/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/111014.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Friday, October 14, 2011, Vol. 12, No. 204 Headlines B E L G I U M DEXIA SA: Breakup Shows EU Govt's Difficulty to Rescue Banks G E R M A N Y STYROLUTION GROUP: Moody's Assigns 'B2' Corporate Family Rating G R E E C E * GREECE: CDS Pay-Outs May Be Triggered if Bond Losses Exceed 21% I R E L A N D BANK OF IRELAND: Moody's Downgrades Deposit Ratings to 'Ba1' MR BINMAN: High Court Appoints Interim Examiner QUINN GROUP: Judge Yiasemi Has Yet to Decide on Anglo Dispute QUINN INSURANCE: European Commission Approves Restructuring I T A L Y WIND TELECOMM: Fitch Affirms LT Issuer Default Rating at 'BB' K A Z A K H S T A N ATF BANK: Moody's Cuts Long-Term Deposit Ratings to 'Ba3' N E T H E R L A N D S BRIT INSURANCE: Fitch to Assess Impact of CEO Resignation ELM BV: Moody's Lowers Rating on EUR22.5-Mil. Notes to 'Caa3' R U S S I A ALROSA OJSC: Fitch Affirms Senior Unsecured Rating at 'BB-' U N I T E D K I N G D O M AEOLUS CDO: Fitch Withdraws Ratings on Five Note Classes to 'Dsf' CELF LOAN: S&P Raises Ratings on Two Note Classes From 'BB+ EXOVA HOLDINGS: Moody's Downgrades Corp. Family Rating to 'B3' LABS SERIES 2006-1: Moody's Cuts Rating on EUR75MM Notes to Caa1 MARSTON'S ISSUER: Fitch Affirms 'BB+' Rating on Class B Notes PEMBERTON TRANSPORT: Unable to Pay GBP478,000 Owed to Creditors PLYMOUTH ARGYLE FC: Investors Submit Final Proposals SKYE IT: Still Weighs Insolvency Options TREES: Moody's Cuts Rating on EUR225-Mil. Loan Facility to Caa3 X X X X X X X X * EUROPE: EC Calls for More Stringent Review of Banks * BOOK REVIEW: The Style and Management of a Pediatric Practice ********* ============= B E L G I U M ============= DEXIA SA: Breakup Shows EU Govt's Difficulty to Rescue Banks ------------------------------------------------------------ Anne-Sylvaine Chassany, Aaron Kirchfeld and Fabio Benedetti at Bloomberg News report that analysts said France and Belgium's decision to break up Dexia SA three years after bailing the lender out shows how European governments are being hampered in rescuing banks without jeopardizing sovereign credit ratings. According to Bloomberg, people with knowledge of the matter said the two governments chose on Sunday to preserve Brussels- and Paris-based Dexia's consumer bank in Belgium and municipal lending unit in France because those operations were considered systemically and politically important. The people said Dexia's other assets will be sold to limit the cost of the bailout, Bloomberg notes. "France and Belgium have had to take a more drastic approach to keep the bill at a minimum this time," Bloomberg quotes Jean- Pierre Lambert, an analyst at Keefe Bruyette & Woods Ltd. in London, as saying. "That means if something happens to a French bank, for example, France would probably fight to protect the domestic retail network but push the bank to sell non-core activities to reduce the costs and preserve the country's AAA rating." Belgium, France and Luxembourg on Sunday provided a EUR90 billion (US$123 billion) 10-year guarantee to cover Dexia's funding needs, Bloomberg recounts. Belgium will provide about 61% of the cover and France about 37% of the backing, Bloomberg discloses. The Belgian government is buying Dexia's national consumer lending unit for EUR4 billion while French state-owned banks Caisse des Depots et Consignations and La Banque Postale are in talks to take over the bank's French municipal lending unit, which provides loans to local governments, Bloomberg notes. The people, as cited by Bloomberg, said France and Belgium each tried to get the other to provide a bigger share of the guarantee than their proportionate stakes in Dexia. The French state directly and indirectly controls about 26%, and Belgian entities own 44%, Bloomberg discloses. Dexia SA -- http://www.dexia.com/-- is a Belgian-based bank and insurance carrier that focuses on Public and Wholesale Banking, providing local public finance actors with banking and financial solutions, and on Retail and Commercial Banking in Europe, mainly Belgium, France, Luxembourg and Turkey. ============= G E R M A N Y ============= STYROLUTION GROUP: Moody's Assigns 'B2' Corporate Family Rating --------------------------------------------------------------- Moody's Investors Services has assigned a definitive B2 corporate family rating (CFR) to Styrolution Group GmbH, a new 50:50 joint- venture between BASF Group and INEOS Group through the combination of BASF Styrenics, INEOS Nova and INEOS ABS assets. Concurrently, Moody's has also assigned a definitive B2 rating to the company's EUR480 million of senior secured guaranteed notes due in 2016. The outlook on all ratings is stable. RATINGS RATIONALE The B2 CFR is constrained by: (i) Styrolution's focus on a relatively narrow portfolio of quasi-commodity and commodity styrenics products, which is currently in oversupply in some regions, and exposed to cyclicality in demand; (ii) its high exposure to volatile feedstocks, which can lead to wide fluctuations in EBITDA; (iii) the company's relatively weak market positioning in the highly fragmented Asian market, which is expected to remain the growth market for styrenics products over the medium term; and (iv) the company's lack of sufficient operating and financial history as an independent standalone entity, with a corresponding absence of sufficient audited historical financial statements for the new combined entity. More positively, the CFR also reflects the new combined company's large size, integrated nature and cost leadership in the global styrenics market, particularly in Europe and North America, where Styrolution enjoys leading market positions and owns first- and second-quartile-rated plants. In addition, the rating factors in the company's moderate total debt/EBITDA ratio and robust credit metrics based on pro-forma 2010 combined accounts. Indeed, going forward, Moody's expects the company to maintain such metrics, based on the conservative financial policy indicated by management and the rating agency's assumption of positive free cash flow generation. The stable outlook reflects Moody's expectation that, going forward (i) Styrolution will apply a conservative financial policy and remain moderately leveraged; and (ii) its management will be focused on achieving positive free cash flows and projected cost synergies over the medium term. While positive rating pressure is unlikely in the short term, Moody's would consider upgrading the rating if the company were able to (i) realize the projected cost synergies; (ii) achieve higher profitability and EBITDA than historical levels; (iii) maintain a total debt/EBITDA adjusted ratio of below 2.5x; and (iv) improve its retained cash flow (RCF)/debt ratio such that it increases above 30%. Furthermore, to achieve a rating upgrade, Styrolution would also have to achieve an improved liquidity position, specifically a larger amount of cash available on the balance sheet at any time than the initial anticipated level of EUR100 million. Moody's would consider downgrading the rating in case of (i) materially lower EBITDA (before exceptional items) than the pro- forma 2010 level of EUR407 million, as a result of underperformance in achieving cost synergies and/or deterioration in the reference markets; (ii) a total debt/EBITDA adjusted ratio exceeding 3.0x; and (iii) an RCF/debt ratio of below 20%. PRINCIPAL METHODOLOGY The principal methodology used in rating Styrolution was the Global Chemical Industry Methodology published in December 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Styrolution, based in Ludwigshafen (Germany), is a new 50:50 joint-venture between BASF Group and INEOS Group, through the combination of BASF Styrenics, INEOS Nova and INEOS ABS assets. The joint-venture became fully operational as a new independent company on October 1, 2011, following the approval of the relevant antitrust authorities. The company is a leading player in the styrenics business, especially in Europe and North America, with combined unaudited pro-forma 2010 revenues of EUR6.4 billion and EBITDA (before exceptional items) of nearly EUR407 million. =========== G R E E C E =========== * GREECE: CDS Pay-Outs May Be Triggered if Bond Losses Exceed 21% ----------------------------------------------------------------- Abigail Moses at Bloomberg News reports that credit-default swaps insuring Greek government debt may pay out should proposals to increase losses on the bonds exceed the 21% already agreed. According to Bloomberg, analysts at Barclays Capital, Evolution Securities Ltd. and Credit Agricole SA said deeper cuts would likely have to be imposed on bondholders, triggering a credit event on the swaps contracts. Luxembourg Prime Minister Jean-Claude Juncker triggered speculation that so-called haircuts on Greek bonds could exceed 60% when interviewed on Austrian television on Tuesday, Bloomberg notes. Finance ministers are considering reshaping a July deal that foresaw investors contributing EUR50 billion (US$69 billion) to a EUR159 billion rescue, Bloomberg discloses. Credit-default swaps on Greece cover a net notional US$3.7 billion, according to the Depository Trust & Clearing Corp., which runs a central registry that captures most trades, Bloomberg discloses. That's less than 1% of the government's $471 billion of bonds and loans outstanding, according to data compiled by Bloomberg The increase in private sector involvement, or PSI, involving debt exchanges and rollovers may put finance ministers on a collision course with the European Central Bank which has insisted since the start of the crisis that there should be no credit event that triggers credit-default swaps, Bloomberg notes. ============= I R E L A N D ============= BANK OF IRELAND: Moody's Downgrades Deposit Ratings to 'Ba1' ------------------------------------------------------------ Moody's Investors Service has downgraded the bank deposit ratings of Bank of Ireland (UK) Plc (BoI UK) to Ba1/Not-Prime, from Baa3/Prime-3 following a reassessment of UK systemic support and of Moody's parental support assumptions. The Ba1 long-term deposit rating now incorporates one notch of parental support from Bank of Ireland (BoI) and no UK systemic support. The outlook is negative. Previously, the long-term ratings of BOI UK incorporated two notches of UK systemic support and no parental support. The action concludes the review of the ratings initiated on 24 May 2011. RATINGS RATIONALE The removal of UK systemic support results from Moody's reassessment of the probability that the UK government would provide support to financial institutions, if needed. Please see "Moody's downgrades 12 UK financial institutions, concluding review of systemic support" on www.moodys.com for more details. Therefore, Moody's has lowered to 0 from 2 the notches of systemic support it incorporates into BoI UK's long-term deposit rating. Moody's believes that there is insufficient certainty surrounding the likelihood and extent of support available over the medium- term to most banks with low nationwide market shares of deposits and loans (including BoI UK) to warrant any uplift of their standalone credit strength. However, Moody's has also reassessed Moody's parental support assumptions and this leads to the Ba1 long-term deposit rating now incorporating one notch of parental support from the bank's Irish parent, Bank of Ireland. This reflects the importance of BoI UK to its parent, primarily as a source of retail funding. A key part of the restructuring of the Irish banking system is the focus on improving banks funding profiles and as a result deposit gathering is a key factor. BoI UK is a substantial source of deposit growth for BoI and is likely to remain so in the future given its strong Post Office franchise in the UK. As a result of the importance of these deposits as a stable source of funding for BoI Moody's believes that there is an increased likelihood that the Irish government would provide support to BoI (UK) through BoI. Therefore, the Ba1/Not-Prime deposit ratings are now in line with the deposit ratings of BoI. The outlook on BoI UK is negative, in line with the negative outlook on the parent's ratings. WHAT COULD CHANGE THE RATING UP/DOWN Positive pressure on BoI UK's ratings is unlikely until (i) it has a proven longer-term track record of consistent and sustainable profitability; and (ii) the BFSR of its parent improves. The high level of integration of BoI UK into its parent means that it is unlikely that the subsidiary's BFSR could be higher than that of Bank of Ireland. The BFSR could be downgraded if BoI UK's capitalization was to reduce - either through higher than expected losses or through dividend payments to its parent - resulting in a core Tier 1 ratio below 7%. A downgrade of the parent, or a reduction in the level of integration with its parent could also have negative implications, especially if it led, in Moody's opinion, to a weakening of BoI UK's risk management. Since the debt and deposit ratings benefit from parental support uplift, they remain sensitive to any further changes in the ratings of Bank of Ireland. The methodologies used in this rating were Bank Financial Strength Ratings: Global Methodology published in February 2007, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology published in March 2007. MR BINMAN: High Court Appoints Interim Examiner ----------------------------------------------- RTE News reports that Ms. Justice Mary Finlay Geoghegan on Wednesday appointed Billy O'Riordan of PricewaterhouseCoopers as interim examiner to Mr. Binman. The interim examiner was also appointed to subsidiary companies Greenport Environmental Ltd., Rural Refuse & Recycling and Clearpoint Recycling Ltd. (the Binman Group), RTE relates. The company will continue to trade normally during the examinership process, RTE discloses. According to RTE, in the statement, the company said following a decision by Bank of Scotland (Ireland) to withdraw its support, the company's directors sought the protection of examinership while management negotiated a restructuring of its debts and new equity investment for the companies. The statement said the High Court was advised that an investor had indicated a willingness to invest sums in each of the companies in order to fund a Scheme of Arrangement and to provide additional working capital facilities, RTE notes. The company, as cited by RTE, said it had tried to negotiate revised credit facilities with Bank of Scotland (Ireland) since the beginning of the economic downturn, but claimed that the bank had "failed to engage meaningfully in this process, leaving the Company no alternative but to seek examinership". Justice Finlay Geoghegan set next Tuesday as the date for a full hearing of the company's application, RTE says. Mr. Binman is an Ireland-based waste disposal group. The company employs 331 people directly and approximately 280 indirectly. QUINN GROUP: Judge Yiasemi Has Yet to Decide on Anglo Dispute ------------------------------------------------------------- Michael Jansen at The Irish Times reports that Judge Yiasimis Yiasemi of the District Court of Nicosia in Cyprus on Tuesday heard closing statements from counsel in the case of Anglo Irish Bank versus Quinn and reserved his ruling without specifying a date. According to The Irish Times, in the coming weeks, Judge Yiasemi has to decide whether to lift an injunction preventing Anglo from interfering in a EUR500 million Russian property empire belonging to Sean Quinn and his family. The proceedings were brief, as the judge had limited the length of counsel statements, but produced a long-awaited breakthrough for Anglo: the release of "Cyprus Affidavit Two," a massive and potentially explosive collection of documents containing material on the efforts of the Quinns to put out of reach of Anglo the Russian properties, including the EUR132 million Kustoff Tower in Moscow, the most valuable asset in the portfolio, The Irish Times relates. The Quinns have described the affidavit as "scandalous, irrelevant, as well as vexatious" and attempted to block or postpone its admission, while Anglo has argued that the material contained in it is essential to an understanding of the case, The Irish Times discloses. The case continues, The Irish Times notes. As reported by the Troubled Company Reporter-Europe on Sept. 15, 2011, Irish Examiner related that the Quinn family began legal proceedings against Anglo earlier this year in which they challenged the appointment of the receiver appointed over their shares in some of the Quinn Group companies in Ireland, Irish Examiner disclosed. They are also taking action in Cyprus challenging Anglo's appointment of a receiver over shares in a number of Cypriot companies, Irish Examiner noted. The Quinn Group -- http://www.quinn-group.com/-- is a business group headquartered in Derrylin, County Fermanagh, Northern Ireland. The privately owned group has ventured into cement and concrete products, container glass, general insurance, radiators, plastics, hotels and real estate. QUINN INSURANCE: European Commission Approves Restructuring ----------------------------------------------------------- Geoff Percival at Irish Examiner reports that the go-ahead for the restructuring of Quinn Insurance (QIL) -- including a change of ownership and a EUR700 million compensation injection -- has been granted by the European Commission. Wednesday's EC approval for a EUR738 million pay-out to QIL's new owners, from the Irish insurance compensation fund -- the role of which is to cover losses of insurance companies -- follows on from last week's Irish High Court approval of the takeover of QIL by a consortium consisting of US insurance giant, Liberty Mutual and Quinn Group creditor, Anglo Irish Bank, Irish Examiner relates. The new owners will take control of the general insurance arm in Ireland, while the company's British operations -- seen as non- viable -- will be wound down; except the private motor insurance business, which will be sold, Irish Examiner discloses. The EC found Quinn Insurance's Irish general insurance business to be viable, as it represents the historically profitable part of the firm and can benefit from Liberty's expertise, Irish Examiner notes. Some EUR320 million of the total compensation fund pay-out will be paid immediately, Irish Examiner states. "The administrators of Quinn Insurance have worked out a plan that provides for a viable future for the healthy parts, ensures an adequate burden sharing by the shareholders and limits the distortions of competition," Irish Examiner quotes Joaquin Almunia, vice-president of the EC and head of its competition policy, as saying. According to Irish Examiner, the commission also said that Anglo's part ownership of QIL -- which will be rebranded byits new owners -- will improve the wind-down bank's position as Quinn Group creditor. About Quinn Insurance Quinn Insurance is owned by Sean Quinn, who was once Ireland's richest man, and his family. The company has more than 20% of the motor and health insurance market in Ireland. Employing almost 2,800 people in Britain and Ireland, it was founded in 1996 and entered the UK market in 2004. As reported by the Troubled Company Reporter-Europe, The Irish Times said the Financial Regulator put Quinn Insurance into administration in March 2010 after his office discovered guarantees had been provided by the insurer's subsidiaries as far back as 2005 on Quinn Group debts of more than EUR1.2 billion. The regulator said the guarantees reduced the amount the firm had in reserve to protect policyholders against possible claims, putting 1.3 million customers at risk, according to the Irish Times. ========= I T A L Y ========= WIND TELECOMM: Fitch Affirms LT Issuer Default Rating at 'BB' ------------------------------------------------------------- Fitch Ratings has affirmed WIND Telecomunicazioni Spa's (WIND) ratings, including its Long-term Issuer Default Rating (IDR) at 'BB'. Fitch has also revised WIND's Rating Outlook to Negative from Stable on concerns over a rise in leverage on the back of a recent spectrum acquisition and the company's ability to withstand economic headwinds. 'WIND's spectrum acquisition triggered a notable rise in leverage while any benefits from this purchase are likely to be medium-term at best. Coupled with a likely negative impact of any austerity measures in Italy, this investment significantly reduces headroom within the current rating level, it may significantly slow down deleveraging and reduce free cash flow (FCF) generation,' says Nikolai Lukashevich, Senior Director with Fitch's TMT team. WIND agreed to pay EUR1,120 million for 800 MHz and 2.6 GHz spectrum blocks at end-September 2011. The upfront payment will be EUR682 million, with the remaining EUR438 portion extended over a five-year period, at EUR88 million per annum. Although this investment is backed by a compelling strategic rationale providing WIND with an ability to develop LTE infrastructure, it is also estimated by Fitch to cause a spike in leverage; the upfront payment is equal to 0.3x of WIND's LTM-to-Q211 EBITDA. The extended portion is equal to 0.2x of WIND's LTM-to-Q211 EBITDA, annual spectrum payments will be a notable drag on FCF. WIND's financial performance revealed notable weakness in Q211, with revenues and EBITDA down by 1% and 5% yoy respectively. Although the company continues to outperform its domestic peers, this relative strength may not be sufficient to maintain positive growth in absolute terms. Fitch also notes that the pricing environment in Italy has significantly changed over the past year with WIND no longer having a pronounced pricing advantage over its peers which may stall its market share gains. Further pressures are likely if Italy introduces additional austerity measures. WIND's ratings continue to benefit from potential support from its sole ultimate shareholder, Vimpelcom Ltd., whose credit profile remains notably stronger than WIND's. On a stand-alone basis, WIND's credit profile corresponds to a 'BB-' level, which is uplifted by one notch for benign shareholder influence. Evidence of tangible shareholder support may be positive for the ratings, although Vimpelcom's representatives have recently commented that they would prefer WIND to rely on self-funding on a ring-fenced basis for the time being. WIND's leverage is high for its rating category and is estimated by Fitch to reach 4.8x of Net Debt (including PIK debt)/EBITDA at end-2011 as a result of the spectrum investment and economic headwinds. A further rise in leverage (as measured by the above metric) exceeding 5x on a sustainable basis would likely trigger a downgrade. WIND's credit profile is supported by its established position of the third-largest and highest-growing mobile operator in Italy supported by its expanding alternative fixed-line/broadband business. WIND's current ratings are not directly impacted or limited by the Italian sovereign rating. The following rating actions have been taken: Long-Term IDR: affirmed at 'BB' with a Negative Outlook Short-Term IDR: affirmed at 'B' WIND's senior credit facilities: affirmed at 'BB+' -- Senior secured 2018 notes issued by WIND Acquisition Finance S.A.: affirmed at 'BB+' -- Senior 2017 notes issued by WIND Acquisition Finance S.A.: affirmed at 'BB-' -- Senior PIK notes issued by WIND Acquisition Holdings Finance S.A.: affirmed at 'B+' =================== K A Z A K H S T A N =================== ATF BANK: Moody's Cuts Long-Term Deposit Ratings to 'Ba3' --------------------------------------------------------- Moody's Investors Service has downgraded ATF Bank's long-term local and foreign-currency deposit ratings to Ba3 from Ba2, its foreign-currency senior unsecured debt rating to Ba3 from Ba2 and foreign-currency junior subordinated debt rating to B2 from B1. Moody's has also assigned a negative outlook to the bank's deposit and debt ratings. ATF Bank's E+ standalone bank financial strength rating (BFSR) -- which maps to B3 on the long-term rating scale -- is unaffected by this and continues to carry a stable outlook. The rating actions conclude the review for downgrade of ATF's ratings, implemented on June 14, 2011. RATINGS RATIONALE The decision to downgrade the bank's ratings is triggered by (i) Moody's downgrade of UniCredit's ratings on October 5, 2011 (UniCredit is ATF Bank's ultimate parent); and (ii) Moody's reassessment of parental support probability extended to ATF Bank, from UniCredit. "We have lowered our assumption of parental support probability for ATF Bank's ratings to moderate from high, as Moody's considers that the subsidiary's strategic importance for UniCredit has diminished," explains Armen Dallakyan, a Moody's Assistant Vice President and lead analyst for ATF Bank. "Consequently, ATF Bank's deposit and senior unsecured debt ratings now receive three-notches of rating uplift from the bank's standalone credit strength of B3," adds Mr. Dallakyan. Moody's has also removed the low systemic support probability for ATF Bank, which however has not had any rating impact. The rating agency believes that the only external support provider for the bank is likely to be UniCredit. As reflected in the negative outlook, the bank's deposit and debt ratings may be further downgraded if UniCredit's ratings are downgraded, or if Moody's revises downwards its assumption of moderate parental support. ATF Bank's ratings are also likely to be downgraded if the bank's BFSR is downgraded. PRINCIPAL METHODOLOGIES The methodologies used in this rating were Bank Financial Strength Ratings: Global Methodology published in February 2007, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology published in March 2007. Headquartered in Almaty, Kazakhstan, ATF Bank reported total assets of US$6.57 billion and total capital of US$239 million, in accordance with its audited IFRS financial statements at year-end 2010. ===================== N E T H E R L A N D S ===================== BRIT INSURANCE: Fitch to Assess Impact of CEO Resignation --------------------------------------------------------- Brit Insurance Holdings B.V. has announced that its Chief Executive, Dane Douetil, will step down with effect from October 27 2011, a development that Fitch Ratings will be closely monitoring. Mr. Douetil will be succeeded, subject to FSA approval, by Mark Cloutier, who has recently been working as an advisor to Brit Insurance in developing the group's future strategy. Over time, Fitch will determine what implications this change in management will have for the future profile of Brit Insurance as well as any potential risks that may materialize as a result of the relatively short transition period. Fitch will assess any change in strategy as part of its ongoing evaluation of the insurer's credit quality, and will take appropriate rating action as necessary. The announcement follows the takeover of Brit Insurance on March 9, 2011 by Achilles Netherlands Holdings B.V, a holding company majority owned by funds managed by Apollo Management VII, L.P. and funds advised by CVC Capital Partners Ltd. The group reported an overall profit before tax for H111 of GBP6.8 million (H110: GBP77.5 million). The current ratings were affirmed on September 28. The affirmations and Stable Outlook reflected the group's solid financial profile, which was supported by a strong level of risk- adjusted capitalization and strong underlying earnings. Fitch currently rates Brit Insurance as follows: Brit Insurance Limited's -- Insurer Financial Strength (IFS) rating at 'A': Outlook Stable. Brit Insurance Holdings N.V.'s -- Long-term Issuer Default Rating (IDR) at 'BBB+': Outlook Stable -- Subordinated notes at 'BB+'. ELM BV: Moody's Lowers Rating on EUR22.5-Mil. Notes to 'Caa3' ------------------------------------------------------------- Moody's Investors Service has downgraded the rating of the notes issued by ELM B.V. under the Series 48. The notes affected by the rating action are: Issuer: ELM B.V. Series 48 - Leveraged Asset Backed Securities 2006-2 -- EUR22,500,000 Floating Rate Credit Linked Secured Notes due 2056, Downgraded to Caa3 (sf); previously on Mar 25, 2011 Ba3 (sf) Placed Under Review for Possible Downgrade RATINGS RATIONALE This transaction is a synthetic CDO currently referencing a portfolio of 54 European ABS assets. At present, the portfolio is comprised mainly of Prime and Subprime RMBS (53.5%) and CMBS (37%). The notes have a thicknesses of 4.6% and a credit enhancement of 0%. Moody's explains that the rating action reflects a deterioration in the credit quality of the underlying portfolio. Since the last rating action in Sep 2010, WARF has deteriorated from 28, which implies an average portfolio rating quality of Aa3, to 192, an implied rating of Baa1. The actions also resolves the review for downgrade status of this rating. Moody's placed the transaction on review for possible downgrade on 25 March 2011 when 10 reference assets, amounting to 9.3% of the current portfolio, were placed on review for possible downgrade due to the announcement of new operational risk guidelines. Since March 2011, 14 reference assets amounting to 24.9% of the portfolio have been downgraded either as a result of the implementation of the operational risk guideline or performance deterioration in the pool and 4 assets amounting to the 7.1% of the portfolio remain on review for possible downgrade to deal specific operational risk concerns. In particular, the two lowest rated assets are a Dutch ABS which was downgraded by eight notches to Ba2 and was left on review for possible downgrade due to performance concern, and a German CMBS which was downgraded by four notches . This transaction is also subject to a high level of macroeconomic uncertainty due to a 18% exposure of assets originated in Greece, Portugal, Ireland, Spain and Italy. In the process of determining the rating, Moody's took into account the results of sensitivity analyses. Moody's considered a model run assuming one of the lowest rated asset being downgraded by several notches. The model output for this run resulted to be the same as the base case run. The principal methodology used in this rating was Moody's Approach to Rating SF CDOs, published in November 2010. Moody's analysis for this transaction is based on the CDOROM. This model is available on moodys.com under Products and Solutions -- Analytical models, upon return of a signed free license agreement. Moody's did not run a separate loss and cash flow analysis other than the one already done using the CDOROM 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. =========== R U S S I A =========== ALROSA OJSC: Fitch Affirms Senior Unsecured Rating at 'BB-' ----------------------------------------------------------- Fitch Ratings has affirmed Russia-based diamond producer OJSC ALROSA's Long-term Issuer Default Rating (IDR) and senior unsecured rating at 'BB-', Short-term IDR at 'B'. The Outlook on the Long-term IDR is Stable. Fitch assesses Alrosa's stand-alone rating at 'B+'. Alrosa's stand-alone credit profile continues to be driven by its market position as the world's largest rough diamond producer with a competitive cost position. The company's reserve base is sound - it has more than 1.0 billion carats of proved reserves, which gives an average mine life of more than 40 years. The Stable Outlook reflects Fitch's expectations that the company will be able to maintain an acceptable liquidity position and refinance debt maturing over 2012-2013. Fitch assesses Alrosa's link with its controlling shareholder, the Russian Federation, as weak to medium, which provides a one notch uplift to the company's stand-alone ratings. Support from the Russian Federation during 2008-2009 included the purchase of diamonds via the Russian State Depository for Precious Metals and Stones and financing provided via state-owned Bank VTB (JSC; 'BBB'/Stable). The agency believes that Alrosa's importance as the largest employer and taxpayer in Sakha (Yakutia) ('BB+'/Positive) would lead to further support if needed. Despite the increased demand for diamonds and rising prices compared with 2010, increasing macroeconomic uncertainty and the global economy's material downward revision of growth prospects, including China and India, may negatively affect demand for diamonds in 2012. Over the past 12 months Alrosa has continued to build its sales network with an increase in the share of sales under long-term contracts with major international and Russian clients to 63% in 2010 from 36% in 2009, reducing uncertainty regarding operating cash inflows. In 2010 Alrosa introduced auctioned sales, which provide a 10%-15% upside in prices compared to contract sales. The agency notes the company's increased information transparency, including reorganization into Open Joint-Stock Company in April 2011, disclosure of information regarding diamond reserves and resources under Russian standards in May 2011 and publication of IFRS consolidated accounts on a quarterly basis starting from 2010. Alrosa, as with other mining companies in Russia, faces mining cost inflation at a rate higher than general inflation, which may place pressure on the company's profitability over the next two- fiver years. An expected increase of the proportion of underground mining will affect the average cash mining costs as well. Rating constraints include Alrosa's lack of product diversification with exposure to the price cycles of the diamond market, which follow global economic cycles (although these price cycles are typically not as severe as for other mined commodities), and its exposure to the weak Russian business environment with the associated higher-than average political, business and regulatory risks. The rating also reflects Alrosa's plans to buy 90% of CJSC Geotransgaz and 90% in LLC Urengoy Gas Company from VTB Group of companies. The company's lack of a track record in developing non- core assets may require additional cash outflows. Fitch expects Alrosa to show revenue growth of 20%-30% in FY2011 before stabilizing in FY2012. EBITDAR margins are expected to improve in FY2011 to 34%-38% with a decline in FY2012 to 28%-32% (FY2010: 30.7%). Positive free cash flow margin is expected to shrink to 6.7% in FY2011 and to 0.3% in FY2012 (FY2010: 15.3%) mainly due to intensification of capex and expected increase of RUB-denominated cash costs with a rate higher than general inflation. The agency estimates FY2011 net EBITDAR leverage at 2.1x-2.3x with an increase to 2.3x-2.5x by end-2012. =========================== U N I T E D K I N G D O M =========================== AEOLUS CDO: Fitch Withdraws Ratings on Five Note Classes to 'Dsf' ----------------------------------------------------------------- Fitch Ratings has downgraded and simultaneously withdrawn Aeolus CDO Limited's (Series Colonnade I) ratings as follows: -- EUR49,700,000 Class A: downgraded to 'Dsf' from 'Csf'; withdrawn -- EUR25,000,000 Class B: downgraded to 'Dsf' from 'Csf'; withdrawn -- EUR12,880,595 Class C: downgraded to 'Dsf' from 'Csf'; withdrawn -- EUR14,587,122 Class D: downgraded to 'Dsf' from 'Csf'; withdrawn -- EUR10,696,811 Class E: downgraded to 'Dsf' from 'Csf'; withdrawn Fitch received the final distribution report for the transaction and noted the super senior swap was not fully repaid and as such that all the outstanding tranches have defaulted. All the tranches were marked as 'Dsf' and the ratings were subsequently withdrawn. Aeolus is a limited liability company incorporated in Jersey, Channel Islands. This transaction is a partially funded synthetic securitization of a diverse portfolio of mainly European mezzanine structured finance assets. The structure combines characteristics of both cash and synthetic CDO transactions. The senior credit default swap (SCDS) and all the classes of credit-linked notes are backed by a credit default swap (CDS) between the issuer and Morgan Stanley Capital Services Inc, which is the swap counterparty. CELF LOAN: S&P Raises Ratings on Two Note Classes From 'BB+ ----------------------------------------------------------- Standard & Poor's Ratings Services raised its credit ratings on all rated classes of notes in CELF Loan Partners V Ltd. "The rating actions follow our assessment of the transaction's performance using data from the latest available trustee report, dated Aug. 5, 2011, in addition to a cash flow analysis. We have taken into account recent developments in the transaction and reviewed the transaction under our 2010 counterparty criteria (see 'Counterparty And Supporting Obligations Methodology And Assumptions,' published on Dec. 6, 2010)," S&P related. "We have also observed from the August 2011 trustee report that the overcollateralization test results for all classes of notes have improved and are currently passing. In addition, we have observed an improvement in the credit quality of the portfolio, such as a decrease in assets rated 'CCC' to 8.78% from 10.49%," S&P said. "We subjected the capital structure to a cash flow analysis to determine the break-even default rate for each rated class. In our analysis, we used the reported portfolio balance that we consider to be performing, the weighted-average spread, and the weighted- average recovery rates that we considered appropriate. We incorporated various cash flow stress scenarios using our standard default patterns, levels, and timings for each rating category assumed for each class of notes, in conjunction with different interest stress scenarios," S&P related. At closing, CELF Loan Partners V entered into derivative obligations in order to mitigate against losses from devaluation in currencies the transaction is exposed to. "We believe that the documentation for these derivatives do not fully reflect our 2010 counterparty criteria. We conducted our cash flow analysis assuming that the transaction does not benefit from support from the derivatives. After conducting these cash flow analyses, we concluded that the ratings on the class A-1, A- 2, and A-3 notes could be raised as high as 'AA-' (the equivalent to the issuer credit rating on the swap counterparty plus one notch). We have therefore raised our ratings on these classes to 'AA- (sf)'," S&P stated. "In our opinion, the improvements we have seen in the transaction's performance since our last transaction update have benefited the class B to D notes, and we believe the credit enhancement levels available to these classes are now commensurate with higher rating levels. We have therefore raised our ratings on these classes," S&P said. CELF Loan Partners V is a cash flow collateralized loan obligation (CLO) transaction that securitizes loans to primarily speculative- grade corporate firms. The transaction closed in June 2008 and is managed by CELF Advisors LLP. Ratings List CELF Loan Partners V Ltd. EUR243.154 Million, GBP70.465 Million, US$108.470 Million Floating-Rate Notes Class Rating To From Ratings Raised A-1 AA- (sf) A+ (sf) A-2 AA- (sf) A+ (sf) A-3 AA- (sf) A+ (sf) B-1 A+ (sf) BBB+ (sf) B-2 A+ (sf) BBB+ (sf) C BBB+ (sf) BBB- (sf) D-1 BBB-(sf) BB+ (sf) D-2 BBB-(sf) BB+ (sf) EXOVA HOLDINGS: Moody's Downgrades Corp. Family Rating to 'B3' -------------------------------------------------------------- Moody's Investors Service has downgraded to B3 from B2 the corporate family rating (CFR) and probability of default rating (PDR) of Exova Holdings Ltd. Concurrently, the rating agency has downgraded to Caa1 from B3 the rating on the GBP155 million of senior unsecured notes issued by Exova PLC, a wholly owned subsidiary of Exova. The outlook on the ratings is stable. RATINGS RATIONALE The rating action reflects Exova's failure to improve earnings and to achieve credit metrics that are commensurate with a B2 rating. The stable outlook is based on the expectation that Exova will continue to maintain profitability ratios at current levels and to gradually reduce its leverage going forward. The previous B2 rating incorporated Moody's expectation that Exova will be able to reduce its leverage towards 5.5x debt/EBITDA on a Moody's-adjusted basis (including operating leases and 25% of a subordinated shareholder loan). However, in 2010, Exova's debt/EBITDA ratio as adjusted by Moody's was 6.9x. While Exova reported a 7.2% revenue increase in the first half of 2011, reported EBITDA was virtually unchanged (GBP19.4 million in 2011 compared with GBP19.9 million in 2010). Against this backdrop Moody's does not expect a material near-term reduction in the company's financial leverage. Exova's ratings reflect (i) the company's high financial leverage; (ii) relatively limited scale, as evidenced by revenues of around GBP 228 million in 2010; (iii) the short contract lengths in some segments, which exert constant renewal pressure on the company at comparable margin levels; and (iv) the challenge for the company to remain in compliance with the financial covenants under its bank debt facilities. However, Exova's ratings continue to be supported by (i) the company's strong position as a market-leading provider of laboratory-based testing services covering a number of geographic markets, industries and testing services; (ii) its strong customer diversification, with a high degree of customer retention; (iii) the recurring and non-discretionary character of many testing services and (iv) Exova's track record of relatively stable revenue and solid profitability levels, with EBITDA margins close to 20%. As of June 2011, Exova had a sufficient liquidity cushion, with a cash balance of GBP18 million and availability under its GBP35 million revolving credit facility. The stable rating outlook is based on Moody's expectation that Exova will be able to maintain its current profitability levels and generate gradual revenue growth. This should enable the company to maintain an adequate liquidity situation and gradually reduce its leverage to below 6.5x debt/EBITDA over time. Downgrades: Issuer: Exova Holdings Limited -- Probability of Default Rating, Downgraded to B3 from B2 -- Corporate Family Rating, Downgraded to B3 from B2 Issuer: Exova plc -- Senior Unsecured Regular Bond/Debenture, Downgraded to Caa1 from B3 WHAT COULD CHANGE THE RATINGS UP/DOWN For positive pressure to be exerted on Exova's ratings, the company would need to demonstrate a longer term track record of solid operating performance and an improvement in credit metrics. This could be reflected by (i) a reduction in the company's debt/EBITDA ratio towards 5.5x; (ii) an increase in its EBITDA- capex/interest to levels above 1.5x; and (iii) positive free cash flow generation on a sustainable basis. Negative pressure on Exova's ratings could arise if Exova's profitability and credit metrics were to weaken or if negative free cash flow were to erode the company's liquidity profile. In addition, Exova's ratings could come under downward pressure if the company were unable to reduce its debt/EBITDA ratio to below 6.5x or if headroom under its financial covenants were to tighten. The principal methodology used in rating Exova Holdings Limited was the Global Business & Consumer Service Industry Rating Methodology published in October 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. LABS SERIES 2006-1: Moody's Cuts Rating on EUR75MM Notes to Caa1 ---------------------------------------------------------------- Moody's Investors Service has downgraded the rating of the notes issued by UBS AG, Jersey Branch - LABS Series 2006-1. The notes affected by the rating action are: Issuer: UBS AG, Jersey Branch - LABS 2006-1 -- EUR75,000,000 Leveraged Asset-backed Securities due 2056, Downgraded to Caa1 (sf); previously on Mar 25, 2011 Ba3 (sf) Placed Under Review for Possible Downgrade RATINGS RATIONALE This transaction is a synthetic CDO currently referencing a portfolio of 54 European ABS assets. At present, the portfolio is comprised mainly of Prime and Subprime RMBS (78%) and CMBS (14%). The notes have a thicknesses of 5.2% and a credit enhancements of 0%. Moody's explains that the rating action reflects a deterioration in the credit quality of the underlying portfolio. The action also resolves the review for downgrade status of this rating. Moody's placed the transaction on review for possible downgrade on 25 March 2011 when 10 reference assets, amounting to 18% of the portfolio, were placed on review for possible downgrade due to the announcement of new operational risk guidelines. Since March 2011, 15 reference assets amounting to 24.4% of the portfolio have been downgraded either as a result of the implementation of the operational risk guideline or performance deterioration in the pool and three assets amounting to the 4.8% of the portfolio remain on review for possible downgrade to deal specific operational risk concerns. In particular, one Irish RMBS asset was downgraded by 8 notches to Baa3 due to performance deterioration and the Greeks RMBS, amounting 2.8% of the portfolio, have been downgraded to below investment grade making them the lowest rated assets in the current portfolio. In the process of determining the rating, Moody's took into account the results of sensitivity analyses. Given that this transaction is subject to a high level of macroeconomic uncertainty due to a 32% exposure of assets originated in Greece, Portugal, Ireland, Spain and Italy, Moody's considered a model run assuming one RMBS asset from these regions being downgraded to below investment grade. The model output for this run resulted to be the same as the base case run. Moody's explained that there exist a number of sources of uncertainty, operating both on a macro level and on a transaction- specific level, that may influence the rating actions taken. Among the general macro uncertainties are those surrounding future housing prices, pace of residential mortgage foreclosures, loan modification and refinancing, unemployment rates and interest rates. The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in November 2010. Moody's did not run a separate loss and cash flow analysis other than the one already done using the CDOROM model. For a description of the analysis, refer to the methodology and the CDOROM user guide on Moody's website. 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. MARSTON'S ISSUER: Fitch Affirms 'BB+' Rating on Class B Notes ------------------------------------------------------------- Fitch Ratings has affirmed Marston's Issuer plc's class A, AB and B notes, and revised their Outlooks to Stable from Rating Watch Negative (RWN), following their placement on RWN triggered by the release of the agency's updated Whole Business Securitisation (WBS) criteria. Since Fitch's recent annual review in June 2011, trading updates from both the managed and tenanted business has been in line with Fitch's expectations. The securitized group's July 2011 trailing 12 months (TTM) EBITDA has increased mildly by 0.6% reaching GBP127.7m. This increase was primarily driven by strong sales growth in both the managed and tenanted estate (respectively up by 8.4% and 4.2%), and to a lesser extent by an increase in the average number of managed pubs (up by 3.7%). Despite being the key growth driver for managed sales, EBITDA growth was limited by the lower margin food sales (which now represents 42% of the total managed sales (against 40% last year), and by the increase in costs associated with the Retail Agreement (RA) conversion program, which resulted in EBITDA margin compression to 33.9% from 35.9%. Fitch notes that the credit metrics have stabilized with Fitch base case FCF DSCR (minimum of the both the average and median FCF DSCRs to the note's legal final maturity) for the class A, AB, and B notes being around 1.7x, 1.6x and 1.4x respectively, based on the agency's base case FCF and actual debt service. Fitch views positively that on top of the usual WBS credit enhancements (e.g. cash-lock up conditions, tranched liquidity facility, deferability of the junior notes in favor of the most senior ones), the transaction benefits from an annuity-like debt profile, which unlike other UK WBS transactions, removes any point-in-time stresses. In the near term, the agency continues to forecast marginal EBITDA growth despite a declining trend in the margin due to an expected continuation in the aforementioned trends, in addition to the projected positive impact of the 2012 Olympic Games, the Euro 2012 Football Championship and the ongoing 'staycation' effect next summer. In the long term, Fitch expects EBITDA growth to remain broadly flat, slightly declining in the later years of the transaction. The Stable Outlook is underpinned by the resilience of the group as a whole over the past two years, and management's recent actions which could result in some further potential uplifts in profit in the years to come through both the managed (with the offering more targeted towards women and families) and the tenanted estate with the consolidation of the pubs under flex-tie substantive agreements and the rollout of the RA pubs. However, Fitch remains cautious about the pub sector as it is still challenged by macro-economic factors such as the recent VAT increase (to 20% from 17.5% in January 2011), uncertainty about the jobs' market, rising commodity prices, the ongoing change in consumer behavior, further exposure to alcohol taxation and the continued strength of the off-trade. In addition, despite progress made in the tenanted model notably in terms of transparency, the Business, Innovation and Skills Committee (BISC) has completed its investigation into the fairness of the tenancy agreements, resulting in the recommendation to establish a statutory code. This could potentially add further costs to the tenanted business, although management believes it is already in adherence with all recommendations made. Marston's has also mitigated this risk as, being franchises, none of its new RA pubs are concerned. The transaction is the securitization of both managed and tenanted pubs operated by Marston's comprised of 276 managed pubs (representing c. 55.2% of Marston's plc's managed pubs) and 1,560 tenanted pubs (c. 94.5%). The ratings actions are as follows: -- GBP165.7m class A1 floating-rate notes due 2020: affirmed at 'BBB+'; Outlook revised to Stable from RWN -- GBP214.0m class A2 fixed rate notes due 2027: affirmed at 'BBB+'; Outlook revised to Stable from RWN -- GBP200.0m class A3 fixed-rate notes due 2032: affirmed at 'BBB+'; Outlook revised to Stable from RWN -- GBP230.2m class A4 floating-rate notes due 2031: affirmed at 'BBB+'; Outlook revised to Stable from RWN -- GBP80m class AB1 floating-rate notes due 2035: affirmed at 'BBB'; Outlook revised to Stable from RWN -- GBP155.0m class B fixed-rate notes due 2035: affirmed at 'BB+'; Outlook revised to Stable from RWN PEMBERTON TRANSPORT: Unable to Pay GBP478,000 Owed to Creditors --------------------------------------------------------------- Chris Tindall at Roadtransport.com reports that Pemberton Transport is unable to pay its creditors any of the GBP478,000 owed to them after no assets were realized during its liquidation. It means that as well as unsecured creditors, secured creditor Boston Commercial Finance, which was granted a debenture over its entire assets in March 2010, will not receive any of the GBP78,500 owed to it either, Roadtransport.com notes. Pemberton Transport was sold to Lynne Walker in November 2009 and traded for just five more months before she attempted to go into a company voluntary arrangement, Roadtransport.com recounts. At the time Nickolas Rimes at Rimes & Co said creditors would receive 51p in the pound if they agreed to the arrangement, Roadtransport.com relates. However, it was blocked and the business went into liquidation in July 2010, Roadtransport.com relates. Pemberton Transport is based in the United Kingdom. PLYMOUTH ARGYLE FC: Investors Submit Final Proposals ---------------------------------------------------- Press Association Sport reports that the investors looking to save Plymouth Football Club from liquidation have submitted their final proposals for the payment of outstanding wages to players and staff at Home Park. According to the news agency, staff at the Devon club have not been paid in full this year and, with time running out for a deal to be agreed, Akkeron Group chairman James Brent has urged those owed money to take up the offer. PA Sport relates that the proposal includes a sum paid upon the takeover being concluded, as well as incremental payments each month and full remuneration after a certain length of time. "The selfless approach of staff and players is what has kept this football club alive on life support. While we would clearly have liked to offer faster payment of PAFC's debts to employees, the proposal is the best the company can safely offer," PA Sport quotes Mr. Brent as saying in a statement. "I hope the payments can be accelerated through the receipt of unbudgeted income. I hope also that the current and previous employees will accept these proposals. While risks to a rescue remain, this will be an important step forward in avoiding liquidation." Plymouth Argyle Football Club, commonly known as Argyle, or by their nickname, The Pilgrims, is an English professional football club based in Central Park, Plymouth. It plays in Football League One, the third division of the English football league system. As reported in the Troubled Company Reporter-Europe on March 8, 2011, the High Court placed Plymouth Argyle Football Club into administration. Brendan Guilfoyle, Christopher White and John Russell of The P&A Partnership have been appointed as administrators. The TCR-Europe, citing The Guardian, reported on March 3, 2011, that Plymouth Argyle directors have been warned that the club needs an injection of around GBP3 million if it is not to be placed into administration. The P&A Partnership has been trying to sell the debt-crippled Pilgrims since they were plunged into administration, according to Plymouth Herald. Devon businessman James Brent is expected to complete his takeover of the League Two club this month. Plymouth Herald noted that the deal would secure Argyle's short-term future and bring to an end a process that by lead administrator Brendan Guilfoyle's own admission has been "complex and protracted". SKYE IT: Still Weighs Insolvency Options ---------------------------------------- CRN reports that the business recovery firm overseeing the wind-down of Skye IT has stressed the reseller has not yet formally entered administration. Taylor Aitken director David Brason said that although the company has ceased trading and its 23 staff have been laid off, various insolvency options are still being considered, according to the report. CRN relates that Skye IT has debts approaching GBP1 million but Mr. Brason said the HP Gold partner's large debtor book could see creditors recover up to 30p in the pound. "The position of the company is that it has ceased trading but it is not in administration and not in liquidation," CRN quotes Mr. Brason as saying. "It will do some form of act of insolvency but whether that is a liquidation or if the factoring firm, RBS, chooses to appoint an administrator, is still in discussion." According to CRN, Mr. Brason said that Skye IT's sister companies Skye UAE, Skye Direct, Skye Recruit and Skye Training will all continue to trade. Skye IT's chief executive, Paul Swords, was a director at VAR Future Networks Systems, which also collapsed owing several million pounds to distributors, the report notes. Chelmsford-based Skye IT, part of the Skye Group, provides management, consulting and supply services for IT and technical solutions. TREES: Moody's Cuts Rating on EUR225-Mil. Loan Facility to Caa3 --------------------------------------------------------------- Moody's Investors Service has downgraded the rating of the syndicated loan facility entered into by Trees. The facility affected by the rating action is: Issuer: UBS AG, London Branch - EUR225,000,000 Syndicated Loan Facility to TREES -- EUR225,000,000 Syndicated loan facility to TREES, Downgraded to Caa3 (sf); previously on Mar 25, 2011 B2 (sf) Placed Under Review for Possible Downgrade RATINGS RATIONALE This transaction is a cash CDO currently referencing a static portfolio of 53 European ABS assets. At present, the portfolio is comprised mainly of Prime and Subprime RMBS (56.3%) and CMBS (40.6%). The facility has a thicknesses of 4.5% and a credit enhancement of 0%. Moody's explains that the rating action reflects a deterioration in the credit quality of the underlying portfolio. Since the last rating action in September 2009, WARF has deteriorated from 36 , which implies an average portfolio rating quality of Aa2, to 146, an implied average rating of A2. The action also resolves the review for downgrade status of this rating. Moody's placed the transaction on review for possible downgrade on March 25, 2011 when 9 reference assets, amounting to 8.4% of the current portfolio, were placed on review for possible downgrade due to the announcement of new operational risk guidelines. Since March 2011, 15 reference assets amounting to 13.3% of the portfolio have been downgraded either as a result of the implementation of the op risk guideline or performance deterioration in the pool and one asset amounting to the 0.7% of the portfolio remains on review for possible downgrade due to deal specific operational risk concerns. In particular since March 2011, two Greek RMBS with a 3.1% cumulative exposure have been downgraded by one notch to Ba1 and by seven notches to B1 due to the related sovereign rating action, making them the lowest rated asset in the current portfolio. In the process of determining the rating, Moody's took into account the results of sensitivity analyses. Given that this transaction is subject to a high level of macroeconomic uncertainty due to a 28.8% exposure of assets originated in Greece, Portugal, Spain and Italy, Moody's considered a model run assuming the two assets from these countries being downgraded to below investment grade. The model output for this run resulted in the same rating as the base case run. Moody's explained that there exist a number of sources of uncertainty, operating both on a macro level and on a transaction- specific level, that may influence the rating actions taken. Among the general macro uncertainties are those surrounding future housing prices, pace of residential mortgage foreclosures, loan modification and refinancing, unemployment rates and interest rates. The principal methodology used in this rating was Moody's Approach to Rating SF CDOs, published in November 2010. Moody's analysis for this transaction is based on the CDOROM. This model is available on moodys.com under Products and Solutions -- Analytical models, upon return of a signed free license agreement. Moody's did not run a separate loss and cash flow analysis other than the one already done using the CDOROM model. For a description of the analysis, refer to the methodology and the CDOROM user guide on Moody's website. 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. =============== X X X X X X X X =============== * EUROPE: EC Calls for More Stringent Review of Banks ----------------------------------------------------- Matthew Dalton and Laurence Norman at The Wall Street Journal report that the European Commission on Wednesday set out proposals to shore up European banks in the face of the region's escalating sovereign-debt crisis, calling for a more-stringent review of the banks that will likely result in a broad recapitalization program. According to the Journal, the commission said that the banks with inadequate capital will need to raise it, from private sources if possible and from governments as a last resort. The commission said that all holdings of EU sovereign debt, marked at "prudent" valuations, should be included in the new reviews, the Journal notes. The stress tests published over the summer didn't examine what would happen if banks had to absorb major losses on their holdings of Greek bonds and other debt from troubled euro-zone sovereign countries, the Journal says. To pass the tests, banks were required to have core Tier 1 capital, a key measure of their buffers against losses, of at least 5% under stressed economic conditions, the Journal states. The European Banking Authority, the pan-EU banking regulator, is likely to set a higher capital threshold in the new reviews, the Journal discloses. According to the Journal, an EU official said on Wednesday the EBA suggested a 9% threshold in a confidential communication to national banking authorities, an EU official said on Wednesday. The official added that the threshold could be changed in political discussions, the Journal notes. The commission, as cited by the Journal, said that European governments should disburse the sixth slice of emergency lending to Greece, which is already overdue, and move up the launch of the euro zone's permanent rescue fund, the European Stability Mechanism, by one year, to mid-2012. The so-called troika of the commission, the European Central Bank and the International Monetary Fund finished the latest review of Greece's economic-adjustment program on Tuesday, the Journal recounts. The governments say they believe the ESM, which has paid-in capital of EUR80 billion (US$109 billion) and overall lending capacity of EUR500 billion, disburses aid more efficiently than its temporary predecessor, the European Financial Stability Facility, the Journal notes. The ESM is also able to impose losses on sovereign creditors when it makes loans, the Journal says. That may be necessary as euro-zone governments consider whether to impose bigger losses on banks holding Greek bonds as part of a new round of bailout lending to the government, the Journal states. The commission said banks that need capital should raise it from private sources if possible, including by converting debt to equity, according to the Journal. It said these banks should be forbidden from paying bonuses or dividends before the recapitalization has been completed, the Journal notes. National governments should be ready to provide capital if banks can't raise it from private investors, the Journal states. The commission, as cited by the Journal, said that the EFSF must be available to lend money to governments to recapitalize their banks as a last resort. The commission said regulators should use the definition of capital laid out in the Basel III banking rules when examining whether banks have enough of it, the Journal relates. Basel III requires bank common equity, the most basic form of loss-absorbing capital, to equal 4.5% of risk-adjusted assets in 2015, the Journal notes. * BOOK REVIEW: The Style and Management of a Pediatric Practice --------------------------------------------------------------- Author: Leo W. Bass, M.D. and Jerome H. Wolfson, M.D. Publisher: Beard Books Softcover: 154 pages Price: $34.95 Review by Henry Berry The Style and Management of a Pediatric Practice is an essential resource for pediatricians who have completed their medical education and training and are about to set up a practice in this critical area of healthcare. The authors write from a wealth of experience. For many years, they had a successful joint practice in Pittsburgh, where they also taught pediatrics and consulted for a juvenile detention center. Their teaching and consulting work evidences the broader role that many pediatricians are taking in bettering the lives of their young patients. This broad perspective of a pediatrician's mission is reflected in the preface to the book, in which the authors state, "We are encouraging our patients to stay with us longer and we are spending more time with adolescents and even young adults." Bass and Wolfson further note that pediatricians are playing a more central role in healthcare in general. Today's pediatrician must keep pace with the latest medical issues and topics, and be prepared to deal with expanded patient relationships and treat a greater variety of patients. Nonetheless, authors recognize that, "the fulcrum of any pediatric practice is [still] the newborn baby." As an example of the more expansive mission that pediatricians must now be prepared for, the authors point out that, unlike in years past, the care and treatment of older children may entail genital exams and discussions of sexual matters. Also, as many readers are undoubtedly aware, contemporary pediatricians, more so than earlier generations, must be alert to and capable of diagnosing a variety of psychological and emotional conditions of older children, such as attention deficit disorder and substance abuse. In their expanded role, pediatricians must work with medical professionals in specialized areas such as psychology, with teachers and others at schools, and with personnel who provide community services for younger persons. Bass and Wolfson's book begins with the premise that, to get a new practice off on the right foot, a pediatrician must first understand the mechanics of setting up an office, which, in turn, is inextricably bound with his or her style of practice. In other words, pediatricians need to recognize the interrelation between the mechanics of the office -- that is, its arrangement or design -- and their personality and the standard of care they intend to provide as physicians. Thus, the design of a small pediatric facility implies a standard of care the pediatricians mean to provide. Another important consideration, which the authors weave into the discussion, is aligning the pediatrician's mechanics and style with what constitutes prudent business practice. The book is, however, more than a "how-to" on setting up a pediatric practice. Bass and Wolfson never stray from their objective of helping beginning pediatricians meet the demands of today's world. In doing so, the authors introduce topics that otherwise might be overlooked by beginning pediatricians. For instance, on the subject of play areas, the authors do not simply mention it as a necessary adjunct of a pediatric office, nor do they merely include it as an item on a checklist. Rather, Bass and Wolfson discuss the purpose of the play area, its value to patients and the pediatrician, and how it is used in the daily operations of the practice. With these considerations in mind, the authors advise the pediatrician to ensure that the play area is part of the waiting room so parents can keep an eye on their children. This, in turn, requires that the waiting room be especially large, not only to include the play area, but also because "pediatric patients tend to have lots of company -- sometimes both parents or grandparents or friends." An inviting play area is also important because it will "distract the children . . . while you have a private word with their parents." The design of a pediatric practice must also take into account the various medical procedures that will be performed on patients. For example, the authors suggest that, "In examining the eye you attempt the fundoscopic exam without touching the face . . . In examination of the ears learn to stand with your eye at arm's length from the otoscope." Most importantly, the authors tackle the topic of delivering healthcare to patients of diverse ages and needs. They discuss for example, what office behavior to expect from children of all ages, which can even vary from month to month for patients of the same age. Managing a patient from registration to receiving payment is another topic that is concisely and knowingly covered. Style and Management of a Pediatric Practice provides a comprehensive, concrete, informative handbook on implementing the best medical and business practices for the smaller pediatric practice. The authors advocate their particular "system" and beginning pediatricians may conclude they want to modify the authors' advice, but they will find it unfailingly provides a good starting point. This work can help novice pediatricians quickly hit the ground running without expending unnecessary time and energy that is better used on treating patients. Leo W. Bass, M.D., and Jerome H. Wolfson, M.D., were prominent pediatricians in the Pittsburgh area for many years. Besides operating their own pediatric practice, they have consulted, taught, and provided services for local medical facilities. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than US$3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Thursday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/booksto order any title today. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Psyche A. Castillon, Julie Anne G. Lopez, Ivy B. Magdadaro, Frauline S. Abangan and Peter A. Chapman, Editors. Copyright 2011. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$625 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *