/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/110520.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, May 20, 2011, Vol. 12, No. 99 Headlines C Z E C H R E P U B L I C ECM REAL ESTATE: First-Quarter Net Loss Widens to EUR12.4 Million ODEVNI PODNIK: German Cos. Make Money From Made-to-Measure Unit SAZKA AS: Posts CZK867 Million Loss in First Quarter 2011 SUNNY DAYS: Declared Bankrupt by Prague Court D E N M A R K AMAGERBANKEN AS: BankNordik to Acquire Viable Part of Business G E R M A N Y GERRESHEIMER AG: Moody's Changes Rating on EUR300MM Notes to 'Ba1' SGL CARBON SE: Moody's Changes Outlook on 'Ba2' Rating to Stable G R E E C E REGENCY ENTERTAINMENT: Creditors May Take Control H U N G A R Y * HUNGARY: Construction Sector Liquidations Down 10.1% in April I R E L A N D ALLIED IRISH: Moody's Downgrades Subordinated Debt Rating to 'C' CORSAIR FINANCE: S&P Lowers Rating on Series 17 Notes to 'BB+' WINDERMERE XIV: Moody's Junks Rating on EUR97.1MM Class B Notes K A Z A K H S T A N KAZKOMMERTSBANK: Moody's Assigns '(P)B2' Rating to US$2-Bil. Notes N E T H E R L A N D S KBC BANK: Fitch Upgrades Individual Rating From 'D' KHAMSIN CREDIT: S&P Lowers Rating on Series 22 Notes to 'CCC-' R U S S I A BANK AVANGARD: Moody's Affirms 'E+' BFSR; Stable Outlook * RUSSIA: Pres. Proposes Special Bankruptcy Regime for Agri Firms S L O V A K I A TIPOS: Management Withdraws Restructuring Proposal U K R A I N E ISD GROUP: Debt Restructuring Talks with Creditors Ongoing * CITY OF BERDYANSK: Moody's Withdraws Ratings U N I T E D K I N G D O M BROWNE'S CHOCOLATE: Re-employs 80 Workers After 300 Redundancies CORNERSTONE TITAN: S&P Puts 'B-' Rating on Class F Notes on Watch FOCUS (DIY): Makes 100 Jobs Redundant at Head Office HIREMEE: Goes Into Administration, Cuts 6 Jobs JOHNSON STEVENS: Goes Into Administration on Embargo on IRISL LAMMAS SCHOOL: Launches New Sixth Form College TWO ORCHARDS: Goes Into Administration X X X X X X X X * BOOK REVIEW: Performance Evaluation of Hedge Funds ********* =========================== C Z E C H R E P U B L I C =========================== ECM REAL ESTATE: First-Quarter Net Loss Widens to EUR12.4 Million ----------------------------------------------------------------- Lenka Ponikelska at Bloomberg News reports that ECM Real Estate Investments AG, the developer that filed for insolvency on Tuesday, said its first-quarter loss widened as it raised less money than forecast from the sale of a unit and re-valued a residential project in Prague. According to Bloomberg, the company said in an e-mailed statement that the net loss for three months ended March 31 was EUR12.4 million (US$17.7 million), compared with EUR6 million a year earlier. Total assets fell 5% to EUR148.6 million, Bloomberg discloses. ECM filed an insolvency petition on Tuesday, saying it aims to reorganize its business and debt, Bloomberg relates. Two of the developer's creditors Ceska Sporitelna AS and Volksbank AS filed their own insolvency proposals for ECM to the Municipal Court in Prague in April for breaching covenants, Bloomberg recounts. ECM Real Estate Investments AG is a Luxembourg-based developer. It built Prague's tallest building. ODEVNI PODNIK: German Cos. Make Money From Made-to-Measure Unit --------------------------------------------------------------- According to CTK, regional daily Prostejovsky denik, citing Jiri Tomola who represents the Ceska sporitelna bank, Odevni podnik's largest creditor, on Wednesday said that German entrepreneurs probably make money from production of made-to-measure clothing at the company. OP's made-to-measure unit, which is the last functioning part left from OP, allegedly generates no profit in the Czech Republic, CTK states. CTK relates that Mr. Tomola said the entire margin, that is the profit from the production and sale of made-to-measure clothing, stays at subsidiary OP Bernhardt Fashion GmbH in Germany. OP's lawyer Petr Dite rejected Mr. Tomola's statements, CTK notes. As reported by the Troubled Company Reporter-Europe, OP, which used to be the largest textile company in the Czech Republic, was declared insolvent in January last year. The company was originally declared bankrupt in May 2010, as nobody submitted a reorganization plan, but the bankruptcy was cancelled in December following a complaint of OP's largest creditor Ceska sporitelna, CTK disclosed. Many of OP's creditors believe the company's insolvency can only be resolved by bankruptcy and not by reorganization, CTK noted. They said no OP creditor will want to submit a reorganization plan and the company will end up in bankruptcy, according to CTK. Odevni podnik is a Czech textile company. SAZKA AS: Posts CZK867 Million Loss in First Quarter 2011 --------------------------------------------------------- CTK reports that Josef Cupka, the receiver of Sazka AS, said the company posted a loss of around CZK867 million from January 1 to March 31. Mr. Cupka on Wednesday submitted to a court a report about the firm's economic performance, CTK relates. He told CTK that the report is based on data supplied by Sazka. "The material contains data on the state of bank accounts, staff numbers, the number of operated terminals and the development of sales," CTK quotes Mr. Cupka as saying. The court should make public the report in the insolvency register shortly, CTK notes. According to CTK, Sazka spokesman Jan Tuna said the company's loss in the period from January 1 to March 28 is CZK144 million lower. Sazka, which declared insolvent at end-March, saw its lottery revenues fall by 47% year-on-year to CZK380 million in April, according to a report by consulting company PricewaterhouseCoopers drafted for Sazka's provisional creditor committee, CTK relates. Month-on-month the revenues decreased by CZK224 million, or 37%, CTK discloses. CTK notes that Mr. Tuna said PwC's data differ from reality, the difference being in the order of several hundred million crowns. In January, lottery revenues made up around 85% of Sazka's total revenues, CTK states. Sazka AS is a provider of lotteries and sport betting games in the Czech Republic. SUNNY DAYS: Declared Bankrupt by Prague Court --------------------------------------------- The City Court in Prague declared Sunny Days bankrupt on Wednesday, CTK reports, citing the company's insolvency administrator Michal Simku. Sunny Days had been in insolvency proceedings since June last year and was declared insolvent in March this year, CTK relates. According to CTK, nearly 70% creditors have lodged claims on Sunny Days. Sunny Days used to be one of the biggest Czech travel agencies. ============= D E N M A R K ============= AMAGERBANKEN AS: BankNordik to Acquire Viable Part of Business -------------------------------------------------------------- Xinhua reports that BankNordik on Wednesday said it has signed a purchase agreement for the viable part of Denmark's Amager Bank for DKK235 million (US$44.9 million). According to Xinhua, BankNordik said in a press statement that the deal is subject to approval by Denmark's Financial Stability Company, a state-run financial stability facility. The purchase means BankNordik takes over all of Amager Bank's 82,000 private customers and 10,000 business clients, while facing credit exposure of less than DKK5 million (around US$1 million ), Xinhua discloses. It also brings BankNordik additional deposits, loans, and guarantees, totaling around DKK10 billion (US$1.9 billion), Xinhua notes. The deal ends months of speculation about the fate of Amager Bank (Amagerbanken in Danish), which declared bankruptcy early in February after suffering huge losses starting 2008, owing to bad investments it had made in the property sector, Xinhua states. It was subsequently taken under control of the FSC, which put its viable part up for sale, Xinhua recounts. The FSC still retains some DKK12 billion (US$2.3 billion) worth of Amager Bank's bad debts, Xinhua says, citing Danish financial Web site Borsen.dk. Amagerbanken A/S is a regional bank based in Copenhagen, Denmark. The bank provides a range of banking services to both private and business customers, specializing in the customized car and home loans, asset management and pensions. As of December 31, 2009, it operated through 25 branches, as well as three wholly owned subsidiaries: Ejendomsaktieselskabet Matr. 4285, Ejendomsaktieselskabet Matr. 3825, and Investeringsanpartsselskabet AMAK 3. ============= G E R M A N Y ============= GERRESHEIMER AG: Moody's Changes Rating on EUR300MM Notes to 'Ba1' ------------------------------------------------------------------ Moody's Investors Service has changed to Ba1 (LGD4-50%) from provisional (P)Ba1 (LGD4-50%) the rating of the EUR300 million notes due 2018 following the receipt of the final documentation of the notes. The rating outlook is stable. RATINGS RATIONALE The notes have been issued by Gerresheimer AG, the ultimate holding company of the Gerresheimer group, and proceeds of the notes issue will be used to refinance existing indebtedness and for general corporate purposes. As the Gerresheimer group is financed primarily through senior unsecured borrowings raised by Gerresheimer AG or the guarantors of the proposed notes, there are only immaterial amounts of secured or decentralized subsidiary borrowings in the capital structure. In addition, the notes benefit from upstream guarantees of Gerresheimer Glas GmbH, Gerresheimer Regensburg GmbH and Gerresheimer Glass Inc. The latter two are major operating subsidiaries which mitigates the risk of potential structural subordination. Gerresheimer AG and the guarantors are also the borrowers and guarantors under the group's syndicated EUR400 million senior credit facility agreement. The Ba1 instrument rating is in line with Moody's Loss-Given- Default Methodology and reflects the pari passu ranking of the proposed notes with the vast majority of the group's financial debt. Gerresheimer's Ba1 Corporate Family Rating takes into consideration (i) the limited cyclicality of the company's end markets which has historically allowed for fairly stable profit margins, (ii) Gerresheimer's established market positions and customer relationships in the pharmaceuticals industry, (iii) significant barriers to entry as a substantial portion of revenues comes from products that require customer validation processes and/or regulatory approval (e.g. FDA or EMA), (iv) a clear strategic focus on high growth niche markets for value-added specialty packaging and (v) the balanced financial policy demonstrated since the IPO in 2007. At the same time, the rating also takes into consideration certain risks and challenges. In particular, Moody's cautions that selective acquisitions are an integral part of Gerresheimer's strategy, which might adversely impact credit metrics. Moreover, Moody's expects M&A activity in the pharmaceutical sector to continue as companies seek to alleviate pressure on revenues and earnings from upcoming patent expiries. This could potentially also result in changes to the respective supplier base or increased price pressure on suppliers such as Gerresheimer. At the same time Gerresheimer needs to maintain an innovative product offering in order to defend its competitive position. Lastly, Gerresheimer has a substantial exposure to potentially volatile input costs (primarily energy and resin needs) which needs to be successfully managed. The stable rating outlook reflects Moody's expectation that Gerresheimer will be able to maintain current profit margins and continue to generate positive Free Cash Flow. Moreover, the rating incorporates Moody's expectation that leverage ratios will remain at levels of close to 3x debt/EBITDA. In addition, the stable outlook assumes that management will maintain a balanced approach towards shareholders and creditors interest, in particular with view to potential M&A activity. Positive rating pressure could build up if Gerresheimer were able to further grow the business profitably and further reduce leverage ratios, including achieving a debt/EBITDA ratio of 2.5x on a sustainable basis. However, an upgrade to Baa3 would also require further evidence of a balanced financial policy on a long term basis or a commitment by management to achieve ratios that are in line with investment-grade levels. Moody's could consider downgrading Gerresheimer if the group's profitability were to come under pressure, resulting in negative FCF and its debt/EBITDA ratio weakening to 3.5x or higher. Smaller bolt-on acquisitions are incorporated into the rating. However, negative rating pressure could also build if Gerresheimer were to engage in larger transactions and fail to return to a debt/EBITDA ratio of 3.0x in the intermediate term. The principal methodologies used in this rating were Global Packing Manufacturers: Metal, Glass, and Plastic Containers published in June 2009, and Loss Given Default for Speculative- Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Gerresheimer AG, with headquarters in Duesseldorf, Germany, is the parent company of the Gerresheimer group, a leading producer of specialty glass and plastic packaging solutions primarily for the pharmaceutical and healthcare industry. Revenues in the fiscal year 2010 (ending November 2010) amounted to EUR1,025 million. Currently, the company employs about 10,000 staff at 45 locations in Europe, America and Asia. Gerresheimer AG is publicly listed and 100% of shares are in free-float. SGL CARBON SE: Moody's Changes Outlook on 'Ba2' Rating to Stable ---------------------------------------------------------------- Moody's Investors Service has changed to stable from negative the outlook on the Ba2 rating of SGL Carbon and on the ratings of the existing notes. RATINGS RATIONALE The review of the outlook from negative to stable was prompted by the good progress in the group's financial performance recorded in 2010, especially from the second half of the year, and in the first quarter of 2011, which translates into improved credit metrics compared to 2009, ahead of expectations when the outlook was changed to negative in November 2009. Moody's expects the positive momentum to continue in the next quarters, based on the good visibility provided by the group's order book, and a supportive business environment with demand from the steel industry back to robust growth, which sustains the performance of the graphite electrodes business line, and the first signs that the aluminum industry is starting to restore capex plans during 2011 and 2012. For the above reasons, Moody's believes the negative rating pressure is no longer justified and debt and cash flows metrics are positioned more in line with Moody's expectation for the current rating category. In particular, Moody's notes that the adjusted RCF/Net Debt ratio, at 19.5% as of December 2010, has continued to gradually improve (18.4% was recorded in 2009), and was higher than Moody's original estimate. Adjusted Net Debt/EBITDA has also improved to 3.7x from 4x in 2009, ahead of Moody's expectation. On a more cautious note, Moody's considers the still high dependence of SGL Carbon's overall profitability from graphite electrodes and cathodes (both constituting the Performance Products division, which accounted for 91% of 2010 EBITDA in 2010) as a structural weakness. This is due to the high exposure of both graphite electrodes and cathodes to cyclical end user markets (steel and aluminum respectively), and to the continued downward trend in profitability experienced by the Performance Products division in the last 3 years. This mainly stems from SGL Carbon's inability to completely pass through rising raw material costs to customers. The main raw material, accounting for more than one- third of the Graphite Electrode division's manufacturing costs, is needle coke, which supply is structurally limited, being a by- product of the sweet crude oil refining process, and even more highly concentrated now after the recent acquisition in 2010 of Seadrift Coke, one of the only 3 major global suppliers, by competitor Graftech. Moody's considers as unlikely, at least in the short to medium term, a lower dependence of SGL Carbon from the Performance Product division, particularly after the completion in 2011/2012 of the new integrated graphite plant in Malaysia, the world's biggest manufacturing 'hub' for graphite electrodes. Whilst Moody's understands the opportunities stemming from this new facility, in terms of lowering the manufacturing cost base and improving the Company's ability to serve the fast growing demand in Asia, it also highlights the inherent risks of overcapacity in the industry, especially in Asia, over the next downturn given the cyclical end users markets, and related needs to restructure capacity, especially in Europe. Moody's also notes that SGL Carbon's substantial capex plan scheduled in 2011-2012 will lead to negative free cash flows in the next two years. However, Moody's believes negative free cash flows will be modest and result only in a small additional increase in debt, with Net Debt/EBITDA ratio not worsening, as Moody's expects further improvements in EBITDA during both 2011 and 2012, driven by the recovery in the main end user markets for the group, and the starting contribution to profit from the new plant in Malaysia for graphite electrodes and cathodes, which will be operating at full steam in 2012. The Carbon Fiber division should also start to positively contribute to operating profit from next year, after the high investments which have been required so far. Future investments will also be required in 2011 and 2012 to develop innovative projects, especially in the aeronautics and automotive segments. The expected modest negative free cash flows resulting from the high capex requirements are not considered as a major issue for the rating positioning, given the current healthy liquidity position of the group, and the absence of material debt repayments until 2013. In particular, the good liquidity position is supported by a cash balance of EUR285 million at the end of December 2010, and by the full availability of a EUR200 million revolver credit facility (completely undrawn at the end of Q4 2010), whose original maturity (in 2012) has been recently extended until April 2015. While a rating upgrade is unlikely in the short term, Moody's would consider it if reference markets, particularly for steel and aluminum, improve faster than expected, and SGL can take full advantage of this, and improves its adjusted RCF/Net Debt ratios sustainably above 35%, further deleverages the business, with an adjusted Net Debt/EBITDA ratio below 3x, hence providing for ample headroom under financial covenants, and starts producing positive Free Cash Flows, with evidence of growing cash flow contribution from the Advanced Materials division (i.e. from both Graphite Materials & Systems and from Carbon Fibers and Composites business lines). Downward rating pressure could result from a material decline of profitability in the Performance Product division, still the main cash flow generator for the group, not adequately counterbalanced by cash flows from the other business lines (i.e. Advanced Materials), if this leads to a material financial underperformance, as recorded by continuing negative Free Cash Flows generation, adjusted RCF/Net Debt remaining below 20%, and adjusted Net Debt/EBITDA ratio heading towards 4x or more. The principal methodology used in rating SGL Carbon SE was the Global Chemical Industry Methodology, published December 2009. Headquartered in Wiesbaden, Germany, SGL Carbon is one of the world's leading manufacturers of carbon and graphite-based products. The Company was formed as a result of several mergers and completed an IPO in April 1995 on the Frankfurt Stock Exchange. The company has progressively extended its product portfolio and global footprint, with substantial investments recently in its high-growth Carbon Fiber & Composites ("CFC") division and in its new major green-field production site for graphite electrodes and cathodes in Malaysia, which will be almost fully completed by end of 2011. At the end of 2010, SGL generated revenues of EUR1,382 million and adjusted EBITDA of EUR228 million. =========== G R E E C E =========== REGENCY ENTERTAINMENT: Creditors May Take Control ------------------------------------------------- BC Partners Ltd., the private-equity firm that owns Fitness First, may lose control of Regency Entertainment SA after the company breached debt terms at the end of 2010, Patricia Kuo and Anne- Sylvaine Chassany at Bloomberg News report, citing three people with knowledge of the matter. According to Bloomberg, its sources said London-based BC Partners is offering mezzanine lenders a 72.5% stake in the company if they agree to write off EUR200 million (US$285.4 million) of junior debt. Bloomberg relates that the people said senior lenders owed EUR360 million are offered a 12.5% stake in the company and will need to convert their debt into a new five-year term loan of the same amount that will pay interest of 400 basis points more than the euro interbank offered rate, including a 100 basis points margin as pay-in-kind loan. The people, as cited by Bloomberg, said under the proposal, which has received support from majority of lenders, Regency can ask creditors to provide as much as EUR35 million of new debt. Bloomberg notes that the people said the plan needs approval from lenders holding at least 75% of the loans. Athens, Greece-based Regency is a casino operator. BC Partners acquired Regency in 2006 using a EUR680 million (US$876 million) leveraged-buyout loan arranged by Deutsche Bank AG, according to data compiled by Bloomberg. ============= H U N G A R Y ============= * HUNGARY: Construction Sector Liquidations Down 10.1% in April --------------------------------------------------------------- MTI-Econews reports that Opten, which compiles information on companies, said on Wednesday that creditors and suppliers launched liquidation procedures against 276 companies in the Hungarian construction sector in April, down 10.1% year-on-year. According to MTI, compared with the previous month, the number of liquidations fell 17.4% in April. The number of voluntary liquidations totaled 434 in April, double compared to the same month of 2010, MTI discloses. ============= I R E L A N D ============= ALLIED IRISH: Moody's Downgrades Subordinated Debt Rating to 'C' ---------------------------------------------------------------- Moody's Investors Service has downgraded the dated subordinated debt of Allied Irish Banks (AIB) one further notch to C from Ca, and downgraded the undated subordinated debt and tier 1 instruments to C(hyb) from Ca(hyb). This follows the announcement of an offer from AIB to buy back its subordinated and tier 1 debt for cash at very high discounts to the par value, and the previous announcement on April 14 that the Irish High Court had made a Subordinated Liabilities Order (SLO) with regard to AIB. AIB is rated Ba2/N-P for bank deposits, Ba3/N-P for senior debt and has a D- bank financial strength rating (mapping to Ba3 on the long-term scale). The outlook on the ratings is negative. RATINGS RATIONALE Under the exchange offer AIB is offering to purchase for cash its outstanding subordinated debt and tier 1 securities (which totals approximately EUR2.6 billion) at discounts of between 75% and 90% to the nominal value of the debts. This transaction will be classed by Moody's as a "Distressed Exchange" as a result of (i) the extremely high discount to the nominal value, and (ii) the coercive nature of the offer. Moody's notes that the offer is extremely coercive as a result of the potential that noteholders choosing to not participate in the exchange could face losses of over 99% to the original nominal value . Moody's would also note that if the take-up on this offer is not viewed as high enough by the government then losses compared to the original promise will be imposed through the SLO that will result in the terms and conditions of the debts being adjusted resulting in a diminished financial obligation (see "Moody's comments on AIB Subordinated Liabilities Order" published on April 19, 2011). A distressed exchange is defined as an offer by an issuer to creditors of a new or restructured debt, or a new package of securities, cash or assets, that amount to a diminished financial obligation relative to the original obligation with the effect of allowing the issuer to avoid a bankruptcy or payment default. According to Moody's, a distressed exchange is a form of default. Moody's includes distressed exchanges in its definition of default in order to capture credit events whereby issuers effectively fail to meet their debt service obligations, but yet do not actually file for bankruptcy or miss an interest or principal payment. Allied Irish Banks is headquartered in Dublin, Ireland, and at end-2010 had total assets of EUR145 billion. The principal methodologies used in this rating were Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt published in November 2009, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology published in March 2007. Other methodologies used in this rating were Moody's Approach to Evaluating Distressed Exchanges published in March 2009, and Moody's Approach to Rating Structured Finance Securities in Default published in November 2009. CORSAIR FINANCE: S&P Lowers Rating on Series 17 Notes to 'BB+' -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its credit rating on Corsair Finance (Ireland) No. 6 Ltd.'s series 17 notes. This is a European synthetic collateralized debt obligation (CDO) transaction. "On April 28, 2011, we raised the rating on this tranche. However, we have discovered that the value for the level of credit enhancement that we used to calculate synthetic rated overcollateralization (SROC) for this tranche was higher than it should have been. Consequently, the upgrade of this tranche was incorrect. Following the discovery of this error, we have taken corrective action by lowering the rating based on the corrected SROC value," S&P stated. Ratings List Rating To From Rating Lowered Corsair Finance (Ireland) No. 6 Ltd. EUR100 Million Variable-Rate Secured Portfolio Credit-Linked Notes Series 17 BB+ (sf) BBB (sf) WINDERMERE XIV: Moody's Junks Rating on EUR97.1MM Class B Notes --------------------------------------------------------------- Moody's Investors Service has downgraded these classes of Notes issued by Windermere XIV CMBS Limited (amounts reflect initial outstandings): -- EUR836.43M Class A Notes, Downgraded to Ba1 (sf); previously on Nov 2, 2009 Downgraded to Baa1 (sf) -- EUR97.1M Class B Notes, Downgraded to Caa1 (sf); previously on Nov 2, 2009 Downgraded to B1 (sf) Moody's does not rate Class C, Class D, Class E, Class F or Class X issued by Windermere XIV CMBS Limited. The rating action takes into account Moody's updated central scenarios as described in Moody's Special Report "EMEA CMBS: 2011 Central Scenarios". RATINGS RATIONALE The key parameters in Moody's analysis are the default probability of the securitized loans (both during the term and at maturity) as well as Moody's value assessment for the properties securing these loans. Moody's derives from those parameters a loss expectation for the securitized pool. Based on Moody's revised assessment of these parameters, the loss expectation for the remaining pool, which now consists of seven loans (compared to eight at closing) has increased significantly since the last review in November 2009. The downgrade on Class A and Class B Notes are mainly driven by (i) Moody's increased refinancing default risk and loss assessment for the remaining loans in the pool; and (ii) the increased/ high vacancy level for the majority properties securing the loans but also to some extent the lease rollover risk mainly affecting the performance of the Haussmann loan, Sisu loan and Queen Mary loan. The weighted average (WA) vacancy level (by area) for all properties securing the loans is currently reported at 28% as per April 2011 interest payment date (IPD). The overall default probability of the remaining underlying loans as assessed by Moody's has increased compared to the last review due to a re-assessment of the refinancing risk. Moody's WA whole loan-to-value (LTV) ratio is considerable at 107%. As Moody's expects only a limited increase in commercial property values over the next years, nearly all of the loans in the pool will be highly leveraged at refinancing. Therefore, Moody's anticipates that a very large proportion of the pool will default over the transaction term. The loans are not contributing equally to the total size of the pool. The ratings of the classes of Notes are in particular sensitive to the performance of the Haussmann loan (33% of the securitized pool), Fortezza II loan (32% of the pool) and the Sisu loan (16% of the pool) and the success of the borrower to renew upcoming lease expiries or re-let vacated areas. A further deterioration of rental cash flows would lead to higher default probability during the term and a lower property value. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan re- prepayments or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the current stressed macro-economic environment and continued weakness in the occupational and lending markets. Moody's anticipates (i) delayed recovery in the lending market persisting through 2012, while remaining subject to strict underwriting criteria and heavily dependent on the underlying property quality, (ii) values will overall stabilize but with a strong differentiation between prime and secondary properties, and (iii) occupational markets will remain under pressure in the short term and will only slowly recover in the medium term in line with the anticipated economic recovery. Overall, Moody's central global scenario remains 'hooked-shaped' for 2011; Moody's expects a sluggish recovery in most of the world's largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. MOODYS PORTFOLIO ANALYSIS As of the April 2011 IPD, the transaction's total pool balance was EUR782.3 million down by 29% since closing. This is mainly due to (i) partial prepayments of the Sisu loan and Queen Mary loan due to several property disposals; and (ii) the repayment of the smallest loan since closing date (Harbour loan) in November 2010. As a result, seven loans remain outstanding. The proceeds of the repayment and prepayments were allocated to the Classes of Notes on a modified pro-rata basis. To date, the sequential payment triggers have not been breached. In Moody's view, the sequential payment triggers are comparably weak because the hurdles to switch to a fully sequential allocation are set rather high. Therefore, the payment allocation will potentially only change at a relatively late stage when even several event of defaults and even loss allocations to the notes could have occurred. As of the last IPD, all seven loans in the portfolio were current. However, as discussed below two of the seven outstanding loans (Sisu loan and Queen Mary loan) are on the servicer's watchlist. No defaults have been reported to date. The largest loan is the Haussmann loan (33% of the pool) which is secured by one office building located in Paris West CBD near L'Opera. Following the departure of the largest tenant in January 2011, the current vacancy level of the property increased to 56% from 0% in December 2010. As per terms of the facility agreement, amortization has been suspended until a new tenant is contracted. As of April 2011, the reported interest coverage ratio (ICR) calculated 6-month backward-looking and 6-month forward-looking is 1.39x while the loan remains unhedged. To some extent the potential interest rate risk is mitigated as the borrower deposited EUR6.0 million into a servicer controlled account until hedging is completed. Furthermore, the borrower maintains a rental reserve, part of which still remains in a blocked Lehman Brothers' account as efforts continue to re-gain access. The monies from the (accessible) reserve account would become available in case there is a shortfall on debt service or covenant breach (i.e. ICR 1.15x). The lease rollover risk for this loan is high evidenced by a WA lease to expiry or break of 2.8 years. Based on the underwriter's (U/W) market value as per 2007 valuation the current LTV is 61%. Overall the Haussmann loan performs below Moody's expectations. Moody's assumes a property value of EUR217.5 million, representing an LTV of 118.5%, which considers a reduced expected net rental income compared to last review mainly stemming from (i) the existing high vacancy level coupled with increased potential void/ non-recoverable costs; (ii) the future lease rollover risk; and (iii) the assumed over-rented nature of the occupied space since closing. Moody's has given benefit for the above average quality and location of the property. As such, the lease renewal probability is above average. However, only partial lease-up before loan maturity is assumed. The Fortezza II loan (32% of the pool) is secured by an office portfolio located in Italy (Rome and Pescara) which matures in January 2014. The vacancy level of the properties is modest at 7.9% (by area) since December 2009 when "Dipartimento Politische Fiscali" vacated the rented space. The WA average lease to expiry or break is 4.0 years with approximately 80% of the rental income contributed by government related tenants. Based on the valuation in April 2007, the current U/W LTV is 74%. Moody's assumes a property value of EUR239.5 million, representing an LTV of 105%. The reduced value compared to U/W market value considers the average quality/ location of the property portfolio. As a result, Moody's adjusted it's model value for (i) higher potential future void/ non-recoverable costs; and (ii) higher initial yields. This also takes into account the high lease rollover risk shortly after loan maturity in 2014. The third largest loan is the Sisu loan (16% of the pool) which is secured by a mixed portfolio located throughout Finland. The portfolio consist of 230 properties comprising of mainly office and retail properties (approximately 95% by value) but also a sub- portfolio including, amongst others, (partial owned) land/ development sites, residential and warehouse/ industrial properties. Since closing date, the whole loan balance prepaid by 63% due to property disposals. At the last IPD, a significant whole loan prepayment was reported totalling EUR63.8 million. The current vacancy level for the portfolio is high and increased to approximately 30% compared to 27% reported three months prior. Following a review of the recent disposals in Moody's view potential negative selection resulted in the increase of vacancy level as per latest IPD. From the top-10 properties (by U/W value) at the previous IPD, five properties were sold with vacancies ranging between approximately 4% and 5%. The current reported whole loan ICR (calculated on a 12-month forward-looking basis) of this floating rate loan (hedged with an interest rate cap) is 2.49x as of April 2011. Due to the typical Finish leases assumed for the majority of the portfolio, i.e. "until further notice" leases, no WA lease length is reported for this loan. Based on the updated U/W market value as per January 2011 valuation the whole loan and A-Loan LTV are 77% and 65% respectively (i.e. below the default covenant of 80%). As the soft LTV covenant of 71% is breached the loan remains on the Servicer's watchlist. Moody's current property value of EUR139 million, representing a whole loan LTV of 104%, considers the (i) secondary quality of the remaining properties; (ii) the high vacancy level and some potential rental income deterioration resulting from the existing lease characteristics; (iii) in line with the valuer's approach, a considerable reduced net cash flow compared to passing rent due to the inclusion of specific costs items typical for CRE leases in Finland; and (iv) potential negative selection in case of future sales. Also, an adjustment to the U/W yield was assumed by Moody's. Out of the remaining pool, the Baywatch loan (6.0% of the pool), secured by a portfolio of nine office buildings located in Germany was extended as per original facility agreement by 12 months to April 2012. This extension is subject to no future breach of ICR and LTV covenant tests and assumes hedging in place (before 16 May 2011). Moody's increased it refinancing risk for this loan mainly due to the fact that for this loan limited further deleveraging until final maturity is expected as e.g. no hard amortization or future cash trapping was agreed at the time of the loan extension. As a result, Moody's LTV is assumed to remain elevated at 84% until April 2012. Furthermore, the Queen Mary loan (3.5% of the pool) remained on the servicer's watchlist due to ongoing reporting issues (e.g. coverage ratio). The current vacancy level for this loan continues to be high at 30% as per latest IPD. Portfolio Loss Exposure: Moody's expects a high amount of losses on the securitized portfolio, stemming mainly from the performance and the refinancing profile of the securitized portfolio. Given the default risk profile and the anticipated work-out strategy for defaulted and potentially defaulting loans, these expected losses are likely to crystallize only towards the end of the transaction term. RATING METHODOLOGY The principal methodology used in this rating was "Moody's Approach to Real Estate Analysis for CMBS in EMEA: Portfolio Analysis (MORE Portfolio)" published April 2006. Other methodology and factors considered can be found in "Update on Moody's Real Estate Analysis for CMBS Transactions in EMEA" published June 2005. Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months. The updated assessment is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's prior review is summarized in a Press Release dated November 02, 2009. The last Performance Overview for this transaction was published on April 20, 2011. =================== K A Z A K H S T A N =================== KAZKOMMERTSBANK: Moody's Assigns '(P)B2' Rating to US$2-Bil. Notes ------------------------------------------------------------------ Moody's Investors Service has assigned (P)B2 senior unsecured debt rating to Kazkommertsbank's US$2 billion medium-term notes program. At the same time, Moody's assigned a B2 long-term foreign-currency senior unsecured debt rating to the first drawdown of US$300 million. The notes have a seven-year maturity. The outlook on the program and the issued senior unsecured notes is negative, in line with the negative outlook on the bank's debt ratings. RATINGS RATIONALE Moody's says that the B2 rating assigned to the notes is based on the fundamental credit quality of Kazkommertsbank, reflected by its E+ bank financial strength rating (BFSR), mapping to B2 on the long-term rating scale. Moody's assumes no systemic support probability for the bank's debt ratings and consequently there is no notching uplift for the ratings on the senior unsecured notes. The bank's BFSR is constrained by the risks associated with its weak asset quality, stemming from the difficult economic conditions in Kazakhstan and exacerbated by the high borrower and industry concentrations in the bank's loan portfolio. However, the rating is underpinned by its leading market position as the largest bank in Kazakhstan in terms of total assets and deposits. According to the terms and conditions of the notes, Kazkommertsbank must comply with several covenants, including negative-pledge covenants, limitations on mergers, disposals and dividend payments. Moody's most recent rating action on Kazkommertsbank was implemented on 21 October 2010 when the bank's foreign-currency senior unsecured debt rating was downgraded to B2 from Ba3 and foreign-currency subordinated debt rating was downgraded to B3 from B1. The principal methodologies used in this rating were Bank Financial Strength Ratings: Global Methodology published in February 2007, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology published in March 2007. Headquartered in Almaty, Kazakhstan, Kazkommertsbank reported total consolidated assets and total capital of US$18.2 billion and US$2.8 billion, respectively, in accordance with IFRS, as of year- end 2010. ===================== N E T H E R L A N D S ===================== KBC BANK: Fitch Upgrades Individual Rating From 'D' --------------------------------------------------- Fitch Ratings has affirmed KBC Bank's, KBC Verzekeringen N.V.'s (KBC Insurance) and holding company KBC Group's Long-term Issuer Default Ratings (IDRs) at 'A'. The Outlooks on the Long-term IDRs are Stable. At the same time, the agency has affirmed KBC Insurance's Insurer Financial Strength (IFS) rating at 'A'. In addition, the agency has upgraded KBC Bank's Individual Rating to 'C/D' from 'D' and KBC Group Re's IFS rating to 'A' from 'A-'. KBC Bank's, and KBC Group's, Long-term IDRs are at their Support Rating Floors, indicating an extremely high probability of additional support, if needed, from the Belgian state ('AA+'/Stable). The upgrade of KBC Bank's Individual Rating reflects a significant improvement in operating profit as it no longer needs to make substantial write-downs on its CDOs, the fact that the overall level of loan impairment charges appear to have reached a peak and the strengthening of capital ratios. Nevertheless, the Individual Rating also takes into account the continuing pressure on operating revenue and high loan impairment charges given the exposure to Ireland and central and eastern Europe (CEE). In addition, the bank's financial flexibility has been reduced as it will share the burden with its parent, KBC Group, of repaying EUR7bn of state hybrid capital received during the crisis. KBC Insurance's ratings reflect solid capital adequacy thanks to the capital support received from its parent, KBC Group, strong business positions in both Belgium and CEE and better prospects for profitability as shown in 2010 after two years of poor performance. However, a high dividend payout to KBC Group as part of the planned repayment of state hybrid capital has reduced KBC Insurance's standalone creditworthiness. The equalization of KBC Insurance's IFS and IDR ratings reflects the continuing material government support for the group by means of hybrid capital. The group's 'A' IDR places a cap on KBC Insurance's IFS rating. The upgrade of KBC Group Re's IFS rating reflects Fitch's decision to revise its view of the subsidiary as core (previously very important) to KBC Group based on its meaningful size (EUR400m of equity), change of name, business activity, capital support agreement and demonstrated capital support from the group to cover potential CDO write-downs. KBC Group Re is the group's wholly- owned reinsurance subsidiary based in Luxembourg previously known as Assurisk S.A. The group has strong domestic franchises. KBC Bank is one of the three largest Belgian banks with 20% of deposits and KBC Insurance is one of the largest insurers with market shares of 13% in life and 13% in non-life. The group is also present in CEE, especially through its banking activities, which has led to increased impairment charges. The bank and insurance company are managed in an integrated manner in terms of business, strategy, risk and capital. The ratings actions are: KBC Group -- Long-term IDR affirmed at 'A', Outlook Stable -- Senior debt affirmed at 'A' -- Short-term IDR affirmed at 'F1' -- Support Rating affirmed at '1' -- Support Rating Floor affirmed at 'A' KBC Bank -- Long-term IDR affirmed at 'A', Outlook Stable -- Short-term IDR affirmed at 'F1' -- Individual Rating upgraded to 'C/D' from 'D' -- Support Rating affirmed at '1' -- Support Rating Floor affirmed at 'A' -- Senior debt affirmed at 'A' -- Commercial paper affirmed at 'F1' -- Preferred stock affirmed at 'B' KBC Verzekeringen N.V. (KBC Insurance) -- IFS rating affirmed at 'A', Outlook Stable -- Long-term IDR affirmed at 'A', Outlook Stable KBC Group Re -- IFS rating upgraded to 'A' from 'A-', Outlook Stable KBC Funding Trust II hybrid affirmed at 'B' KBC Funding Trust III hybrid affirmed at 'B' KBC Funding Trust IV hybrid affirmed at 'B' KBC Financial Products International, Ltd. -- Senior debt affirmed at 'A' -- Commercial paper affirmed at 'F1' KBC North America Finance Corp. -- Commercial paper affirmed at 'F1' KBC IFIMA N.V. -- Senior debt affirmed at 'A' -- Subordinated debt affirmed at 'A-' -- Market linked securities 'Aemr' -- Commercial paper affirmed at 'F1' KHAMSIN CREDIT: S&P Lowers Rating on Series 22 Notes to 'CCC-' -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its credit rating on Khamsin Credit Products (Netherlands) II B.V.'s series 22 notes. This is a European synthetic collateralized debt obligation (CDO) transaction. "On April 28, 2011, we raised the rating on this tranche. However, we have discovered that the value for the level of credit enhancement that we used to calculate synthetic rated overcollateralization (SROC) for this tranche was higher than it should have been. Consequently, the upgrade of the notes was incorrect. Following the discovery of this error, we have taken corrective action by lowering the rating based on the corrected SROC value," S&P stated. Ratings List Rating To From Rating Lowered Khamsin Credit Products (Netherlands) II B.V. EUR10 Million Floating-Rate Managed Credit-Linked Notes (Orient IC-Xpress) Series 22 CCC- (sf) B- (sf) =========== R U S S I A =========== BANK AVANGARD: Moody's Affirms 'E+' BFSR; Stable Outlook -------------------------------------------------------- Moody's Investors Service has affirmed the standalone E+ bank financial strength rating, B2/Not Prime long-term and short-term global local and foreign currency deposit ratings of Bank Avangard. Concurrently, Moody's Interfax Rating Agency has downgraded Bank Avangard's long-term national scale credit rating (NSR) to Baa1.ru from A3.ru. Moscow-based Moody's Interfax is majority owned by Moody's, a leading global rating agency. The outlook on the BFSR is stable, whilst the NSR carries no specific outlook. Moody's rating action is largely based on Bank Avangard's publicly available unaudited financial statements for 2010 prepared under Russian GAAP, as well as the bank's non-public management reports for that year. RATINGS RATIONALE The downgrade of Bank Avangard's NSR reflects Moody's concerns over the increasing level of related-party transactions as well as the level of single-name concentrations in the bank's loan portfolio, which are also the key constraining factors to the bank's standalone E+ BFSR, mapping to a long-term scale of B2. At the same time, affirmation of the global scale ratings is underpinned by the bank's healthy financial indicators, including asset quality, capital adequacy and profitability. In 2010, Bank Avangard remained focused on maintaining satisfactory asset quality and operating efficiency, and thus demonstrated moderate 15% growth in total assets and 4% growth in the loan book. However, against the background of limited lending opportunities on the market, Moody's concerns over related-party lending as well as big ticket loans have increased. At the same time, healthy asset quality -- with overdue loans accounting for less than 2% of gross loans -- and effective branch network cost control helped Bank Avangard to report positive results both on a pre-provision and post-provision basis. Moody's views positively organic expansion of the bank's network; however, the rating agency notes that the bank's core corporate business, which contributed over 80% to the loan book and over 50% to the total assets, remained dependent on a limited number of names including related parties PREVIOUS RATING ACTIONS AND PRINCIPAL METHODOLOGIES The principal methodologies used in this rating were Bank Financial Strength Ratings: Global Methodology published in February 2007, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology published in March 2007. Moody's last rating action on Bank Avangard was on November 20, 2008 -- when Moody's assigned first-time ratings of B2/Not Prime/E+/A3.ru along with a stable outlook. Headquartered in Moscow, Russia, Bank Avangard reported -- as at December 31, 2010 -- total assets of RUB63 billion and net income of RUB510 million, according to unaudited IFRS. Moody's Interfax Rating Agency's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".ru" for Russia. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Implementation Guidance published in August 2010 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings." ABOUT MOODY'S AND MOODY'S INTERFAX Moody's Interfax Rating Agency (MIRA) specializes in credit risk analysis in Russia. MIRA is controlled by Moody's Investors Service, a leading provider of credit ratings, research and analysis covering debt instruments and securities in the global capital markets. Moody's Investors Service is a subsidiary of Moody's Corporation (NYSE: MCO). * RUSSIA: Pres. Proposes Special Bankruptcy Regime for Agri Firms ----------------------------------------------------------------- RIA Novosti reports that Russian President Dmitry Medvedev proposed on Wednesday the introduction of special bankruptcy procedures for agribusiness companies. According to RIA Novosti, Mr. Medvedev said that the agricultural sector in Russia was not just another industry but employed a third of the country's population compared to 3-5% in developed states. RIA Novosti relates that Mr. Medvedev said that neither he, nor Prime Minister Vladimir Putin had imposed a prohibition on agribusiness bankruptcies after last year's drought, which wiped out a third of Russian crops, but such an order had in fact been sent to those provinces helping to minimize bankruptcies. Mr. Medvedev also said that the government would support agribusiness further because Russian farmers were at a disadvantage compared to farmers in other countries, RIA Novosti notes. =============== S L O V A K I A =============== TIPOS: Management Withdraws Restructuring Proposal -------------------------------------------------- TASR, citing information from Tipos spokesman Rastislav Cepe, reports that the company's management decided to withdraw the restructuring proposal it submitted to Bratislava I District Court earlier this month. According to TASR, the decision came after the Constitutional Court on May 13 accepted a motion from Tipos in which the company claimed that its fundamental commercial law rights had been violated. "Although Tipos has been found to be in a state of imminent bankruptcy, based on the recent facts and circumstances in place after the restructuring report has been worked out, there's no such threat anymore," TASR quotes Tipos general manager Milos Ronec as saying. After receiving the proposal last week, the Constitutional Court postponed the execution of a Supreme Court verdict from November 30, 2010, that Tipos should pay more than EUR14 million to one of its creditors, a Cypriot-based company called Lemikon Limited, due to unauthorized use of a trademark, TASR relates. Tipos had been seeking restructuring to gain protection from its creditors whose claims it says are bogus, TASR notes. Tipos is Slovakia's national lottery company. ============= U K R A I N E ============= ISD GROUP: Debt Restructuring Talks with Creditors Ongoing ---------------------------------------------------------- Art Capital reports that ISD Group continues debt restructuring talks with its creditors. According to Art Capital, Interfax said the creditor committee, which includes leading foreign banks, has prohibited signing any restructuring agreements due to a conflict between Russian and Ukrainian shareholders of the group. ISD Group is a holding company for Ukraine-based Alchevsk Steel and Alchevsk Coke. * CITY OF BERDYANSK: Moody's Withdraws Ratings ---------------------------------------------- Moody's Investors Service has withdrawn ratings of the City of Berdyansk (Ukraine). The rating agency has withdrawn the credit rating for its own business reasons. RATINGS RATIONALE These ratings and outlook have been withdrawn: -- B2 local and foreign currency issuer rating -- A3.ua national scale issuer and debt rating -- (P)B2 senior unsecured local currency rating -- Stable outlook The principal methodologies used in this rating were Regional and Local Governments Outside the US published in May 2008, and The Application of Joint-Default Analysis to Regional and Local Governments published in December 2008. Moody's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".ua" for Ukraine. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Implementation Guidance published in August 2010 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings." Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process. The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. =========================== U N I T E D K I N G D O M =========================== BROWNE'S CHOCOLATE: Re-employs 80 Workers After 300 Redundancies ---------------------------------------------------------------- BBC News reports that 80 out of more than 300 people made redundant in a Devon town earlier this year have got their old jobs back. Production has restarted at Browne's Chocolates after it went into administration, according to BBC News. The report relates that after going into administration in March, Browne's axed 20 jobs. Browne's Chocolates have now both started production, on a smaller scale than previously, according to BBC News. Businessman Jo Keohane, who bought out Browne's, has taken on 10 of the 25 staff laid off. He says there will be more as the company expands, BBC News relates. Browne's Chocolates Ltd is a chocolate company based in the north Devon town of Okehampton. CORNERSTONE TITAN: S&P Puts 'B-' Rating on Class F Notes on Watch ----------------------------------------------------------------- Standard & Poor's Ratings Services took various credit rating actions on all of Cornerstone Titan 2005-1 PLC's classes of notes, following the partial prepayment of the Eagle Office Portfolio loan and the full prepayment of the Trevelyan House loan. Specifically, S&P: * Withdrew its ratings on the class A1, A2, and B notes; * Lowered its rating on the class X notes; * Raised its ratings on the class C and D notes; * Affirmed its rating on the class E notes; and * Placed on CreditWatch negative its rating on the class F notes. On the May 2011 interest payment date (IPD), the Eagle Office Portfolio loan, the largest of the remaining loans in the transaction, prepaid GBP137.6 million of the loan balance following the sale of two properties backing the loan. As a result of this prepayment and the scheduled principal payment (GBP290,780), the current securitized balance decreased from GBP220.5 million in the previous quarter, to GBP82.6 million. In addition, the Trevelyan House loan prepaid in full its balance of GBP15.8 million. As a consequence, the class A1, A2, and B notes were repaid in full, and the class C notes were partially repaid. "In view of these repayments, we have withdrawn the ratings on the class A1, A2, and B notes. At the time of the withdrawal the ratings on the class A1 and A2 notes were on CreditWatch negative," S&P stated. "We have raised our ratings on classes C and D because their relative creditworthiness has improved. The credit enhancement has increased to 77% from 29% for the class C notes, and to 20% from 8% for the class D notes. The rating on the class C notes is capped at 'AA- (sf)' in line with our 2010 counterparty criteria," S&P stated. "We believe the credit enhancement available to the class E notes is commensurate with the current rating. Therefore, we have affirmed our 'B+ (sf)' rating on the class E notes," S&P continued. The class F notes have experienced interest shortfalls, which resulted from the special servicing fees associated with the Jubilee Way loan. "As we await further clarification on the shortfalls, we have placed our rating on the class F notes on CreditWatch negative," S&P said. "We have lowered our rating on the class X notes to 'AA- (sf)' from 'AAA (sf)' and removed it from CreditWatch negative. We placed the ratings on these notes on CreditWatch negative on Jan. 18, 2011, when our 2010 counterparty criteria became effective," according to S&P. "Under our 2010 counterparty criteria, without a replacement framework for a counterparty, and absent other mitigating factors, the maximum ratings achievable for structured finance securities are typically no higher than the counterparty's issuer credit rating. When documents reflect a framework from any of our previous counterparty criteria, the maximum rating that can be achieved absent other mitigating factors is the counterparty's rating plus one notch. In this transaction, the liquidity facility agreement does not contain replacement language from our previous criteria and, as the rating on the liquidity facility provider (Barclays Bank PLC) is 'AA-', the maximum rating that this counterparty can support is 'AA-'. The ratings on the class C and X notes are therefore limited accordingly," S&P added. Cornerstone Titan 2005-1 closed in October 2005 with notes totaling GBP592.0 million. The notes have a legal final maturity in July 2014. Of the nine loans that originally backed the transaction, six have repaid. The note balance has reduced to GBP95.3 million. Ratings List Class Rating To From Cornerstone Titan 2005-1 PLC GBP592.04 Million Commercial Mortgage-Backed Floating- and Variable-Rate Notes Ratings Withdrawn A1 NR AAA (sf)/Watch Neg A2 NR AAA (sf)/Watch Neg B NR AA- (sf) Rating Lowered And Removed From CreditWatch Negative X AA- (sf) AAA (sf)/Watch Neg Ratings Raised C AA- (sf) BBB (sf) D BB+ (sf) B+ (sf) Rating Affirmed E B+ (sf) Rating Placed On CreditWatch Negative F B- (sf)/Watch Neg B- (sf) NR--Not rated. FOCUS (DIY): Makes 100 Jobs Redundant at Head Office ---------------------------------------------------- David Johnson at The Sentinel reports that more than 100 people have been made redundant at the head office of troubled retailer Focus. As reported in the Troubled Company Reporter-Europe on May 10, 2011, H&V News related that Focus DIY fell into administration. Ernst & Young, who were appointed as administrator, said that they are looking for a buyer for the company's stores, which continue to trade as normal, according to H&V News. Administrators Ernst & Young have confirmed that 109 employees at the retailer's Westmere Drive headquarters have been axed, leaving a workforce of 185, according to The Sentinel. The Sentinel relays that an unnamed spokesman for Ernst & Young could make no guarantees about the prospects for the remaining staff. Focus (DIY) was founded by Bill Archer in 1987, with six stores in the Midlands and the north of England. The company now has 178 stores in England, Scotland and Wales, and employs more than 3,900 staff. HIREMEE: Goes Into Administration, Cuts 6 Jobs ---------------------------------------------- Aaron Morby at Construction Inquirer reports that Hiremee has gone into administration with the immediate loss of six jobs. Jason Baker and Geoff Rowley, partners at specialist insolvency firm FRP Advisory, are trading the business as a going concern as they seek a buyer, according to Construction Inquirer. Construction Inquirer says Hiremee will continue to trade, while its business, goodwill and assets are for sale, although six of the 20 staff have been axed. "A downturn in the construction industry has led to fewer businesses needing to hire equipment from Hiremee -- so, despite an excellent reputation amongst its customer base, this has led to cash flow difficulties. The decline in liquidity also made it harder for Hiremee to pay back the large amount of debt it had taken on to fund growth," Construction Inquirer quoted Mr. Baker as saying. "Having investigated all options with Hiremee's director, it was concluded that entering administration would be the best route to safeguarding the value of the business. We are now trading Hiremee as a going concern, with a view to identifying potential buyers for its business and assets and securing a sale as quickly as possible," he added. Established in 1976, Hiremee operates out of depots in Royston, Bishops Stortford and Ware in Hertfordshire. The firm mostly hires JCB and Volvo equipment to contractors in Hertfordshire, Cambridgeshire and Essex and receives a high level of repeat custom. JOHNSON STEVENS: Goes Into Administration on Embargo on IRISL ------------------------------------------------------------- Duncan Brodie at EADT reports that Johnson Stevens Agencies has gone into administration after being hit by an European Union-wide embargo on IRISL, the state-run Iranian shipping line for which it previously acted. EADT relates that administrators from accountancy firm PKF were appointed, with a string of deals to represent other shipping companies immediately being sold to Kestrel Liner Agencies, owned by Norfolk-based shipping entrepreneur Andrew Thorne. David Merrygold, one of the administrators from PKF, said the company had traded successfully for many years but had suffered badly after its bank account was frozen following the embargo on IRISL last year, according to EADT. Mr. Johnson had been instrumental in introducing the administrators to Mr. Thorne as a potential buyer, he added. EADT notes that former Johnson Stevens representations will start trading with immediate effect under the name JSA Global Ltd. A total of 14 employees have transferred to the new ownership, with five others being made redundant, the report adds. Johnson Stevens Agencies is long-established liner agency. LAMMAS SCHOOL: Launches New Sixth Form College ---------------------------------------------- Chad News reports that Sutton's Lammas School is launching a new sixth form college, just one year after the independent school went into administration. In May last year, Chad recalls, how the school faced a cash crisis plunging staff and pupils into an uncertain future. But in the past year, the report notes, the Lammas Road school has seen a dramatic turn-around after new owner and director Jane Reynolds took over in August and Rod Singleton was appointed headteacher. Now the school has received official approval from the Department for Education to launch the new sixth form, Chad relates. TWO ORCHARDS: Goes Into Administration -------------------------------------- StockMarketWire.com reports that Terrace Hill Group said that one of its joint ventures, Two Orchards, has been placed into administration. Two Orchards developed the Maxis office scheme in Bracknell, which consists of two completed, but vacant, grade A office buildings totalling 194,000 sq. ft. and planning consent for a further building of 79,000 sq. ft., according to StockMarketWire.com. StockMarketWire.com recounts that Terrace Hill fully provided for its equity in this joint venture in 2008. The company also provided 1 million in its 2010 accounts in respect of a 3 million interest shortfall guarantee related to the loan to Two Orchards and will provide for the balance of this liability in its 2011 accounts, the report relates. The company has no other obligations towards Two Orchards and the company says this administration has no impact on the company's other banking relationships. =============== X X X X X X X X =============== * BOOK REVIEW: Performance Evaluation of Hedge Funds ---------------------------------------------------- Edited by Greg N. Gregoriou, Fabrice Rouah, and Komlan Sedzro Publisher: Beard Books Hardcover: 203 pages Listprice: US$59.95 Review by Henry Berry Hedge funds can be traced back to 1949 when Alfred Winslow Jones formed the first one to "hedge" his investments in the stock market by betting that some stocks would go up and others down. However, it has only been within the past decade that hedge funds have exploded in growth. The rise of global markets and the uncertainties that have arisen from the valuation of different currencies have given a boost to hedge funds. In 1998, there were approximately 3,500 hedge funds, managing capital of about US$150 billion. By mid-2006, 9,000 hedge funds were managing US$1.2 trillion in assets. Despite their growing prominence in the investment community, hedge funds are only vaguely understood by most people. Performance Evaluation of Hedge Funds addresses this shortcoming. The book describes the structure, workings, purpose, and goals of hedge funds. While hedge funds are loosely defined as "funds with no rules," the editors define these funds more usefully as "privately pooled investments, usually structured as a partnership between the fund managers and the investors." The authors then expand upon this definition by explaining what sorts of investments hedge funds are, the work of the managers, and the reasons investors join a hedge fund and what they are looking for in doing so. For example, hedge funds are characterized as an "important avenue for investors opting to diversify their traditional portfolios and better control risk" -- an apt characterization considering their tremendous growth over the last decade. The qualifications to join a hedge fund generally include a net worth in excess of US$1 million; thus, funds are for high net-worth individuals and institutional investors such as foundations, life insurance companies, endowments, and investment banks. However, there are many individuals with net worth below US$1 million that take part in hedge funds by pooling funds in financial entities that are then eligible for a hedge fund. This book discusses why hedge funds have become "notorious as speculating vehicles," in part because of highly publicized incidents, both pro and con. For example, George Soros made $1 billion in 1992 by betting against the British pound. Conversely, the hedge fund Long-Term Capital Management (LTCP) imploded in 1998, with losses totaling US$4.6 billion. Nonetheless, these are the exceptions rather than the rule, and the editors offer statistics, studies, and other research showing that the "volatility of hedge funds is closer to that of bonds than mutual funds or equities." After clarifying what hedge funds are and are not, the book explains how to analyze hedge fund performance and select a successful hedge fund. It is here that the book has its greatest utility, and the text is supplemented with graphs, tables, and formulas. The analysis makes one thing clear: for some investors, hedge funds are an investment worth considering. Most have a demonstrable record of investment performance and the risk is low, contrary to common perception. Investors who have the necessary capital to invest in a hedge fund or readers who aspire to join that select club will want to absorb the research, information, analyses, commentary, and guidance of this unique book. Greg N. Gregoriou teaches at U. S. and Canadian universities and does research for large corporations. Fabrice Rouah also teaches at the university level and does financial research. Komlan Sedzro is a professor of finance at the University of Quebec and an advisor to the Montreal Derivatives Exchange. ********* 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 U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Psyche A. Castillon, Julie Anne G. Lopez, Ivy B. Magdadaro, Frauline S. Abangan and Peter A. Chapman, Editors. Copyright 2011. 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 * * *