/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/100611.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 Friday, June 11, 2010, Vol. 11, No. 114 Headlines F R A N C E LE MONDE: Prisa Delays Bid; L'Espresso, Ringier Out of Race G E R M A N Y ARCANDOR AG: Berggruen Must Update Karstadt Product Mix GENERAL MOTORS: Germany Rejects Request for EUR1.1BB Opel Aid G R E E C E * GREECE: Won't Return to Drachma or Restructure Debt, PM Says H U N G A R Y * HUNGARY: IMF, EU May Junk Tax Cut Proposals, Commerzbank Says I R E L A N D BANK OF IRELAND: Raises EUR1.73 Billion in Share Sale CARRICKMINES GREEN: Put Up for Sale by Anglo Irish Bank CEDAR GROVE: Put Up for Sale by Receivers at Discounted Prices CHESS CAPITAL: Moody's Cuts Ratings on Tier-1 Securities to 'Ca' GREEN ISLAND: Moody's Cuts Rating on EUR125MM Securities to 'Ca' * IRELAND: Banks Delay Sale of Distressed Properties * IRELAND: Central Bank Failed to Foresee Bank Insolvency Threat K A Z A K H S T A N KAZPOST JSC: Moody's Downgrades Global Scale Rating to 'Ba2' P O L A N D GETIN NOBLE: Fitch Affirms Issuer Default Rating at 'BB' TOWARZYSTWO UBEZPIECZEN: Fitch Keeps BB Insurer Strength Rating P O R T U G A L BANQUE ESPRITO: Fitch Downgrades Individual Rating to 'D/E' R O M A N I A AVICOLA IASI: Enters Insolvency Proceedings After Revenue Slump * ROMANIA: Charcuterie Industry Hit by Insolvencies R U S S I A INTERNATIONAL INDUSTRIAL: Fitch Gives Negative Watch on 'B' Rating RUSSIAN AGRICULTURAL: CEO Change Won't Affect Fitch's Rating * RUSSIA: S&P Corrects Errors on Ratings of Four Governments S P A I N CAJA ESPANA: Fitch Puts C/D Individual Rating on Evolving Watch U N I T E D K I N G D O M BH FREIGHT: In Administration; Moore Stephens Appointed BRITISH AIRWAYS: Cabin Crew Union to Ballot on Further Strikes COLT GROUP: Moody's Changes Outlook on 'Ba3' Rating to Positive CREDIT ISSUES: Enters Into CVA Deal as HMRC Seeks Liquidation EUROPEAN PROPERTY: High Court Orders Liquidation Following Probe NORTH WEST: Loss of Major Contract Prompts Administration SELECT HOMES: Put Into Receivership Due to Outstanding Debts TITAN EUROPE: S&P Cuts Ratings on Class G & H Notes to 'D' TOUCHLINE LTD: In Administration; 24 Jobs Affected * Smelters May Shut Down as Prices Slump, Oleg Deripaska Says X X X X X X X X * BOOK REVIEW: The Executive Guide to Corporate Bankruptcy ********* =========== F R A N C E =========== LE MONDE: Prisa Delays Bid; L'Espresso, Ringier Out of Race ----------------------------------------------------------- Ben Hall at The Financial Times reports that Spanish media group Prisa on Wednesday declared its intention to bid for Le Monde but demanded a delay that may prove unacceptable for the cash-strapped daily. The FT relates the number of potential bidders for the newspaper dwindled when Italian press group L'Espresso and Swiss media group Ringier ruled themselves out of the running. According to the FT, there are now three potential bidders for Le Monde: Prisa; Le Nouvel Observateur, the news magazine owned by Claude Perdriel; and a consortium of Matthieu Pigasse, a Lazard banker, Pierre Berge, the business partner of the late fashion designer Yves Saint Laurent, and Xavier Niel, the telecoms billionaire. The FT says potential bidders have until today, June 11, to present a detailed offer. Le Monde's supervisory board was due to choose a buyer on Monday, June 14, but that decision now looks likely to be delayed until later in the month, the FT notes. As reported by the Troubled Company Reporter-Europe on June 7, 2010, the FT said that Le Monde is in a race against time to find new investors and faces insolvency by the end of July if it fails to recapitalize. The FT disclosed Gilles Van Kote, head of Le Monde's journalists' association, the main shareholder, said bidders would be expected to invest between EUR60 million and EUR100 million in the newspaper group and offer guarantees of editorial independence in return for the takeover. Le Monde also has debts of EUR100 million (US$121.9 million), the FT said. As reported by the Troubled Company Reporter-Europe on June 4, 2010, Mr. Van Kote, as cited by The Times, said a takeover is inevitable, with the daily losing EUR25 million (GBP21 million) last year, the 10th year in a row it has been in the red amid a deepening crisis for the whole of France's national press. Le Monde is a French newspaper. ============= G E R M A N Y ============= ARCANDOR AG: Berggruen Must Update Karstadt Product Mix ------------------------------------------------------- Holger Elfes at Bloomberg News reports that retail analysts said German billionaire Nicolas Berggruen, who won the bidding for Arcandor AG's insolvent department-store operator Karstadt, must update the unit's product mix, overhaul its clothing range and improve its image. "Berggruen has to increase the share of clothing sales in Karstadt's revenue by adding space to the textile departments and selling more-stylish fashions," Bloomberg quoted Joerg Funder, a retail expert at Worms University in the German town of the same name, as saying. "It will be difficult for Berggruen to keep all Karstadt outlets open as the department-store format in small and mid- sized cities is losing appeal," said Klaus Kraenzle, a consumer goods analyst at GSC Research in Dusseldorf, according to Bloomberg. Rent Negotiations Bloomberg relates Mr. Berggruen has said the bid was conditional on negotiating lower rents with the Highstreet partnership, which owns most of Karstadt's real estate. He said discussions on that are ongoing, Bloomberg notes. As reported by the Troubled Company Reporter-Europe on June 10, 2010, Reuters said Highstreet warned Mr. Berggruen that the Karstadt could still be liquidated if he did not accept its deal on rents. Reuters disclosed rent negotiations are planned for this week and Highstreet said it had an offer to cut rents. "Highstreet is ready to reduce rents by another EUR230 million (US$309 million) in the next five years in addition to the contribution of EUR160 million over three years pledged in the restructuring plan," Reuters quoted a spokesman for the Highstreet consortium as saying on Tuesday. Should this offer -- available to all potential Karstadt buyers -- not be taken up, "the probability of a Karstadt liquidation rises significantly," the spokesman said, according to Reuters. "An agreement with Highstreet is a core component of rescuing Karstadt." In an e-mail to Mr. Berggruen dated Monday and seen by Reuters, lexander Dibelius, who heads Goldman's German operations, suggested lowering the minimum fixed rent to EUR210 million from EUR250 million for the rest of this year after the closing of the deal. Reuters noted the e-mail said the rent would go up to EUR211 million for 2011 and 2012, and would then return to EUR250 million by 2018. About Arcandor AG Germany-based Arcandor AG (FRA:ARO) -- http://www.arcandor.com/-- formerly KarstadtQuelle AG, is a tourism and retail group. Its three core business areas are tourism, mail order services and department store retail. The Company's business areas are covered by its three operating segments: Thomas Cook, Primondo and Karstadt. Thomas Cook Group plc is a tour operator with operations in Europe and North America, set up as a result of a merger between MyTravel and Thomas Cook AG. It also operates the e-commerce platform, Thomas Cook, supporting travel services. Primondo has a portfolio of European universal and specialty mail order companies, including the core brand Quelle. Karstadt operates a range of department stores, such as cosmopolitan stores, including KaDeWe (Kaufhaus des Westens), Karstadt Oberpollinger and Alsterhaus; Karstadt brand department stores; Karstadt sports department stores, offering sports goods in a variety of retail outlets, and a portal, karstadt.de that offers online shopping, among others. As reported by the Troubled Company Reporter-Europe, a local court in Essen formally opened insolvency proceedings for Arcandor on September 1, 2009. The proceedings started for the Arcandor holding company and for 14 units, including the Karstadt department-store chain and Primondo mail-order division. Arcandor filed for bankruptcy protection after the German government turned down its request for loan guarantees. On June 8, 2009, the government rejected two applications for help by the company, which employs 43,000 people. The retailer sought loan guarantees of EUR650 million (US$904 million) from Germany's Economy Fund program. It also sought a further EUR437 million from a state-owned bank. GENERAL MOTORS: Germany Rejects Request for EUR1.1BB Opel Aid ------------------------------------------------------------- Andreas Cremer and David Welch at Bloomberg News report that Germany turned down General Motors Co.'s request for EUR1.1 billion (US$1.3 billion) in aid for its money-losing Opel division, forcing the automaker to seek new ways to reorganize the unit. "I'm convinced GM has sufficient financial resources," Bloomberg quoted Economy Minister Rainer Bruederle, a Free Democrat, as saying in Berlin Thursday, in explaining why he rejected GM. "The state is not the better entrepreneur." According to Bloomberg, Mr. Bruederle said GM has about EUR10 billion in free liquidity after paying back credits from the U.S. and Canadian governments. GM has been seeking EUR1.92 billion in loan guarantees from European countries to fund a restructuring that includes closing a factory in Antwerp, Belgium, and eliminating 8,300 of Opel's 48,000 jobs, Bloomberg discloses. Opel, based in Russelsheim, Germany, is seeking EUR333 million in guarantees from the U.K., EUR437 million from Austria and Spain combined and EUR50 million in project financing from Poland, Bloomberg says, citing a PricewaterhouseCoopers report last month commissioned by the German government, Bloomberg notes. Bloomberg relates Nick Reilly, Opel's chief executive officer, said on a conference call that GM is reviewing all options and will continue to talk to other governments for possible backing. According to Bloomberg, Eric Selle, an analyst at JPMorgan Chase & Co. in New York, said Wednesday in a note to clients that GM may now fund EUR3 billion of the restructuring plan, up from EUR1.9 billion it would have paid if it received the German aid. About General Motors With its global headquarters in Detroit, Michigan, General Motors Company -- http://www.gm.com/-- is one of the world's largest automakers. GM employs 207,000 people in every major region of the world and does business in some 140 countries. GM and its strategic partners produce cars and trucks in 34 countries, and sell and service these vehicles through the following brands: Buick, Cadillac, Chevrolet, FAW, GMC, Daewoo, Holden, Opel, Vauxhall and Wuling. GM's largest national market is the United States, followed by China, Brazil, Germany, the United Kingdom, Canada, and Italy. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. GM acquired its operations from General Motors Company, n/k/a Motors Liquidation Company, on July 10, 2009, pursuant to a sale under Section 363 of the Bankruptcy Code. Motors Liquidation or Old GM is the subject of a pending Chapter 11 reorganization case before the U.S. Bankruptcy Court for the Southern District of New York. At March 31, 2010, GM had US$136.021 billion in total assets, total liabilities of US$105.970 billion and preferred stock of US$6.998 billion, and non-controlling interests of US$814 million, resulting in total equity of US$23.053 billion. About Motors Liquidation General Motors Corporation and three of its affiliates filed for Chapter 11 protection on June 1, 2009 (Bankr. S.D.N.Y. Lead Case No. 09-50026). General Motors changed its name to Motors Liquidation Co. following the sale of its key assets to a company 60.8% owned by the U.S. Government. The Honorable Robert E. Gerber presides over the Chapter 11 cases. Harvey R. Miller, Esq., Stephen Karotkin, Esq., and Joseph H. Smolinsky, Esq., at Weil, Gotshal & Manges LLP, assist the Debtors in their restructuring efforts. Al Koch at AP Services, LLC, an affiliate of AlixPartners, LLP, serves as the Chief Executive Officer for Motors Liquidation Company. GM is also represented by Jenner & Block LLP and Honigman Miller Schwartz and Cohn LLP as counsel. Cravath, Swaine, & Moore LLP is providing legal advice to the GM Board of Directors. GM's financial advisors are Morgan Stanley, Evercore Partners and the Blackstone Group LLP. Bankruptcy Creditors' Service, Inc., publishes General Motors Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by General Motors Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) =========== G R E E C E =========== * GREECE: Won't Return to Drachma or Restructure Debt, PM Says -------------------------------------------------------------- Xinhua News Agency reports that Greek Finance Minister George Papaconstantinou said on Wednesday that the country will not return to drachma and will not restructure its national debt this weekend. Mr. Papaconstantinou strongly denied rumors that the country is on the brink of default or exit from the Eurozone, the report notes. "These scenarios of an imminent catastrophe should stop. They are absurd," the report quoted Mr. Papaconstantinou as saying. With the activation of a financial safety net by the European Union and the International Monetary Fund this spring, Greece avoided a bankruptcy, but doubts on the implementation of the terms of the deal and the whole plan to exit the crisis remain, the report says. The report relates Mr. Papaconstantinou stressed that the agreement between Athens and EU and IMF is properly implemented, Greece is consistent to its pledges and the next installment of financial aid will be given to Athens in September. Greece has already received EUR20 billion (US$24.02 billion) out of a total EUR110 billion (US$132.11 billion) secured over a three year period, the report discloses. The report says according to the timetable of the deal, Greece will get another EUR9 billion (US$10. 809 billion) this September, if everything runs smoothly. ============= H U N G A R Y ============= * HUNGARY: IMF, EU May Junk Tax Cut Proposals, Commerzbank Says --------------------------------------------------------------- Zoltan Simon at Bloomberg News reports that Commerzbank AG said the International Monetary Fund and the European Union, which bailed Hungary out in 2008, may reject tax cuts proposed by the new cabinet, aimed at restoring investor confidence. Bloomberg relates Prime Minister Viktor Orban said Tuesday he plans to enact a new tax on banks, cut public spending, reduce personal income taxes and lower taxes for small businesses. He also pledged to stick with a creditor-approved budget-deficit target after government officials rattled world markets last week with talk of a potential default, Bloomberg notes. "We do not think it likely that such a plan will satisfy the EU, the rating agencies or financing institutions such as the IMF, as a credible fiscal consolidation package," Commerzbank AG said in a note Wednesday, according to Bloomberg. "A plan of tax cuts is usually not an acceptable fiscal roadmap within an IMF program." Separately, Bloomberg News' Mr. Simon and Edith Balazs report that Goldman Sachs Group Inc., Fitch Ratings and Budapest Investment said they need more details of the government's deficit-cutting plan before committing funds to the country again. "Orban's message is positive, but he didn't detail the painful measures awaiting the public sector," Daniel Bebesy, who helps manage US$1.5 billion, mostly in Hungarian government bonds at Budapest Investment Management, said in a phone interview, according to Bloomberg. "We remain underweight, and are awaiting policy measures that demonstrate how exactly the cabinet plans to meet its deficit goal." The budget plan, while "moderately encouraging," lacks details on "costing, timing and credibility," Bloomberg quoted David Heslam, a director at Fitch Ratings in London, as saying. "With growing pressure to accelerate deficit reduction in other EU member states, there is unlikely to be much appetite to tolerate any fiscal loosening in Hungary." ============= I R E L A N D ============= BANK OF IRELAND: Raises EUR1.73 Billion in Share Sale ----------------------------------------------------- Louisa Fahy at Bloomberg News reports that Bank of Ireland Plc raised EUR1.73 billion (US$2.08 billion) in a share sale, boosting capital after losses surged. Bloomberg relates Bank of Ireland said it sold 2.97 billion new shares, or about 95% of the securities on offer. The bankers managing the sale sold the remaining 168.6 million remaining shares at 75 cents apiece, a premium of 20 cents to the rights offer price of 55 cents, Bloomberg discloses. The bank is raising a total of EUR3.4 billion after it sold toxic real-estate loans at a discount to the country's so-called bad bank, the National Asset Management Agency, Bloomberg notes. According to Bloomberg, Bank of Ireland, which is 36%-owned by the Irish government, said the new shares are expected to start trading on June 14. Bank of Ireland also placed shares with a group of institutional investors, exchanged some of its Tier 1 and upper Tier 2 bonds to raise capital and converted some of the government's preference shares into equity, Bloomberg states. Headquartered in Dublin, Bank of Ireland -- http://www.bankofireland.com/-- provides a range of banking and other financial services. These include checking and deposit services, overdrafts, term loans, mortgages, business and corporate lending, international asset financing, leasing, installment credit, debt factoring, foreign exchange facilities, interest and exchange rate hedging instruments, executor, trustee, life assurance and pension and investment fund management, fund administration and custodial services and financial advisory services, including mergers and acquisitions and underwriting. The Company organizes its businesses into Retail Republic of Ireland, Bank of Ireland Life, Capital Markets, UK Financial Services and Group Centre. It has operations throughout Ireland, the United Kingdom, Europe and the United States. * * * As reported by the Troubled Company Reporter-Europe on April 7, 2010, Fitch Ratings affirmed the rating on Bank of Ireland's Tier 1 notes at 'CCC' (ISINs: XS0268599999, US055967AA11 and USG12255AA64). At the same time, Moody's Investors Service placed Bank of Ireland's D bank financial strength rating (BFSR -- mapping to a baseline credit assessment of Ba2) on review for possible upgrade, previously they had a developing outlook. CARRICKMINES GREEN: Put Up for Sale by Anglo Irish Bank ------------------------------------------------------- Orna Mulcahy at The Irish Times reports that Carrickmines Green, an apartment scheme in south County Dublin, was put up for sale by Anglo Irish Bank on Thursday. The report recalls Carrickmines Green hit the headlines last year when early buyers lost their deposits after developer Laragan went into examinership. The remainder of the apartments and houses in the scheme beside the M50 were being sold at discounted prices through HT Meagher O'Reilly New Homes, the report notes. Carrickmines Green is located at exit 15 of the M50, beside Carrickmines Retail Park, and close to the Luas Green Line, according to The Irish Times. CEDAR GROVE: Put Up for Sale by Receivers at Discounted Prices -------------------------------------------------------------- Orna Mulcahy at The Irish Times reports that Cedar Grove, an apartment scheme completed in 2007 and unsold since, was put for sale on Thursday. The scheme was being offered at discounted prices by its receivers, the report says. Cedar Grove had been marketed through Lisney but Douglas Newman Good New Homes took over sales, the report notes. Located on Firhouse Road, Cedar Grove is a small scheme with just 18 units that have been completely finished and well maintained through the receivership process, according to The Irish Times. CHESS CAPITAL: Moody's Cuts Ratings on Tier-1 Securities to 'Ca' ---------------------------------------------------------------- Moody's Investors Service announced this rating action on notes issued by CHESS Capital Securities plc. -- EUR125,000,000 Perpetual Tier-One Pass-Through Securities, Downgraded to Ca; previously on Apr 8, 2010 Downgraded to Caa1 The transaction is a pure pass-through of the rating of non- cumulative Perpetual Capital Securities of EBS Capital No. 1 S.A. The rating action follows the downgrade of these securities to Ca from Caa1. GREEN ISLAND: Moody's Cuts Rating on EUR125MM Securities to 'Ca' ---------------------------------------------------------------- Moody's Investors Service took this rating action on notes issued by Green Island Capital Securities plc. -- EUR125,000,000 Perpetual Tier-One Pass-Through Securities, Downgraded to Ca; previously on April 8, 2010 Downgraded to Caa1 The transaction is a pure pass-through of the rating of non- cumulative Perpetual Capital Securities of EBS Capital No. 1 S.A. The rating action follows the downgrade of these securities to Ca from Caa1. * IRELAND: Banks Delay Sale of Distressed Properties ---------------------------------------------------- Orna Mulcahy at The Irish Times reports that David Browne, agent specializing in new homes, said that there could be up to 2,500 apartments in south Dublin that will have to be sold at discounted prices by banks who have foreclosed on the developers who built them. According to the report, some of these have lain empty now for over two years, but it could be several months, if not years, more before they finally make it to the market. The report relates Mr. Browne said the reason for the delay in bringing similar schemes onto the market is the amount of work involved to ready an apartment complex that has been repossessed by the bank. The report notes new homes mortgage specialist Frank Conway suggests that the delay in disposing of distressed properties has been caused by the banks being entirely taken up with transferring loans to Nama, with all other business long-fingered. The rental market has also become an option for empty properties, the report discloses. Mr. Conway also sees a general reluctance by the banks to simply offload properly quickly, the report notes. "The big banks are slow to act on their non-performing loans. Most of the receiverships that I have seen to date are as a result of non-Irish bank moves, who have been a lot more aggressive at recoveries (on the developer end at least)," the report quoted Mr. Conway as saying. * IRELAND: Central Bank Failed to Foresee Bank Insolvency Threat ---------------------------------------------------------------- The report by Patrick Honohan, the new governor of Ireland's Central Bank, has concluded that neither the Central Bank nor the Financial Regulator believed that any financial institution faced serious difficulties, let alone potential insolvency, in the run- up to the financial crisis, Simon Carswell writes for The Irish Times. According to The Irish Times, Mr. Honohan said there had been major failures in the regulation of the banks and the maintenance of financial stability. Mr. Honohan, as cited by The Irish Times, said the potentially very large loan losses that would threaten insolvency at several institutions were not foreseen in any of the regulator's supervision documentation "even as far as late 2008". Regulators failed to challenge in detail the security which was backing the banks' large developer loans and "did not realize just how vulnerable the lenders were to property price declines", The Irish Times quoted Mr. Honohan as saying. =================== K A Z A K H S T A N =================== KAZPOST JSC: Moody's Downgrades Global Scale Rating to 'Ba2' ------------------------------------------------------------ Moody's Investors Service has downgraded the global scale rating of Kazpost JSC to Ba2 from Baa3. As part of the transition from investment grade to non-investment grade, Moody's has also converted the former Baa3 issuer rating into a Ba2 corporate family rating and probability-of-default rating for the state- owned national postal operator in Kazakhstan. At the same time, Moody's has downgraded Kazpost's national scale rating to A3.kz from Aa3.kz. The rating action concluded the review process that was initiated on March 12, 2010. The outlook on the ratings is stable. The rating action reflects Moody's view of the likelihood of diminished support from the Kazakh government, as the state might be more selective in allocating support to its corporate state- owned enterprises in future, given the ongoing policy and structural adjustments within the economy. Kazpost's ratings are assessed according to Moody's government-related issuer methodology and, as a result, the Ba2 CFR reflects the combination of these inputs: * A baseline credit assessment of 15 (on a scale of 1 to 21, where 1 represents the lowest credit risk, with 15 being equivalent to a B2 rating). * The Baa2 local currency rating of the government of Kazakhstan. * Medium dependence. * Medium level of support, which has been reduced. Moody's remains comfortable with the underlying credit quality of the company, as indicated by the current BCA of 15. This is despite Kazpost's operating performance during 2009 being below expectations as a result of (i) the company's business being affected by the general economic conditions in Kazakhstan and by increasing competition and use of electronic communications; and (ii) the postponement of Kazpost's modernization program, with the government having reduced its direct financing support to the company. Moody's recognizes that Kazpost received almost KZT7.8 billion from the government between 2005 and 2008. Among other things, this money was spent on the modernization of the postal network and the construction of rural postal offices. However, government financial support for the development of the postal system halted in 2009, resulting in the company postponing part of its investment program. Moody's also recognizes that, following the postponement of the program, Kazpost's indebtedness is also below expectations, with the company's key credit metrics continuing to support the existing BCA. However, the rating agency would expect the company's capex to increase again over the next few years, resulting in an overall increase in financial debt. "The lower support factored into the CFR partly reflects the reduction in direct government support for Kazpost's investment program, but also Moody's view that the government might be more selective in its provision of extraordinary support going forward," says Paolo Leschiutta, a Senior Vice President in Moody's Corporate Finance Group and lead analyst for Kazpost. Nonetheless, the medium support incorporated in the CFR reflects: (i) the current full ownership of Kazpost, and the lack of specific privatization plans expected in the short to medium term; (ii) the potential modest needs of the company in the context of national resources; (iii) the government's involvement in the strategic and investment decisions of Kazpost; (iv) the company's strategic role in the country, both for broader postal and financial services; and (v) the company's capability to reach rural areas, where alternative infrastructures are currently poor. "The BCA assessment takes into account the relatively low business risk profile of Kazpost, which is a result of (i) the stable postal business; and (ii) the support provided by Kazpost's financial service operations, which are currently run with limited risk for the company and help bear the costs of the postal office network," explained Mr. Leschiutta. "However, the BCA also reflects both the relatively small size of Kazpost and the company's exposure to a single economy, as well as the execution risks associated with the modernization program," Mr. Leschiutta added. The current rating assessment incorporates the successful financing of the company's investment program and a satisfactory liquidity profile going forward. The last rating action on Kazpost was implemented on March 12, 2010, when Moody's placed the Baa3 and Aa3.kz ratings under review for possible downgrade. Kazpost is Kazakhstan's national postal operator, which offers traditional postal services as well as a wide range of financial and other services, including express deliveries, logistics and transportation services. The company has around 22,000 employees and 3,300 post offices around the Republic of Kazakhstan. At FYE December 2009, Kazpost reported revenues of approximately KZT16.3 billion (EUR93 million). =========== P O L A N D =========== GETIN NOBLE: Fitch Affirms Issuer Default Rating at 'BB' -------------------------------------------------------- Fitch Ratings has affirmed Poland-based Getin Noble Bank SA's Long-term Issuer Default Rating at 'BB', Short-term IDR at 'B', Individual Rating at 'D', Support Rating at '5' and National Long- term rating at 'BBB(pol)'. Fitch has simultaneously removed the IDR, the National Long-term rating and the Individual Rating from Rating Watch Evolving, and assigned Stable Outlooks to the two Long-term ratings. The affirmation of GNB's ratings reflects the successful expansion of its franchise in a competitive market with the early 2010 merger of Getin and Noble helping to improve its scale. The ratings also reflect deteriorating asset quality trends, elevated loan impairment charges, large, albeit falling, exposure to foreign currency-denominated mortgages, reliance on the interbank market to hedge structural currency mismatches and moderate liquidity. These factors are balanced by a stable funding source based almost entirely on deposits and diversified income streams. At end-Q110, the loan portfolio was comprised of 70% mortgages, 13% auto loans, 12% consumer loans and 5% business loans. Impaired loans reached 8.7% on the back of a deterioration in consumer lending and a new inflow of impaired mortgage loans. LICs were 28% higher y-o-y, and absorbed 86% of pre-impairment operating profit. Pre-impairment financial performance improved as the cost of funding subsided, new lending picked up and a rebound in financial intermediary business strengthened fee- related earnings. Fitch expects that asset quality will continue to weaken, as the loan book seasons following rapid credit growth in recent years, and is likely to translate into further LICs, which could start bottoming out only in late 2010, assuming no economic stress. At end-Q110, GNB's funding structure was adequate with deposits representing 97% of all interest-bearing liabilities. GNB was successful in attracting long-term funding through structured products and deposit term life insurance sold in cooperation with insurer Europa (a subsidiary of Getin Holding). Consequently, at end-Q110, 41% of deposits had a maturity longer than twelve months. However, GNB's liquidity remains potentially vulnerable to short-term squeezes in the event of a rapid depreciation of the local currency leads to margin calls on swap contracts hedging FX- denominated loans. Based on end-Q110 data, GNB was the 10th-largest bank in Poland by total assets with around a 6% market share in customer deposits. The bank offers auto and consumer loans, mortgages and financial advisory services. Getin Holding, which is ultimately controlled by Leszek Czarnecki, holds a 93.7% stake in GNB. The bank is listed on the Warsaw Stock Exchange. TOWARZYSTWO UBEZPIECZEN: Fitch Keeps BB Insurer Strength Rating --------------------------------------------------------------- Fitch Ratings has affirmed Towarzystwo Ubezpieczen EUROPA SA's and Towarzystwo Ubezpieczen na Zycie EUROPA SA's Insurer Financial Strength ratings at 'BB' and affirmed their National IFS ratings at 'BBB(pol)'. Both ratings have been removed from Rating Watch Evolving and assigned Stable Outlooks. Towarzystwo Ubezpieczen na Zycie EUROPA SA is a wholly-owned subsidiary of Towarzystwo Ubezpieczen EUROPA SA, and the two companies form the Poland-based EUROPA Group. The Stable Outlook reflects Fitch's rating action earlier on Getin Noble Bank, a related bank in which EUROPA continues to maintain a significant proportion of its invested assets. Fitch affirmed GNB's Long-term Issuer Default Rating at 'BB', removed the rating from RWE and assigned a Stable Outlook. Fitch notes that EUROPA retains strong ties with GNB, particularly through the high level of exposure of its investment portfolio to GNB (over 70% of total invested assets), GNB's minority ownership in EUROPA, and EUROPA's reliance on GNB for distribution of its products. EUROPA's ratings will remain strongly linked to GNB's rating while the concentration of EUROPA's investment portfolio in GNB assets remains at the current high levels. EUROPA is 20% owned by GNB, with the majority of the remaining stock owned by Getin Holding SA, a Polish financial group quoted on the Warsaw Stock Exchange. EUROPA specializes in insurance products targeted at the Polish financial sector (bancassurance), with a particular focus on credit-related insurance products and investment products. =============== P O R T U G A L =============== BANQUE ESPRITO: Fitch Downgrades Individual Rating to 'D/E' ----------------------------------------------------------- Fitch Ratings has affirmed Banque Esprito Santo et de la Venetie's Long-term Issuer Default Rating at 'BBB+', Short-term IDR at 'F2' and Support Rating at '2.' The Outlook on the Long-term IDR has been revised to 'Negative' from 'Stable' The change in Outlook reflects the similar Outlook on the Long- term IDR of Banco Espirito Santo (rated 'A+'/Negative/ ST IDR 'F1') which controls 42.7% of BESV. Espirito Santo Financial Group ('A-'/Stable/ ST IDR 'F2') controls a further 44.8% and Italy's Intesa Sanpaolo ('AA-'/Stable/ 'F1+') owns 12.5%. BES is Portugal's third-largest banking group. At the same time, Fitch has downgraded BESV's Individual Rating to 'D/E' from 'D', reflecting the persistent difficulties faced by the bank in funding itself independently. Fitch has additionally affirmed the Short-term rating of BESV's certificate of deposit program at 'F2' and assigned BESV's EUR350m medium-term program ('Bons a Moyen Terme Negociables') a 'BBB+' rating. The affirmation of BESV's IDRs is based on the support Fitch believes the bank could expect to receive from BES, if needed. BESV is not a strategic holding for BES, but it shares the group name and BES appoints the bank's senior management. Fitch believes there is a high probability that BES would provide support to BESV, should this be required. BESV has become increasingly reliant on a committed EUR350m funding line from BES. Given the poor operating environment, it is unlikely that BESV will be in a position to fund itself independently in the near future. BES has also injected additional capital (EUR26.8 million in H208, while a further EUR14.7 million is committed but not yet disbursed) into BESV and subscribed EUR9 million of undated subordinated debt in 2008 and 2009. BES has approved a new business plan focusing on diversification away from the real estate sector and into selected niches where BESV can focus on developing certain fee businesses, notably private banking. Operating profit halved in 2009, as low interest rates failed to offset improved fee income and loan impairment charges and overheads rose, reflecting new hires and the replacement of employees as they retire. The loan book at end-2009 was split between 38% real estate professionals, 33% SMEs and 24% LBOs, with the rest spread among new niches, including film finance and debt collection funding. The bank's asset quality worsened considerably in 2009 but BESV is conservative in its loan classifications and makes provisions for "watch-list" loans even though they rarely experience servicing problems. Excluding these, the impaired loan ratio was 4.4% (2008: 2%), reserved at 85%. 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. ============= R O M A N I A ============= AVICOLA IASI: Enters Insolvency Proceedings After Revenue Slump --------------------------------------------------------------- Diana Tudor at Ziarul Financiar reports that Avicola Iasi has entered insolvency proceedings in the wake of a decision by Iasi Court of Law. According to the report, the company in the first nine months of 2009 saw its revenues slump by one third, to RON47 million (almost EUR11 million), from RON71 million (around EUR19 million) from the same period of 2008. Avicola Iasi is a poultry producer in Romania. The company is controlled by businessman George Becali, according to Ziarul Financiar. * ROMANIA: Charcuterie Industry Hit by Insolvencies --------------------------------------------------- Diana Tudor at Ziarul Financiar reports that the charcuterie industry has been hit by insolvencies, business reorganizations and redundancies as producers saw their cash drain. According to the report, insolvencies are also expected in the poultry sector. "The sector is hurting, lacking the subsidies that were granted until last year. Moreover, prices have not dropped, but on the contrary, they have risen. If we don't see more insolvencies in this field, the turnovers of poultry producers will certainly be hit by a liquidity shortage," the report quoted Grigore Horoi, chairman of Agricola Bacau International, the second biggest poultry producer domestically, as saying. =========== R U S S I A =========== INTERNATIONAL INDUSTRIAL: Fitch Gives Negative Watch on 'B' Rating ------------------------------------------------------------------ Fitch Ratings has revised the rating watch on Russia-based International Industrial Bank's ratings, including its Long-term foreign currency Issuer Default Rating of 'B', to Rating Watch Negative from Rating Watch Positive. A full rating breakdown is provided at the end of this comment. The rating action reflects Fitch's heightened concerns regarding the bank's current liquidity position, including its ability to repay a EUR200 million Eurobond (RUB7.2 billion equivalent) maturing on July 6, 2010, and the weaknesses in its funding profile. The bank's liquid assets (cash and net short-term interbank position) comprised a small RUB3 billion, or just 3% of liabilities, at end-May 2010. IIB's management considers support from its main shareholder, Sergey Pugachev, as the primary potential source of additional liquidity to support repayment of the eurobond. Fitch has been informed that such liquidity might be raised through the sale, or pledge, of assets of the shareholder's OPK group. Without shareholder support, the bank's access to liquidity seems to be limited, given apparently low cash generation from the loan book, reduced borrowing opportunities on capital markets and the already full utilization of the bank's limit for unsecured lending from the Central Bank of Russia. The latter already comprised 33% of total liabilities at end-May 2010, and at end-Q110 IIB's unsecured borrowings from the CBR represented a large 56% of the sector total. The bank continued to grow its loan book through the global financial crisis, with the gross portfolio adding 10% in 2009, and the net loans/assets ratio was a high 87% at end-May 2010. The reported level of non-performing loans (overdue by more than 90 days) has been historically low, making up less than 1% of the loan book at end-2009, while reported rolled-over loans stood at 14% at end-Q110. However, the significant build up of accrued interest during 5M10 (at 6.5% of gross loan book or 30% of statutory equity) suggests that loan performance may not be as good as these numbers suggest. Furthermore, Fitch notes that, although contractually IIB's loan book is predominantly short- term, the portfolio's flexibility (ie the ability of the bank to deleverage and generate cash from amortization of the loan book) has yet to be demonstrated. The high proportion of unsecured loans (87% of the book at end-2009) raises questions about loan quality and the robustness of underwriting procedures. IIB's regulatory capital ratio at 23.3% at end-May 2010 seems to offer a solid cushion against potential credit losses. The bank could potentially increase its impairment reserves up to 37.6% of loans from the actual 26% at end-May 2010 without breaching the minimum regulatory capital requirement of 10%. According to its eurobond issue, the bank is covenanted to keep its Basel I total capital adequacy ratio above 20%. However, IIB's capitalization should be viewed in the context of the potentially high loan impairment level, material concentrations on both sides of the balance sheet and the large proportion of unsecured lending. Fitch will continue to review IIB's liquidity position and the quality of its loan book over the coming weeks. IIB's ratings could be downgraded if the bank fails to elaborate a robust plan to accumulate sufficient liquidity to repay the upcoming eurobond and manage down the high level of CBR funding, or if concerns about the performance of the loan book remain or increase. However, if the bank accumulates sufficient cash for repayment of the eurobond, gradually decreases its dependence on CBR funding and demonstrates the cash-generating ability of the loan book, its ratings could be affirmed at their current level. At end-Q110, IIB was the 28th-largest bank in Russia by total assets. Mr. Pugachev, a member of the upper house of the Russian Parliament, controls an 81% stake. IIB's ratings were placed on Rating Watch Positive on 5 March 2010, along with those ratings of other privately-owned Russian banks, reflecting improvements in the country's banking system infrastructure. The rating actions are: -- Long-term foreign currency IDR: 'B'; rating watch revised to Negative from Positive -- Long-term local currency IDR: assigned at 'B'; placed on RWN -- Senior unsecured debt: 'B'; rating watch revised to Negative from Positive ; Recovery Rating 'RR4' -- Short-term foreign currency IDR: 'B'; placed on RWN -- Individual Rating: 'D'; placed on RWN -- Support Rating: affirmed at '5' -- Support Rating Floor: affirmed at 'No Floor' -- National Long-term Rating: 'BBB(rus)'; rating watch revised to Negative from Positive RUSSIAN AGRICULTURAL: CEO Change Won't Affect Fitch's Rating ------------------------------------------------------------ Fitch Ratings says that the recent change of Russian Agricultural Bank's CEO is not expected to have any immediate impact on the bank's ratings. However, the agency remains concerned about the bank's asset quality, and a significant deterioration in this aspect of the bank's credit profile could put downward pressure on its Individual Rating of 'D'. Fitch presently rates RusAg: Long-term foreign and local currency Issuer Default Ratings 'BBB', Short-term IDR 'F3', Support Rating '2', Support Rating Floor 'BBB' and National Long-term rating 'AAA(rus)'. The Long-term IDRs and National Long-term rating, which all have Stable Outlooks, are driven by potential support from the Russian authorities, given the bank's 100% state ownership, important policy role, close government ties and the state's strong track record of support. RusAg announced on May 24 2010 that the bank's general shareholder meeting had appointed Dmitri Patrushev as the new CEO of the bank, replacing Yuri Trushin, who had served as CEO since the bank's establishment in 2000. First Deputy Prime Minister of the Russian Federation Victor Zubkov was re-elected Chairman of the Supervisory Board. Following the management change, Fitch has received assurances from the bank, including at a meeting with the new CEO at the end of last week, that no major changes in strategy are expected, and that the bank's primary focus will remain on providing services to the agricultural sector. Fitch has also been informed that the change of CEO was not driven by the need to address any critical problems which had arisen at the bank. At the same time, the new CEO has informed the agency that the bank will increase its focus on cost efficiency and seek to broaden the range of services and products offered to customers, while preservation of asset quality will also remain a key goal. In Fitch's view, the bank's close ties with the Russian authorities are likely to be maintained following the change of CEO, and there remains a high probability that support will be forthcoming for the bank, should it be needed. At the same time, Fitch notes that RusAg's asset quality will continue to be a key driver of its stand-alone financial strength and the Individual Rating. The reported level of NPLs (loans more than 90 days overdue) was still a moderate 4.5% at end-April 2010 (4.3% at end-2009 according to audited IFRS accounts), while restructured loans (7.3% at end-2009) were also not excessive. NPLs were fully covered by loan impairment reserves (122% coverage at end-April 2010 under statutory accounts; 136% coverage in end- 2009 IFRS), while the bank's capital ratios (22% regulatory ratio at end-April 2010; 14.6% and 20.7% Basel I tier I and total capital ratios at end-2009) offer significant loss absorption capacity. However, RusAg's credit risk is elevated due to its high exposure to a single sector, with more than 70% of loans extended to agribusiness, and the large scale of long-term lending with extended grace periods on principal repayment. The principal grace periods, combined with government interest rate subsidies enjoyed by many borrowers, may make it relatively easy for the bank's customers to service loans on an ongoing basis, but could lead to considerable under-reporting of the potential level of problems in the loan book. In Fitch's view, an important challenge for the new CEO will be to ensure the robustness of credit procedures and collection mechanisms across the bank's broad branch network, a task which may require close co-operation with other government bodies in Russian regions. RusAg is the fourth-largest bank in Russia in terms of assets, with a 3.3% market share in system assets at end-Q110. The bank has an estimated 60% market share in agribusiness lending and a leading presence in rural areas across Russia. RusAg is fully owned by the state, via the Federal Property Management Committee. * RUSSIA: S&P Corrects Errors on Ratings of Four Governments ------------------------------------------------------------ Standard & Poor's Ratings Services corrected an administrative error relating to its global scale issue ratings on senior unsecured debt of four local and regional governments: City of Ivano-Frankivsk; Republic of Sakha (Yakutia); Samara Oblast; and Tomsk Oblast. The error occurred when Standard & Poor's assigned recovery ratings to all the debt issues of these particular LRGs, but did not assign global scale issue ratings to some of their debt issues. S&P is rectifying that error by assigning issue ratings to the debt issues listed below. Ratings List New Ratings Ivano-Frankivsk (City of) UAH5.5 mil. 12% bonds due Feb. 27, 2011 B- Republic of Sakha (Yakutia) RUB2.5 bil. 7.95% notes due April 11, 2013 BB- RUB2.5 bil. 7.8% notes series 35002 due April 17, 2014 BB- Samara Oblast RUB2 bil. 6.82% fixed/floating rate notes series RU25002SAM0 due Sept. 9, 2010 BB+ RUB4.5 bil. 7.6% fixed-rate notes series RU25003SAM0 due Aug. 11, 2011 BB+ Tomsk Oblast RUB1.4 bil. step down (including increase of RUB1 bil. to be placed March 12, 2008) bonds series RU34034TMS0 due Dec. 17, 2012 B ========= S P A I N ========= CAJA ESPANA: Fitch Puts C/D Individual Rating on Evolving Watch --------------------------------------------------------------- Fitch Ratings has placed Caja Espana de Inversiones, Caja de Ahorros y Monte de Piedad's Long- and Short-term Issuer Default Ratings of 'BBB+' and 'F2', respectively, on Rating Watch Negative. The agency has simultaneously placed Caja Espana's Individual Rating of 'C/D' on Rating Watch Evolving. Fitch's rating action follows the approval of an integration plan by the General Assemblies of Caja Espana and Caja de Ahorros de Salamanca y Soria (Caja Duero, not rated by Fitch) on 5 June 2010. The rating action reflects the agency's view that there is an extremely high probability that the merger will take place in a short timeframe. The merger has already been approved by the Bank of Spain, the Fund for Orderly Bank Restructuring (for further information on the FROB, see the 3 July 2009 special report, entitled 'Fund for Orderly Bank Restructuring', which is available at www.fitchratings.com), the European Commission and Spain's Finance and Economy Ministry. The planned integration will enable the resulting entity to access FROB funds, of up to EUR525 million, which will help absorb further anticipated write-downs on the loan portfolio and foreclosed assets of the combined entity. The new entity will record restructuring costs through the profit and loss account and should be able to generate cost synergies that should support cost efficiency. The merger process bears integration risks and the merged entity will continue to face significant challenges given that economic growth in Spain is expected to be muted over the next few years, the unemployment rate is around 20% and that the Spanish property sector is enduring a significant downturn. A low interest rate environment, reduced business volumes and property sector exposure is expected to place significant pressure on the merged institution's profitability and asset quality, while FROB funds and the revaluation of assets will support equity. In addition, geographic diversification is not achieved. The RWN and RWE will be resolved once Fitch obtains detailed information regarding the merged entity, and once the merger is completed in July 2010. The merger process will involve the dissolution of the two cajas and the creation of a new separate legal entity, into which the assets and liabilities of both cajas will be transferred. The merged entity will have EUR47bn in assets and a market share for deposits of 29% in Castilla-Leon. Caja Espana and Caja Duero were Spain's 13th and 17th largest savings banks by total assets, respectively, at end-2009. Both financial institutions focus on retail banking in the sparsely populated region of Castilla-Leon. The rating actions taken with respect to Caja Espana are: -- Long-term IDR: 'BBB+'; placed on RWN -- Short-term IDR: 'F2'; placed on RWN -- Individual rating: 'C/D'; placed on RWE -- Support Rating: affirmed at '3' -- Support Rating Floor: affirmed at 'BB+' -- State-guaranteed senior debt; affirmed at 'AA+' -- Senior unsecured debt; 'BBB+'; placed on RWN =========================== U N I T E D K I N G D O M =========================== BH FREIGHT: In Administration; Moore Stephens Appointed ------------------------------------------------------- Dominic Perry at RoadTransport.com reports that BH Freight has gone into administration. The report relates Stephen Ramsbottom and David Rolph from corporate recovery firm Moore Stephens were appointed to the company on May 24. According to the report, the last year saw serious losses at the company and a warning in its last set of accounts that a "material uncertainty exists casting doubt upon the company's ability to continue as a going concern". The accounts show that in the year to May 31, 2009 it made a pre-tax loss of GBP50,061 on turnover that fell by GBP1.2 million to GBP6.1 million, the report discloses. The report notes the accounts state: "A major contract came to an end . . . and the current economic conditions create uncertainty over the replacement of this contract and therefore the ability of the company to continue as a going concern." The company's sister firm Select International Transport will take on a large proportion of it work, the report says. BH Freight is a Gloucestershire-based haulier. BRITISH AIRWAYS: Cabin Crew Union to Ballot on Further Strikes -------------------------------------------------------------- Steve Rothwell at Bloomberg News reports that British Airways Plc's cabin-crew union said it will ballot members on further strike action, with the timing of the vote the only issue to be resolved. "Obviously we're going to be balloting," Bloomberg quoted Brian Boyd, the Unite union's national officer for aviation, as saying in an interview. "We're just looking at the timeline." Bloomberg relates Unite said Wednesday in a statement on its Web site that preparations for a ballot are at an "advanced stage". According to Bloomberg, Mr. Boyd said that in addition to contract terms, the vote will concern the removal of travel perks for striking workers and disciplinary action taken during the dispute. The union, Bloomberg says, estimates the strike has cost the carrier GBP7 million (US$10.2 million) a day. Bloomberg notes Len McCluskey, Unite's assistant general secretary, said Wednesday that the sides must compromise to end the dispute and that BA chief executive Willie Walsh's "tough guy" management strike was to blame for the lack of a resolution. British Airways and Unite have yet to resume talks after negotiations that were being held under the auspices of the Advisory Conciliation and Arbitration Service, the U.K.'s state- funded mediator, broke down on June 1, Bloomberg discloses. 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 March 19, 2010, Moody's Investors Service lowered to B1 from Ba3 the Corporate Family and Probability of Default Ratings of British Airways plc; and the senior unsecured and subordinate ratings to B2 and B3, respectively. Moody's said the outlook is stable. This concludes the review that was initiated on November 10, 2009. The rating action reflects Moody's view that credit metrics will not be commensurate with the previous rating category in the medium term. Moody's expect furthermore that metrics will be burdened in the foreseeable future by the company's significant pension deficit, which was at GBP2.6 billion for the APS and NAPS schemes combined as of September 2009 (under IAS). Moody's nevertheless understand that under the current agreement with the trade unions, the cash contributions to these deficits will be frozen at GBP330 million per year for three years, subject to approval by the Pensions Regulator and the trustees COLT GROUP: Moody's Changes Outlook on 'Ba3' Rating to Positive --------------------------------------------------------------- Moody's Investors Service has changed the rating outlook for the Ba3 corporate family and probability-of-default ratings of Colt Group SA to positive from stable. Moody's decision to change Colt's outlook to positive is based on: (i) the consistent year-on-year growth in Colt's EBITDA margin; (ii) its commitment and progress towards growing its high-margin Data and Managed Services business; and (iii) its comfortable liquidity profile. The positive outlook further reflects Moody's expectation that the company will maintain its leverage solidly below 2.5x debt/EBITDA (as adjusted by Moody's) over the medium term and remain focused on free cash flow generation as it continues to invest in the Data and Managed Services segment and related activities. Although Colt's revenues declined by 3.2% during 2009 compared with 2008 levels, Moody's notes that the company reported a 4.9% increase in EBITDA. This was driven by a growth in revenues from its Data (by 0.5% from 2008) and Managed Services (by 24.6%) business, despite difficult macroeconomic conditions. The reported EBITDA margin increased to 19.7% from 18.1% over the same period, supported by an increasing proportion of higher-margin revenue from the Data and Managed Services division and efficient cost control. In 2010, Moody's would expect Colt's revenues and EBITDA generation to be helped by the gradual pick-up in order bookings, the company's cost control measures and the growth in its Data and Managed Services businesses, which now account for approximately 59% of total revenues. Colt's capex is expected to increase in 2010 compared with 2009 levels, thereby having a constraining effect on the company's FCF generation for the year. However, the rating agency takes comfort from the company's cautious approach towards dividends in 2010. In Moody's opinion, Colt's capex/revenue ratio is likely to remain at the mid-teen level (up from 13.3% in 2009) over the medium term, in order to support growth in revenues of the Data and Managed Services business. In this regard, the rating agency would expect the company to remain focused on FCF generation (post capex and dividends, as defined by Moody's) while maintaining a prudent shareholder distribution policy in light of its increased growth capex requirements. At fiscal year-end 2009, Colt had no financial debt outstanding and its gross debt/EBITDA ratio (as calculated by Moody's) of 1.8x reflected Moody's adjustment for operating leases. The ratings and positive outlook assume that the company's capital structure will incorporate some financial debt over time. Upward rating pressure could develop if the company: (i) returns to positive overall organic revenue growth from 2010 onwards and continues to generate good EBITDA margins supported by its growing Data and Managed Services business; (ii) exhibits a commitment to maintain its gross leverage solidly below 2.5x (as adjusted by Moody's) at the end of 2010 and beyond; and (iii) continues to make investments in growing its Managed Services business in particular, while remaining focused on FCF generation (as defined by Moody's). Further clarity on company's debt capital structure and on its shareholder remuneration policy that support the maintenance of leverage solidly below a 2.5x threshold (as calculated by Moody's) over the medium term would be an additional important consideration for upward rating pressure. Colt had EUR293.7 million worth of cash and cash equivalents (including deposits classified as current asset investments) as of 31 March 2010. Moody's expects this, together with internally generated cash flows, to provide the company with sufficient capacity to meet its current operational needs. Going forward, the rating agency expects Colt to arrange for appropriate debt funding based on its growth investment requirements (including additional capex and/or add-on acquisitions). The last rating action on Colt was implemented on October 13, 2009, when Moody's upgraded the company's CFR to Ba3, with a stable outlook. COLT Group S.A. is one of the leading alternative telecoms providers in the UK and Europe, offering high-bandwidth data, voice business communications and integrated IT managed solutions to businesses and governmental organizations. In 2009, the company generated revenues of EUR1.6 billion and reported EBITDA of EUR318.7 million. CREDIT ISSUES: Enters Into CVA Deal as HMRC Seeks Liquidation ------------------------------------------------------------- Debt Management Today reports that Credit Issues entered into a Company Voluntary Arrangement last week after HM Revenue and Customs sought to wind up the firm. Citing www.credittoday.co.uk, Debt Management Today says the company's request to enter into a time to pay scheme was refused by HMRC, forcing it to enter into a CVA. Based in Manchester, Credit Issues is a claims management firm. The company is part of the Guardian Financial Group. EUROPEAN PROPERTY: High Court Orders Liquidation Following Probe ---------------------------------------------------------------- Merseyside-based company European Property Management Ltd., which deliberately misled potential investors as to the benefits of investing, to induce them to purchase shares has been wound up in the High Court following an investigation by the Investigations Directorate of the Insolvency Service. The company was formed to secure and manage residential properties in European Capitals of Culture as they were announced. The investigation discovered that European Property Management Ltd. used Corporate Business Angel Ltd. and at least ten other entities, all of which were unauthorized by the Financial Services Authority, to cold-call potential investors, making misleading and exaggerated claims as to the benefits of investing in this way. Shares were offered to investors in two distinct tranches; a Private Placement Offer around March 2006 and an Entitlement Offer early in 2007. The Insolvency Service's investigation also led to the winding-up in the High Court, of Corporate Business Angel Ltd, which was based in the Derby area. The companies' methods raised a total of GBP853,395 from private investors in the UK. From the sums raised, the company paid out commissions of GBP529,945 to the unauthorized entities, which amounted to 65% of funds raised, and as a consequence less than 30% of shareholders' funds was used for purposes set out in the Company's Information Memorandum. Investigators found that the companies targeted inappropriate investors: one case involved an 86 year old man who had no previous experience of purchasing shares. Commenting on the case, investigator Scott Crighton said, "the sale of the company's shares involved the use of high-pressure telephone selling methods aimed at unsophisticated investors so that those targeted did not have the option of getting independent advice as to the truth of the claims being made. Companies using these methods are conducting serious misconduct which undermines public confidence in business. "The action we have taken sends a clear message; companies that set out to mislead and defraud the public will be shut down. "Everyone should be wary of get rich quick schemes and the old adage applies: if it seems too good to be true, then it probably is." European Property Management Ltd was incorporated on March 1, 2006, and has its current Registered Office at 48-52, Penny Lane, Liverpool, L18 1DG. The company traded from Westpoint House, 6 Grammar School Lane, Wirral, Cheshire, CH48 8AY. Corporate Business Angel Ltd. was incorporated on December 18, 2006, and has its current registered office at Lucre House, 106- 108 Ashbourne Road, Derby, DE22 3AG. NORTH WEST: Loss of Major Contract Prompts Administration --------------------------------------------------------- Paul Flint and Brian Green from KPMG Restructuring were appointed Joint Administrators of North West Precision Forms Ltd. on June 9, 2010. Founded in 1972, the family-run business is a manufacturer and supplier of metal parts, comprising mainly bolt, drills and electric panel boarding to the aviation sector. Based in Birkenhead, the company employs 87 staff and has an annual turnover of about GBP7 million. There have been no redundancies as a result of the administration. Commenting on the appointment, joint administrator Paul Flint, associate partner at KPMG, said, "The administration was prompted by the loss of a major contract worth approximately GBP1.7 million, the delayed start of a new contract and a major recall of an order for rectification. The combination of these factors resulted in pressure from creditors." Mr. Flint added, "It is our intention to trade the business while a buyer is sought, and so would urge any interested parties to contact us as soon as possible." Any interested parties should contact Chris Chapman at KPMG on 0161-246-4000 SELECT HOMES: Put Into Receivership Due to Outstanding Debts ------------------------------------------------------------ Mike Farrell at The Press and Journal reports that Select Homes has gone into receivership due to outstanding bank debts. The report relates Iain Fraser, of RSM Tenon Recovery, based in Aberdeen, has been appointed as one of the receivers. The report notes Mr. Fraser confirmed there had been no job cuts as a result of the action, while it had no ongoing projects that would be impacted upon either. "I understand it was a property development company, which at one time was quite busy and active in building houses throughout Angus, the report quoted Mr. Fraser as saying. "But it has effectively ceased a lot of its business over the past few years and now it has entered into receivership because it basically owed the bank a debt. "There is no work currently being undertaken by Select Homes that will be affected, while it does still own a few sites across Angus, which we will look at throughout the receivership process." Select Homes is a property firm based in Castle Street, Forfar. It was incorporated in 1992. TITAN EUROPE: S&P Cuts Ratings on Class G & H Notes to 'D' ---------------------------------------------------------- Standard & Poor's Ratings Services lowered to 'D' from 'CCC-' its credit ratings on Titan Europe 2006-1 PLC's class G and H notes. At the same time, S&P affirmed its ratings on all other classes of notes in the transaction. In March 2010, S&P lowered its ratings on six classes of notes and affirmed three classes. This reflected the increased risk of principal losses associated with two of the five loans in the pool--the Mangusta and the KQ Warehouse loans -- both of which are in special servicing. At that time, the class G and H notes had both incurred interest shortfalls on the January 2010 interest payment date, resulting from increased special servicing fees and the inability to draw on liquidity to cover these costs. S&P stated then that S&P was likely to lower its ratings on classes G and H to 'D' if the interest shortfalls continued in the next quarter. On the April 2010 IPD, the class H notes received no interest and the class G notes continued to experience a shortfall of interest. These shortfalls were linked primarily to the KQ Warehouse loan, on which no debt service was received in April 2010 due to a material drop in rental income from the properties securing the loan. The drop in income, by about EUR8.7 million, follows the early termination of the Leipzig lease that was triggered by tenant insolvency. In addition, the special servicing fees and expenses accruing on the loan are not covered by the liquidity facility and were funded from loan receipts that would otherwise have been available to the notes. For the Mangusta loan, amounts due in April 2010 were partially paid. The whole-loan waterfall covered the special servicing fees and expenses associated with this loan. S&P notes that the three other loans in the pool are performing and that the Steinberger Hotel Portfolio loan matures in October 2010. Our ratings address timely payment of interest and S&P has consequently lowered the ratings on the class G and H notes to 'D'. TOUCHLINE LTD: In Administration; 24 Jobs Affected -------------------------------------------------- At the request of the directors, Paul Flint and Brian Green from KPMG Restructuring have been appointed as joint administrators of Touchline (UK) Limited. The company, which is based in Warrington, is a leading supplier of embroidered work wear and corporate uniforms, sports wear and school wear. The firm, which last year had a turnover of about GBP800,000, employed 24 members of staff at its base in Warrington. All have been made redundant as a result of the administration. Paul Flint, joint administrator and associate partner at KPMG Restructuring, commented, "Touchline (UK) Limited had been experiencing severe cash flow issues for a number of months, which ultimately prompted the directors to appoint us as administrators. The business has ceased to trade while we seek a buyer for the business and its assets, and we would like to encourage any interested parties to contact us as soon as possible." Any interested parties should contact Alan Crowshaw at KPMG on 0161-246-4000. * Smelters May Shut Down as Prices Slump, Oleg Deripaska Says ------------------------------------------------------------- Rishaad Salamat and Yuriy Humber at Bloomberg News report that Oleg Deripaska, chief executive officer of United Co. Rusal, said a slump in prices for the metal may prompt producers to shut smelters, leading to a supply shortfall. Between 2 million and 3 million metric tons of capacity may be halted in the second and third quarters, potentially causing a "deficit of physical supply," Bloomberg quoted Mr. Deripaska as saying in an interview in Hong Kong. Mr. Deripaska, as cited by Bloomberg, said about 70% of smelters around the world are unprofitable at current prices. According to Bloomberg, aluminum prices have declined 20% over the past two months in London on concern that the European debt crisis and China's measures to curb its property market will hurt demand and derail the global economic recovery. =============== X X X X X X X X =============== * BOOK REVIEW: The Executive Guide to Corporate Bankruptcy ---------------------------------------------------------- Authors: Thomas J. Salerno; Craig D. Hansen; Jordan A. Kroop Publisher: Beard Books Hardcover: 728 pages List Price: US$174.95 The newly revised edition of The Executive Guide To Corporate Bankruptcy is perfectly timed. As the global economy continues to deteriorate, more and more companies are sinking into insolvency with executives at their helm who need a crash course in bankruptcy realities. This excellent book will quickly get both the seasoned executive and the uninitiated lawyer up to speed on the bankruptcy process. Salerno, Kroop and Hansen understand that the reorganization process can be intimidating, puzzling, and generally unpleasant. They penetrate the opaque gloom that some lawyers tend to perpetuate. Each chapter of this book addresses a different aspect of the reorganization process, beginning with an overview of the origins and purpose of US bankruptcy laws and ending with a debunking of common myths about reorganization. In between, they discuss each chapter of the bankruptcy code; discussing the gamut from liquidations through Chapter 11 sales and full-blown reorganizations. The authors' ability to distill the bankruptcy code's complex language into comprehensible and manageable blocks of information makes the book extremely readable. The Executive Guide is full of pragmatic advice. After laying out the essential elements and key players in the restructuring process, the authors get down to the nitty gritty of navigating a distressed company through reorganization. They realistically assess the challenges that an executive should expect to face in Chapter 11. They discuss how to assuage and balance the concerns of employees and key vendors, address the inevitable creditor dissatisfaction with executive compensation, deal with members of their professional team and work effectively as an executive whose actions will be constantly scrutinized and second-guessed. The authors also provide the cautionary note that "executives preparing to embark on a reorganization are usually too preoccupied with business emergencies to think about the personal toll that the process will exact." One common flaw in books that try to be accessible while dealing with technical topics is that they fall short in providing the reader with a substantive understanding of the subject matter. The Executive Guide to Corporate Bankruptcy avoids this pitfall. The book's fourth and fifth chapters provide in-depth analysis of the strategic decisions and steps that should be taken during the restructuring process. The authors explain the importance that venue can have a case, the intricacies of first day motions and how to prepare for confirmation. There is a detailed discussion of the sale of assets during the course of a Chapter 11 restructuring and the importance of making sure that major constituencies are a part of the decision-making process. They also walk the reader through the specifics of a plan of a reorganization, explaining the dynamics of the negotiation process, especially how to understand and appreciate the needs of your constituents and how to get a plan confirmed. The icing on the cake for this book is the excellent appendix. The final section of the book includes a user-friendly glossary of commonly used bankruptcy terms and a reorganization timeline. It also includes sample documents such as debtor-in-possession (DIP) financing agreements, operating reports, first day motions and orders, management severance agreements, and more. The summary of management incentive stock plans implemented in recent restructuring transactions is particularly informative. This is a terrific book. While geared to the non-lawyer executive, it will also be a useful resource for any lawyer who wants to gain practical familiarity with the bankruptcy process. This should be a best seller in today's environment, though it may need to be delivered to most executives in a brown paper wrapper. ********* 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. Joy A. Agravante, Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez, Frauline S. Abangan 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 * * *