/raid1/www/Hosts/bankrupt/TCREUR_Public/110907.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, September 7, 2011, Vol. 12, No. 177
Headlines
D E N M A R K
* DENMARK: Banks Won't Emerge From Financial Crisis Until 2015
E S T O N I A
PTA GRUPP: Faces Bankruptcy After Restructuring Plan Fails
F R A N C E
PAGESJAUNES GROUPE: Moody's Rates EUR350-Mil. Notes at 'B2'
G E R M A N Y
VERSATEL AG: Moody's Withdraws 'B2' Corporate Family Rating
I C E L A N D
* ICELAND: Ex-Prime Minister Faces Trial Over 2008 Finc'l. Crisis
I R E L A N D
DIRECTROUTE FINANCE: S&P Keeps 'BB+' Senior Debt Rating
EUROCREDIT CDO VI: Moody's Upgrades Class C Notes Rating to 'Ba2'
KINTYRE CLO I: Moody's Upgrades Rating on Class E Notes to 'Caa1'
OCELOT CDO I: S&P Lowers Rating on Class D Notes to ' CCC+'
* IRELAND: In Receivership, Uncertain Over Transport Projects
* IRELAND: Number of Insolvencies Up 68% in August 2011
N E T H E R L A N D S
AVOCA II: Moody's Upgrades Rating on Class D Notes to 'B3 (sf)'
GRESHAM CAPITAL: Moody's Upgrades Rating on Class E Notes to 'B1'
ST. JAMES'S: Moody's Upgrades Rating on Class D Notes to 'Ba1'
R O M A N I A
REALITATEA MEDIA: Files For Insolvency
R U S S I A
PROGNOZ SILVER: Moscow Terminated Bankruptcy, Says High River
RAIFFEISENBANK ZAO: S&P Raises Stand-Alone Credit Profile to 'bb'
* RUSSIA: Central Bank's Head of Supervision Steps Down
S P A I N
ABENGOA SA: Fitch Affirms 'BB' Long-Term Issuer Default Rating
U N I T E D K I N G D O M
CLINTON CARDS: Seeks More Time to Pay Rent Bill
DA GREEN & SONS: Lincolnshire Field Acquires Whaplode Site
FARRINGDON MORTGAGES: Fitch Affirms Low-B Ratings on Two Tranches
JJB SPORTS: Draws Up Incentive Plan to Accelerate Turnaround
PREMIER FOODS: Moody's Lowers CFR to Ba3; Outlook Remains Stable
SUPERGLASS: Has Debt-for-Equity Swap Deal with Clydesdale Bank
X X X X X X X X
* More Oil Tanker Operators Expected to Face Insolvency
* EUROPE: Banks May Collapse Over Sovereign Bond Losses
* Global Regulators May Soften Bank Liquidity Rules
*********
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D E N M A R K
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* DENMARK: Banks Won't Emerge From Financial Crisis Until 2015
--------------------------------------------------------------
Frances Schwartzkopff at Bloomberg News reports that Claus E.
Petersen, the deputy chairman of the Danish Local Banks
Association, said Denmark's banks probably won't fully emerge
from the country's financial crisis until as late as 2015 as a
rescue package designed to spur consolidation and avoid
insolvencies encounters hurdles.
Denmark's banks have faced an international funding wall since
the failures of two lenders this year triggered the European
Union's first senior creditor losses within a resolution
framework, Bloomberg notes. The government, which faces a
Sept. 15 election, has secured lawmaker backing to help healthy
banks buy lenders at risk of insolvency in an effort to sidestep
the country's bail-in clause, Bloomberg discloses. Lawmakers
agreed on the measures after banks warned an absence of funding
would create a liquidity freeze, Bloomberg relates.
To jumpstart takeovers, lawmakers proposed last month that the
state assume weaker banks' bad loans and extend debt guarantees
to merged institutions, Bloomberg recounts. The guarantees are
scheduled to expire by 2013, Bloomberg discloses. The central
bank on Aug. 16 said it will accept bank loans as collateral in
an effort to ease access to liquidity for the country's banks,
Bloomberg relates.
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E S T O N I A
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PTA GRUPP: Faces Bankruptcy After Restructuring Plan Fails
----------------------------------------------------------
Ott Ummelas at Bloomberg News, citing Aeripaeev, reports that PTA
Grupp AS was expected to be declared bankrupt by the Harju County
Court yesterday.
According to Bloomberg, Peeter Larin, PTA's main owner and chief
executive officer, as cited by the newspaper, said that the
company is unable to meet its restructuring plan.
Bloomberg notes that the newspaper, citing bankruptcy trustee
Urmas Ustav, said that PTA has assets worth EUR844,000
(US$1.2 million) and liabilities of EUR2.9 million.
PTA Grupp AS is a clothing maker and retailer based in Tallinn,
Estonia.
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F R A N C E
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PAGESJAUNES GROUPE: Moody's Rates EUR350-Mil. Notes at 'B2'
-----------------------------------------------------------
Moody's Investors Service has assigned a definitive B2 rating
(LGD-3) to the EUR350 million senior secured notes due 2018
issued by PagesJaunes Finance & Co. S.C.A., following receipt of
final documentation. The final terms of the bond are in line with
the drafts reviewed for the provisional (P)B2 instrument rating
assignment.
Ratings Rationale
Moody's definitive rating on this debt obligation is in line with
the provisional rating assigned on May 6, 2011. Moody's rating
rationale was set out in a press release issued on that date.
PagesJaunes Groupe S.A and PagesJaunes Finance & Co. S.C.A.'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 PagesJaunes Groupe S.A and
PagesJaunes Finance & Co. S.C.A's core industry and believes
PagesJaunes Groupe S.A and PagesJaunes Finance & Co. S.C.A's
ratings are comparable to those of other issuers with similar
credit risk. Other methodologies used include Loss Given Default
for Speculative-Grade Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
Headquartered in France, PagesJaunes is the leading provider of
local media advertising and local website and digital marketing
services, with the majority of its operations (more than 93% of
2010 total revenue) in France and the remainder (approximately
6%) of operations in Spain and Luxembourg. The company reported
EUR1,125 million revenues in 2010.
PagesJaunes is listed on the Paris stock exchange and is
controlled by Mediannuaire Holding SA, which holds 54.7% of the
shares as its sole material asset. MDH's shareholders are KKR
(80%) and Goldman Sachs Capital Partners (20%).
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G E R M A N Y
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VERSATEL AG: Moody's Withdraws 'B2' Corporate Family Rating
-----------------------------------------------------------
Moody's Investors Service has withdrawn Versatel's B2 corporate
family rating (CFR) and B2 probability of default rating (PDR).
Ratings Rationale
Moody's has withdrawn the rating for its own business reasons.
The rating of the EUR525 million senior secured floating-rate
notes (FRN) has been withdrawn upon prepayment thereof.
Headquartered in D=81sseldorf, Versatel is one of the leading
facilities-based alternative telecommunications operators in
Germany. In 2010, Versatel generated revenues of EUR725 million
and EBITDA (as adjusted by the company) of EUR171 million.
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I C E L A N D
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* ICELAND: Ex-Prime Minister Faces Trial Over 2008 Finc'l. Crisis
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BBC News reports that former Icelandic Prime Minister Geir Haarde
has appeared at a special court on charges of "failures of
ministerial responsibility" in his handling of the 2008 financial
crisis.
Iceland plunged into a deep recession following the collapse of
its three leading banks, including Icesave's parent company
Landsbanki, in autumn 2008, BBC relates. The failure of Icesave,
which hit thousands of savers in the UK and Netherlands, led to a
dispute over compensation, which remains unresolved, BBC
discloses.
Mr. Haarde, 60, led the Independence Party government at the time
of the crisis.
Mr. Haarde has called the case against him a "farce" and says he
wants it to be thrown out, BBC relates. Mr. Haarde adds the case
is a political vendetta by the current coalition, the report
notes.
The charges carry a maximum penalty of two years in prison,
according to BBC. Mr. Haarde's lawyers argue that the charges
are too vague to meet legal standards and have not been properly
investigated, the report relates.
The lawyer defending Mr. Haarde said all charges suggesting that
the former prime minister is legally responsible for the island's
financial and economic crisis should be dropped, Bloomberg News
relates in a separate report. The formal indictment against Mr.
Haarde is "unclear and unreasoned," Bloomberg quotes Andri
Arnason, who is defending the former premier, as saying in the
Reykjavik-based court on Monday.
The hearing was held before the Landsdomur court, a special body
to try cabinet ministers, which has never before heard a case,
BBC cites.
The two-hour hearing finished at midday, and a decision is
expected within three weeks, BBC discloses.
When Icesave collapsed, then UK Prime Minster Gordon Brown
accused his Icelandic counterpart of "unacceptable" and "illegal"
behavior after Iceland said it could not give a guarantee to
reimburse UK customers of the online bank, BBC recounts.
In response, Mr. Haarde accused the UK government of "bullying"
and bringing down one of its other banks after the Treasury froze
the assets of Icelandic institutions in the UK, BBC states.
UK Bullied Iceland, Grimmson Says
Iceland President Olafur Ragnar Grimsson also accused European
countries of having bullied Iceland into agreeing to guarantee
repayment of the debts of the failed Landsbanki, Reuters relates
in a separate report.
Reuters recounts that when Iceland's banking sector collapsed in
the 2008 crisis, accounts were frozen at Landsbanki, which has
accepted deposits from British and Dutch savers through online
funds called Icesave. Iceland then asserted that the estate of
the failed bank should have been enough to repay about US$5
billion (EUR3.5 billion) of debt to British and Dutch savers.
President Grimmson said the British and Dutch demand that the
Iceland government guarantee the debt had been "absurd", Reuters
relays. "The EU should investigate and face up to how in the
world it was possible that EU member states agreed to support
this absurd claim against Iceland," Reuters quoted President
Grimmson as saying.
The British and Dutch, with the support of other EU nations, had
also persuaded the IMF to pressure Iceland, President Grimsson
said, Reuters reports. Since the 2008 financial crisis, Iceland
had to accept a bailout led by the IMF, accompanied by a program
of economic reforms, which have just been completed, Reuters
points out.
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I R E L A N D
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DIRECTROUTE FINANCE: S&P Keeps 'BB+' Senior Debt Rating
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Standard & Poor's Ratings Services is keeping its 'BB+' issue
rating on the senior debt of Republic of Ireland-based road
project DirectRoute (Limerick) Finance Ltd. (ProjectCo)
on CreditWatch with negative implications, where it was placed on
May 27, 2011.
The bonds retain an unconditional and irrevocable guarantee of
payment of scheduled interest and principal provided by monoline
insurer MBIA U.K. Insurance Ltd. (MBIA U.K.; B/Negative/--).
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 ongoing CreditWatch placement reflects the fact that we have
not yet received a new financial model for the operational phase
of the project, and our view that the minimum debt service
coverage ratio (DSCR) in the new model may be significantly lower
than our previous forecast of 1.20x," S&P related.
ProjectCo has informed us that technical difficulties with the
model architecture have delayed its production. "However, we
understand that the new model is currently being audited, and
ProjectCo expects to be in a position to deliver it later this
month. At that point, we will undertake our own analysis of the
model and its assumptions," S&P stated.
"On May 27, 2011, we lowered the issue ratings on the senior debt
to 'BB+'," S&P stated.
"The downgrade reflected 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. Although
traffic volumes for the first six months of 2011 have shown
stronger growth than in prior periods, our view remains
unchanged," S&P said.
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
stated.
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.
"We aim to review the CreditWatch placement following our receipt
of a new financial model reflecting the operational phase of the
project. If we do not receive the new model within the next 1-2
months, we may take further rating actions, including suspending
the current rating," S&P stated.
"If, as a result of revised traffic volume projections, the new
financial model forecasts a minimum DSCR that is significantly
lower than our previous forecast of 1.20x, we may lower the
rating on the senior debt," S&P related.
"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, for example, by credibly demonstrating
substantial cost savings without any significant effect on the
minimum performance standards required by the NRA," S&P added.
EUROCREDIT CDO VI: Moody's Upgrades Class C Notes Rating to 'Ba2'
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Eurocredit CDO VI PLC:
Issuer: Eurocredit CDO VI PLC
-- EUR125M Class A-R Senior Secured Revolving Floating Rate
Notes due 2022 (currently EUR 122,321,518.79 outstanding),
Upgraded to Aaa (sf); previously on Jun 22, 2011 Aa2 (sf)
Placed Under Review for Possible Upgrade
-- EUR210M Class A-T Senior Secured Floating Rate Notes due
2022 (currently EUR 206,358,249.04 outstanding), Upgraded
to Aaa (sf); previously on Jun 22, 2011 Aa2 (sf) Placed
Under Review for Possible Upgrade
-- EUR33.5M Class B Senior Secured Floating Rate Notes due
2022, Upgraded to A1 (sf); previously on Jun 22, 2011 Baa1
(sf) Placed Under Review for Possible Upgrade
-- EUR30M Class C Senior Secured Deferrable Floating Rate
Notes due 2022, Upgraded to Baa1 (sf); previously on
Jun 22, 2011 Ba2 (sf) Placed Under Review for Possible
Upgrade
-- EUR24M Class D Senior Secured Deferrable Floating Rate
Notes due 2022, Upgraded to Ba1 (sf); previously on
Jun 22, 2011 B1 (sf) Placed Under Review for Possible
Upgrade
-- EUR20M Class E Senior Secured Deferrable Floating Rate
Notes due 2022, Upgraded to Ba3 (sf); previously on
Jun 22, 2011 Caa2 (sf) Placed Under Review for Possible
Upgrade
Ratings Rationale
Eurocredit CDO VI PLC, issued in December 2006, is a multi
currency Collateralised Loan Obligation ("CLO") backed by a
portfolio of mostly high yield European and US loans. The
portfolio is managed by Intermediate Capital Group PLC. This
transaction will be in reinvestment period until January 2013. It
is predominantly composed of senior secured loans.
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The actions also reflect
consideration of an increase in the transaction's
overcollateralization.
The actions reflect key changes to the modeling assumptions,
which incorporate (1) a removal of the temporary 30% default
probability macro stress implemented in February 2009, (2)
increased BET liability stress factors as well as (3) change to a
fixed recovery rate modeling framework. Additional changes to the
modeling assumptions include (1) standardizing the modeling of
collateral amortization profile, and (2) changing certain credit
estimate stresses aimed at addressing the lack of forward looking
indicators as well as time lags in receiving information required
for credit estimate updates.
The overcollateralization ratios of the rated notes have improved
since the rating action in September 2009. The Class A/B, Class
C, Class D and Class E overcollateralization ratios are reported
at 131.2%, 120.6%, 113.2% and 107.8%, respectively, versus July
2009 levels (on which the last rating actions were based) of
127.0%, 116.9%, 109.9% and 104.7%, respectively, and all related
overcollateralization tests are currently in compliance.
Reported WARF has increased from 2849 to 2955 between July 2009
and August 2011. The change 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. In addition, securities rated Caa or lower
make up approximately 8.97% of the underlying portfolio versus
9.26% in July 2009. Additionally, as of August 2011 there is no
defaulted securities in the underlying portfolio compared to EUR
15.9 million in July 2009.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as the portfolio par amount, WARF,
diversity score, and weighted average recovery rate, may be
different from the trustee's reported numbers. In its base case,
Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of EUR 457.4
million, defaulted par of EUR0, a weighted average default
probability of 30.46% (consistent with a WARF of 3046), a
weighted average recovery rate upon default of 42.87% for a Aaa
liability target rating, a diversity score of 38 and a weighted
average spread of 2.85%. The default probability 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 of the assets in the collateral pool.
For a Aaa liability target rating, Moody's assumed that 82.17% of
the portfolio exposed to senior secured corporate assets would
recover 50% upon default, while the remainder non first-lien loan
corporate assets would recover 10%. In each case, historical and
market performance trends and collateral manager latitude for
trading the collateral are also relevant factors. These default
and recovery properties of the collateral pool are incorporated
in cash flow model analysis where they are subject to stresses as
a function of the target rating of each CLO liability being
reviewed.
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 and (2) the large concentration
of speculative-grade debt maturing between 2012 and 2015 which
may create challenges for issuers to refinance. CLO 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.
Sources of additional performance uncertainties are:
1) Moody's notes that around 74% of the collateral pool consists
of debt obligations whose credit quality has been assessed
through Moody's credit estimates. Large single exposures to
obligors bearing a credit estimate have been subject to a
stress applicable to concentrated pools as per the report
titled "Updated Approach to the Usage of Credit Estimates in
Rated Transactions" published in October 2009.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may
be extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest 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, weighted average coupon, and
diversity score.
The principal methodology used in the rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
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
modeled, 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.
KINTYRE CLO I: Moody's Upgrades Rating on Class E Notes to 'Caa1'
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Kintyre CLO I P.L.C.:
-- EUR239,750,000 Class A Senior Secured Floating Rate Notes
due 2023, Upgraded to Aa1 (sf); previously on June 22, 2011
A1 (sf) Placed Under Review for Possible Upgrade
-- EUR20,300,000 Class B Senior Secured Deferrable Floating
Rate Notes due 2023, Upgraded to A3 (sf); previously on
June 22, 2011 Ba1 (sf) Placed Under Review for Possible
Upgrade
-- EUR21,700,000 Class C Senior Secured Deferrable Floating
Rate Notes due 2023, Upgraded to Ba1 (sf); previously on
June 22, 2011 B1 (sf) Placed Under Review for Possible
Upgrade
-- EUR19,950,000 Class D Senior Secured Deferrable Floating
Rate Notes due 2023, Upgraded to Ba3 (sf); previously on
June 22, 2011 Caa3 (sf) Placed Under Review for Possible
Upgrade
-- EUR11,550,000 Class E Senior Secured Deferrable Floating
Rate Notes due 2023, Upgraded to Caa1 (sf); previously on
June 22, 2011 Ca (sf) Placed Under Review for Possible
Upgrade
Ratings Rationale
Kintyre CLO I P.L.C., issued in March 2007, is a single currency
Collateralised Loan Obligation backed by a portfolio of high
yield European loans. The portfolio is managed by Plemont
Portfolio Managers Limited advised by the Royal Bank of Scotland
plc. This transaction will be in reinvestment period until 20
December 2012. It is predominantly composed of senior secured
loans.
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The actions also reflect
consideration of an increase in the transaction's
overcollateralization ratios and deleveraging of the senior notes
since the rating action in November 2009.
The actions reflect key changes to the modeling assumptions,
which incorporate (1) a removal of the temporary 30% default
probability macro stress implemented in February 2009, (2)
increased BET liability stress factors as well as (3) change to a
fixed recovery rate modeling framework. Additional changes to the
modeling assumptions include (1) standardizing the modeling of
collateral amortization profile, and (2) changing certain credit
estimate stresses aimed at addressing the lack of forward looking
indicators as well as time lags in receiving information required
for credit estimate updates.
The overcollateralization ratios of the rated notes have improved
since the rating action in November 2009. The Class A, Class B,
Class C, Class D and Class E overcollateralization ratios are
reported at 136.3%, 124.7%, 114.3%, 105.8% and 101.1%,
respectively, in July 2011, versus October 2009 levels of 128.9%,
118.6%, 109.0%, 101.5% and 97.5%, respectively. Moody's also
notes that the Class D and Class E OC tests are currently failing
in absolute terms by 0.2% and 3.7% respectively. However, Classes
D and E currently bear EUR1.0 million and EUR1.6 million deferred
interest. According to the terms of the transaction, these
deferred amounts will only be paid once the Class C and Class D
notes, respectively, are redeemed in full, provided that
sufficient interest and principal cash flows will then be
available.
Reported WARF has increased from 2,600 to 2,856 between October
2009 and July 2011. However, this reported WARF overstates the
actual deterioration in credit quality 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 September 1, 2010. Additionally, defaulted securities total
about EUR21.8 million of the underlying portfolio compared to
EUR37.4 million in October 2009.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as the portfolio par amount, WARF,
diversity score, and weighted average recovery rate, may be
different from the trustee's reported numbers. In its base case,
Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of EUR294.2
million, a defaulted par of EUR21.98 million, a weighted average
default probability of 22.1% (consistent with a WARF of 2,831), a
weighted average recovery rate upon default of 46.8% for a Aaa
liability target rating, a diversity score of 34 and a weighted
average spread of 2.83%. The default probability 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 of the assets in the collateral pool.
For a Aaa liability target rating, Moody's assumed that 92% of
the portfolio exposed to senior secured corporate assets would
recover 50% upon default, while the remainder non first-lien loan
corporate assets would recover 10%. In each case, historical and
market performance trends and collateral manager latitude for
trading the collateral are also relevant factors. These default
and recovery properties of the collateral pool are incorporated
in cash flow model analysis where they are subject to stresses as
a function of the target rating of each CLO liability being
reviewed.
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 17% of the portfolio
being exposed to obligors located in Ireland, Spain and Italy and
2) the large concentration of speculative-grade debt maturing
between 2012 and 2015 which may create challenges for issuers to
refinance. CLO 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.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of
recoveries and the manager's decision to work out versus sell
defaulted assets create additional uncertainties. Moody's
analyzed the currently defaulted assets assuming recovery
values ranging from 10% to the current reported market price
of defaulted assets (i.e. 38%).
2) Moody's notes that around 80% of the collateral pool consists
of debt obligations whose credit quality has been assessed
through Moody's credit estimates.
3) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may
be extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
4) Other collateral quality metrics: The deal is allowed to
reinvest 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.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
The cash flow model used for this transaction, whose description
can be found in the methodology listed above, is Moody's CDOEdge
model.
In addition to the quantitative factors that are explicitly
modeled, 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.
OCELOT CDO I: S&P Lowers Rating on Class D Notes to ' CCC+'
-----------------------------------------------------------
Standard & Poor's Ratings Services took various credit rating
actions on seven synthetic collateralized debt obligation (CDO)
tranches issued by Ocelot CDO I PLC under the Ocelot CDO II
program. "At the same time, we withdrew our credit ratings on
series 2006-03 and 2005-6," S&P related.
"Following our analysis of the current credit quality of the
portfolio, we have lowered and placed on CreditWatch negative our
rating on series 2006-02, and lowered our ratings on series 2005-
02, 2006-04, 2005-04, and 2005-08. Since our last rating action
on Dec. 23, 2010, we believe the likelihood of the attachment
point being breached has increased (see 'Various Rating Actions
Taken On 10 Ocelot CDO I Tranches Under The Ocelot CDO II
Program'). In our opinion, the attachment points for these series
of notes are consistent with lower ratings," S&P stated.
"We have affirmed our ratings on series 2005-03 and 2005-07,
where the attachment point is, in our opinion, still at a level
commensurate with our current ratings," S&P related.
"At the same time, we have withdrawn the ratings on series 2006-
03 and 2005-06 following notification that the notes terminated
early and in full," S&P stated.
Ratings List
Rating
To From
*Rating Lowered and Placed on Creditwatch Negative
Ocelot CDO I PLC
EUR50 Million Class A Floating-Rate Mezzanine Notes
Series 2006-02 (Ocelot CDO II)
BBB (sf)/Watch Neg BBB+ (sf)
*Ratings Lowered
Ocelot CDO I PLC
EUR50 Million Class B Floating-Rate Mezzanine Notes
Series 2005-02 (Ocelot CDO II)
BB+ (sf) BBB- (sf)
Ocelot CDO I PLC
EUR1 Million Class C Floating-Rate Mezzanine Notes
Series 2006-04 (Ocelot CDO II)
BB+ (sf) BBB- (sf)
Ocelot CDO I PLC
EUR3 Million Class D Floating-Rate Mezzanine Notes
Series 2005-04 (Ocelot CDO II)
CCC+ (sf) B- (sf)
Ocelot CDO I PLC
EUR0.61 Million Class D Floating-Rate Mezzanine Notes
Series 2005-08 (Ocelot CDO II)
CCC+p (sf) B-p (sf)
*Ratings Affirmed
Ocelot CDO I PLC
EUR2 Million Class C Floating-Rate Mezzanine Notes
Series 2005-03 (Ocelot CDO II)
BB- (sf)
Ocelot CDO I PLC
EUR0.78 Million Class C Floating-Rate Mezzanine Notes
Series 2005-07 (Ocelot CDO II)
BB-p (sf)
*Ratings Withdrawn
Ocelot CDO I PLC
EUR2 Million Class A Floating-Rate Mezzanine Notes
Series 2006-03 (Ocelot CDO II)
NR BBB+ (sf)
Ocelot CDO I PLC
EUR1.225 Million Class B Floating-Rate Mezzanine Notes
Series 2005-06 (Ocelot CDO II)
NR BBB-p (sf)
NR--Not rated.
* IRELAND: In Receivership, Uncertain Over Transport Projects
-------------------------------------------------------------
RTE News reports that Ireland Transport Minister Leo Varadkar
said the country is in receivership and it is by no means certain
that any of the major transport projects for Dublin will be built
in the next five years.
Minister Varadkar said that the government is considering the
different transport options for the capital -- including Metro
North, DART Underground, the Luas Connector, and the DART link to
Dublin Airport, according to RTE News. The report relates that
Minister Varadkar said each is being assessed on affordability
grounds, on the transport and economic benefit it would have for
the city, and how many jobs it would create and hopes that one of
the projects can be funded.
The report notes that the government will publish a new National
Development Plan in the coming weeks, which will clarify which
infrastructural projects will go ahead.
* IRELAND: Number of Insolvencies Up 68% in August 2011
-------------------------------------------------------
TheJournal.ie reports that the number insolvencies in Ireland
rose in August with 10 companies every business day in the
country going bust during the month.
Citing new figures released September 1 by Vision-net.ie,
TheJournal.ie discloses that 205 companies were declared
insolvent last month and had either a Liquidator or Receiver
appointed, representing a 68% increase on the same month last
year.
April saw the highest number of insolvencies, at 215.
Of those companies declared insolvent in August, 60% had an
"unsatisfied mortgage", which means that any banks loans taken
out by these companies will be only partially repaid at best,
TheJournal.ie relays.
According to TheJournal.ie, Vision-net.ie said insolvencies in
August comprised of 174 liquidations (85%) and 31 receiverships
(15%), however, when compared to the July to August period,
displayed a 22% drop in the level of receiverships.
TheJournal.ie relates that Vision-net.ie said construction was
the sector most adversely affected by the appointment of a
liquidator, with 40% declared insolvent. Retail (33%), real
estate (21%) and hospitality (17%) businesses followed.
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N E T H E R L A N D S
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AVOCA II: Moody's Upgrades Rating on Class D Notes to 'B3 (sf)'
---------------------------------------------------------------
Moody's Investors Service has upgraded the rating of this note
issued by Avoca II CLO B.V:
-- EUR256M Class A-1 Senior Secured Floating rate notes due
2020 (current notional balance of 179,259,145.68), Upgraded
to Aaa (sf); previously on Jun 22, 2011 Aa1 (sf) Placed
Under Review for Possible Upgrade
-- EUR21M Class A-2 Senior Secured Floating rate Notes due
2020, Upgraded to Aa1 (sf); previously on Jun 22, 2011 A3
(sf) Placed Under Review for Possible Upgrade
-- EUR27M Class B Senior Secured Defferable Floating Rate
Notes due 2020, Upgraded to Baa2 (sf); previously on
Jun 22, 2011 Ba1 (sf) Placed Under Review for Possible
Upgrade
-- EUR15.7M Class C-1 Senior Secured Deferrable Floating Rate
Notes due 2020, Upgraded to Ba2 (sf); previously on Jun 22,
2011 B3 (sf) Placed Under Review for Possible Upgrade
-- EUR7.5M Class C-2 Senior Secured Deferrable Fixed Rate
Notes due 2020, Upgraded to Ba2 (sf); previously on Jun 22,
2011 B3 (sf) Placed Under Review for Possible Upgrade
-- EUR5M Class D Senior Secured Deferrable Floating Rate Notes
due 2020, Upgraded to B3 (sf); previously on Jun 22, 2011
Caa3 (sf) Placed Under Review for Possible Upgrade
Ratings Rationale
Avoca II CLO B.V issued in November 2004, is a single currency
Collateralised Loan Obligation ("CLO") backed by a portfolio of
senior secured European loans (96%) and mezzanine loans (4%). The
transaction is managed by Avoca Capital and has been in its
amortisation phase since 15th January 2010.
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011.
The actions reflect key changes to the modelling assumptions,
which incorporate (1) a removal of the temporary 30% default
probability macro stress implemented in February 2009, (2)
increased BET liability stress factors as well as (3) change to a
fixed recovery rate modelling framework. Additional changes to
the modelling assumptions include (1) standardizing the modelling
of collateral amortization profile and (2) changing certain
credit estimate stresses aimed at addressing the lack of forward
looking indicators as well as time lags in receiving information
required for credit estimate updates.
Moody's notes that the Class A1 notes have been paid down by
approximately EUR 76.7 million since the rating action in October
2009. Overcollateralization ratios have increased for senior
classes and slightly decreased for junior classes with the Class
A, Class B, Class C and Class D ratios observing 132.22%,
116.51%, 105.72% and 103.65% respectively, versus August 2009
levels of 127.23%, 115.93%, 107.71% and 106.08% respectively.
Reported WARF has increased from 2687 to 2830 between August 2009
and July 2011. The change in reported WARF understates the
stability of credit quality 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
September 1, 2010.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as the portfolio par amount, WARF,
diversity score, and weighted average recovery rate, may be
different from the trustee's reported numbers. In its base case,
Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of EUR 267.9
million, a weighted average default probability of 22.93%
(consistent with a WARF of 3336) a weighted average recovery rate
upon default of 48.4% for a Aaa liability target rating, a
diversity score of 27 and a weighted average spread of 2.96%. The
default probability 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 of the assets
in the collateral pool. For a Aaa liability target rating,
Moody's assumed that 96% of the portfolio exposed to senior
secured corporate assets would recover 50% upon default, while
the remainder non first-lien loan corporate assets would recover
10%. In each case, historical and market performance trends and
collateral manager latitude for trading the collateral are also
relevant factors. These default and recovery properties of the
collateral pool are incorporated in cash flow model analysis
where they are subject to stresses as a function of the target
rating of each CLO liability being reviewed.
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.
Sources of additional performance uncertainties are:
1) Deleveraging: The main source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging 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.
2) Moody's also notes that around 67% of the collateral pool
consists of debt obligations whose credit quality has been
assessed through Moody's credit estimates. Large single
exposures to obligors bearing a credit estimate have been
subject to a stress applicable to concentrated pools as per
the report titled "Updated Approach to the Usage of Credit
Estimates in Rated Transactions" published in October 2009.
The principal methodology used in the rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modelled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
The cash flow model used for this transaction, whose description
can be found in the methodology listed above, is Moody's CDOEdge
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.
GRESHAM CAPITAL: Moody's Upgrades Rating on Class E Notes to 'B1'
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Gresham Capital CLO II.
-- EUR121.5M Class A Senior Secured Floating Rate Notes due
2026, Upgraded to Aaa (sf); previously on Jun 22, 2011 Aa1
(sf) Placed Under Review for Possible Upgrade
-- EUR75M Senior Secured Floating Rate Variable Funding Notes
due 2026, Upgraded to Aaa (sf); previously on Jun 22, 2011
Aa1 (sf) Placed Under Review for Possible Upgrade
-- EUR22.8M Class B Deferrable Secured Floating Rate Notes,
Upgraded to Aa3 (sf); previously on Jun 22, 2011 A2 (sf)
Placed Under Review for Possible Upgrade
-- EUR17.1M Class C Deferrable Secured Floating Rate Notes due
2026, Upgraded to Baa1 (sf); previously on Jun 22, 2011 Ba1
(sf) Placed Under Review for Possible Upgrade
-- EUR14.7M Class D Deferrable Secured Floating Rate Note,
Upgraded to Ba2 (sf); previously on Jun 22, 2011 B1 (sf)
Placed Under Review for Possible Upgrade
-- EUR13.65M Class E Deferrable Secured Floating Rate Notes
due 2026, Upgraded to B1 (sf); previously on Jun 22, 2011
Caa2 (sf) Placed Under Review for Possible Upgrade
-- EUR5M Class S1 Combination Notes due 2026, Upgraded to A3
(sf); previously on Jun 22, 2011 Baa3 (sf) Placed Under
Review for Possible Upgrade
The ratings of the Combination Notes address the repayment of the
Rated Balance on or before the legal final maturity. For Class
S1, 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 Rated Balance may not necessarily correspond to the
outstanding notional amount reported by the trustee.
Ratings Rationale
Gresham Capital CLO II B.V., issued in October 2006, is a
multicurrency Collateralised Loan Obligation ("CLO") backed by a
portfolio of mostly high yield European loans of approximately
EUR146 million and GBP35 million. The portfolio is managed by
Investec Bank Plc. This transaction is in its reinvestment period
until November 20, 2012. It is predominantly composed of senior
secured loans.
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011.
The actions reflect key changes to the modeling assumptions,
which incorporate (1) a removal of the temporary 30% default
probability macro stress implemented in February 2009, (2)
increased BET liability stress factors as well as (3) change to a
fixed recovery rate modeling framework. Additional changes to the
modeling assumptions include (1) standardizing the modeling of
collateral amortization profile, (2) changing certain credit
estimate stresses aimed at addressing the lack of forward looking
indicators as well as time lags in receiving information required
for credit estimate updates, and (3) adjustments to the equity
cash-flows haircuts applicable to combination notes.
Moody's notes that the Class A notes and the Variable Funding
Notes have been paid down by approximately EUR17.9 million and
GBP2.0 million since the rating action in June 2011. As a result
of the deleveraging, the overcollateralization ratios have
increased since the rating action in June 2011. As of the latest
trustee report dated August 08, 2011, the Class A, Class B, Class
C, Class D and Class E overcollateralization ratios are reported
at 155.93%, 132.98%, 119.76%, 110.34% and 102.82%, respectively,
versus May 2011 levels of 149.30%, 128.78%, 116.75%, 108.07% and
100.40%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and seniority distribution in the asset
pool, may be different from the trustee's reported numbers. In
its base case, Moody's analyzed the underlying collateral pool to
have a performing par of EUR186 million, a weighted average
default probability of 28.5% (consistent with a WARF of 3541), a
weighted average recovery rate upon default of 46.40% for a Aaa
liability target rating, a covenant diversity score of 28, and a
weighted average spread of 3.17%. The default probability 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 of the assets in the collateral
pool. For a Aaa liability target rating, Moody's assumed that
90.49% of the portfolio exposed to senior secured corporate
assets would recover 50% upon default, while the remainder non
first-lien loan corporate assets would recover 10%. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors. These
default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject
to stresses as a function of the target rating of each CLO
liability being reviewed.
Moody's notes that the 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. CLO
notes' performance may also be impacted by divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Deleveraging: The main source of uncertainty in this
transaction is whether delevering from unscheduled principal
proceeds will continue and at what pace. Deleveraging may
accelerate due to high prepayment levels in the loan market,
which may have significant impact on the notes' ratings.
2) Moody's also notes that around 69.70% of the collateral pool
consists of debt obligations whose credit quality has been
assessed through Moody's credit estimates. Large single
exposures to obligors bearing a credit estimate have been
subject to a stress applicable to concentrated pools as per
the report titled "Updated Approach to the Usage of Credit
Estimates in Rated Transactions" published in October 2009.
3) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may
be extended due to the manager's decision to participate in
amend-to-extend offerings. Moody's tested for a possible
extension of the actual weighted average life in its analysis.
4) The deal has significant exposure to non-EUR denominated
assets. Volatilities in foreign exchange rate will have a
direct impact on interest and principal proceeds available to
the transaction, which may affect the expected loss of rated
tranches.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
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
modeled, 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.
ST. JAMES'S: Moody's Upgrades Rating on Class D Notes to 'Ba1'
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by St. James's Park CDO B.V.
Issuer: St. James's Park CDO B.V.
EUR50,000,000 Class A2 Senior Secured Floating Rate Notes due
2020, Upgraded to Aaa (sf); previously on Jun 22, 2011 Aa3 (sf)
Placed Under Review for Possible Upgrade
EUR28,000,000 Class B Senior Secured Floating Rate Notes due
2020, Upgraded to Aa1 (sf); previously on Jun 22, 2011 Baa1 (sf)
Placed Under Review for Possible Upgrade
EUR24,000,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2020, Upgraded to A3 (sf); previously on Jun 22, 2011
Ba2 (sf) Placed Under Review for Possible Upgrade
EUR26,000,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2020, Upgraded to Ba1 (sf); previously on Jun 22, 2011
B3 (sf) Placed Under Review for Possible Upgrade
EUR12,000,000 Class E Senior Secured Deferrable Floating Rate
Notes due 2020, Upgraded to Ba3 (sf); previously on Jun 22, 2011
Caa3 (sf) Placed Under Review for Possible Upgrade
Ratings Rationale
St. James's Park CDO B.V., issued in December 2007, is a multi
currency Collateralised Loan Obligation backed by a portfolio of
mostly high yield European leveraged loans. The portfolio is
managed by Blackstone Debt Advisors L.P. This transaction passed
its reinvestment period in Nov 2010. It is predominantly composed
of senior secured loans.
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011.
The actions reflect key changes to the modeling assumptions,
which incorporate (1) a removal of the temporary 30% default
probability macro stress implemented in February 2009, (2)
increased BET liability stress factors as well as (3) change to a
fixed recovery rate modeling framework. Additional changes to the
modeling assumptions include standardizing the modeling of
collateral amortization profile.
Moody's notes that the Class A1 notes have been paid down by
approximately 49% or EUR59.1 million since the rating action in
August 2009. As a result of the deleveraging, the
overcollateralization ratios have increased since the rating
action in August 2009. As of the latest trustee report dated
August 15, 2011, the Class A/B and Class C overcollateralization
ratios are reported at 136.4% and 124.53% respectively, versus
August 2009 levels of 130.6% and 120.9%, respectively.
Reported WARF has increased from 2761 to 2828 between July 2009
and July 2011. The change 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. In addition, securities rated Caa or lower make
up approximately 8.9% of the underlying portfolio versus 14.1% in
July 2009. Additionally, defaulted securities total about EUR4.5
million of the underlying portfolio compared to EUR5.4 million in
July 2009.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as the portfolio par amount, WARF,
diversity score, and weighted average recovery rate, may be
different from the trustee's reported numbers. In its base case,
Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of EUR341.5 million
at the initial FX rate, defaulted par of EUR4.5 million, a
weighted average default probability of 20.2% (consistent with a
WARF of 3006), a weighted average recovery rate upon default of
46.4% for a Aaa liability target rating, a diversity score of 38
and a weighted average spread of 3.25%. The default probability
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 of the assets in the collateral
pool. For a Aaa liability target rating, Moody's assumed that
88.89% of the portfolio exposed to senior secured corporate
assets would recover 50% upon default, while the remainder non
first-lien loan corporate assets would recover 10%. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also relevant factors.
These default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject
to stresses as a function of the target rating of each CLO
liability being reviewed.
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 2) the large
concentration of speculative-grade debt maturing between 2012 and
2015 which may create challenges for issuers to refinance. CLO
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.
Sources of additional performance uncertainties are:
1) Deleveraging: The main source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging may
accelerate due to high prepayment levels in the [bond/loan]
market and/or collateral sales by the manager, which may have
significant impact on the notes' ratings.
2) Moody's also notes that around 47.6% of the collateral pool
consists of debt obligations whose credit quality has been
assessed through Moody's credit estimates. Large single
exposures to obligors bearing a credit estimate have been
subject to a stress applicable to concentrated pools as per
the report titled "Updated Approach to the Usage of Credit
Estimates in Rated Transactions" published in October 2009.
3) The deal has significant exposure to non-EUR denominated
assets. Volatilities in foreign exchange rate will have a
direct impact on interest and principal proceeds available to
the transaction, which may affect the expected loss of rated
tranches.
The principal methodology used in the rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
The cash flow model used for the 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
modeled, 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.
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R O M A N I A
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REALITATEA MEDIA: Files For Insolvency
--------------------------------------
Romania-insider.com reports that Realitatea Media has filed for
insolvency, according to the Bucharest Court. The first court
term was set for September 7.
Realitatea Media, which has been taken over by real estate
investor Elan Schwartzenberg earlier this year, has a management
contract with Asesoft, which owned by Romanian businessman
Sebastian Ghita. In October 2010, when the management contract
was signed, Asesoft announced plans to invest EUR75 million in
Realitatea Media in the following five years. At that time,
Realitatea Media was controlled by Romanian businessman Sorin
Ovidiu Vantu.
Romania-insider.com discloses that Realitatea Media reported a
loss of EUR20.4 million last year, down from EUR39 million the
year before. Citing data reported to the Finance Ministry,
Romania-insider.com says the company's turnover in 2010 was just
slightly bigger than its losses at EUR23 million. Various
creditors have already asked for the company's insolvency,
according to Romania-insider.com.
Romania-insider.com relates that Romanian magazine Capital said
Willbrook Management is currently negotiating to take over
Romanian TV station The Money Channel. The acquisition should
have been finalized in August, according to Daiana Voicu,
managing partner of Willbrook International.
Realitatea Media SA operates TV stations Realitatea TV, The Money
Channel, ActionStar, CineStar and ComedyStar, and radio stations
Realitatea FM, Radio Guerrilla and Radio Alpha. It has almost
800 employees.
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PROGNOZ SILVER: Moscow Terminated Bankruptcy, Says High River
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High River Gold Mines Ltd. was informed that the Arbitration
Court of the City of Moscow terminated the official bankruptcy
proceedings for Prognoz Silver LLC in connection with the
application of Prognoz Silver claiming that the criteria of
bankruptcy are no longer in place.
The application to put Prognoz Silver into bankruptcy was
initially filed by Prognoz Silver itself. High River holds a 50%
indirect interest in Prognoz Silver, which operates the Prognoz
silver project in the Republic of Sakha (Yakutia), Russia.
High River and OJSC Buryatzoloto, which participated in financing
the expenditures at the Prognoz silver project, are considering
and evaluating the future steps with regard to Prognoz Silver and
development of the Prognoz silver project.
About High River
High River is an unhedged gold company with interests in
producing mines and advanced exploration projects in Russia and
Burkina Faso. Two underground mines, Zun-Holba and Irokinda, are
situated in the Lake Baikal region of Russia. Two open pit gold
mines, Berezitovy in Russia and Taparko-Bouroum in Burkina Faso,
are also in production. Finally, High River has a 90% interest
in a development project, the Bissa gold project in Burkina Faso,
and a 50% interest in an advanced exploration project with NI 43-
101 compliant resource estimates, the Prognoz silver project in
Russia.
RAIFFEISENBANK ZAO: S&P Raises Stand-Alone Credit Profile to 'bb'
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Standard & Poor's Ratings Services had taken positive rating
actions on six Russian banks, thanks to improved operating
conditions and macroeconomic prospects.
S&P took these actions:
Raiffeisenbank ZAO: "We have revised our assessment of the
stand-alone credit profile to 'bb' from 'bb-' and affirmed
the long-term, short-term, and national scale ratings," S&P
related.
OJSC Alfa-Bank: "We revised the outlook to positive from
stable and affirmed the long-term, short-term, and national
scale ratings," S&P stated.
Bank Vozrozhdenie: "We raised the long-term rating to 'BB-'
from 'B+' and we raised the national scale rating to 'ruAA-'
from 'ruA+'. We affirmed the short-term rating," S&P related.
Ural Bank for Reconstruction and Development: "We revised the
outlook to positive from stable, raised the national scale
rating to 'ruBBB+' from 'ruBBB-', and affirmed the long- and
short-term ratings," S&P noted.
International Bank of Saint-Petersburg: "We revised the
outlook to positive from stable and affirmed the long-term,
short-term, and national scale ratings," S&P said.
Development Capital Bank OJSC: "We raised the long-term
rating to 'B' from 'B-' and we raised the national scale
rating to 'ruA-' from 'ruBBB+'. We affirmed the short-term
rating," S&P noted.
Summary
"We took these positive rating actions because we expect these
banks will have sustainable levels of business and continue to
recover from the economic crisis of 2008-2009. Since 2009 most
rated Russian banks have improved liquidity and lowered their
dependence on foreign funding and central bank liquidity
facilities. This is due to a significant increase in customer
deposits over the past two years. We believe that a majority of
rated Russian banks will generate preprovision earnings
sufficient to absorb expected credit risk charges and produce
retained earnings at a pace that will largely support the
anticipated expansion of risk assets," S&P stated.
Systemwide asset quality has improved since the fourth quarter of
2010, due to the economic rebound and banks' efforts to work out
delinquent loans. Consequently, the stock of nonperforming loans
is declining. "In our opinion, the systemwide rate of new loan-
loss provisions to loans in 2011 will be the same or a bit lower
than in 2010. Over the medium term, we expect gradual improvement
in asset quality as the impact of the deep 2009 recession
recedes," S&P related.
After a slow start in 2011, most rated Russian banks have
accelerated their lending to both corporate and retail borrowers.
"We anticipate that systemwide loans will grow a nominal 20% in
2011 and 25% in 2012 (this translates to an estimated 10%-15%
real rate of growth). We believe this trend will persist in the
medium term, helping to compensate for an anticipated narrowing
of net interest margins. The double-digit expansion in lending
and overall business volumes will improve most banks' financial
performance -- especially in light of continued rapid expansion
of relatively profitable retail loans," according to S&P.
The outlooks on the credit ratings on most banks in Russia are
stable or positive. "If the relatively positive systemwide trends
in asset quality, liquidity, and expanding business volumes
continue, we anticipate few negative rating actions in the medium
term," S&P said.
At the same time, Russia's banking industry continues to retain
several risk factors that limit the credit ratings on private
sector banks. Russia has only moderate growth prospects due to an
uncompetitive manufacturing sector and the slow pace of economic
reform. Growth is relatively volatile and depends highly on the
prices of oil and other commodities. Russia's weak and arbitrary
legal system creates uncertain prospects for workouts and
recoveries of impaired loans. "Moreover, bank regulation is
heavily rules based, allowing banks to circumvent the spirit of
the regulations, in our opinion. Lastly, the dominance of state-
owned banks, particularly in terms of access to and cost of
funding, results in an unbalanced playing field, to the detriment
of private sector bank creditworthiness," S&P stated.
Raiffeisenbank ZAO
"We revised the bank's stand-alone credit profile to 'bb' from
'bb-' to reflect our view on its positive business development
through improved asset quality, while it managed to keep an
adequate liquidity cushion and capitalization on the back of the
eased operating environment in Russia. The bank's asset quality
improved over 2010 and the first half of 2011 and compares
favorably with the system average. This is due, in our view, to
its adequate underwriting criteria, monitoring procedures,
recovery, and restructuring efforts. The long-term rating on
Raiffeisenbank ZAO is three notches higher than its stand-alone
credit profile, reflecting our view of the bank as a core
entity of the Austrian Raiffeisen group," S&P said.
The ratings continue to be constrained by relatively high
systemwide macroeconomic risks.
Further rating actions on the bank could ensue from changes to
the sovereign foreign currency ratings, but are not necessarily
automatically linked. "If we lower the sovereign foreign currency
ratings and Transfer and Convertibility (T&C) assessment, it
would likely trigger a similar rating action on Raiffeisenbank
ZAO. We might lower the ratings on Raiffeisenbank ZAO if the
bank's parent entity evolves in a way that weakens the bank's
core status within the group, if that were not offset by
improvements in the bank's stand-alone credit profile that
resulted in substantial asset-quality enhancement, while
maintaining adequate levels of liquidity and capitalization.
Near-term probability of an upgrade is low and would only be
possible if we also raised the sovereign foreign currency ratings
and T&C assessment on Russia," S&P said.
OJSC Alfa-Bank
The ratings on Alfa-Bank reflect its consistent strategy,
established franchise as the largest private sector financial
group in Russia, and good earnings prospects. "Our outlook on
Alfa-Bank is positive. The bank is well positioned to benefit
from the expected growth in the Russian banking market over the
medium term. Since the Russian credit cycle bottomed out in the
first half of 2010, credit quality, including that of Alfa-Bank,
has bounced back. Compared with its Russian peers, Alfa-Bank has
taken an aggressive stance with respect to restructuring and
collecting the debts of problem borrowers. The increased
proportion of retail deposits to total liabilities over the past
two years has improved its funding profile. Equity plus loan-loss
reserves equaled 25% of loans at year-end 2010, providing
adequate coverage of the bank's asset risks," S&P related.
The operating environment for banks in Russia remains risky
because of the economy's high credit risk and the various
shortcomings in Russia's legal and regulatory infrastructure.
Alfa-Bank also retains significant single-party concentration in
lending and deposits. "We estimate that the bank's operating
margin in 2011 will narrow somewhat due to competition from state
banks and moderately tighter net interest margins. However, total
pretax income likely will equal or exceed that of 2010 ($700
million) due to an increase in business volumes. The declining
number of problem borrowers from the 2009 recession and the
typical running rate of credit losses in Russia will likely
result in full-year 2011 loss provisions moderately lower than in
2010," S&P noted.
"The positive outlook indicates that we would raise the ratings
if the economic rebound remains steady and Alfa-Bank maintains
its current capital leverage and cushion of cash and securities
eligible for secured borrowing as a proportion of total assets. A
reduction of concentrations in loans and deposits at Alfa-Bank
could also lead to an upgrade. But we could lower the ratings if
Russia entered a recession, or if Alfa-Bank loosened its risk
management, liquidity, or debt policies," S&P stated.
Bank Vozrozhdenie
"We upgraded Bank Vozrozhdenie because of the bank's good
earnings recovery with provisioning ratios, liquidity, and
capitalization remaining adequate, and thanks to its modest risk
appetite. The ratings are constrained by the bank's still quite
high, albeit stabilized, level of nonperforming and foreclosed
assets on the balance sheet, concentrations in the loan book, and
continuing competitive pressure from larger banks," S&P stated.
"We expect that Vozrozhdenie will continue to follow a
conservative credit management strategy based on local market
knowledge. We might consider a positive rating action if the
bank's asset quality indicators moved closer to precrisis levels,
with improving business diversification, while liquidity and
capitalization remained adequate," S&P related.
"We could lower the ratings if we saw a pronounced negative trend
in asset quality or deterioration in its risk profile, or if the
bank's core earnings and capitalization were to come under
downward pressure," S&P said.
Ural Bank for Reconstruction and Development
"The revision of the outlook on Ural Bank for Reconstruction and
Development (UBRD) to positive from stable reflects the
demonstrated recovery in the bank's earnings and asset quality,
which we expect to continue on a sustainable basis. The ratings
on the bank reflect the bank's good market knowledge and position
in the Sverdlovsk Oblast (BB/Positive/--), its home region; and
an adequate, albeit potentially volatile, share of liquid assets
and business benefits derived from the bank's relationship with
Russian Copper Co. (not rated)," S&P related.
"We expect that UBRD's asset quality will continue to improve and
the bank will maintain adequate liquidity at least over the next
two years. The current level of capital does not include room for
much further expansion at the current rating level. However, a
sizable capital increase is expected in the fourth quarter of
2011 from the bank's shareholders: Depending upon the ultimate
amount, this could trigger an upgrade. The potential upgrade
would also depend upon the pace of the bank's loan expansion and
our expectations of profitability and self-sustained capital
generation," S&P said.
The ratings on UBRD continue to be constrained by high systemwide
risks, as well as the bank's weak, although improving,
capitalization and high single-name and industry lending
concentrations, including those to related parties.
"We would lower the ratings if the bank's asset quality and risk
profile or liquidity were to deteriorate significantly. We could
revise the outlook to stable if the capital increase does not
materialize," S&P stated.
International Bank of Saint-Petersburg
The revision of the outlook to positive from stable reflects
International Bank of Saint-Petersburg's demonstrated resilience
to market conditions. "We expect that the bank will sustain its
good name recognition in Russia's Northwest Federal District, and
maintain an adequate liquidity and credit profile with a
particular focus on risk management," S&P related.
The ratings remain constrained by the bank's high single-name
concentrations, squeezed net interest margin, and low
capitalization.
"We could raise the ratings if International Bank of Saint-
Petersburg is able to sustainably improve its profitability,
decrease single-name concentrations, and maintain adequate
capitalization. We would consider a negative rating action if the
bank's financial profile deteriorates significantly, asset
quality worsens materially, profitability threatens
capitalization, or if there is a significant liquidity shortage,"
S&P related.
Development Capital Bank OJSC
The upgrade of Development Capital Bank reflects the bank's good
level of capitalization and liquidity position, as well as
improved asset quality metrics. The ratings are supported by
gradually improving diversification of the loan portfolio and the
recovery of the Moscow region's real estate market, which is the
bank's main lending industry concentration. The ratings continue
to be constrained by the bank's narrow business base with its
dependence on the owner's real estate business and its high,
although improving, concentrations on both sides of the balance
sheet.
"The stable outlook balances our view on the remaining high
concentrations and solid capitalization and liquidity.
Capitalization is unlikely to be materially diluted by expected
moderate asset growth over the next two years, and will be
supported by self-sustained capital generation and the owner's
current reluctance to withdraw dividends. "We also expect
Development Capital Bank to maintain an acceptable portion of
liquid assets in future," S&P stated.
"We could raise the ratings if the bank significantly reduces its
single-name and industry concentrations and improves the
diversity of its client base through organic business growth.
However, if the bank's asset quality significantly worsens or if
an unjustified increase in risk appetite erodes its currently
good capital and liquidity buffers, we could lower the ratings,"
S&P added.
Ratings List
Upgraded; CreditWatch Action; Ratings Affirmed
To From
Raiffeisenbank ZAO
Counterparty Credit Rating BBB/Stable/A-3 BBB/Stable/A-3
Russia National Scale Rating ruAAA ruAAA
Stand-Alone Credit Profile bb bb-
OJSC Alfa-Bank
Counterparty Credit Rating BB-/Positive/B BB-/Stable/B
Russia National Scale Rating ruAA- ruAA-
Bank Vozrozhdenie
Counterparty Credit Rating BB-/Stable/B B+/Positive/B
Russia National Scale Rating ruAA- ruA+
Ural Bank for Reconstruction and Development
Counterparty Credit Rating B-/Positive/C B-/Stable/C
Russia National Scale Rating ruBBB+ ruBBB-
International Bank of Saint-Petersburg
Counterparty Credit Rating B-/Positive/C B-/Stable/C
Russia National Scale Rating ruBBB ruBBB
Development Capital Bank OJSC
Counterparty Credit Rating B/Stable/C B-/Positive/C
Russia National Scale Rating ruA- ruBBB+
NB: This list does not include all ratings affected.
* RUSSIA: Central Bank's Head of Supervision Steps Down
-------------------------------------------------------
Courtney Weaver and Charles Clover at The Financial Times report
that the head of supervision at Russia's central bank has
resigned after a series of scandals in which regulators failed to
detect massive mismanagement in some of Russia's largest banks.
According to the FT, Gennady Melikyan, deputy governor of the
central bank in charge of bank supervision, announced he would
step down on September 9.
Mr. Melikyan occupied one of the most hazardous jobs in Russian
financial sector, the FT relates. His predecessor, Andrei
Kozlov, was shot dead in 2006 in an assassination-style hit after
launching a crusade to clean up the sector and revoking the
licenses of a number of banks, the FT relays.
Mr. Melikyan's departure follows the politically tinged
US$14 billion bail-out of the Bank of Moscow, Russia's third
largest bank, in July, the FT relates.
After Bank of Moscow was bought earlier this year by VTB, a
state-controlled bank, the latter said it found that nearly a
third of Bank of Moscow's assets were loans extended to companies
connected to its former management, the FT recounts. Alexei
Kudrin, finance minister, accused the bank's former management --
led by Andrei Borodin, a close ally of Yury Luzhkov, the ousted
Moscow mayor -- of siphoning off huge sums of money, the FT
relates. Mr. Borodin denies the accusations, the FT says.
Bank of Moscow's bail-out followed last year's collapse of
Mezhprombank, owned by the Kremlin-connected tycoon Sergei
Pugachyov, which was declared bankrupt in November after amassing
RUR80 billion in debts, and the bail-out of a third bank, AMT, to
the tune of RUR12 billion, the FT discloses.
Experts in the banking sector said that while the three banks'
histories were largely isolated incidents, collectively they
demonstrated a troubling lack of oversight by the central bank,
the FT notes.
Mr. Melikyan, as cited by the FT, said he was standing down for
health reasons and denied his resignation was related to any of
the recent scandals. He is likely to be replaced by another
central bank official, the FT states.
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ABENGOA SA: Fitch Affirms 'BB' Long-Term Issuer Default Rating
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Fitch Ratings has affirmed Abengoa, S.A.'s Long-term Issuer
Default Rating (IDR) and senior unsecured rating at 'BB'. The
Outlook for the Long-term IDR is Stable.
Abengoa's diversification in terms of geography, industry and
counterparties remains a key rating driver as well as its leading
positions in the renewable energy field. This is further
supported by its integrated business model between engineering
and construction and its solar, biofuels, transmission, water and
recycling businesses. Fitch notes that Abengoa's order backlog
was around EUR7.8bn as of June 2011. This ensures average
business activity of 24 months, which is above some of its
national and international peers.
Abengoa's rating is constrained by its relatively high leverage
given the large contribution of engineering and construction and
biofuels to corporate (recourse) earnings. The ratings are based
on an assumption of sustainable net (recourse) leverage of below
3x. Fitch views positively Abengoa's recent announcement of
several asset disposals (Telvent and some of its Brazilian
transmission lines) as it will enable the company to reduce its
corporate net leverage in order to be commensurate with its
current rating level.
Fitch understands that Abengoa may continue divesting some
businesses on an opportunistic basis as part of a strategy to
optimise value and incorporate partners to its different
businesses. Successful implementation of such steps would be
credit enhancing for the company.
Government and regulatory support for renewable energy sources,
especially in the EU and US, are essential for Abengoa's
business. Although Fitch does not expect any significant changes
to existing support mechanisms, any variations that affected its
businesses could put negative pressure on the ratings.
Despite the Stable Outlook, Fitch notes that there is limited
headroom at the current rating level, as also reflected by a
tight Fitch-adjusted interest cover ratio forecast of around 2x.
Long delays in the delivery of key projects, negative regulatory
changes leading to a decrease in the order backlog, and lower
dividend flow from non-recourse businesses to the parent company
may be negative for the ratings. In addition, increased leverage
beyond 3x (on a net recourse basis) due to higher than expected
capex requirements or debt funded acquisitions would possibly
lead to a downgrade.
On the other hand, delivery of some key projects and an increase
in the profitability of the biofuels and recycling business along
with a reduction in net leverage would be positively assessed by
Fitch.
Abengoa's liquidity at corporate level as of June 2011 should be
sufficient to cover corporate debt (EUR1.2 billion) for the next
18-24 months with corporate cash and equivalents of EUR3.2
billion after receiving EUR930 million of its recent assets
disposals.
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U N I T E D K I N G D O M
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CLINTON CARDS: Seeks More Time to Pay Rent Bill
-----------------------------------------------
The Scotsman reports that Clinton Cards has reportedly been
forced to ask its landlords for more time to pay its rent as it
struggles with falling sales.
According to the Scotsman, one Sunday newspaper said the company
has been contacting landlords of its 700+ shops to ask to pay a
third of its rent two weeks after the due date.
Rent is due at the end of this month, but consumer spending is
weak after a difficult summer, the Scotsman discloses.
As reported by the Troubled Company Reporter-Europe on Aug. 2,
2011, The Financial Times related that with revenues under attack
from supermarkets, cheaper rivals like Card Factory and online
card personalization sites, a collapse in profitability has led
to concerns from landlords that a restructuring is on the cards
to reduce the GBP80 million annual rent bill on its 800-store UK
portfolio.
Clinton Cards is a greetings card retailer.
DA GREEN & SONS: Lincolnshire Field Acquires Whaplode Site
----------------------------------------------------------
Spalding Guardian reports that one of South Holland's farm
giants, Lincolnshire Field Products Ltd, has bought the former DA
Green and Sons site at Whaplode for an undisclosed sum.
As reported in the Troubled Company Reporter-Europe on Oct. 18,
2010, DA Green and Son in Whaplode has gone into administration.
R. Grant, S. Wilson and A. O'Keefe were appointed joint
administrators of the company on Oct. 14, 2010.
Spalding Guardian notes that the company's joint administrators
have put a GBP1.5 million price tag on the company's 10-acre main
site at High Road.
LFP Financial Director Aubrey Day said, "We paid less than the
guide price," according to Spalding Guardian.
The reports notes that Mr. Day said the Whaplode site lies at the
heart of LFP's farming operations, which stretch from Sutton
Bridge to Quadring Fen and from Swineshead to Cowbit. The report
relates that LFP plans to create chilled storage on the Green's
site for 4,600 tonnes of produce, chiefly potatoes and white
cabbage, and use other areas for ambient storage. It may also
store some farm machines there, the report adds.
DA Green and Son is a construction firm who worked on a series of
high profile national projects. The firm has worked at a number
of high profile sights including Heathrow Approach, Trent Bridge
cricket ground and Harlequins rugby club.
FARRINGDON MORTGAGES: Fitch Affirms Low-B Ratings on Two Tranches
-----------------------------------------------------------------
Fitch Ratings has affirmed eight tranches of Farringdon Mortgages
Plc (Farringdon) 1 and 2, a series of UK non-conforming RMBS
transactions.
The affirmations reflect the stable performance of the underlying
collateral, the low current stock of repossessed properties and
the sufficient level of credit enhancement available to the
notes. The Farringdon series comprises residential mortgage
loans originated solely by Rooftop Mortgages Limited. The
portfolios are highly deleveraged with remaining note principal
of 14.8% in Farringdon 1 and 23.6% in Farringdon 2.
Arrear levels have stabilized as the loans, which are all linked
to three-month LIBOR have benefited from the current low rates.
In July 2011, the volume of loans in arrears by more than three
months (excluding repossessions) was 14.8% for Farringdon 1 and
20.01% for Farringdon 2, compared with peaks of 24.2% and 25.6%
in Q309, respectively.
Subsequently, repossession activities have remained low over the
past few interest payment dates. The number of repossessed
properties sold in the past year has exceeded the number of newly
repossessed assets, enabling a decrease in the volume of unsold
repossessions. As of July 2011, Farringdon 1 had repossessed
properties of only GBP476,580 (2.7% of the current pool) whilst
in Farringdon 2 this balance stood at GBP86,527, (0.18% of the
current portfolio balance). The low volume of repossessed
properties is expected to limit losses, which should be covered
by the reserve funds and will subsequently allow the reserve
funds to steadily replenish with available gross excess spread.
In Fitch's view, replenishment of the reserve funds will increase
the credit enhancement available in these deals. As of July
2011, Farringdon 1's cash reserve fund was at 51.5% of its target
amount and Farringdon 2'scash reserve fund was at 51.8%.
At present, Fitch does not expect that the performance will
deteriorate to levels that would threaten the ratings of the
notes. As a result, the ratings of the notes have been affirmed.
As the portfolio has deleveraged to such low levels, the agency
recognizes that delinquency of a few loans could lead to a
significant jump in arrears. Fitch will continue to monitor the
performance of this deal and take rating actions as it deems
necessary.
The rating actions are as follows:
Farringdon Mortgages No. 1 Plc (Farringdon 1):
-- Class M2a (ISIN XS0211300362) affirmed at 'AAAsf', Outlook
Stable
-- Class B1a (ISIN XS0211301766) affirmed at 'AAsf', Outlook
Stable
-- Class B2a (ISIN XS0211303382) affirmed at 'BBsf', Outlook
Stable
Farringdon Mortgages No. 2 Plc (Farringdon 2):
-- Class A2a (ISIN XS0228709985) affirmed at 'AAAsf'; Outlook
Stable
-- Class A2a DAC (ISIN XS0228710561) affirmed at 'AAAsf';
Outlook Stable
-- Class M2a (ISIN XS0228711882) affirmed at 'AAsf'; Outlook
Stable
-- Class B1a (ISIN XS0228712260) affirmed at 'BBBsf'; Outlook
Stable
-- Class B2a (ISIN XS0228712930) affirmed at 'Bsf'; Outlook
Stable
JJB SPORTS: Draws Up Incentive Plan to Accelerate Turnaround
------------------------------------------------------------
Mark Wembridge at The Financial Times reports that senior
managers at JJB Sports could substantially increase their
ownership of the struggling sportswear retailer under an
incentive scheme designed to accelerate the turnaround at the
retailer.
According to the FT, under the new agreement, which replaces all
previous management incentive schemes, senior managers would
receive in aggregate 20% of any growth in the value of the
company -- growing by 5% per annum until the scheme vests -- once
the market capitalization of the company passes GBP101.3 million
from the current level of GBP60 million.
If the value of the company reaches GBP193 million, double the
value of an emergency cash injection received from shareholders
last year, senior managers will automatically receive new shares
representing 7.2% of the current share capital, the FT says.
This year, JJB warned that it could take as long as five years to
turn around the business after it reported a doubling of full-
year losses to GBP181 million, the FT relates. It narrowly
avoided administration in March thanks to an injection of nearly
GBP100 million from investors including Crystal Amber, an
activist fund, Harris Associates of the US and the Bill and
Melinda Gates Foundation, the FT recounts.
Aim-traded JJB said it would call a general meeting to approve
the incentive plan, the FT discloses.
JJB, as cited by the FT, said the scheme was "designed to
incentivize the company's directors and senior managers to
execute the company's turnaround plan successfully and share in
the value that would be created in the process."
JJB shares have lost more than 80% of their value over the past
12 months, the FT notes.
JJB Sports plc is a sports retailer supplying branded sports and
leisure clothing, footwear and accessories. JJB Sports is a high
street sports retailer, with 250 stores in the United Kingdom and
Eire. It provides a range of products covering United Kingdom
sports. The Company stocks all its sports brands, supported by
its own-brand and exclusive ranges. The Company's segment
includes the Company's retail operations, including any retail
stores, which are attached to fitness clubs. The Company
operates in two geographic segments: the United Kingdom and Eire.
The Company's subsidiaries include Blane Leisure Limited, Sports
Division (Eireann) Limited, Golf TV Limited, TV Sports Shop
Limited, Original Shoe Company Limited and Qubefootwear Limited.
The Company sold its fitness club operations on March 25, 2009.
PREMIER FOODS: Moody's Lowers CFR to Ba3; Outlook Remains Stable
----------------------------------------------------------------
Moody's Investors Service has lowered to Ba3 from Ba2 the
corporate family rating (CFR) of Premier Foods plc. The outlook
remains stable.
Ratings Rationale
"The downgrade of Premier Foods' corporate family rating to Ba3
reflects Moody's expectation that deteriorating market conditions
are likely to put pressure on the company delivering on their
business plan in line with Moody's previous expectations and
result in key credit metrics, particularly RCF to Net debt,
decreasing during FY2011 and delaying deleveraging prospects",
says Douglas Crawford, Moody's lead analyst for Premier Foods.
The rating action incorporates Moody's expectation that the
company will show deteriorating operating performance and credit
metrics as a result of the depressed consumer environment and the
pressures that input price increases put on the business. It also
relects the rating agency's concerns of further value declines in
the branded business versus private label products. The rating
also further reflects Moody's view that covenant headroom under
the existing bank facilities will be tight over the next few
quarters following the recent trend in earnings as well as the
gradual step-up in covenant levels.
Premier Foods' ongoing business trading profit fell 29% year-on-
year to GBP67 million in the half year to 25 June 2011 in
conjunction with a 3% fall in branded sales. Reported Average
debt to EBITDA pro forma for the disposal of the meat free and
canning divisions now stands at 4x, up from 3.74x at December
2010 and further away from the company's target of reducing to
3.25x or less. Whilst Moody's acknowledges Premier Foods' lack of
promotional spend compared to the market in the first half of
this year following on from the grocery de-listings, it will
still be susceptible to a switch to lower priced products even
with the increased promotions expected in the second half of
2011, or a need for renewed brand investment.
As a result, Moody's expects Premier Foods' adjusted leverage
ratio to approach 4.5x at the end of FY2011, exceeding Moody's
previous expectations. Similarly, its adjusted RCF to Net debt
eroded to approximately 12% for the last-twelve months to June
2011 from around 14% in FY2010 and is expected to decline further
below 12% at FY2011. This expected deterioration in Premier
Foods' credit metrics would position it more in the Ba3 rating
category relative to its peers.
More positively, Moody's acknowledges the company's large
portfolio of well-known brands and its recent ability to fully
pass on input price increases despite the time lag taken and the
temporary de-listing of their grocery products by a large
customer. Combined with sustained procurement gains and
manufacturing efficiencies, these should enable Premier Foods to
cope with moderate input cost inflation in the future. Moreover,
the company has a public Average debt to EBITDA target and a
public financial strategy to reduce debt and has done so during
the course of this year through its disposals.
Moody's regards Premier Foods' current liquidity as just adequate
for its requirements. The company had cash of GBP116 million as
of June 2011 and GBP249 million in availability under its GBP500
million RCF that matures in 2013. Final net proceeds from the
disposal of the Canning business are expected to be GBP167
million and the rating agency expects positive free cash flow
generation in the second half of the year. However, Moody's notes
that covenant headroom on the bank facilities could weaken to a
single digit percentage over the next few quarters and the
adequacy of the liquidity profile depends on compliance with
these covenants and the company otherwise retaining continued
access to their bank facilities.
The stable outlook reflects the rating agency's view that metrics
are likely to remain within the parameters for the rating and
that the company is expected to maintain an adequate liquidity
profile at all times.
In view of the rating action, upward pressure is not expected in
the short term. However, it could materialize if leverage trends
below 4x on a sustained basis with RCF to Net debt improving
beyond 14% in conjunction with evidence of better sales trends
and profit expectations. Negative pressure on the rating could
develop if earnings deteriorate and further weaken covenant
headroom, or if other liquidity concerns emerge; or if adjusted
leverage approaches 5x and RCF to Net debt is below 12% or if
free cash flow is negative with limited prospect for improvement.
The principal methodology used in rating Premier Foods Plc. was
the Global Packaged Goods Industry Methodology published in July
2009.
Headquartered in St Albans, Premier Foods is the largest
manufacturer and distributor of food in the UK, with a focus on
ambient grocery, bread and chilled products. The company has
around 16,000 employees producing foods from around 60 facilities
in the UK and Ireland. For the last 12-month period ended
June 25, 2011, Premier Foods reported revenues and adjusted
EBITDA of GBP2.4 billion and GBP323 million respectively.
SUPERGLASS: Has Debt-for-Equity Swap Deal with Clydesdale Bank
--------------------------------------------------------------
BBC News reports that Superglass has been forced to restructure
its debt after disappointing performance.
BBC relates that Superglass warned it would not be able to
service its debt to Clydesdale Bank without a debt-for-equity
swap it recently agreed with its lender.
According to the trading update for the end of its financial
year, debt has increased to GBP17.7 million, BBC notes. Profit
expectations are slightly down on the previous trading update in
June, BBC discloses.
As part of the agreement with Clydesdale Bank, the company has
avoided having to meet the conditions of loans, which were due to
be tested at the end of last month, BBC says. Those tests of its
bank covenants are now scheduled for the end of October, BBC
states.
The company has suffered from the downturn in home building,
input cost increases, and the failure of one of its production
furnaces last year, according to BBC.
Superglass is a Stirling-based manufacturer of home insulation
materials.
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* More Oil Tanker Operators Expected to Face Insolvency
-------------------------------------------------------
The Financial Times reports that at least one leading oil tanker
operator is likely to follow collapsed smaller operators into
insolvency as the sector is swamped by oversupply.
Nasdaq-listed Omega Navigation, Netherlands-based Marco Polo
Seatrade, and several other small operators have already been
forced into bankruptcy protection, the FT discloses. Cyprus-
based Ocean Tankers, which made a EUR19.6 million net loss for
the first half on EUR9.77 million income, has had several of its
ships arrested -- held under court orders by creditors -- during
port calls this year, the FT notes.
Recent senior figures in the industry predict that far larger
names are likely to follow, the FT states. Moody's recently
downgraded one operator facing acute challenges -- New York-
listed General Maritime -- to Caa3, only just above default, the
FT relates.
According to the FT, Morten Arntzen, chief executive of Overseas
Shipholding Group, said the most vulnerable companies were those
that had entered the downturn with significant ship orders under
way and poor corporate governance. The market, the FT says, has
been depressed by the rapid expansion of the world tanker fleet,
which is growing far faster than oil demand, as vessels ordered
before the financial crisis are delivered.
Bruce Chan, chief executive of New York-listed Teekay Tankers,
said a range of sizes of companies would suffer, the FT notes.
"Companies that have a significant amount of spot market exposure
and a lot of debt will not have the cash flow capacity to weather
a prolonged downturn," the FT quotes Mr. Chan as saying.
* EUROPE: Banks May Collapse Over Sovereign Bond Losses
-------------------------------------------------------
Louise Armitstead at The Telegraph reports that Josef Ackermann,
the chief executive of Deutsche Bank, Germany's biggest bank, has
warned that "numerous" European lenders would collapse if they
were forced to book their losses on stricken sovereign bonds.
The Telegraph relates that Mr. Ackermann said the value of
billions of euros of loans has plunged to a level that could
overwhelm smaller banks. According to the Telegraph, he told a
conference in Frankfurt: "Numerous European banks would not
survive having to revalue sovereign debt held on the banking book
at market levels."
Traders said fears over the banks' exposure to European debt were
exacerbated by the uncertainty of the US legal cases and
regulatory reform, the Telegraph notes.
The debt crisis has also squeezed bank revenues as mergers and
acquisitions -- as well as stock market listings -- have been
shelved, the Telegraph states. Trading figures have also fallen,
the Telegraph relates. According to the Telegraph, Mr. Ackermann
said that bank profits will take a long time to recover.
Even so, Mr. Ackermann firmly rejected the proposal by Christine
Lagarde, the new head of the International Monetary Fund, for
another round of recapitalizing European banks, the Telegraph
notes.
Mr. Ackermann claims that the move would be "counterproductive"
and argued that "a forced recapitalization would give the signal
that politicians do not themselves believe in the measures" they
have implemented to bolster fragile eurozone countries, the
Telegraph relates.
* Global Regulators May Soften Bank Liquidity Rules
---------------------------------------------------
Ben Livesey, citing the Financial Times, reports that global
regulators may ease new rules requiring banks to hold more liquid
assets to weather a funding crisis amid lenders' claims that the
regulations may curtail lending.
According to Bloomberg, the newspaper, citing people familiar
with the discussions, reported that members of the Basel
Committee on Banking Supervision want to soften key technical
definitions of the so-called "liquidity coverage ratio," due to
take effect in 2015.
Bloomberg relates that the FT report, citing research by JPMorgan
Chase & Co., said 28 European banks faced a total liquidity
shortfall of EUR493 billion (US$694 billion) at the end of 2010
under the ratio's current structure, which requires lenders to
hold enough "easy-to-sell assets" to withstand a 30-day run on
their funding.
The FT, as cited by Bloomberg, said that the changes being
considered would effectively cut the liquidity levels banks would
be required to hold and allow them to include more corporate and
covered bonds.
According to Bloomberg, the FT reported that the Basel
committee's staff is gathering data on the potential impact of
the ratio and a subgroup is working on definitions ahead of a
full meeting of the group this month.
*********
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, 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 * * *