issuance and business scale recovery in an improving operating environment (for additional information please also see 'Fitch Changes CB Renaissance Capital's Rating Watch to Positive' dated 19 March 2010, available on www.fitchratings.com). The US$225 million notes are issued under the US$1.5bn loan participation notes program, which has been rated Long-term 'B-' and Short-term 'B' for senior unsecured borrowings, and are to be used solely for financing a loan to CBRC. Renaissance Consumer Funding Limited, an Irish company, will only pay noteholders principal and interest received from CBRC. CBRC's loan participation notes program allows for multi-currency borrowings and for various tenors. The issuer's claims under the loan agreement will rank at least equally with all other unsecured and unsubordinated creditors of CBRC, save those claims preferred by any bankruptcy, employment, insolvency, liquidation or similar laws of general application. Under Russian law, the claims of retail depositors rank above those of other senior unsecured creditors. In early March 2010, account balances from individuals represented 18% of CBRC's total liabilities, according to the bank's local GAAP accounts. The loan agreement contains covenants restricting any mergers, disposals and other types of corporate reorganizations and stipulates that operations with affiliates should be conducted on market terms. CBRC is obliged to comply with prudential supervision ratios. In addition to this, it also commits to maintaining a minimum ratio of capital-to-risk weighted assets at 12%, as defined in accordance with the Basel I guidelines, and a maximum ratio of funded exposure to any single borrower (which is not a related party) at 10% of net asset value. According to the terms of the loan agreement, a cross default is triggered if overdue indebtedness of CBRC or any of its material subsidiaries exceeds US$5 million. Noteholders will receive a put option if Renaissance Holdings Management Limited ceases to own or control, directly or indirectly, 50% plus one share of the issued and outstanding voting share capital of CBRC or no longer has the right to appoint or remove a majority of the Board of Directors of CBRC. At end-2009, CBRC was the 79th-largest bank in Russia by total assets, focused on the consumer finance market (it operates under the brand name 'Renaissance Credit'). CBRC is part of the broader Renaissance Group, which also includes Renaissance Capital investment banking group (holding company Renaissance Financial Holdings Limited rated 'B'/Stable), the merchant banking entity Renaissance Partners and asset manager Renaissance Investment Management. The rating actions with respect to CBRC are: -- Long-term IDR: upgraded to 'B-' from 'CCC'; off RWP; Outlook Stable, -- Senior unsecured debt: upgraded to 'B-' from 'CCC'; off RWP; Recovery Rating at 'RR4' -- Short-term IDR: upgraded to 'B' from 'C', off RWP -- Individual Rating: upgraded to 'D/E' from 'E'; off RWP -- Support Rating: affirmed at '5' -- Support Rating Floor: affirmed at 'No Floor' -- National Long-term Rating; upgraded to 'BB-(rus)' from 'B- (rus)'; off RWP; Outlook Stable In Fitch's rating criteria, a bank's standalone risk is reflected in Fitch's Individual ratings and the prospect of external support is reflected in Fitch's Support ratings. Collectively these ratings drive Fitch's Long- and Short-term IDRs. * S&P Changes Outlook on 14 Russian Institutions to Stable ---------------------------------------------------------- Standard & Poor's Ratings Services said that it has revised the outlook on the long-term counterparty credit ratings on 14 financial institutions in Russia to stable from negative. In addition, S&P upgraded the Russia national scale ratings on four of these entities by one notch. At the same time, S&P affirmed the counterparty credit ratings on all of the financial institutions and the Russia national scale ratings on seven of them. "The rating action reflects Standard & Poor's view that operating conditions for financial institutions in Russia are gradually stabilizing," said Standard & Poor's credit analyst Ekaterina Trofimova. The Russian Federation is rated foreign currency BBB/Stable/A-3, local currency BBB+/Stable/A-2, and Russia national scale ruAAA/-- /--). "In S&P's opinion, the growth in problem loans has peaked; liquidity has improved and the prospects are brighter for refinancing," Ms. Trofimova said. In addition, many of the financial institutions that S&P rate in Russia have enhanced their loss-absorption cushions through provisioning, recent preprovisioning earnings that were higher than S&P had expected, balance sheet deleveraging, and some capital injections. All these factors, S&P believe, reduce the probability of further downgrades for most of the financial institutions S&P rate in Russia. Russian authorities have implemented measures over the past two years to help maintain customer confidence and stabilize the banking system. As a result, retail deposits grew more than 25% in 2009, which S&P considers to be a good achievement during a tough year for the Russian banking industry, which had experienced deposit flight in the past. The improving customer deposit base is helping banks reduce their reliance on central bank funding and partly offset the net capital outflows related to foreign debt repayments (including swaps and cross boarder-related party financing) by Russian banks, which totaled over $40 billion in 2009. In 2010, Russian banks are due to repay over $40 billion of foreign liabilities (including swaps and cross boarder-related party financing), which they aim to achieve through their increased balance sheet liquidity and gradually normalizing refinancing conditions, as illustrated recently by the ability of some Russian banks to raise capital through public foreign and domestic borrowings. The capitalization of the Russian stock market more than doubled in 2009 and domestic bond issuance is growing, supporting domestic banks' profits and refinancing prospects. "Most of the Russian banking sector's improvements are cyclical though and shaped by the gradual economic recovery," Ms. Trofimova said. S&P expects that Russia's GDP will grow by 4.5% in 2010, compared with a contraction of almost 8% in 2009. Russian banks are exiting the slump with their financial and commercial fundamentals significantly weakened by the heavy burden of accumulated problem loans. Currently, S&P estimates problem (including restructured) loans at almost 40% of the total system loans. While S&P anticipates no further material increase in the share of the banking system's problem loans, asset quality is unlikely to recover back to pre-2008 levels for at least a couple of years. "This, in S&P's opinion, is likely to make recovery lengthy and painful, increasing Russian banks' vulnerability to adverse developments and constraining their growth at least in the next couple of years," Ms. Trofimova said. S&P considers that total banking system loans may grow by about 10% in 2010, which is still significantly slower than before 2008. S&P believes Russian banks have improved their business practices, diversification, and franchises over the past few years and that this improvement is likely to help them recover from the downturn. "Deeper and more effective banking and macroeconomic reforms would strengthen the fundamental creditworthiness of the banking system and help provide a stronger base for the possibility of higher ratings on Russian banks in the future, but authorities have made limited progress on reforms so far, in S&P's view," Ms. Trofimova said. Ratings List Commercial Bank Petrocommerce (OJSC) To From -- ---- Counterparty credit rating B+/Stable/B B+/Negative/B Russia national scale ruA ruA Ural Bank for Reconstruction and Development To From -- ---- Counterparty credit rating B-/Stable/C B-/Negative/C Russia national scale ruBBB- ruBBB- ZAO UniCredit Bank To From -- ---- Counterparty credit rating BBB-/Stable/A-3 BBB-/Negative/A-3 Surgutneftegasbank To From -- ---- Counterparty credit rating B+/Stable/B B+/Negative/B National Factoring Company To From -- ---- Counterparty Credit Rating B-/Stable/C B-/Negative/C Russia National Scale ruBBB ruBBB- Investment Company Veles Capital LLC To From -- ---- Counterparty Credit Rating B-/Stable/C B-/Negative/C Russia National Scale ruBBB ruBBB- West Siberian Commercial Bank To From -- ---- Counterparty Credit Rating B-/Stable/C B-/Negative/C Russia National Scale ruBBB- ruBBB- B&N Bank To From -- ---- Counterparty Credit Rating B-/Stable/C B-/Negative/C Russia National Scale ruBBB- ruBBB- Aljba Alliance To From -- ---- Counterparty Credit Rating B-/Stable/C B-/Negative/C Rosbank OJSC JSCB To From -- ---- Counterparty Credit Rating BB+/Stable/B BB+/Negative/B Russia National Scale ruAA+ ruAA+ TransCreditBank To From -- ---- Counterparty Credit Rating BB/Stable/B BB/Negative/B Russia National Scale ruAA ruAA BNP PARIBAS ZAO To From -- ---- Counterparty credit rating BBB-/Stable/A-3 BBB-/Negative/A-3 Russia national scale rating ruAAA ruAAA International Bank of Saint-Petersburg To From -- ---- Counterparty Credit Rating B-/Stable/C B-/Negative/C Russia National Scale Rating ruBBB ruBBB- SOTSGORBANK To From -- ---- Counterparty Credit Rating B-/Stable/C B-/Negative/C Russia National Scale Rating ruBBB ruBBB- N.B. -- This list does not include all ratings affected. =============== S L O V E N I A =============== RENAULT SA: Slovenian Unit Expects Lower Sales in Main Markets -------------------------------------------------------------- Boris Cerni at Bloomberg News reports that Revoz d.d., Renault SA's Slovenian unit, expects European car sales to remain subdued as government sales incentives end and the Continent's economies still struggle to pick up pace. "For this year we won't reach 2009's record and the first reason is that the crisis isn't over yet," Bloomberg quoted Revoz Chief Executive Officer Ales Bratoz as saying in an interview. "We expect lower sales in our main markets in Western Europe, France, Germany and Italy." Twingo and Clio II models made up the bulk of the unit's 900 vehicle-a-day output in 2009, boosting sales to EUR1.29 billion (US$1.75 billion), Bloomberg discloses. "The pace of Slovenia's economic recovery will be determined in the next couple of months when it will be clearer if demand in Europe picked up enough," Mr. Bratoz said in the interview Thursday at the plant in Novo mesto, according to Bloomberg. Bloomberg notes Mr. Bratoz warned that high labor and energy costs in Slovenia, the first post-communist country to adopt the euro three years ago, may affect competitiveness. About Renault SA Renault SA -- http://www.renault.com/-- is a France-based company primarily engaged in the manufacture of automobiles and related services. The Company has two main areas of business activity: the Automobile division, which handles the design, manufacture and marketing of passenger cars and commercial vehicles, under Renault, Renault Samsung Motors and Dacia brands, and the Sales Financing division, which provides financial and commercial services related to the Company's sales activities, and is comprised of RCI Banque and its subsidiaries. The Company operates worldwide via a group of subsidiaries and dependant companies, including wholly owned Renault SAS, 99.43%-owned Dacia, 44.3%-owned Nissan Motor and 20.7%-owned AB Volvo, among others. * * * Renault SA continues to carry long- and short-term corporate credit and debt ratings of 'BB/B' from Standards & Poor's Ratigns Services with stable outlook. The ratings were lowered to their current level from 'BBB-/ A-3' in June 2009. As reported by the Troubled Company Reporter-Europe on June 23, 2009, S&P said Renault's financial profile was already hit by the large increase in debt in 2008, and credit measures were weak compared with what S&P generally considered to be commensurate with a 'BBB-' rating. S&P said that the company's financial metrics were likely to deteriorate further and would probably not return in the medium term to levels S&P considered consistent with the previous rating. "Our downgrade of Renault reflects our view that auto demand is likely to remain very low in Europe in 2010, due to the weak economic environment and the payback effect of the incentive schemes that several European countries have adopted to date in 2009," said Standard & Poor's credit analyst Barbara Castellano. "We believe these factors will continue to penalize Renault's profitability." =========== T U R K E Y =========== EUROBANK TEKFEN: Moody's Changes Outlook on 'Ba1' Rating to Neg. ---------------------------------------------------------------- Moody's Investors Service has changed the outlook on the Ba1 long- term global local currency deposit rating of Eurobank Tekfen A.S. (Turkey) to negative from stable. Eurobank Tekfen's other ratings remain unaffected by this action, that concludes the review initiated on March 4, 2010. This rating action is the direct result of Moody's lowering Eurobank Tekfen A.S.'s Greek parent bank's, EFG Eurobank's (EFG), baseline credit assessment "BCA" to Baa2 from Baa1. EFG is Eurobank Tekfen A.S.'s controlling shareholder with 70% ownership. For further details on the rating actions on the parent bank please refer to Moody's press release dated March 31, 2010. Moody's notes that Eurobank's Ba1 (with a negative outlook) GLC deposit rating incorporates its standalone credit strength (BCA of Ba3, mapped from the BFSR of D-), and benefits from a two-notch uplift due to imputed parental support from EFG. The uplift is a result of Moody's assessment of a high probability of parental support from EFG, given Eurobank Tekfen's integral role in the group's franchise and earnings performance. The negative outlook on the GLC deposit rating of Eurobank Tekfen indicates that any downward rating action on its parent's BFSR or BCA (which is the input used for parental support from EFG) could lead to a similar action on Eurobank Tekfen's GLC deposit rating. Moody's adds that Eurobank A.S. has adequate liquidity, and operates with comfortable liquidity ratios, with loans to customer deposits at 71% and liquid assets to total assets of 57% (as of Q4-2009). Only 3.9% of Eurobank Tekfen's total deposits come from EFG. Furthermore, the bank has unutilized diversified funding sources, which should ensure that its liquidity remains sound going forward. This rating action was taken: * Eurobank Tekfen AS: the outlook on the Ba1 long-term local currency deposit rating was changed to negative. Its other ratings were unaffected. The last rating action on Eurobank Tekfen A.S. was implemented on March 4, 2010, when the long-term local currency deposit rating was placed on review for possible downgrade due to the rating action on the parent bank. Its other ratings were unaffected. Eurobank Tekfen A.S. reported total assets of TRY4.04 billion (US$2.6 billion) under BRSA at the end of December 2009. ============= U K R A I N E ============= * UKRANIAN CITY OF KYIV: Fitch Affirms Long-term Rating at 'B-' --------------------------------------------------------------- Fitch Ratings has affirmed the Ukrainian City of Kyiv's Long-term foreign and local currency ratings at 'B-' with Negative Outlooks and its Short-term foreign currency rating at 'B'. The agency has simultaneously downgraded Kyiv's National Long-term rating to 'A(ukr)' from 'AA-(ukr)'. The Outlook on the National Long-term rating is Negative. The rating action reflects increased refinancing risks and foreign exchange risk exposure, as well as the deterioration in the city's budgetary performance and its decreased liquidity position. The ratings also consider the city's status as Ukraine's capital and its well-diversified economy. The Negative Outlooks reflect increased refinancing risk on debt obligations maturing on July 15, 2011 and the unclear prospects for the city's 2010 budget which has yet to be approved. The city's direct debt increased to UAH5.6 billion at end-2009, or 47.3% of current revenue (2008: 33.1%). Direct debt largely consists of long-term US$-denominated loan participation notes, totaling US$700 million, exposing the city to forex risk. Kyiv faces the refinancing of 50% of its direct debt in July 2011, including UAH1.2 billion of domestic loans and US$200 million of loan participation notes. Given Kyiv's shrinking liquidity position, future debt amortization will add significant short-term refinancing pressure to its budget. The city's contingent risk is moderate, and mainly stems from the debt of the city's public sector entities. Kyiv's status as the country's capital will continue to support its ratings, as Fitch believes the city's ability to access short- term liquidity from the national treasury is a mitigating factor for increased refinancing risk. The capital's economy is diversified, and provides a broad tax base for Kyiv's budget whilst supporting wealth indicators above the national average. Kyiv accounted for 18.9% of the country's GDP and its economy will benefit from the possible stabilization of the national economy in 2010. The city's budgetary performance significantly deteriorated in 2009, with the operating margin turning to a negative 8.7% compared with a positive 15.1% in 2008. Kyiv's operating revenue was distressed by the negative macroeconomic environment in Ukraine, which led to a widening of the deficit before debt variation to 16.2% of total revenue in 2009 (2008: 14.5%). The city had to radically cut its capital outlays, which decreased to 8.8% in 2009 from 30.2% in 2008. Fitch notes that the city has not adopted a budget for 2010, which further complicates its budget execution capacity and negatively impacts the budgetary process. The City of Kyiv has a population of 2.7 million inhabitants, which makes up about 5.6% of Ukraine's total population. =========================== U N I T E D K I N G D O M =========================== BRITISH AIRWAYS: Misses Deadline to Sign Iberia Merger Agreement ---------------------------------------------------------------- Pilita Clark and Mark Mulligan at The Financial Times report that British Airways and Iberia missed a March 31 deadline they had set to sign a definitive merger agreement on their plan to create Europe's third-largest airline group. Citing people with knowledge of the process, the FT says while the boards of both airlines remain committed to the merger, first announced in November, their plans to list a new holding company in both London and Madrid have run into trouble. It was always planned for the merged company to be listed on the London Stock Exchange and potentially in Madrid, the FT notes. According to the FT, people familiar with the situation said complications related to the market regulators' review of the proposed listings made it impossible to meet the deadline. About British Airways Headquartered in Harmondsworth, England, British Airways Plc, along with its subsidiaries, (LON:BAY) -- http://www.ba.com/-- is engaged in the operation of international and domestic scheduled air services for the carriage of passengers, freight and mail and the provision of ancillary services. The Company's principal place of business is Heathrow. It also operates a worldwide air cargo business, in conjunction with its scheduled passenger services. The Company operates international scheduled airline route networks together with its codeshare and franchise partners, and flies to more than 300 destinations worldwide. During the fiscal year ended March 31, 2009 (fiscal 2009), the Company carried more than 33 million passengers. It carried 777,000 tons of cargo to destinations in Europe, the Americas and throughout the world. In July 2008, the Company's subsidiary, BA European Limited (trading as OpenSkies), acquired the French airline, L'Avion. * * * As reported in the Troubled Company Reporter-Europe on Nov. 12, 2009, Moody's Investors Service placed the Ba3 Corporate Family and Probability of Default Ratings of British Airways plc and the senior unsecured and subordinate ratings of B1 and B2 under review for possible downgrade. Moody's said the rating action reflects the continued weakening in profitability in the first half of FY2010 (to September 2009), with an operating loss of GBP111 million reported versus a profit of GBP140 million a year earlier (post restructuring charges), and Moody's view that losses in FY2010 will likely be higher than in FY2009. This comes in spite of lower operating costs, notably for fuel, as demand in the industry remains very depressed, while the company has successfully reduced its employee and selling costs. Reported net debt remained constant during the period, partly benefiting from a positive exchange rate impact, although Moody's debt metrics also incorporate the full value of the convertible notes issued in August 2009. BRITISH AIRWAYS: Virgin's Branson Wants EU to Block AMR Alliance ---------------------------------------------------------------- Gavin Finch at Bloomberg News, citing the Sunday Telegraph, reports that Virgin Atlantic Airways Ltd. will ask the European Commission to block a cooperation agreement between British Airways Plc and AMR Corp.'s American Airlines. Bloomberg relates that Virgin Chief Executive Officer Richard Branson, as cited by the Sunday Telegraph, in an interview said the alliance between the two companies would damage competition in the industry and lead to higher fares for consumers. About British Airways Headquartered in Harmondsworth, England, British Airways Plc, along with its subsidiaries, (LON:BAY) -- http://www.ba.com/-- is engaged in the operation of international and domestic scheduled air services for the carriage of passengers, freight and mail and the provision of ancillary services. The Company's principal place of business is Heathrow. It also operates a worldwide air cargo business, in conjunction with its scheduled passenger services. The Company operates international scheduled airline route networks together with its codeshare and franchise partners, and flies to more than 300 destinations worldwide. During the fiscal year ended March 31, 2009 (fiscal 2009), the Company carried more than 33 million passengers. It carried 777,000 tons of cargo to destinations in Europe, the Americas and throughout the world. In July 2008, the Company's subsidiary, BA European Limited (trading as OpenSkies), acquired the French airline, L'Avion. * * * As reported in the Troubled Company Reporter-Europe on Nov. 12, 2009, Moody's Investors Service placed the Ba3 Corporate Family and Probability of Default Ratings of British Airways plc and the senior unsecured and subordinate ratings of B1 and B2 under review for possible downgrade. Moody's said the rating action reflects the continued weakening in profitability in the first half of FY2010 (to September 2009), with an operating loss of GBP111 million reported versus a profit of GBP140 million a year earlier (post restructuring charges), and Moody's view that losses in FY2010 will likely be higher than in FY2009. This comes in spite of lower operating costs, notably for fuel, as demand in the industry remains very depressed, while the company has successfully reduced its employee and selling costs. Reported net debt remained constant during the period, partly benefiting from a positive exchange rate impact, although Moody's debt metrics also incorporate the full value of the convertible notes issued in August 2009. CANARY WHARF: Moody's Affirms Rating on Class D2 Notes at 'Ba1' --------------------------------------------------------------- Moody's Investors Service has affirmed the ratings of these Classes of Notes issued by Canary Wharf Finance II plc (amounts reflect initial outstandings): -- GBP1215 million Class A1 6.455 per cent. First Mortgage Debentures due October 2033, affirmed at Aaa; previously on 22 Jan 2004 confirmed at Aaa; -- GBP400 million Class A3 5.952 per cent. First Mortgage Debentures due October 2037, affirmed at Aaa; previously on 22 Jan 2004 confirmed at Aaa; -- GBP222 million Class A7 Floating Rate First Mortgage Debentures due 2037, affirmed at Aaa; previously on 24 Apr 2007 definitive rating assigned Aaa; -- GBP222 million Class B 6.800 per cent. First Mortgage Debentures due October 2033, affirmed at A1; previously on 14 April 2009 downgraded to A1; -- GBP104 million Class B3 Floating Rate First Mortgage Debentures due 2037, affirmed at A1; previously on 14 Apr 2009 downgraded to A1; -- GBP275 million Class C2 Floating Rate First Mortgage Debentures due 2037, affirmed at Baa1; previously on 14 Apr 2009 downgraded to Baa1; -- GBP125 million Class D2 Floating Rate First Mortgage Debentures due 2037, affirmed at Ba1; previously on 14 Apr 2009 downgraded to Ba1. The affirmation follows Moody's review of the transaction. The transaction is performing in line with Moody's current expectations. 1) Transaction Overview Canary Wharf Finance II plc represents a true-sale single-borrower securitization secured by first-ranking mortgages over seven prime office properties located in the London Docklands Canary Wharf district -- a purpose built area for office properties, which has been subject to extensive urban regeneration since 1981. This transaction originally closed in June 2000 and the Issuer has issued Notes on six occasions, with the most recent issuance closing in April 2007. The total current balance of the Notes is approximately GBP2.50 billion. Moody's took a rating action on the Notes in April 2009, in light of these developments in the transaction: (i) the insolvency of Lehman Brothers Limited, the main tenant of the largest property in the pool, 25/30 Bank Street; (ii) the weakening credit strength of a number of larger tenants occupying the other six properties in the transaction; and (iii) Moody's expectation of further property value declines in the future. 2) Rating Analysis Property Values. Commercial real estate values in the UK declined by up to 45% from late 2007 until the first half of 2009, although there is evidence that prime London property values have recovered by approximately 10% since then. Moody's central scenarios envisage some value recovery for prime UK properties over the next few years, albeit at a moderate rate. The office properties in the Issuer's portfolio are expected to follow this trend also. The Issuer's property portfolio was valued at GBP3.7 billion in 2005, rising to GBP4.4 billion in December 2007, and subsequently falling in value to GBP2.7 billion by June 2009. Since June 2009, the portfolio value has increased to GBP2.96 billion, an increase of 7.7%. Rental income after expiry of rent free periods, but excluding rental income on unlet space, is approximately GBP225.7 million per annum, indicating a return of 7.63%. Correspondingly, this implies that the transaction's Note-to-Value moved from 92.2% in June 2009 back down to 84.7% in December 2009, excluding any cash collateral or cash reserves. In 2009 Moody's re-examined its modeling value for the property portfolio and adopted a "sustainable value" of GBP3.3 billion (based on a cap rate of approximately 6.75%) and a trough value of GBP2.7 billion to be applied as the 2009 modeling value. The sustainable value and trough value assumptions have been reconfirmed as of the date of this affirmation. Although by comparison with other CMBS transactions which Moody's rates the leverage is currently relatively high for the ratings assigned, the analysis considers both the long-dated nature of the transaction as well as the significant expected loan amortization which should, reduce the transaction's leverage over time. Moody's modeling approach also allows for a degree of property dilapidation during the final 15 years of the transaction. Term Default Risk. London office occupational markets have been affected by increases in vacancy rates and by an increased risk of tenant defaults over the past twelve to eighteen months. The average tenant rating in the portfolio has declined during the past 18 months, which was due to the downgrades of several financial sector tenants. This was already expected when Moody's reviewed the transaction in April 2009. However, the higher tenant default risk coupled with somewhat weaker prospects for letting-up vacant spaces together increased the term default risk of the securitized loan compared to Moody's last review. The Notes' ratings could be subject to downward rating pressure if there would be further substantial adverse changes affecting the tenants or the rent roll in the future. The seven properties in the portfolio are occupied by more than 45 tenants, with the majority being active in the financial or banking sector. The top five tenants by percentage of annual gross portfolio rent excluding the Lehman Brothers rent (19.3%) are Clifford Chance LLP (11.5%), Morgan Stanley & Co International plc (A2, Prime-1) (8.8%), Citigroup Inc (A3, Prime-1) (6.0%) and Barclays Bank plc (Aa3, Prime-1) (3.3%). Although the rate of rental voids has remained historically stable at less than 1%, physical vacancy is on the increase. In particular, several larger tenants such as KPMG and JP Morgan have served their notices, while others, such as Barclays are seeking to reorganize and rationalize their office space by end of 2010. Moody's continues to expect an increased level of vacancies, and has incorporated the uncertainty around the future rental profile in the modeling for the ratings. Impact of Lehman Brothers insolvency. Lehman Brothers Limited is the tenant of record for 25/30 Bank Street, which, at 19.8% of the total portfolio's lettable area, is the largest property in the securitized portfolio, providing in excess of 1,000,000 sq. ft. of prime office space. LBL is currently undergoing UK insolvency procedures via administration, while LBL's parent, Lehman Brothers Holding Inc., which acts as guarantor under the lease agreement, is currently undergoing chapter 11 administration in the United States. On January 21, 2010, the administrators of LBL failed to pay part of the rent, resulting in a rental shortfall of GBP2.57 million for the quarter. The shortfall was satisfied through the use of the designated rental shortfall cash reserves of the Issuer. Meanwhile, LBL are in default of their rental agreement, which gives Canary Wharf Group as landlord, the right to seek recovery of such amounts through legal channels. The LBL rent is guaranteed for a four year period, by a rental shortfall facility provided by AIG Financial Products Corporation (unrated), whose obligations are guaranteed by American International Group, Inc. (A3, Prime-1). The rental shortfall facility is drawable on every quarter in which there has been a shortfall between the rent received on the building and the rent which would have been due under the original LBL lease, and it may be drawn for a period of up to four years commencing from the date of first drawdown. The facility is not available for any rental shortfall purposes from any other building and cannot be used after the expiry of the four year period commencing from the first drawing date. So far, the rental shortfall facility has not been used. Due to the breach of a rating trigger in the rental shortfall facility agreement, AIGFPC subsequently funded a cash deposit into an AIGFPC bank account, over which the Issuer has a fixed charge. The amount deposited is equivalent to the net present value of four years of future LBL contracted rent. This amount is adjusted every quarter to reflect the latest NPV calculations and rental obligations of LBL over the forward looking four year period. Refinancing Risk. The loan backing the Notes is amortizing. The current balance is GBP2.505 billion, compared with GBP2.557 billion at the last closing date in April 2007. At the note payment date in October 2034, the final scheduled amortization payment under the bonds will be GBP746 million. In comparison to other CMBS transactions, the refinancing percentage of the loan at its final maturity date is relatively low: 29.8% of the current loan outstanding will need to be refinanced in October 2034. EMI GROUP: Terra Firma May Have to Sell Shares to New Investors --------------------------------------------------------------- Rowena Mason at The Daily Telegraph reports that Terra Firma, Guy Hands' private equity fund, could sell stake in EMI if investors refuse to cough up EMI may be forced to sell shares to new investors if its current backers refuse to take part in a GBP120 million plan to save it from the hands of its lender Citigroup. According to the report, sources close to Terra Firma insisted that EMI was unlikely to be forced into the arms of hedge funds and other potential new investors, saying that its current ones seemed keen to back the fundraising. Terra Firma, which bought EMI for GBP4.2 billion just before the credit crunch hit in 2007, has until June to plug a GBP120 million funding gap and save its flagship investment from being seized by Citigroup, the report notes. The report says Mr. Hands has for some weeks been preparing a plan to take to investors to see the music label through to March 2011. But Citigroup believes it has the power to block Mr. Hands's plans if they are not in the interests of the company and its stakeholders, the report notes. EMI -- http://www.emigroup.com/-- is the fourth largest record company in terms of market share (behind Universal Music Group, Sony Music Entertainment, and Warner Music Group). It houses recorded music segment EMI Music and EMI Music Publishing. EMI Music distributes CDs, videos, and other formats primarily through imprints and divisions such as Capitol Records and Virgin, and sports a roster of artists such as The Beastie Boys, Norah Jones, and Lenny Kravitz. EMI Music Publishing, the world's largest music publisher, handles the rights to more than a million songs. EMI Music operates through regional divisions (EMI Music North America, International, and UK & Ireland). Private equity firm Terra Firma owns EMI. INTERNATIONAL PERSONAL: Fitch Assigns 'BB+' Issuer Default Rating ----------------------------------------------------------------- Fitch Ratings has assigned International Personal Finance Plc a Long-term Issuer Default rating of 'BB+' with a Stable Outlook and a Short-term IDR of 'B'. The ratings reflect IPF's strong cash generation, high margins, robust risk management and low leverage. The ratings also reflect the credit and regulatory risks that arise from unsecured home- collected lending in emerging markets in a more challenging operating environment. In addition, they reflect reliance on wholesale funding, operational risks from a high growth cash-based business and structural FX risks from international activities. Upward rating potential could arise from greater diversification of funding and revenue; the latter could occur as new markets become more established. Downward rating pressure would arise if IPF experiences difficulty in diversifying its funding, from a material increase in leverage or from a major deterioration in performance and asset quality within its key markets due to weakened economic conditions. Whilst IPF operates in markets with high growth potential, its performance is closely correlated to the economic condition of its key markets. Profit before tax declined 19% y-o-y in 2009 to GBP61.7 million. Significant arrears are part of IPF's business model; impairment charges rose to 30% of revenue in 2009 (2008: 23%) as the global recession impacted its key markets. Operations in its established markets (Poland, the Czech Republic and Slovakia) remained profitable in 2009 but revenue was impacted by IPF's prudent decision in October 2008 to tighten lending criteria across all markets in response to the more difficult operating environment. The Hungarian business was particularly badly affected, required restructuring and reported a loss for 2009. In its more recently established markets, Mexico was modestly profitable for the first time in 2009 and Romania is expected to be profitable in 2010. IPF has reduced costs through a H208 efficiency program. Fitch considers IPF to have a robust risk management framework but the agency notes that credit quality problems have arisen in the past in certain markets from rapid growth and control failures. Leverage is low and IPF plans for this to fall further over the medium term; debt/tangible equity was 1.3x at end-2009. The company is reliant on wholesale funding; bank facilities totaled GBP598m at end-2009, compared with total borrowings of GBP333 million. Funding is mainly from committed bank facilities (end-2009: GBP590 million); the largest part of this is a syndicated facility (GBP493 million); GBP160 million of this facility matured in March 2010, which reduced funding headroom to a still adequate level. Given the short-term nature of the loan book (weighted average maturity around six months), slowing lending would release substantial cash. IPF was established as a separate company in July 2007 after de- merging from Provident Financial Plc (rated 'BBB+'/Stable). It is listed in London and focuses on emerging market home-collected small unsecured loans. IONA CDO: S&P Downgrades Ratings on All US$136.5 Mil. Notes ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its credit ratings on all of IONA CDO I's US$136.5 million secured floating-rate credit- linked notes. These rating actions reflect S&P's assessment of the credit deterioration of the assets in the transaction's underlying reference portfolio, which primarily comprises U.S. residential mortgage-backed securities from 2004, 2005, and 2006 vintages. In S&P's opinion, credit deterioration has led to an increase in scenario loss rates. At the same time, S&P believes that portfolio asset defaults have lowered the available credit enhancement for the notes. In S&P's view, the ratings are no longer commensurate with the credit enhancement and portfolio quality, and S&P has therefore lowered its ratings on classes A and B. S&P believes losses from the credit events will exceed the available credit enhancement for the class C notes. In S&P's opinion, the class C noteholders are very unlikely to receive full repayment of principal and interest due to them. As such, S&P also lowered its rating on the class C notes. Ratings List Ratings Lowered IONA CDO I US$136.5 Million Secured Floating-Rate Credit-Linked Notes Ratings ------- Class To From ----- -- ---- A CCC+ BB B CCC- CCC+ C CC CCC KAUPTHING SINGER: Halabi Declared Bankrupt Over GBP56.3MM Loan -------------------------------------------------------------- Graham Ruddick at The Daily Telegraph reports that property tycoon Simon Halabi has been declared bankrupt. According to the report, the bankruptcy order was made in the High Court on March 30 over a GBP56.3 million loan he received from failed Icelandic bank Kaupthing Singer & Friedlander. Citing Estates Gazette, the report says bankruptcy proceedings were launched last year by Ernst & Young, the joint administrator to Kaupthing, over the GBP56.3 million debt. Mr. Halabi was not present at the hearing and no representations were made on his behalf, the report notes. The report relates Laura John, Ernst & Young's barrister, told the hearing that Mr. Halabi had not responded to a bankruptcy petition served to Ashurst, the law firm acting on the property entrepreneur's behalf. Kaupthing is listed as a secured creditor in the joint administrators' statement of proposals for companies holding some of Mr. Halabi's London assets, the report discloses. The debt is believed to be related to a personal guarantee given by Mr. Halabi over his acquisition of Esporta, the health club chain, in 2007, the report states. Kaupthing Singer & Friedlander is the U.K. unit of collapsed Icelandic lender Kaupthing Bank hf. LAND OF LEATHER: To Close 19 Remaining Shops; 240 Jobs Affected --------------------------------------------------------------- Cabinet Maker reports that Land of Leather has confirmed that its 19 remaining shops are going to close, after administrators failed to find a buyer. According to the report, the shops will be closed in stages, with the majority by April 10, 2010, in an attempt to complete outstanding orders and liquidate the group's remaining stock holding. The closures will result in the loss of 240 jobs, the report notes. The report recalls Lee Manning and Nick Edwards of Deloitte LLP, the business advisory firm, were appointed as Joint Administrators to Land of Leather on January 12, 2009. Land of Leather is a furniture retailer. The company operated from 109 retail stores across the United Kingdom and Ireland with a head office in Kent. LNR PROPERTY: S&P Removes Hatfield From Select Servicer List ------------------------------------------------------------ Standard & Poor's Ratings Services removed Hatfield Philips International Ltd. and Hatfield Philips Deutschland GmbH from its Select Servicer List as U.K. and German primary and special servicers of commercial mortgages. S&P maintains its AVERAGE servicer ranking on HPI and HPD. This change will be reflected in S&P's next publication of the Select Servicer List in due course. S&P admits servicers to its Select Servicer List based on a number of factors, including each firm's ability to maintain a SUFFICIENT financial position. S&P has removed HPI and HPD from its Select Servicer List because LNR Property Corp. (the ultimate parent of the servicers) currently does not meet S&P's criteria to maintain a SUFFICIENT financial position. The action is a consequence of S&P's CCC/Negative/-- rating on LNR Property Corp. (the ultimate parent of the servicers) and LNR Property Ltd. In line with S&P's criteria, a rating at this level is insufficient for us to allow HPI and HPD on S&P's select servicer list. This opinion does not replace that of a senior debt or counterparty credit rating on LNR Property Corp. and LNR Property Ltd. S&P is currently conducting its annual review of HPI and HPD's operational activities and a detailed report with the current rankings will follow in the near future. MUSIC GROUND: Shuts Shops; Liquidator to Be Appointed ----------------------------------------------------- MI Pro reports that Music Ground has shut its shops in Manchester, Leeds & London. The report says the fate of the music retail chain's five other shops is unclear but it seems likely that following a rearrangement, at least some of these will remain open. According to MI Pro, Justin Harrison, one of the chain's owners, was unable to discuss the closures but confirmed that a liquidator was in the process of being appointed. Mr. Harrison stressed that Hi Watt -- a separate business -- remains healthy and is still very much in business, the report notes. He hoped to be in a position to make a statement about the underlying reasons for the closures and to reveal future plans in a few weeks, the report states. Music Ground is owned by father and son team, Rick and Justin Harrison. PEARL GROUP: Two Investors to Gain From Phoenix Float ----------------------------------------------------- Paul J. Davies at The Financial Times reports Hugh Osmond's Sun Capital and Manjit Dale's TDR Capital could gain at least GBP100 million from Phoenix Group, the renamed Pearl zombie life assurance fund business, ahead of its listing on the main FTSE index this summer. According to the FT, the two private equity investors, who created Pearl out of a series of mergers and acquisitions, hold contingent rights to more than 20 million unissued shares in the group. The FT says these must be removed before Phoenix can gain its full listing because of the potential dilution they present. The FT recalls the rights were given as part of Pearl's restructuring last year, which saw Sun and TDR give up 70% of the group in a rescue takeover by Liberty Acquisitions, an Amsterdam- listed blank-check company. Pearl's lenders also got contingent rights to 8.5 million shares, the FT states. The FT relates Jonathan Moss, chief executive, who last Wednesday delivered Phoenix's first annual results since its financial restructuring, said negotiations over the contingent rights were constructive and should be concluded in the near term. Phoenix also said last week that its banks and the Financial Services Authority had approved a deal with bondholders over GBP500 million of junior debt that will see investors take a hit of 15p in the pound on their value, the FT notes. Pearl Group Limited -- http://www.pearlgrouplimited.co.uk/-- operates through two primary operating companies: Pearl Assurance and Phoenix Life Limited. It also operates London Life, NPI Ltd, and Scottish Mutual. However, its companies don't sell new policies but instead maintain blocks of life insurance policies and pension products bought from other insurers (called closed life funds). It has more than 7 million such policies in force. Its asset and risk management business operates as Ignis Asset Management. Pearl Group intends to list on the London Stock Exchange. PEMBERTON INTERNATIONAL: High Court Orders Liquidation ------------------------------------------------------ Five companies involved in the mis-selling of undeveloped land for investment to the public have been ordered into liquidation in the High Court following an Insolvency Service investigation on behalf of the Government. The Company Investigations of the Insolvency Service found that Pemberton International Limited; Eldon International Limited; Willow International Limited; Allied Investment Management Limited and Abacus Investment Management (London) Limited were all involved in operating an unscrupulous land investment business. The companies falsely claimed to provide the best land and property in the U.K. with future development potential and the capacity to deliver maximum returns to investors including selling land they had no right to. Commenting on the case Ian Lucas, Minister for Business said, "This action sends a clear message to those businesses who set out to cheat members of the public and investors, you will be thoroughly investigated and when necessary closed down. This case also highlights the need to remind potential investors to be wary of any land banking, or other scheme, that promises huge profits for little outlay." The investment plots were marketed for sale across five sites in Thorndon, Suffolk; Halifax, West Yorkshire; Worplesdon, Surrey; and Folkestone and Bromley in Kent. More than 500 plots of land were sold to investors generating nearly GBP1.8 million for the companies before they were forced to close down. None of the sites were found to have any prospect of planning permission for residential development. The grounds for winding up the companies were that they made misleading and unfounded statements in marketing the plots of land to the public; sold land on two sites (Worplesdon and Thorndon) that they had no right to sell and that over a third of company receipts were found to have gone to those involved in the running the business, namely; -- GBP372,226 to Mr. Eshpari -- GBP152,042 to Mr. Mitchell -- GBP184,786 to Mr. Straker -- GBP34,795 to Mr. Gongora In ordering the companies into liquidation Registrar Derrett said: "This is a very serious case where considerable amounts of money have been obtained from members of the public. I am satisfied that the evidence, based on a very full report, substantiates all of the allegations. The evidence shows diversion of funds and the intermingling of funds by the companies that can't be unraveled. I am satisfied that Mr. White and Mr. Eshpari have demonstrated complete lack of co-operation and that this is very obviously a case where winding up orders should be made." The investigation also found that the companies had failed to keep proper accounting records; had failed to comply with Companies Act requirements; failed to co-operate fully with the investigation and operated with a serious lack of transparency as to who controlled the companies and with a lack of clarity regarding the structure and roles of the companies. The petitions to wind up the companies in the public interest were presented on September 29, 2009, under the provisions of section 124A of the Insolvency Act 1986. The companies initially opposed the winding up action but were not present or represented at the full hearing of the petitions on March 31, 2010, and they were all ordered into liquidation on grounds of public interest. Pemberton International Limited was incorporated on August 14, 2003. The registered office of the company is at 50 Ellison Road, London, SW16 5BY. The sole recorded director of the company is De'Rial White who is shown to have been appointed on January 15, 2009. The previous directors of the company are shown to have been Omar Eshpari (from April 7, 2008 until November 3, 2008) and Steven David Lawrence Tagg (from November 3, 2008 until January 6, 2009). No company secretary is shown to have been appointed in succession to Carl John Pearson who is recorded as secretary from April 7, 2008 until December 17, 2008. Eldon International Limited was incorporated on August 14, 2003. The registered office of the company is at 50 Ellison Road, London, SW16 5BY. The sole recorded director of the company is De'Rial White who is shown to have been appointed on January 15, 2009. The previous director of the company is shown to have been Stevan David Lawrence Tagg (from July 23, 2008 until January 6, 2009). No company secretary is shown to have been appointed in succession to Oliver Wilson who is recorded as secretary from July 23, 2008 until January 19, 2009. Willow International Limited was incorporated on August 21, 2008. The registered office of the company is at 50 Ellison Road, London, SW16 5BY. The sole recorded director of the company is De'Rial White who is shown to have been appointed on January 15, 2009. The previous director of the company is shown to have been Jose Emilio Gongora (from August 21, 2008 until January 15, 2009). No company secretary is shown to have been appointed in succession to Carl John Pearson who is recorded as secretary from August 21, 2008 until January 15, 2009. Allied Investment Management Limited was incorporated on October 8, 2008. The registered office of the company is at 50 Ellison Road, London, SW16 5BY. The sole recorded director of the company is De'Rial White who is shown to have been appointed on October 10, 2008. The previous directors of the company are shown to have been Stefan Mitchell (from October 8, 2008 until October 10, 2008), Majgan Rassoli (from October 8, 2008 until November 17, 2008) and Dean Benjamin Straker (from October 8, 2008 until November 17, 2008). The company secretary of the company is Stefan Mitchell who is shown to have been appointed on October 8, 2008. Abacus Investment Management (London) Limited was incorporated on November 6, 2008. The registered office of the company is at Rutland House, 90-92 Baxter Avenue, Southend-on-Sea, Essex SS2 6HZ. The sole director and secretary of the company was Mr Ashley Cunningham who is shown to have been appointed on November 6, 2008 and to have resigned as a director on October 27, 2009. All public enquiries concerning the affairs of the company should be made to: The Official Receiver, Public Interest Unit, Tel No 0207 637 1110: Email: piu.or@insolvency.gsi.gov.uk PROMINENT CMBS: S&P Retains Neg. Watch on BB-Rated Class E Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its credit rating on Prominent CMBS Funding No. 1 PLC's class A2 notes due to their redemption. At the time of the notes' redemption, its CreditWatch negative placement on the rating was unresolved. S&P's ratings on the class A1, B, C, D, and E notes are unaffected by the class A2 notes redemption and remain on CreditWatch negative. On June 18, 2009, S&P placed all Prominent CMBS Funding No. 1's notes on CreditWatch negative as part of S&P's review of European commercial mortgage-backed securities transactions that closed between July 1, 2005 and Dec. 31, 2005. During December 2009 S&P published an update keeping the ratings on CreditWatch negative. Bank of Scotland PLC arranged this transaction, which closed in December 2005. The EUR584 million and GBP600 million mortgage- backed notes issued were initially tied to a pool of 33 commercial real estate loans secured on 168 properties throughout the U.K, plus an additional GBP10 million fully funded reserve account as additional credit enhancement. According to the latest quarterly investor report that the servicer -- Bank of Scotland PLC -- issued on March 22, 2010, the collateral pool comprised 17 loans with an aggregate balance of GBP429.2 million, down from GBP1 billion at closing. Ratings List Prominent CMBS Funding No. 1 PLC EUR584 Million, GBP600 Million Mortgage-Backed Floating-Rate Notes Rating Withdrawn Rating ------ Class To From ----- -- ---- A2 NR AAA/Watch Neg Ratings Remain on Creditwatch Negative Class Rating ----- ------ A1 AAA/Watch Neg B AA+/Watch Neg C A/Watch Neg D BBB/Watch Neg E BB/Watch Neg NR -- Not rated. QINETIQ GROUP: Could Not Afford Lucrative Redundancy Terms ---------------------------------------------------------- Sylvia Pfeifer at The Financial Times reports that Leo Quinn, the new head of Qinetiq Group plc, has told union representatives of the former government defense research group that it can no longer afford lucrative redundancy terms for the roughly half of its UK staff who are former defense ministry employees still entitled to public sector-type conditions. According to the FT, Mr. Quinn wants to terminate all collective agreements from September 30 and "modernize" them to take account of Qinetiq's financial position following two recent profit warnings. The FT says Mr. Quinn is finalizing a restructuring program at the group that will lead to significant job losses. The FT relates David Luxton, national secretary at the Prospect union, which represents about 2,000 of the company's 6,500 UK employees, wrote in a letter to members last week, "This is a provocative and unhelpful development given that it was delivered to the trade unions at the beginning of a constructive discussion around creating a sustainable future for Qinetiq". Under a pay deal agreed three years ago, employees who joined before 2001 (mostly former MoD staff) are entitled to receive eight weeks' pay per year of service, capped at 20 years' service, in case of redundancy, the FT discloses. Those people who joined after 2001 are on statutory terms, the FT notes. Mr. Quinn now wants to introduce statutory redundancy terms for all employees in the UK, as well as statutory notice periods, the FT states. QinetiQ Group plc -- http://www.qinetiq.com/global.html-- is an international provider of technology-based services and solutions to the defense, security and related markets. QinetiQ develops and delivers services and solutions for government organizations, in the United Kingdom and United States, including defence departments, intelligence services and security agencies. In addition, the Company provides technology insertion and consultancy services to commercial and industrial customers around the world. QinetiQ has three sectors: EMEA (Europe, Middle East and Australasia), which delivers technology solutions, consultancy and managed services to the Ministry of Defense in the United Kingdom, and civil and other government customers in the United Kingdom and Australia; QinetiQ North America, which provides technology and services to the United States Government, and Ventures, which comprises commercial product businesses and business venturing activities. In July 2009, QinetiQ acquired Cyveillance, Inc. TOWERGATE PARTNERSHIP: Moody's Affirms 'B2' Corp. Family Rating --------------------------------------------------------------- Moody's Investors Service affirmed the B2 Corporate Family Rating of Towergate Partnership Limited, a UK based independent insurance intermediary, and revised the outlook to negative from stable. Towergate is a non-listed intermediary currently consisting of four main business divisions covering retail insurance broking, insurance networks, underwriting services to insurers under delegated underwriting authority agreements and Paymentshield, altogether controlling around GBP1.7 billion of premiums in aggregate as at year-end 2008. Moody's previously upgraded the CFR to B2 in July 2009 following the successful integration of Paymentshield into Towergate. David Masters, Moody's lead analyst for Towergate, noted, "The rating affirmation reflects the continued strong market position Towergate maintains within the UK broker market, combined with healthy levels of free cashflows and excellent levels of profitability, at least on an Earnings Before Interest, Tax, Depreciation and Amortisation basis, where margins have consistently exceeded 25% of revenues, on Moody's basis". Commenting on the outlook change, Mr. Masters noted that Towergate's ability to meaningfully deleverage (an expectation at the time of the previous rating upgrade in July 2009) has been hampered by the ongoing macro-economic challenges and suppressed levels of investment income, which have also affected other similarly rated insurance brokers to varying degrees. Whilst part of the outstanding debt obligations remain off balance sheet, the relatively high levels of financial leverage/interest expense are likely to pressurize bottom-line profitability in the near-term. Furthermore, the UK insurance market -- from which Towergate derives the majority of its revenues -- remains highly competitive, with direct commercial insurance premium rates hardening only slowly during 2009. The current B2 rating incorporates Moody's expectation of the EBITDA margin remaining consistently above 20% together with some improvement in financial leverage and coverage metrics from the 2008 level (2008 debt-to-EBITDA of 7.3x and interest coverage of 0.7x, on a Moody's basis). Whilst not considered likely in the short-term due to the current negative outlook, factors that could lead to an upgrade include adjusted free cash flow exceeding 10% of debt, a debt-to-EBITDA ratio of less than 4.5 times and interest coverage exceeding 3.0 times (all on a Moody's basis). Conversely, further negative rating action could result from a failure to improve leverage/coverage metrics over the near-to medium term from the current (end 2008) levels. Further negative rating pressure could also arise in the event of a meaningful and unprofitable acquisition strategy, although Moody's anticipate that Towergate's future acquisition strategy is likely to focus on small scale acquisitions. For the year ended December 31, 2008, Towergate reported commission and fee income of GBP318 million (2007: GBP278 million) and a net loss of GBP19 million (2007: GBP-15 million). This rating was affirmed and the outlook revised to negative: * Towergate Partnership Limited: B2 corporate family rating The last rating action was on July 22, 2009, when the rating was upgraded to B2 with a stable outlook. TUBE LINES: S&P Corrects Ratings on C and D Subordinated Notes -------------------------------------------------------------- Standard & Poor's Ratings Services said that it corrected an error relating to its ratings on the C and D subordinated notes issued by Tube Lines (Finance) PLC, which briefly were shown on S&P's systems as not rated (NR). The error was due to a data input mistake in S&P's systems which, instead of showing the correct maturity date of the notes as March 31, 2031, showed their fixed-to-floating transition date (March 31, 2010). As the fixed-to-floating transition date has passed, the ratings on the C and D subordinated notes were automatically withdrawn. The correct ratings, 'BBB-/Watch Neg' on the tranche C notes and 'BB/Watch Neg' on the tranche D notes, respectively, have been reinstated. The other debt ratings on Tube Lines (Finance) remain unaffected by this error. Ratings List Revised Ratings Tube Lines (Finance) PLC Subordinated Debt To From -- ---- GBP150.3 mil. 8.6801% C Sub nts due 03/31/2031 BBB-/Watch Neg NR GBP21.59 mil. fltg rate D Sub nts due 03/31/2031 BB/Watch Neg NR * UK: County Court Judgments v. Businesses Hit Record Levels ------------------------------------------------------------ The value of County Court Judgments against businesses in England and Wales in 2009 reached a total of GBP899 million, according to figures released March 31 by Registry Trust Ltd. This is an increase of 5% compared with 2008. The number of County Court Judgments against businesses reached a record high. County Court Judgments against businesses in 2009 rose nearly 8% year-on-year to reach 207,100. Public interest in judgment information surged, with a 58.5% increase in searches of the Register. Nine searches out of 10 are conducted online, at www.trustonline.org.uk. This is the fifth consecutive year in which the number of commercial judgments has risen. According to Registry Trust chairman, Malcolm Hurlston, the figures are indicative of the worsening economy. "Last year has been difficult for businesses, and we expect a similar picture in 2010. The figures show that commercial creditors are increasingly turning to the courts to get their money back. Now more than ever it is important to check firms you may be dealing with on Registry Trusts website, www.trustonline.org.uk. A CCJ should ring warning bells that the business has had problems paying its debts in the past." * UK: Consultation Launched on Pre-Pack Administration Sales ------------------------------------------------------------ Business Minister Ian Lucas has taken decisive steps to ensure confidence in the pre-packaged administration sale process with a range of possible new measures aimed at making the system more open. Pre-packaged sales are a process used by insolvency practitioners to sell the business and assets of an insolvent company prior to formal insolvency proceedings, usually administration. The term "pre-pack" has become widely used to describe these sales, where the purchaser is identified and the sale is agreed in advance, then executed on or shortly after the formal appointment of an administrator. Pre-packs are used in about a quarter of administrations (expected numbers in 2009/10, about 1,250 out of some 5,000 administrations). He was reacting to an Insolvency Service report issued March 19 which revealed that in a third of cases, insolvency practitioners were failing to fully comply with the industry's own rules on transparency. In a consultation launched March 31, the Minister put forward options including strengthening the laws surrounding the use of 'pre-packs'. He is also seeking views on automatic scrutiny of all 'pre-packs' by the Official Receiver, a trusted and independent public official. Ian Lucas said: "Pre-packs are a good option for companies in difficulty as they can preserve value and jobs. But if business and the general public are to trust the process, it must be transparent. "That was why rules were introduced a year ago to ensure prompt and valuable information was given to creditors. But this is still not happening in all cases. "So I am putting forward a range of possible measures designed to ensure that pre-packs are not only being used responsibly and appropriately but, crucially, are also seen to be doing so." The consultation also includes proposals on possible conflicts of interest, such as whether or not the person advising on a pre-pack should go on to become the administrator and whether court or creditor approval should be required for pre-pack deals involving connected parties. The consultation can be found at the Insolvency Service Web site and closes on June 24, 2010. =============== X X X X X X X X =============== * S&P Downgrades Ratings on 88 Tranches From 13 European CLO Deals ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its credit ratings on 88 tranches in 13 European collateralized loan obligation transactions. Of the ratings lowered, all were previously on CreditWatch negative, from which they have now been removed. At the same time, S&P affirmed its ratings on three tranches (in two of the 13 transactions). Of the ratings affirmed, two were previously on CreditWatch negative, from which they have now been removed. Excluding combination notes, S&P reviewed tranches representing a current combined notional amount of US$8.69 billion (EUR6.33 billion). Including combination notes, S&P reviewed tranches representing a current combined notional amount of US$8.85 billion (EUR6.55 billion), of which the downgraded tranches represent US$8.77 billion (EUR6.48 billion) and the affirmations US$73.94 million (EUR54.75 million). For the full list of rating actions, see "S&P Ratings List For European CLO Transactions--April 1, 2010 Review." S&P also provides further analysis for each transaction in individual Transaction Update reports. The downgrades follow: * The application of S&P's new corporate collateralized debt obligation criteria; and * For some of the transactions, S&P's assessment of the deterioration in the credit quality of the collateral supporting the CLO tranches due to increased exposure to obligors that have either defaulted or been downgraded into the 'CCC' category. Of the tranches S&P downgraded, 21 are constrained under its criteria by the largest obligor default test, which is one of the supplemental stress tests S&P introduced as part of its criteria update. The largest obligor default test assesses whether, in S&P's view, a CDO tranche has sufficient credit enhancement (not counting excess spread) to withstand specified combinations of underlying asset defaults, with a flat recovery rate of 5%. The other supplemental stress test introduced under S&P's recent criteria update, the largest industry default test, didn't affect S&P's analysis of any tranche ratings. S&P will continue to review the remaining European CLO tranches that S&P placed on CreditWatch negative under its corporate CDO criteria and resolve the CreditWatch status on these in due course. ********* 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-Fernandez, 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 * * *