/raid1/www/Hosts/bankrupt/TCREUR_Public/110601.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Wednesday, June 1, 2011, Vol. 12, No. 107
Headlines
B E L G I U M
DEXIA SA: To Take Hit From Asset Disposals in Second Quarter
C Z E C H R E P U B L I C
SAZKA AS: Fortuna Entertainment Makes US$146.8-Mil. Takeover Offer
SAZKA AS: Bankruptcy Takes Effect; Mulls Appeal
F R A N C E
REXEL SA: Moody's Assigns 'Ba3' Definitive Rating to 2018 Notes
G R E E C E
DRYSHIPS INC: Ocean Rig Adopts Shareholder Rights Plan
* GREECE: EU to Decide on New Aid Package by End of June
I R E L A N D
ALLIED IRISH: Posts EUR10.2 Billion Net Loss in 2010
CORDIL CONSTRUCTION: Directors Form New Company
DECO 17: S&P Lowers Rating on Class G Notes to 'D'
DIAMOND LIVING: Set to Appoint Liquidator; Mulls Store Closures
DIRECTROUTE FINANCE: S&P Lowers Rating on Senior Debt to 'BB+'
GILSON MOTOR: Directors Face Jail on Failure to File Statement
HOWARD PROPERTY: Auditors Express Going Concern Doubt
KNOWLES ELECTRICAL: Put Into Liquidation by Directors
QUINN GROUP: Sean Quinn's Family Challenges Receivership
ZOO IV: Fitch Says Note Ratings Unaffected by Buyback
* IRELAND: Company Failures Down in May, Vision Net Data Show
I T A L Y
BANCA POPOLARE: Moody's Corrects EUR500MM Preferred stock to 'Ba3'
UNIONFIDI PIEMONTE: Fitch Ratings Affirms Long-Term IDR at 'BB-'
L U X E M B O U R G
HARVEST CLO: Moody's Raises Rating on Class E Notes to 'Caa3'
N E T H E R L A N D S
EUROLOAN CLO: Moody's Upgrades Rating on Class D Notes to 'Caa3'
GREEN PARK: Moody's Upgrades Rating on Class R Notes to 'B3 (sf)'
JUBILEE CDO: Moody's Upgrades Rating on Class D Notes to 'Caa3'
R U S S I A
ACRON JSC: Moody's Assigns '(P)B1' Rating to RUR-Denominated Bond
NATIONAL RESERVE: Moody's Affirms 'E+' BFSR; Stable Outlook
S P A I N
AYT LICO: Moody's Cuts Rating on Class B Notes to 'B1 (sf)'
S W I T Z E R L A N D
BARRY CALLEBAUT: Moody's Upgrades Issuer Rating From 'Ba1'
U N I T E D K I N G D O M
BOWEN PLC: Creditor Files Winding-Up Petition Over Debt
* UK: Construction Sector Insolvencies Up 19% in First Quarter
*********
=============
B E L G I U M
=============
DEXIA SA: To Take Hit From Asset Disposals in Second Quarter
------------------------------------------------------------
Peggy Hollinger, Jennifer Thompson, Stanley Pignal and Nikki Tait
at The Financial Times report that Dexia SA, the Franco-Belgian
bank rescued by an international government bail-out three years
ago, is accelerating asset disposals in an attempt to reduce risk
and improve longer-term profitability.
However, the decision to step up the sale of the assets such as US
mortgage-backed securities and long-term bonds that helped to
bring the bank to its knees in 2008 will leave Dexia nursing a
EUR3.6 billion (US$5.1 billion) exceptional hit in the second
quarter, the FT notes.
The FT relates that Pierre Mariani, the group's chief executive,
said the scale of the loss meant the bank would incur a full-year
loss although this would be "significantly below the level of the
provision."
Last year, the group reported net profit of EUR723 million and the
market had been expecting about EUR700 million this year, the FT
discloses.
According to the FT, the Dexia chief also said the disposals would
have to be discussed with European regulators, as they would
automatically imply the disappearance of a large part of the state
aid granted to the bank by France, the Netherlands, and Luxembourg
in the 2008 rescue.
Dexia has operated under the close supervision of the European
Commission, acting as the European Union's competition authority,
since it was bailed out at the height of the financial crisis in
October 2008, the FT discloses.
Brussels has sought to ensure that the aid given to Dexia -- EUR6
billion in equity from the state and existing shareholders as well
as a funding guarantee of up to EUR150 billion -- did not result
in a distortion of competition, the FT states.
About Dexia SA
Dexia SA -- http://www.dexia.com/-- is a Belgian bank specialized
in retail banking and local public finance. The Bank offers a
range of banking services for individual customers, small and
medium-sized enterprises and institutional clients. It has four
divisions: Asset Management, Personal Financial Services, Treasury
and Financial Markets, and Investor Services. The Asset
Management division offers products ranging from traditional and
alternative funds to socially responsible investments. The
Personal Financial Services segment focuses on banking and
insurance products, including both life and non-life insurance
products. Through its Treasury and Financial Markets division,
Dexia is present in the capital markets and provides support to
the entire Group. The Investor Services segment offers various
services to shareholders, such as fund and pension administration.
Through its subsidiaries, Dexia SA is active in over 30 countries,
including Belgium, Luxembourg, Slovakia, Turkey, France, Australia
and Japan.
===========================
C Z E C H R E P U B L I C
===========================
SAZKA AS: Fortuna Entertainment Makes US$146.8-Mil. Takeover Offer
------------------------------------------------------------------
Lenka Ponikelska at Bloomberg News reports Fortuna Entertainment
Group NV offered to buy assets of Sazka AS for as much as US$146.8
million.
According to Bloomberg, Fortuna said in an e-mailed statement that
the offer was made in association with its controlling
shareholder, private-equity company Penta Investments Ltd., which
would give financial help with a takeover.
Fortuna sent its bid to Sazka's administrator, Josef Cupka, on
Monday, Bloomberg relates.
The Prague Municipal Court declared Sazka bankrupt after a meeting
with its creditors, Bloomberg discloses. Penta said on May 29
that it would bid for the lottery business as soon as the company
was declared insolvent, Bloomberg recounts.
Fortuna, as cited by Bloomberg, said the price bid is based on
valuations of Sazka's logo, distribution network and licenses. It
said that the final offer will depend on the "actual" state of
Sazka's assets, Bloomberg notes.
As reported by the Troubled Company Reporter-Europe, CTK, citing
information made public in the insolvency register, said the
Prague City Court declared Sazka insolvent on March 29.
Sazka AS is a provider of lotteries and sport betting games in the
Czech Republic.
SAZKA AS: Bankruptcy Takes Effect; Mulls Appeal
-----------------------------------------------
CTK reports that Sazka AS is in bankruptcy as of Monday.
The Prague City Court's decision has been published in the
insolvency register, CTK relates.
According to CTK, the decision on Sazka's bankruptcy was made at a
meeting of its creditors on Friday. Sazka board of directors is
losing the right to handle the company's assets which will now be
administered by an insolvency administrator, CTK notes.
Sazka's management wants to turn to court to defend itself against
the decision on bankruptcy, CTK discloses.
"By the bankruptcy declaration, the right to handle the assets is
being transferred to the insolvency administrator, as are the
debtor's rights and duties when they are related to the assets,"
CTK quotes the insolvency court as saying on Monday.
Sazka now has 15 days from receiving the verdict to appeal at the
High Court in Olomouc, CTK states.
The creditor committee was to meet insolvency administrator Josef
Cupka on Monday to talk about securing money for paying prizes and
for Sazka's operation, CTK recounts. According to CTK, creditor
committee chairman Josef Novotny on Sunday said that hundreds of
millions of crowns, maybe even CZK500 million, will be needed for
this.
The groups PPF and KKCG have the main say in the creditors
committee, CTK notes.
As reported by the Troubled Company Reporter-Europe, CTK, citing
information made public in the insolvency register, said the
Prague City Court declared Sazka insolvent on March 29.
Sazka AS is a provider of lotteries and sport betting games in the
Czech Republic.
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F R A N C E
===========
REXEL SA: Moody's Assigns 'Ba3' Definitive Rating to 2018 Notes
---------------------------------------------------------------
Moody's Investors Service has assigned a Ba3 definitive rating to
the EUR500 million worth of senior unsecured Notes due 2018 issued
by Rexel.
Ratings Rationale
The Ba3 rating on the 2018 Notes reflects the fact that they rank
pari passu with other senior unsecured Notes and remaining bank
facilities. The Notes are issued at the parent company, and
guaranteed by the same subsidiaries as other senior unsecured
Notes, which together comprise about 82% of the group's LTM
reported EBITDA. The new Notes benefit from substantially the
same covenants as the existing EUR650 million 2016 Notes (rated
Ba3) although with slightly increased carve-outs; including for
debt incurrence, restricted payments and limitations on sales of
assets.
Rexel is a leading global distributor of low voltage products. For
2010, it reported total sales and EBITA of EUR11.9 billion and
EUR616 million respectively. Although Rexel is listed, with a
market capitalization of around EUR4.7 billion, about 72% is owned
by a group of private equity sponsors, predominantly Clayton
Dubilier & Rice, Eurazeo and Merrill Lynch Global Private Equity.
A shareholders' agreement (that expires in 2012) allows these
three parties together to appoint eight members of Rexel's
Supervisory Board.
Rexel's ratings were assigned by evaluating factors that Moody's
considers relevant to the credit profile of the issuer, such as
the company's (i) business risk and competitive position compared
with others within the industry; (ii) capital structure and
financial risk; (iii) projected performance over the near to
intermediate term; and (iv) management's track record and
tolerance for risk. Moody's compared these attributes against
other issuers both within and outside Rexel's core industry and
believes Rexel's ratings are comparable to those of other issuers
with similar credit risk. Other methodologies used include Loss
Given Default for Speculative Grade Issuers in the US, Canada, and
EMEA, published June 2009.
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G R E E C E
===========
DRYSHIPS INC: Ocean Rig Adopts Shareholder Rights Plan
------------------------------------------------------
Ocean Rig UDW Inc., DryShips, Inc.'s majority-owned subsidiary,
has adopted a shareholder rights plan, pursuant to which
shareholders will receive one right per share of common stock held
to purchase a fraction of a share of Series A Participating
Preferred Stock. The right separates from the common stock and
become exercisable after a person or group, other than DryShips,
acquires beneficial ownership of 15% or more of Ocean Rig UDW's
common stock or the 10th business day after a person or group,
other than DryShips, announces a tender or exchange offer which
would result in that person or group holding 15% or more of the
Ocean Rig UDW's common stock. In such event, each holder of a
right (except the acquiring person) is entitled to buy at the
exercise price of $100, a number of shares of the Ocean Rig UDW's
common stock, which has a market value of twice the exercise
price. Any time after the date an acquiring person obtains more
than 15% of Ocean Rig UDW's common stock and before that acquiring
person acquires more than 50% of Ocean Rig UDW's outstanding
common stock, the Ocean Rig UDW is permitted to exchange each
right owned by all other rights holders, in whole or in part, for
one share of common stock.
The rights may have anti-takeover effects. The rights will cause
substantial dilution to any person or group that attempts to
acquire Ocean Rig UDW without the approval of the Ocean Rig UDW's
board of directors. Ocean Rig UDW may redeem the rights at any
time prior to a public announcement that a person has acquired
beneficial ownership of 15% or more of Ocean Rig UDW's common
stock.
About DryShips Inc.
Based in Greece, DryShips Inc. -- http://www.dryships.com/--
-- owns and operates drybulk carriers and offshore oil
deep water drilling units that operate worldwide. As of Sept. 10,
2010, DryShips owns a fleet of 40 drybulk carriers (including
newbuildings), comprising 7 Capesize, 31 Panamax and 2 Supramax,
with a combined deadweight tonnage of over 3.6 million tons and
6 offshore oil deep water drilling units, comprising of 2 ultra
deep water semisubmersible drilling rigs and 4 ultra deep water
newbuilding drillships.
DryShips's common stock is listed on the NASDAQ Global Select
Market where it trades under the symbol "DRYS".
The Company's balance sheet at March 31, 2011, showed US$6.99
billion in total assets, US$3.05 billion in total liabilities, and
US$3.94 billion in total equity.
In its audit report on the Company's financial statements for the
year ended Dec. 31, 2010, Deloitte, Hadjipavlou Sofianos &
Cambanis S.A., noted that the Company's inability to comply with
financial covenants under its original loan agreements as of Dec.
31, 2009, its negative working capital position and other matters
raise substantial doubt about its ability to continue as a going
concern.
* GREECE: EU to Decide on New Aid Package by End of June
--------------------------------------------------------
Helene Fouquet at Bloomberg News reports that European Union
leaders will decide on additional aid for Greece by the end of
June and have ruled out a "total restructuring" of the nation's
debt, said Jean-Claude Juncker, head of the group of euro-area
finance ministers.
According to Bloomberg, inspectors from the EU, the International
Monetary Fund and the European Central Bank are set to wrap up a
review of Greece's progress in meeting the terms of last year's
EUR110 billion (US$158 billion) bailout in the coming days. The
EU will then formulate its plan for further aid to Greece, which
remains shut out of financial markets a year after the rescue
package, Bloomberg says.
Under the terms of the rescue package, Greece was due to return to
financial markets and sell about EUR30 billion of bonds next year,
Bloomberg discloses. With its 10-year bonds yielding 16.4%, more
than twice that of the time of the bailout, the EU has indicated
Greece will need more aid to plug its financing gap, Bloomberg
states.
The IMF has threatened to withhold its share of the payments until
the EU explains how Greece will be funded, Bloomberg notes.
=============
I R E L A N D
=============
ALLIED IRISH: Posts EUR10.2 Billion Net Loss in 2010
----------------------------------------------------
Allied Irish Banks, p.l.c., filed on May 18, 2011, its annual
report on Form 20-F for the fiscal year ended Dec. 31, 2010.
KPMG, in Dublin, Ireland, noted that there are a number of
material economic, political and market risks and uncertainties
that impact the Irish banking system, including the Company's
continued ability to access funding from the Eurosystem and the
Irish Central Bank to meet its liquidity requirements, that raise
substantial doubt about the Company's ability to continue as a
going concern.
The Company reported a net loss of EUR10.16 billion on
EUR1.84 billion of interest income for 2010, compared with a net
loss of EUR2.33 billion on $2.87 billion of interest income for
2009.
The net loss of EUR10.2 billion for 2010 included a loss of
EUR6.0 billion on the transfer of assets to the National Asset
Management Agency ("NAMA").
Total operating income was negative EUR3.4 billion in 2010.
Excluding the loss on transfer of assets to NAMA, total operating
income was EUR2.6 billion. This compares to EUR4.1 billion in the
year to December 2009, a decrease of EUR1.5 billion or 36%.
The Company's balance sheet at Dec. 31, 2010, showed
EUR145.2 billion in total assets, EUR140.9 billion in total
liabilities, and stockholders' equity of EUR4.3 billion.
A copy of the Form 20-F is available at http://is.gd/j6fXs9
About Allied Irish Banks, p.l.c.
Allied Irish Banks, p.l.c. -- http://www.aibgroup.com/-- is a
major commercial bank based in Ireland. It has an extensive
branch network across the country, a head office in Dublin and a
capital markets operation based in the International Financial
Services Centre in Dublin. AIB also has retail and corporate
businesses in the UK, offices in Europe and a subsidiary company
in the Isle of Man and Jersey (Channel Islands).
Since the onset of the global and Irish financial crisis, AIB's
relationship with the Irish Government has changed significantly.
As at Dec. 31, 2010, the Government, through the National Pension
Reserve Fund Commission ("NPRFC"), held 49.9% of the ordinary
shares of the Company (the share of the voting rights at
shareholders' general meetings), 10,489,899,564 convertible non-
voting ("CNV") shares and 3.5 billion 2009 Preference Shares. On
April 8, 2011, the NPRFC converted the total outstanding amount of
CNV shares into 10,489,899,564 ordinary shares of AIB, thereby
increasing its holding to 92.8% of the ordinary share capital.
In addition to its shareholders' interests, the Government's
relationship with AIB is reflected through formal and informal
oversight by the Minister and the Department of Finance and the
Central Bank of Ireland, representation on the Board of Directors
(three non-executive directors are Government nominees),
participation in NAMA, and otherwise.
CORDIL CONSTRUCTION: Directors Form New Company
-----------------------------------------------
Enda Cunningham at The Connacht Sentinel reports that four former
directors of Cordil Construction, which collapsed into
receivership last week with debts of well over EUR30 million,
formed a new company called Lidroc Construction.
Gerry Dillon, Padraig Higgins, Morgan Darcy and Tom O'Callaghan
formed Lidroc in mid-February.
The Receiver Manager's staff began the lengthy process of trawling
through Cordil accounts and has already found that a series of
contracts are tied up in arbitration, according to The Connacht
Sentinel. Michael McAteer of insolvency specialists Grant
Thornton was appointed as Receiver Manager of Cordil.
Mr. McAteer, The Connacht Sentinel relates, is now also assessing
the viability of 'finishing out' existing contracts, including the
new arthouse cinema on Lower Merchant's Road, the extension to the
'Jes' school, and the new clubhouse for Hibernians Football Club.
The Connacht Sentinel, citing the Connacht Tribune, relates that
Cordil had closed down 15 of its sites around the country, with
the loss of 51 direct jobs and more than 400 subcontractors' jobs.
The Connacht Sentinel relates that the company blamed restrictive
clauses in Government contracts, and claimed to be owed around
EUR4 million by the HSE and the Department of Education for
completed work and work in progress.
The Connacht Sentinel discloses that attempts by the directors
over the following fortnight to secure a temporary overdraft
facility from bankers failed. The report relates that Mr. McAteer
was appointed Receiver Manager over the entire assets of Cordil by
ACC Bank, which had a charge over all of the company's fixed and
floating assets.
Meanwhile, The Connacht Sentinel adds that it has emerged that
Cordil had suffered further cashflow problems because of a series
of unpaid contracts which are tied up in arbitration and
conciliation processes.
Cordil Construction is a construction firm.
DECO 17: S&P Lowers Rating on Class G Notes to 'D'
--------------------------------------------------
Standard & Poor's Ratings Services lowered to 'D (sf)' from 'B
(sf)' its credit rating on DECO 17 - Pan Europe 7 Ltd.'s class G
notes. All other ratings in this transaction remain unaffected.
This rating action follows the recurring interest shortfalls on
this class of notes caused by margin mismatches between the loan
and note margins, rather than by an underperformance of loans or a
structural deficiency.
DECO 17 is a 2007-vintage commercial mortgage-backed securities
(CMBS) transaction that initially securitized 12 commercial
property loans.
At closing, the loan margins were too low to cover the DECO 17's
margin obligations under its notes. To cover the mismatch, it
entered into a series of swap transactions that exchange the
margin that it receives from six of the loans for a higher loan
margin (90 bps) to enable it to fund interest due under the notes
as well as senior expenses.
However, in October 2009 the notional amount under the margin swap
reduced for three of these loans. Because the transaction
structure allows for a margin step-up under the loans, the
structure designed the margin swap to step down in notional at the
same time. However, the arranger did not implement the step-up
until Jan. 23, 2010, with the result that a note interest
shortfall occurred on the January 2010 note interest payment date,
which affected the class B to G notes.
DECO 17 has since repaid the shortfalls on the class B, C, D, and
E notes. These repayments were at the expense of classes F and G,
whose interest shortfalls increased accordingly. The reason is
that there is very little excess cash in the transaction and the
combined amount of shortfalls has only marginally reduced.
"We expect DECO 17 to repay the class F note interest shortfall,
but this could take 1.5 years, according to our calculations," S&P
said.
"By contrast, we anticipate that the class G shortfall could
increase to more than 7% of the class G note balance in the same
period. We also believe this class is highly vulnerable to
principal loses given the refinance risk that we see under some of
the loans. We have therefore lowered our rating on this class to
'D (sf)'," S&P related.
DECO 17 is a CMBS transaction that was arranged by Deutsche Bank
AG. This transaction initially comprised 12 loans. One of the
loans (5% of the Day 1 loan portfolio balance) has prepaid. The
majority of the remaining loans mature in 2014 (75% by loan pool
balance) while the legal final maturity date of the notes is in
2020.
Ratings List
DECO 17 - Pan Europe 2 PLC
EUR1.249 Billion Commercial Mortgage-Backed Floating-Rate Notes
Class Rating
To From
Ratings Lowered
G D (sf) B (sf)
Ratings Unaffected
A1 A (sf)
A2 A (sf)
B A (sf)
C BBB+ (sf)
D BB+ (sf)
E BB (sf)
F BB- (sf)
DIAMOND LIVING: Set to Appoint Liquidator; Mulls Store Closures
---------------------------------------------------------------
John Mulligan at Irish Independent reports that Diamond Living has
confirmed that it intends to appoint a liquidator this week and to
shut its outlets once existing customer orders have been
delivered.
The closure is expected to lead to the loss of dozens of jobs, the
report notes.
Diamond Living is the trading name of Amaranth Furniture, which is
controlled by William Diamond.
According to Irish Independent, the company related in a statement
that sales at Diamond Living over the past few months had
reflected the sharp fall in furniture sales in Ireland.
"As a result of this, and the fact that the future for the trade
is not expected to improve in the foreseeable future, it has been
decided to wind up Amaranth Furniture," Irish Independent quotes
the statement as saying. "This will reduce operations at Diamond
Living to servicing existing customers and delivering existing
customer orders until all such orders have been delivered, the
Diamond Living warehouse facility at our head office . . . will
remain open during usual hours to facilitate these operations."
The company added that while all three of its outlets -- at
Airside in Swords, Liffey Valley and the Longmile Road -- are
currently open, it may not be necessary to keep all of the stores
open in order to adequately facilitate customers, Irish
Independent notes.
Latest publicly available accounts for Amaranth Furniture, for the
12 months to the end of April 2010, show that it made a EuR250,000
loss and had net assets of EUR1.4 million at that time, Irish
Independent relates.
A creditors' meeting for Amaranth is due to be held this Friday at
4:00 p.m. in the Deer Park Hotel, Howth, Irish Independent
discloses.
Diamond Living is a furniture retailer with three large stores in
Dublin.
DIRECTROUTE FINANCE: S&P Lowers Rating on Senior Debt to 'BB+'
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating on the
senior debt of Republic of Ireland-based road project DirectRoute
(Limerick) Finance Ltd. (ProjectCo) to 'BB+' from 'BBB-'. "At the
same time, we placed the rating on CreditWatch with negative
implications," S&P stated.
The bonds retain an unconditional and irrevocable guarantee
provided by monoline insurer MBIA U.K. Insurance Ltd. (MBIA U.K.;
B/Negative/--) of payment of scheduled interest and principal.
Under Standard & Poor's criteria, a rating on monoline-insured
debt reflects the higher of the rating on the monoline and
Standard & Poor's underlying rating (SPUR). In this case, the
rating on the bonds reflects the SPUR as it is higher than the
current rating on MBIA U.K.
"The downgrade reflects our view that, based on traffic volumes
for the first nine months of operations, traffic through the
Limerick road tunnel will be materially lower than our original
base-case assumptions over the life of the concession," S&P
continued.
Positively, traffic volumes for the first four months of 2011 have
shown stronger growth than in prior periods. "However, in our
opinion, this recovery would need to be both very strong and
sustained for a further unprecedented period to restore levels to
our original forecasts. Furthermore, the mix of traffic currently
using the tunnel shows a much higher proportion of cars compared
with light goods vehicles (LGVs) and heavy goods vehicles (HGVs)
than we anticipated. As cars pay lower tolls than LGVs and HGVs,
toll revenues are currently substantially lower than we forecast,"
S&P noted.
As a result, the project is heavily reliant on the guarantee from
the Irish National Roads Authority (NRA), the concession grantor.
"In our view, it is likely that this will remain the case for most
of the remaining life of the 35-year concession," S&P continued.
The impact of lower-than-forecast traffic volumes is compounded by
the increased margin on the project's European Investment Bank
(EIB; AAA/Stable/A-1+) loan, which reduces the project's financial
headroom. The margin increase is due to successive downgrades of
MBIA U.K.
A new financial model for the operational phase of the project is
currently under development by ProjectCo. "In our view, based on
performance to date, we anticipate that the new model will show
lower debt service coverage ratios (DSCRs) than those contained in
the previous model, which was developed for financial close,"
according to S&P.
S&P noted, "We aim to review the CreditWatch placement following
our receipt of a new financial model reflecting the operational
phase of the project. If, as a result of revised traffic volume
projections, the new financial model forecasts a minimum DSCR
significantly lower than our previous forecast of 1.20x, we may
lower the rating on the senior debt further."
"However, we may revise the outlook to stable if the new financial
model shows a minimum DSCR of a similar level to our previous
forecast. This could occur, for example, by ProjectCo credibly
demonstrating substantial cost savings, without any significant
effect on the minimum performance standards required by the NRA,"
S&P added.
GILSON MOTOR: Directors Face Jail on Failure to File Statement
--------------------------------------------------------------
Independent.ie reports that model and TV presenter Glenda Gilson
and her brother Damien could face jail after consistently refusing
to comply with court orders in relation to the liquidation of
their car company, Gilson Motor Company Ltd.
As reported in the Troubled Company Reporter-Europe on March 17,
2011, The Irish Times said the High Court's Ms. Justice Mary
Laffoy granted the Revenue Commissioners' petition to wind up
Gilson Motor after being informed it has failed to satisfy a
demand from the Revenue for more than EUR140,000 in unpaid taxes.
The judge appointed Gary Lennon of Lennon Corporate Recovery as
liquidator. The Irish Times said the company's directors, Glenda
Gilson and her brother Damien, were directed to file a statement
of affairs within 21 days.
Independent.ie relates that despite repeated requests since last
March, the duo have failed to file statements of affairs to the
High Court.
According to Independent.ie, Justice Mary Finlay Geoghegan said
Monday in court that Ms. Gilson and her brother are "not
compliant" with the rules and described the situation as
"extremely serious." She added that "the motion for attachment
and committal still stands," Independent.ie relates.
This means that the Gilsons could be committed to prison and have
their assets seized unless they file the statements within the
timeframe proposed, the report notes.
Ms. Justice Geoghegan has given the Gilsons a new deadline of June
27 to file the documents, Independent.ie relates.
Gilson Motor Company Ltd. is a Dublin-based car sales company.
HOWARD PROPERTY: Auditors Express Going Concern Doubt
-----------------------------------------------------
Barry O'Halloran at The Irish Times reports that accounts for the
main Irish property companies of Howard Holdings show the
directors have acknowledged that the collapse in asset values and
shortage of bank finance threaten the group's future.
The most recent accounts for Howard Property Ireland show the
group was EUR27 million in the red at the end of its 2010
financial year and had debts of almost EUR32 million, the bulk of
which it owed to banks, The Irish Times discloses.
The group transferred debts owing to Anglo Irish Bank to the
National Asset Management Agency last December, The Irish Times
recounts. Anglo had a EUR12.5 million charge over book debts and
a number of other secured loans, The Irish Times notes.
In March, the British high court put London-based Howard Holdings
plc, the holding company for the Irish property development group,
in liquidation, The Irish Times relates. The plc stopped trading
in August 2009.
According to The Irish Times, a directors' report, signed by
Greg Coughlan, Brian Madden, and Jason Clerkin, accompanying
accounts recently lodged for Howard Property Ireland show that its
board believes it faces significant risks.
"As the parent company is no longer operational; the investments
that it holds are backed by property assets which have fallen in
value; and the ability to secure ongoing banking facilities is in
question, the assessment of the board of directors is that the
principal risk associated with the company is its ability to
continue to operate given these circumstances," The Irish Times
quotes the report as stating.
The accounts show that that Howard Property Ireland's liabilities
outstripped its assets by EUR27.8 million at the end of April
2010, The Irish Times relates. Net debt was EUR31.9 million, the
report adds.
The company prepared and filed accounts for 2008, 2009, and 2010
together, The Irish Times notes. The 2008 figures show that the
company wrote over EUR11 million off the value of its properties
and lost more than EUR20 million that year, The Irish Times
states.
According to The Irish Times, its auditors, PFK O'Connor, Leddy
Holmes, say the uncertainty created by the collapsed property
market and the transfer of loans to NAMA, meant they were unable
to indicate if the 2010 accounts gave a true and fair view of the
company's financial affairs.
The auditors point out that there are problems with the group's
corporate structure, The Irish Times states.
Howard Property Ireland is a property company.
KNOWLES ELECTRICAL: Put Into Liquidation by Directors
-----------------------------------------------------
Eibhilin Marron at kavanaghfennell relates that the directors of
Knowles Electrical (Contracting) Limited have decided to put the
company into liquidation amidst an unprecedented recession.
Ken Fennell of kavanaghfennell has been appointed liquidator over
the assets of the company, the report cites.
Knowles Electrical (Contracting) Limited was established by Wally
Knowles in April 1964 and has been trading in Lower George's
Street, Dun Laoghaire, ever since. The business has been run by
the Knowles family for over 47 years. The company provided small
and medium domestic appliances to families within the South Dublin
region and in some cases as far West as Connemara. The company
stocked brands such as Miele, Bosch, Siemens, Tefal and Russell
Hobbs. The two daughters of Knowles' owner previously continued
trading in the hope of surpassing the difficult times.
QUINN GROUP: Sean Quinn's Family Challenges Receivership
--------------------------------------------------------
Mary Carolan at The Irish Times reports that the family of
businessman Sean Quinn has brought Commercial Court proceedings
claiming that loans of about EUR2.34 billion made by Anglo Irish
Bank to various Quinn companies and Cypriot-registered companies
are unenforceable because they were issued for "an illegal
objective of market manipulation" -- support of the Anglo share
price.
The action by Mrs. Patricia Quinn and her five children -- Aoife,
Colette, Brenda, Ciara and Sean Quinn Jr. -- arises from events of
the past two years that led to the family losing control of
companies in the Quinn group, The Irish Times discloses.
The Irish Times relates that Mr. Justice Peter Kelly transferred
the case on Sunday to the Commercial Court. It involves the
largest ever claim in the court's seven year history and is likely
to be heard early next year, The Irish Times notes.
According to The Irish Times, Aoife Quinn related in an affidavit
that the plaintiffs signed personal guarantees in late 2008 over
certain loans by Anglo to Cypriot-registered companies owned by
the family without being told of the "precarious" financial
position of Anglo. She said they had no independent legal or
financial advice and the nature of the loan documents was never
discussed with them.
The Irish Times relates that Ms. Quinn said the lending by Anglo
to various Quinn companies and to the Cypriot companies, whether
directly or via other companies held by members of the Quinn
family, "was in support of an illegal objective of market
manipulation" prohibited by the relevant EU Directive on Market
Abuse. The lending was "tainted with illegality, or was intended
to support an illegal purpose, such that the said loans are not
enforceable," she added.
On those and other grounds, the family claim Anglo was not
entitled last month to appoint Kieran Wallace as receiver over
shares in several Quinn group companies, The Irish Times cites.
They also claim the bank cannot pursue them under the guarantees
for repayment of the loans to the Cypriot companies, The Irish
Times notes.
The Quinns further claim that they are entitled to hundreds of
million Euro in damages as a result of the actions of the bank,
The Irish Times states. They allege negligence, breach of duty
and intentional and/or negligent infliction of economic damage.
The judge observed the case is likely to last several weeks and
made directions for the exchange of legal documents with a view to
having the case heard early next year, The Irish Times relates.
In seeking transfer, Brian O'Moore SC, who represents the Quinns,
said his side was contending various loans by Anglo to a number of
Quinn companies and the Cypriot companies involved an unlawful
support of the Anglo share price, The Irish Times notes.
Quinn Group ROI Ltd. controls its cement, building materials,
glass and other manufacturing businesses in Ireland and Britain
through its ownership of Quinn Group, an operating entity
registered in Northern Ireland.
ZOO IV: Fitch Says Note Ratings Unaffected by Buyback
-----------------------------------------------------
Fitch Ratings says that the recent partial repurchase of Zoo IV
ABS Plc's class A1-B notes does not in itself impact the notes'
ratings.
Under the buyback, the repurchase of EUR2 million of the class A1-
B notes was undertaken at a discounted purchase price. The
repurchased notes have been subsequently cancelled, thereby
marginally increasing the available credit enhancement to all
rated notes. The buyback was funded using cash available in the
principal collection account.
The current EUR2 million repurchase of the class A1-B notes forms
part of the buyback offer approved by the noteholders in an
extraordinary resolution in November 2010, when the noteholders
approved a maximum buyback amount of EUR35 million of the class
A1-B notes at a maximum price of 70%. Under the terms of the
buyback offer, the funds used for the repurchase will be applied
exclusively to redeem the class A1-B notes that have been
repurchased, and will not be applied towards the pro-rata
redemption of the class A1-A, A1-B and A1-R notes.
In November 2010, EUR10.5 million buy-back of the class A1-B notes
was undertaken.
Zoo IV ABS Plc's notes are rated as:
-- EUR150.0m class A1-A: 'BBBsf'; Outlook Stable; Loss Severity
(LS) Rating 'LS2'
-- EUR105.2m class A1-B: 'BBBsf'; Outlook Stable; LS Rating
'LS2'
-- EUR100.0m class A1-R: 'BBBsf'; Outlook Stable; LS Rating
'LS2'
-- EUR27.0m class A-2: 'BBsf'; Outlook Negative; LS Rating
'LS5'
-- EUR30.0m class B: 'Bsf'; Outlook Negative; LS Rating 'LS4'
-- EUR35.0m class C: 'CCsf';
-- EUR28.0m class D: 'Csf';
-- EUR8.5m class E: 'Csf';
-- EUR7.1m combo class P: 'CCsf'
* IRELAND: Company Failures Down in May, Vision Net Data Show
-------------------------------------------------------------
Irish Independent, citing research from Vision Net, reports that
company failures in Ireland could be starting to bottom out.
There have been 155 liquidators appointed so far in May, compared
to 190 in the previous month, Irish Independent discloses. The
number of receiverships also fell, from 64 in April to 44 in May,
Irish Independent notes.
Almost two thirds of the 152 insolvencies recorded in May 2011
came about because of creditors seeking liquidations, Irish
Independent states.
Court-ordered liquidations rose 50%, Irish Independent relates.
According to Irish Independent, Vision Net's data shows 40% fewer
first-time directors were appointed in May, a sign fewer people
are willing to strike out on their own in business.
=========
I T A L Y
=========
BANCA POPOLARE: Moody's Corrects EUR500MM Preferred stock to 'Ba3'
------------------------------------------------------------------
Moody's is correcting the rating on EUR500 million preferred stock
of Banca Popolare di Lodi Investor Trust III, ISIN XS0223454512,
to Ba3(hyb) from Ba2(hyb).
As announced in a press release dated September 28, 2010, Moody's
took rating action on Banco Popolare Societa Cooperativa.
As part of that rating action, Moody's also took action on the
ratings of Banco Popolare's subsidiaries. Due to an internal
administrative error, however, ISIN XS0223454512 was inadvertently
omitted from the action taken on the Banco Popolare and its
subsidiaries on September 28, 2010, when preferred stock was
downgraded to Ba3 from Ba2.
Moody's now corrects the rating of the ISIN XS0223454512 to
Ba3(hyb).
The principal methodologies used in this rating were Bank
Financial Strength Ratings: Global Methodology published in
February 2007, Incorporation of Joint-Default Analysis into
Moody's Bank Ratings: A Refined Methodology published in March
2007, and Moody's Guidelines for Rating Insurance Hybrid
Securities and Subordinated Debt published in January 2010.
UNIONFIDI PIEMONTE: Fitch Ratings Affirms Long-Term IDR at 'BB-'
----------------------------------------------------------------
Fitch Ratings has affirmed Unionfidi Piemonte's (UPI) Long-term
Issuer Default Rating (IDR) at 'BB-' and Short-term IDR at 'B'.
The Outlook on the Long-term IDR remains Negative.
UPI's ratings and Outlook reflect its tight capitalization, thin
profitability and deteriorating asset quality.
UPI's asset quality continued to deteriorate in 2010 due to
difficulties in the local economy. At end-2010, problem guarantees
had increased to reach 6.8% of total guarantees, slightly higher
than the average for the Italian banking system and for the region
of Piedmont. The use of counter-guarantees reduces its net risk,
which nonetheless remained high relative to Fitch Core Capital.
The agency expects UPI's problem guarantees to continue to
increase in 2011, albeit at a slower pace than in 2010.
After posting losses for two consecutive years, UPI reported a
small net income in 2010. This was a result of significantly lower
loan impairment charges due to high recoveries, as well as close
control over costs.
UPI's capitalization remains tight. Although UPI is not yet a
regulated entity under Article 107 of Italian banking law, UPI
estimates a total capital ratio only just above the 6% minimum
regulatory requirement. UPI acknowledges its weakness and has put
in place a number of measures to support its capitalization. These
initiatives include a EUR20 million capital increase launched in
early 2011. However, Fitch considers that resources that can be
made available are limited.
UPI provides credit guarantees to local SMEs. It is expanding its
geographical coverage outside of its historic region of Piedmont
and cooperating with other regional confidi.
===================
L U X E M B O U R G
===================
HARVEST CLO: Moody's Raises Rating on Class E Notes to 'Caa3'
-------------------------------------------------------------
Moody's Investors Service took these rating actions on notes
issued by Harvest CLO I S.A.
Issuer: Harvest CLO I S.A.
-- EUR339.3M Class A-1 Senior Floating Rate Notes due 2017
(currently EUR 205.0 million), Upgraded to Aaa (sf);
previously on Oct 29, 2009 Downgraded to Aa1 (sf)
-- EUR4M Class A-2 Senior Fixed Rate Notes due 2017 (currently
EUR 2.4 million), Upgraded to Aaa (sf); previously on Oct
29, 2009 Downgraded to Aa1 (sf)
-- EUR13.6M Class B-1 Senior Fixed Rate Notes due 2017,
Upgraded to A1 (sf); previously on Oct 29, 2009 Downgraded
to Baa2 (sf)
-- EUR31.4M Class B-2 Senior Floating Rate Notes due 2017,
Upgraded to A1 (sf); previously on Oct 29, 2009 Downgraded
to Baa2 (sf)
-- EUR32.5M Class C Senior Subordinated Deferrable Floating
Rate Notes due 2017, Upgraded to Ba1 (sf); previously on Oct
29, 2009 Downgraded to B2 (sf)
-- EUR22.5M Class D Senior Subordinated Deferrable Floating
Rate Notes due 2017, Upgraded to B3 (sf); previously on Oct
29, 2009 Downgraded to Caa3 (sf)
-- EUR11.5M Class E Senior Subordinated Deferrable Floating
Rate Notes due 2017, Upgraded to Caa3 (sf); previously on
Oct 29, 2009 Downgraded to Ca (sf)
-- EUR6M Class Q Combination Notes due 2017 (currently EUR 4.64
million), Upgraded to B3 (sf); previously on Oct 29, 2009
Downgraded to Ca (sf)
-- EUR20M Class S Combination Notes due 2017, Withdrawn (sf);
previously on Oct 29, 2009 Downgraded to A2 (sf)
-- EUR4M Class U Combination Notes due 2017 (currently EUR 1.52
million), Upgraded to B3 (sf); previously on Oct 29, 2009
Downgraded to Ca (sf)
The ratings assigned to the Class U Combination Notes address the
ultimate repayment of the Rated Balance through either interest or
principal payments, the Rated Balance being equal to the initial
notional minus any amounts paid to the Noteholders. The rating
assigned to the Class Q Combination Note addresses the ultimate
payment of interest at a coupon rate of six month EURIBOR on the
Rated Balance and the ultimate repayment of the Rated Balance.
Moody's outstanding Rated Balance on the Combinations Notes may
not necessarily correspond to the outstanding notional amounts
reported by the trustee.
Ratings Rationale
Harvest CLO I S.A., issued in April 2004, is a cash leveraged loan
collateralized obligation managed by 3i Group plc. The underlying
portfolio is exposed to 81.6% senior secured loans and 17.2%
mezzanine and second lien loan exposures. The asset pool comprises
approximately EUR325 million of collateral assets, 85% of which
are issued by obligors incorporated in Europe. Most assets are
denominated in EUR and non-euro denominated assets are hedged
through perfect asset swaps. The reinvestment period of Harvest
CLO I S.A. ended in March 2009. Since then, the asset pool has
amortized and the liabilities have started to repay, the principal
amount of the class A1 notes having decreased by 40% since
closing.
The upgrades are a result primarily of the amortizing of the deal
since the last rating action. The following OC ratios were
reported in the April 2011: 136% for class A/B (vs. 115% in
October 2009), 120% for class C (vs. 105%), 111% for class D (vs.
100%) and 106% for class E (vs. 97%). Currently, all the OC tests
of Harvest CLO I are in compliance. According to the trustee,
between October 2009 and April 2011 the proportion of obligors
rated Caa1 and below has decreased from 15.12% to 8.35%, the
diversity score has decreased from 41 to 35 and the WARF has
remained fairly stable (from 2848 to 2923).
In the base case, Moody's analyzed the underlying collateral pool
with an adjusted weighted average rating factor of 4050 (vs. 4330
in October 2009), a diversity score of 33 (vs 35 in October 2009),
and a weighted-average recovery rate of 58%.
In order to assess the sensitivity of the model output to changes
in credit quality of the portfolio, Moody's ran sensitivity
analyses on key parameters. For example, Moody's ran cases with a
+/- 15% change in the base case WARF. The impact on model output
for the notes was less than one notch for Class A and B notes and
less than 2 notches for the other rated tranches, compared to the
base case model outputs.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2012 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
In addition a major source of uncertainty in this transaction is
whether amortizing from unscheduled principal proceeds will
continue and at what pace. Amortizing may accelerate due to high
prepayment levels in the loan market and/or collateral sales by
the manager, which may have significant impact on the notes'
ratings.
The principal methodology used in this ratings was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
August 2009.
Under this methodology, Moody's used its Binomial Expansion
Technique, whereby the pool is represented by independent
identical assets, the number of which is being determined by the
diversity score of the portfolio. The default and recovery
properties of the collateral pool are incorporated in a cash flow
model where the default probabilities are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability range is derived from the credit
quality of the collateral pool, and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority and jurisdiction of the assets in the collateral pool.
The cash flow model used for this transaction, whose description
can be found in the methodology listed above, is Moody's EMEA
Cash-Flow model.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" and "Annual Sector Review (2009): Global CLOs", key
model inputs used by Moody's in its analysis, such as par amount,
weighted average rating factor, diversity score, and weighted
average recovery rate, may be different from the trustee's
reported numbers.
Moody's also notes that around 71% of the collateral pool consists
of debt obligations whose credit quality has been assessed through
Moody's credit estimates.
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.
In addition to the quantitative factors that are explicitly
modelled, qualitative factors are part of the rating committee
considerations. These qualitative factors include the structural
protections in each transaction, the recent deal performance in
the current market environment, the legal environment, specific
documentation features, the collateral manager's track record, and
the potential for selection bias in the portfolio. All information
available to rating committees, including macroeconomic forecasts,
input from other Moody's analytical groups, market factors, and
judgments regarding the nature and severity of credit stress on
the transactions, may influence the final rating decision.
=====================
N E T H E R L A N D S
=====================
EUROLOAN CLO: Moody's Upgrades Rating on Class D Notes to 'Caa3'
----------------------------------------------------------------
Moody's Investors Service took these rating actions on notes
issued by Euroloan CLO I B.V.
Issuer: Euroloan CLO I B.V.
-- EUR195M Class A1 Notes (current outstanding EUR111M),
Upgraded to Aaa (sf); previously on Nov 4, 2009 Downgraded
to Aa1 (sf)
-- EUR65M Class A2 Notes, Upgraded to Aa1 (sf); previously on
Nov 4, 2009 Downgraded to A2 (sf)
-- EUR30M Class B Notes, Upgraded to Aa3 (sf); previously on
Nov 4, 2009 Downgraded to Ba2 (sf)
-- EUR18M Class C Notes, Upgraded to Ba1 (sf); previously on
Oct 15, 2010 Downgraded to Caa2 (sf)
-- EUR21M Class D Notes, Upgraded to Caa3 (sf); previously on
Nov 4, 2009 Downgraded to Ca (sf)
Ratings Rationale
Euroloan CLO B.V., issued in October 2008, is a static
collateralized loan obligation backed by mostly high yield
European loans. A significant proportion of the portfolio was
exposed to CLO mezzanine securities since closing (14% at last
rating action). However, the entire portion of those CLO
securities have been sold and principal sales proceeds have been
used to amortize further the Class A notes or else increase the
current cash reserve. According to the latest trustee report dated
April 2011, the asset pool comprises approximately EUR257 million
of assets, reduced from EUR306 million in last rating action in
October 2010 (data based on June 2010 trustee report). The
current portfolio is composed of 62% senior secured loans, 7%
other non-secured loans and 30% cash.
According to Moody's, the upgrade rating actions taken on the
notes is primarily a result of the increased overcollateralization
cushions due to deleveraging of the portfolio. Since the last
rating action in October 2010, Class A notes were redeemed by
EUR41 million, resulting in the current remaining Class A balance
of EUR111 million. As of the latest trustee dated April 2011, the
Class A/B, Class C, Class D and Class E overcollateralization
ratios are reported at 128.55%, 116.86%, 105.43% and 97.74%
respectively, versus June 2010 levels of 103.37%, 95.82%, 88.21%
and 82.97% respectively. In addition, Moody's notes that the
removal of the CLO securities from the asset pool substantially
reduced the level of uncertainties when assessing the performance
of the underlying portfolio. This is in turn positively reflected
in Moody's expected loss modelling approach.
Moody's also notes that approximately 60% (notional of EUR154
million) of the collateral pool consists of debt obligations whose
credit quality has been assessed through Moody's credit estimates.
As credit estimates do not carry credit indicators such as ratings
reviews and outlooks, a stress of a two notch-equivalent assumed
downgrade was applied to each of these estimates as described in
Moody's Updated Approach to the Usage of Credit Estimates in Rated
Transactions (October 2009) .
As a result of amortizations, the remaining portfolio continues to
become increasingly concentrated with the current top ten issuers
now accounting for 24% of the overall pool. In addition,
approximately EUR34 million of portfolio assets are currently
rated Caa1 or below, representing 13.1% of the current portfolio.
In the base case, Moody's analyzed the underlying collateral pool
with an adjusted weighted average rating factor of 4096 with a
weighted-average recovery rate of 69.67%. Moody's also ran a
number of sensitivity analysis including consideration of the
scenario that the three largest obligors (which represents 10% of
the current pool) migrating to Caa2. This jump to Caa2 scenario
had less than half a notch modelling output impact for all classes
of notes.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2012 and
2014 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the transaction
delevering pace and 2) divergence in legal interpretation of CDO
documentation by different transactional parties due to embedded
ambiguities.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
August 2009.
Under this methodology, due to the lack of granularity of the
portfolio, Moody's relies on a simulation based framework. Moody's
therefore used CDOROM, to generate default and recovery scenarios
for each asset in the portfolio and then a cash-flow model in
order to compute the associated loss to each tranche in the
structure.
The cash flow model used for this transaction, whose description
can be found in the methodology listed above, is Moody's EMEA
Cash-Flow model.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" and "Annual Sector Review (2009): Global CLOs", key
model inputs used by Moody's in its analysis, such as par amount,
weighted average rating factor, diversity score, and weighted
average recovery rate, may be different from the trustee's
reported numbers.
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.
GREEN PARK: Moody's Upgrades Rating on Class R Notes to 'B3 (sf)'
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of three class
of Combination Notes and downgraded one class of Combination Notes
issued by Green Park CDO B.V. The notes affected by the rating
action are:
Issuer: Green Park CDO B.V.
-- EUR4M Class R Combination Notes due 2023 (current rated
balance of EUR2,799,045), Upgraded to B3 (sf); previously on
Nov 13, 2009 Downgraded to Caa1 (sf)
-- EUR4M Class S Combination Notes due 2023 (current rated
balance of EUR3,268,255), Upgraded to Baa2 (sf); previously
on Nov 13, 2009 Downgraded to Baa3 (sf)
-- EUR10M Class U Combination Notes due 2023 (current rated
balance of EUR7,862,189) Upgraded to Baa2 (sf); previously
on Nov 13, 2009 Downgraded to Baa3 (sf)
-- EUR14M Class V Combination Notes due 2023 (current rated
balance of EUR12,280,557), Downgraded to Baa3 (sf);
previously on Nov 13, 2009 Downgraded to Baa1 (sf)
The ratings of Class T remain unchanged.
The ratings of the Combination Notes address the repayment of the
Rated Balance on or before the legal final maturity. For Classes T
and V, the 'Rated Balance' is equal at any time to the principal
amount of the Combination Note on the Issue Date increased by the
Rated Coupon of 0.25% and 1.5% per annum respectively, accrued on
the Rated Balance on the preceding payment date minus the
aggregate of all payments made from the Issue Date to such date,
either through interest or principal payments. For Classes R, S,
and U, which do not accrue interest, the 'Rated Balance' is equal
at any time to the principal amount of the Combination Note on the
Issue Date minus the aggregate of all payments made from the Issue
Date to such date, either through interest or principal payments.
The ratings are not an opinion about the ability of the issuer to
pay interest. The Rated Balance may not necessarily correspond to
the outstanding notional amount reported by the trustee.
Ratings Rationale
The upgrades of Classes R, S and U reflect continued cash flow
payments to the Combination Notes which have reduced the Rated
Balance on these notes since last rating action in November 2009.
The amount of the underlying tranches generating the cash flows to
the Combination Notes retains the same principal as at last action
and payments to the equity continue to be made. The impact of this
amortization has been enhanced by improvement in the underlying
portfolio, including a reduction in the weighted average rating
factor (WARF) from 2820 to 2642 and an increase in the weighted
average spread from 2.75% to 3.22% since the last rating action.
The decrease in reported WARF understates the actual credit
quality improvement because of the technical transition related to
rating factors of European corporate credit estimates, as
announced in the press release published by Moody's on 1 September
2010. These updated figures were taken from the trustee report
dated April 11, 2011.
The downgrade to the Class V Combination Note is driven by the
correction of an underestimation of the Rated Balance made at the
time of the last rating action in November 2009 due to an input
error. Had the correct Rated Balance been used, the model result
would have been lower for this Class. Today's rating action takes
into account the correct Rated Balance.
The same input error affected the Rated Balance on the Class T
Combination Notes at the time of the last rating action, but the
impact on the model was limited and therefore the ratings are
unaffected.
As a base case, Moody's analyzed the underlying collateral pool
with an adjusted weighted average rating factor of 3628, a
weighted average recovery rate of 61.27% and a diversity of score
of 40.
Moody's also ran sensitivity analysis on key parameters for the
rated notes. For instance, if the WARF were increased by 200, the
model outputs of all rated notes would not be changed by more than
one notch.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by uncertainties of credit
conditions in the general economy. The deal is allowed to reinvest
(on a non-discretionary basis) and the manager has the ability to
deteriorate the collateral quality metrics' existing cushions
against the covenant levels. Moody's analyzed the impact of
assuming lower of reported and covenanted values for weighted
average rating factor, weighted average spread, and diversity
score. However, as part of the base case, Moody's considered
spread and coupon levels higher than the covenant levels due to
the large difference between the reported and covenant levels.
CDO notes' performance may also be impacted by (1) the manager's
investment strategy and behavior and (2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
August 2009.
Under this methodology, Moody's used its Binomial Expansion
Technique, whereby the pool is represented by independent
identical assets, the number of which is being determined by the
diversity score of the portfolio. The default and recovery
properties of the collateral pool are incorporated in a cash flow
model where the default probabilities are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability range is derived from the credit
quality of the collateral pool, and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority and jurisdiction of the assets in the collateral pool.
The cash flow model used for this transaction, whose description
can be found in the methodology listed above, is Moody's CDOEdge
model.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" and "Annual Sector Review (2009): Global CLOs", key
model inputs used by Moody's in its analysis, such as par amount,
weighted average rating factor, diversity score, and weighted
average recovery rate, may be different from the trustee's
reported numbers.
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.
JUBILEE CDO: Moody's Upgrades Rating on Class D Notes to 'Caa3'
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Jubilee CDO III B.V.:
Issuer: Jubilee CDO III B.V.
-- EUR222M Class A-1 Senior Secured Floating Rate Notes,
Upgraded to Aaa (sf); previously on Dec 16, 2009 Downgraded
to Aa1 (sf)
-- EUR43M Class A-2 Senior Secured Floating Rate Notes,
Upgraded to Aa3 (sf); previously on Dec 16, 2009 Downgraded
to Baa1 (sf)
-- EUR32M Class B Senior Secured Deferrable Floating Rate
Notes, Upgraded to Ba1 (sf); previously on Dec 16, 2009
Downgraded to B1 (sf)
-- EUR13M Class C Senior Secured Deferrable Floating Rate
Notes, Upgraded to B3 (sf); previously on Dec 16, 2009
Downgraded to Caa2 (sf)
-- EUR6M Class D Senior Secured Deferrable Floating Rate Notes,
Upgraded to Caa3 (sf); previously on Dec 16, 2009 Downgraded
to Ca (sf)
-- EUR4M Cl. S Combination Notes, Withdrawn (sf); previously on
Dec 16, 2009 Downgraded to Ca (sf)
Ratings Rationale
Jubilee CDO III, issued in January 2004, is a Collateralised Loan
Obligation backed by a portfolio of mostly high yield European
loans. The portfolio is managed by Alcentra. This transaction has
passed the reinvestment period. It is composed of 89.92% senior
loans from 19 various industries. Although Jubilee has a diversity
score of 26, it retains 46 unrelated obligors in the pool.
According to Moody's, the rating actions taken on the notes result
primarily from the delevering of the Class A Notes, which have
been paid down by approximately 39% or EUR82.6 million since the
rating action in December 2009. As a result of the delevering, the
overcollateralization ratios have increased since the rating
action in December 2009. As of the latest trustee report dated
April 11, 2011, the Class A/B and Class C overcollateralization
ratios are reported at 135.4% and 114.3%, respectively, versus
December 2009 levels of 118.4% and 105.2%, respectively. The Class
S combination notes were withdrawn based on the outstanding
balance of zero reported by the Trustee.
Improvement in the credit quality is observed through an
improvement in the average credit rating (as measured by the
weighted average rating factor). In particular, as of the latest
trustee report dated April 2011, the weighted average rating
factor is currently 2881 compared to 2904 in the December 2009
report.
In its base case, Moody's analyzed the underlying collateral pool
with WARF of 4024 versus modelled WARF of 4167 at last rating
action. The base case diversity score, weighted average spread and
weighted-average recovery rate were respectively 26, 2.92% and
63%.
In addition to the base case analysis described above, Moody's
also performed sensitivity analyses on key parameters for the
rated notes. For instance, the WARF level was tested by increasing
it by 200 and assumed recovery rate was reduced by 10%
independently of each other. The impact on the senior and junior
notes was less than 1 notch from the base case model outputs and
no more than 2 notches on the mezzanine notes. Various additional
scenarios have been considered for the analysis and include the
application of stresses applicable to concentrated pools with non
publicly rated issuers, as outlined in "Updated Approach to the
Usage of Credit Estimates in Rated Transactions" published in
October 2009.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2012 and
2014 which may create challenges for issuers to refinance.
The main source of additional performance uncertainty in this
transaction is whether delevering from unscheduled principal
proceeds will continue and at what pace. Delevering may accelerate
due to high prepayment levels in the loan market and/or collateral
sales by the manager, which may have significant impact on the
notes' ratings.
The principal methodology used in this rating was the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in August 2009. Other methodologies and
factors that may have been considered in the process of rating
this issuer can also be found on Moody's website.
Under this methodology, Moody's used its Binomial Expansion
Technique, whereby the pool is represented by independent
identical assets, the number of which is being determined by the
diversity score of the portfolio. The default and recovery
properties of the collateral pool are incorporated in a cash flow
model where the default probabilities are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability range is derived from the credit
quality of the collateral pool, and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority and jurisdiction of the assets in the collateral pool.
The cash flow model used for this transaction, whose description
can be found in the methodology listed above, is Moody's EMEA
Cash-Flow model.
In addition to the quantitative factors that are explicitly
modelled, qualitative factors are part of the rating committee
considerations. These qualitative factors include the structural
protections in each transaction, the recent deal performance in
the current market environment, the legal environment, specific
documentation features, the collateral manager's track record, and
the potential for selection bias in the portfolio. All information
available to rating committees, including macroeconomic forecasts,
input from other Moody's analytical groups, market factors, and
judgments regarding the nature and severity of credit stress on
the transactions, may influence the final rating decision.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" and "Annual Sector Review (2009): Global CLOs", key
model inputs used by Moody's in its analysis, such as par amount,
weighted average rating factor, diversity score, and weighted
average recovery rate, may be different from the trustee's
reported numbers.
Moody's also notes that around 52% of the collateral pool consists
of debt obligations whose credit quality has been assessed through
Moody's credit estimates.
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.
===========
R U S S I A
===========
ACRON JSC: Moody's Assigns '(P)B1' Rating to RUR-Denominated Bond
-----------------------------------------------------------------
Moody's Investors Service has assigned a provisional (P)B1 rating
to the proposed RUR-denominated bond of JSC ACRON, one of the
world's leading producers of nitrogen fertilizers, with a global
NPK capacity of 2.2 million tonnes.
Acron will use the proceeds of the bond, amounting to RUR7.5
billion (approximately USD264 million), to refinance its existing
debt. Given the bond's proposed maturity of 10 years, Moody's
expects the company to benefit from a strengthened liquidity
profile as a result of this transaction. Acron will use
approximately half of the proceeds (the equivalent of US$130-140
million) to repurchase from the market its RUR-denominated bonds
issued in 2009, which could be subject to a put option exercisable
in Q3 2011.
Ratings Rationale
"The bond rating -- at the same level as the corporate family
rating previously assigned to Acron by Moody's -- assumes that the
instrument will rank equal to other senior unsecured debt
instruments in the company's capital structure," says Julia
Pribytkova, a Moody's Vice President-Senior Analyst and lead
analyst for Acron. The company predominantly uses pre-export and
export credit agency (ECA)-backed types of financing for its
operating activities and capital investment purposes,
respectively.
Moody's issues provisional ratings in advance of the final sale of
securities, and these ratings represent only the rating agency's
preliminary opinion. Upon a conclusive review of the transaction
and associated documentation, Moody's will endeavor to assign
definitive ratings to the bonds. A final rating may differ from a
provisional rating.
Principal Methodology
The principal methodology used in rating JSC Acron was the Global
Chemical Industry Rating Methodology, published December 2009.
Other methodologies used include Loss Given Default for
Speculative Grade Issuers in the US, Canada, and EMEA, published
June 2009.
Based in Russia, Acron is the operating and holding company of a
group of chemical companies engaged in the manufacture and sale of
mineral fertilizers. In 2010, Acron reported revenues of RUB46.7
billion and EBITDA of RUB10.3 billion.
NATIONAL RESERVE: Moody's Affirms 'E+' BFSR; Stable Outlook
-----------------------------------------------------------
Moody's Investors Service has affirmed the standalone E+ bank
financial strength rating and B2/Not Prime long-term and short-
term local and foreign currency deposit ratings of National
Reserve Bank. The bank's BFSR maps to B2 on the long-term scale.
Concurrently, Moody's Interfax Rating Agency has downgraded NRB'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 NRB's publicly available
audited financial statements for 2010 prepared under IFRS, and
unaudited financial statements for Q1 2011 prepared under Russian
GAAP, as well as the bank's non-public management reports for that
period.
Ratings Rationale
The downgrade of NRB's NSR reflects Moody's concerns over the
bank's diminished capital base following its RUB9 billion dividend
payout in Q1 2011, and the bank's low operating efficiency in 2009
and 2010. As a result of the decline in capital, the bank's
exposure to equity securities exceeded 100% of Tier 1 capital,
thereby reducing the capital cushion available to absorb the
effect of any material reduction in equity prices as envisaged by
Moody's scenario analysis. At the same time, NRB faced a material
squeeze in interest margins in 2009-2010 and reported negative
recurring profitability -- interest and commission income did not
cover operating expenses, and thus, if trading gains shrink, the
bank could call for more capital to cover operating losses.
Moody's acknowledges the bank's strategy to cut its exposure to
volatile equities in the medium term and develop SME lending;
however, the rating agency recognises that this strategy is
subject to execution risk due to (i) intense competition in
lending and (ii) investors' perception towards Russian equities.
According to Moody's, NRB's ratings are constrained by the bank's
very high market risk appetite, large concentrations in its loan
portfolio and its undiversified funding structure, which is
significantly reliant on related parties. Related-party funding
remains a significant driver of the bank's non-equity funding,
and, as of 1 January 2011, deposits from affiliated entities
accounted for over 20% of non-equity funding according to audited
IFRS. Although credit risk concentration in the bank's loan book
is relatively high (top 20 borrowers accounted for 60% of the loan
book and 55% of Tier 1 capital as at YE2010), the significant drop
in capital following the dividend payout renders these
concentration concerns more salient.
NRB's ratings are supported by good financial performance in 2010
and by long-standing relationships with a number of prominent
Russian companies. NRB's non-performing loans (NPLs, defined as
90+ days overdue) accounted for around 13% of the bank's loan book
at YE2010, which is in line with the average for the sector. NPLs
peaked in mid-2010 and demonstrated a degree of recovery by
YE2010. The rating agency expects NRB's asset quality to improve
gradually in 2011, aided by a gradually reviving regional economy
and resumed loan growth.
The bank's NPLs were sufficiently covered by provisions (17% of
the bank's loan book). Moody's also notes that NRB has a good
capital buffer that is sufficient for coverage of the bank's
potential losses. The bank's Tier 1 ratios stood at 51.5% as at
YE2010 according to audited IFRS, and Moody's expects this ratio
to drop to close to 35% at Q1 2011 as a result of the dividend
payout. Although NRB remained profitable in 2009 and 2010, the
bank's revenues were largely supported by trading income during
these years, as the bank was loss-making on a pre-provision and
pre-trading basis in 2009 and 2010.
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 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).
Headquartered in Moscow, Russia, NRB reported total assets of
RUB58.3 billion and net income of RUB3.4 billion as at
December 31, 2010, according to audited IFRS.
=========
S P A I N
=========
AYT LICO: Moody's Cuts Rating on Class B Notes to 'B1 (sf)'
-----------------------------------------------------------
Moody's Investors Service has downgraded these classes of notes
issued by AyT Lico Leasing I:
-- EUR300M A Notes, Downgraded to A2 (sf); previously on Mar
18, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
-- EUR31.3M B Notes, Downgraded to B1 (sf); previously on Mar
18, 2011 Baa3 (sf) Placed Under Review for Possible
Downgrade
The rating action concludes Moody's review initiated on March 18,
2011.
Ratings Rationale
This rating action reflects (i) the worse-than-expected collateral
performance; and (ii) the increased legal risk associated with an
originator default scenario, which takes into account the
downgrade of Lico Leasing to Baa3/P-3 (negative outlook) from
Baa1/P-2 on 24 March 2011.
Moody's analysis takes into account: (i) the credit quality of the
underlying portfolio of lease loans, from which the rating agency
determined its cumulative default and recovery rate; (ii) the
volatility assumption calculated by the rating agency; and (iii)
the transaction structure, as assessed through Moody's cash flow
analysis. Moody's calibrates its default distribution curve using
the two key parameters of: (i) the expected cumulative default
rate; and (ii) volatility. The rating agency then uses its default
distribution curve in the cash flow model used to rate European
ABS transactions .
Transaction Performance
In March 2011, the one-year 90+ day delinquency rate stood at
4.83% of the current pool balance and represented a more than
doubling from 2.02% in March 2010. This jump confirmed the rising
trend in delinquencies observed since June 2010 when 90+ day
delinquencies stood at around 2.07%. Moody's believes that
elevated delinquency levels will most likely translate into a
significant upsurge in the cumulative default rate, which
currently stands at 0.96% of the total securitized pool
(cumulative written-off receivables).
Key Revised Assumptions: Cumulative Default,
Volatility And Recovery Rate
Moody's has increased its lifetime default expectation for the AyT
Lico Leasing I collateral pool, factoring in: (i) the current
collateral performance; and (ii) any likely performance
deterioration of the pool in the current down cycle. In doing so,
the rating agency took into account the transaction's exposure to
the real estate sector (23% of the pool balance as of April 2011)
and the negative outlook for the Spanish SME ABS sector.
Moody's has adjusted its default probability assumption for SME
debtors in the: (i) low-single-B range for debtors operating in
the real estate sector; and (ii) high-single-B range for non-real-
estate debtors. At the same time, the rating agency estimates the
remaining weighted average life of the portfolio to be 1.3 years.
Given the granularity as measured by the effective number of
leases (1,314), Moody's used a normal inverse gross default
distribution.
These revised assumptions have translated into a rise in the
cumulative mean default assumption for AyT Lico Leasing I equal to
10.2% of the current portfolio balance with a coefficient of
variation of 45% (53% at closing). The revised default assumption
of 10.2% of the current pool balance corresponds to an equivalent
rating of B2 over the portfolio weighted average life and
translates into a default rate of 5.6% of the total securitized
pool over the life of the transaction. This compares to a 2.5%
assumption at closing.
Moody's raised its base recovery rate assumption to 50%
(stochastic recovery rate) from 22.5% at closing. These estimates
reflect recoveries observed in the transaction and currently
witnessed in the Spanish leasing market. Moody's assumes a
constant prepayment rate (CPR) of 5%.
Moody's uses its excel-based cash flow model, Moody's ABSROM(TM),
as part of its quantitative analysis of the transaction. Moody's
ABSROM(TM) enables users to model various features of a standard
European ABS transaction, including: (i) the specifics of the
default distribution of the assets; (ii) their portfolio
amortization profile, yield, or recoveries; and (iii) the specific
priority of payments, triggers, swaps and reserve funds on the
liability side of the asset-backed securities (ABS) structure.
Moody's ABSROM(TM) User Guide, available on Moody's website,
covers the functionality of the model and provides a comprehensive
index of the user inputs and outputs.
Increased Legal Risk
Due to the downgrade of Lico Leasing to Baa3/P-3, Moody's believes
that the transaction is now exposed to an increased legal risk as
the downgrade of the originator equates to an increased likelihood
of a bankruptcy scenario of the originator. In Moody's opinion,
Spanish leasing ABS transactions are exposed to legal
uncertainties associated with recoveries on defaulted lease
contracts following the insolvency of the originator. If an
originator becomes insolvent, asset-sale proceeds could form part
of the insolvency estate. Moody's assesses the impact of the legal
risks by assuming a stressed recovery rate (see "Moody's updates
on the impact of originator insolvency on Spanish ABS leasing
transactions", published 4 December 2009).
For this transaction, Moody's assumed a stressed recovery rate
upon the default of the originator of 15% compared to an average
50% when the originator is not defaulting.
The combination of the revised default assumption and increased
legal risk affecting the recovery value resulted in today's
downgrade.
Ayt Lico Leasing I
AyT Lico Leasing I closed in September 2005 and securitized
Spanish lease receivables originated by Lico Leasing
(approximately 11,000 leases as of April 2011). The purpose of
these lease contracts is to finance a diverse set of assets
including vehicles, equipment and real estate. As of March 2011,
the 5-year revolving period ended in June 2010. The current pool
factor stands at 16% considering the total securitized pool. For
class A notes, the credit enhancement has increased to 20.95%
compared with 12.45% at closing. For the class B notes, the credit
enhancement currently stands at 4.84% compared with 3.00% at
closing.
The principal methodology used in this rating was Moody's Approach
to Rating CDOs of SMEs in Europe, published in February 2007. In
addition, Refining the ABS SME Approach: Moody's Probability of
Defaults Assumptions in the Rating Analysis of Granular SME
Portfolios in EMEA, published in March 2009, and Moody's Approach
to Rating Granular SME Transactions in EMEA, published in June
2007, were applied for this rating action.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments in this transaction.
=====================
S W I T Z E R L A N D
=====================
BARRY CALLEBAUT: Moody's Upgrades Issuer Rating From 'Ba1'
----------------------------------------------------------
Moody's Investors Service has assigned a Baa3 issuer rating to
Barry Callebaut AG. Moody's also upgraded the rating of the EUR350
million 2017 senior unsecured notes to Baa3. The ratings outlook
is stable. Moody's will withdraw Barry Callebaut's Corporate
Family Rating (CFR) and Probability of Default Rating (PDR) in
line with Moody's policy for credits that transition from
speculative grade to investment grade.
Ratings Rationale
"The upgrade of Barry Callebaut's rating to investment grade
reflects the company's track record of relatively stable operating
performance in spite of volatile cocoa prices and challenging
economic conditions, which has allowed the company to achieve
credit metrics in line with a higher rating category", says Tanya
Savkin, Moody's lead analyst for Barry Callebaut.
Barry Callebaut's rating is supported by the company's established
presence in all major global markets and the company's focus on
diversifying its revenues from Europe with new markets such as
Russia, Brazil, China and India which typically display higher
growth prospects. Moody's believes that Barry Callebaut should be
able to achieve its annual target of 6% to 8% volume growth per
annum benefiting from continued outsourcing trends for chocolate
manufacturers.
Barry Callebaut's rating also reflects the resilience of its
hedging policy to volatile cocoa beans prices. The company's cost-
plus business model which covers around 80% of its sales volumes
has proved successful in the last couple of years and allowed it
to sustain relatively stable operating margin levels while cocoa
beans prices more than doubled since 2008.
More negatively, Barry Callebaut's rating is constrained by the
company's reliance on politically unstable countries such as Ivory
Coast for the supply of cocoa beans, its main raw material.
Although Moody's recognizes Barry Callebaut's efforts to diversify
the sourcing of cocoa beans outside of Ivory Coast, it nonetheless
stresses that the company is exposed to supply disruption risks
inherent to the industry.
Barry Callebaut continued to grow at above-market pace in the
first half of 2010/2011, reporting sales volume growth of 7.1%
driven by increasing demand from emerging markets and new
outsourcing agreements. The Consumer Products division, however,
which serves food retailers and represents about 10% of the
company's total volumes, remained under negative pressure due to
unfavorable market conditions, especially in Germany. The company
reported stable EBITDA margin at 11.7% in the first half of
2010/11 and Moody's expects that Barry Callebaut will be able to
maintain its adjusted gross leverage ratio below 3.0x going
forward.
Barry Callebaut's liquidity requirements are significant and
difficult to predict because of the volatility of cocoa prices,
which can be impacted by weather conditions, investor speculation
and political events. However, Moody's assumes that Barry
Callebaut will maintain adequate credit facilities to fund its
growth strategy and to cover potentially higher levels of
volatility in working capital cycles.
The stable outlook reflects Moody's expectation that the company
will maintain its solid market position and credit metrics in line
with its rating category, including a prudent dividend policy. In
addition, Moody's expects that the company will use any disposal
proceeds to repay debt.
Positive pressure on the ratings or outlook could occur if the
company improves its operating margins close to double digit
levels, further reduces its adjusted gross debt to EBITDA ratio to
below 2.5x and increases its RCF to net debt ratio to above 25%;
all in conjunction with increased diversification of raw materials
supply. Conversely, negative pressure could occur if the company
fails to maintain its operating margins at a high single digit
level, its debt to EBITDA ratio below 3.0x and RCF to net debt
ratio well below 20%; or if additional concerns over supply risk
arise.
The principal methodology used in rating Barry Callebaut was the
Global Food - Protein and Agriculture Industry Methodology,
published September 2009. Other methodologies used include Loss
Given Default for Speculative Grade Issuers in the US, Canada, and
EMEA, published June 2009 (and/or) the Government-Related Issuers
methodology,published July 2010.
Barry Callebaut AG is a fully integrated company and the world's
leading supplier of cocoa and chocolate products. The company
reported annual sales of CHF5.2 billion (around EUR3.6 billion)
for fiscal year 2009/2010.
===========================
U N I T E D K I N G D O M
===========================
BOWEN PLC: Creditor Files Winding-Up Petition Over Debt
-------------------------------------------------------
Barry O'Halloran at The Irish Times reports that Duffy Contracting
Services filed a petition with the companies court in London to
have Bowen plc wound up over an unpaid debt.
According to The Irish Times, it is not known how much Bowen owes
Duffy Contracting, but some sources say the figure is between
GBP200,000 and GBP270,000.
Bowen suspended its operations last week and told its 29 staff not
to report for work on May 19, The Irish Times relates.
The Irish Times relates that Bowen on Thursday said it is dealing
with some trading issues that have resulted in a decision to
suspend activities while the company works with its advisers to
agree on the best action to take.
The company recently hired advisers to work on a restructuring
program for the business, The Irish Times discloses.
The wind-up petition only pertains to Bowen plc and not to the
group's Irish operations, which are continuing to trade as normal,
The Irish Times notes.
According to unconfirmed reports, Bowen's problems are partly
rooted in the fact that at least one of its clients has failed to
pay the company on time, or in full, for work it has completed,
The Irish Times states.
According to the most recent figures, Bowen made a profit of
GBP111,599 on a turnover of GBP22.3 million in 2009, The Irish
Times discloses.
Bowen plc is the London-based subsidiary of Bowen Construction.
* UK: Construction Sector Insolvencies Up 19% in First Quarter
--------------------------------------------------------------
Julia Kollewe at The Guardian reports that experts warned on
Monday that the U.K. construction industry could sink deeper into
recession as the number of companies unable to pay their debts
rose by nearly a fifth in the last quarter, the first rise in two
years.
Insolvencies in the U.K construction sector climbed by 19% to 948
in the first three months of the year from 796 in the fourth
quarter of last year, The Guardian says, citing accountancy firm
Wilkins Kennedy.
It is the first quarterly rise in insolvencies since early 2009
and has stoked fears of another prolonged downturn for the sector,
The Guardian relates. The figures show that the number of
construction companies going bust had fallen steadily every
quarter since the 1,209 insolvencies at the start of 2009, when
Britain was mired in recession, The Guardian discloses.
*********
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
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Copyright 2011. All rights reserved. ISSN 1529-2754.
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