/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/111125.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, November 25, 2011, Vol. 12, No. 234 Headlines A R M E N I A * ARMENIAN BANKS: Moody's Changes Outlook on Ba3 Ratings to Neg. F I N L A N D STORA ENSO: S&P Affirms 'BB' Long-Term Corporate Credit Rating F R A N C E BANQUE PALATINE: Fitch Affirms Individual Rating at 'D' G E R M A N Y COMMERZBANK AG: May Need Extra EUR5-Bil. to Boost Capital FRANZ HANIEL: Moody's Changes Outlook on Ba1 Ratings to Negative HAUS 1998-1: Moody's Cuts Rating on 2 RMBS Note Classes to 'Ba2' H U N G A R Y AXA BANK: Moody's Assigns 'D+' Bank Financial Strength Rating I R E L A N D BANK OF IRELAND: Junior Bondholders May Suffer 100% Loss TBS INTERNATIONAL: In Talks with Bankers on Debt Restructuring ZOO ABS IV: Fitch Raises Rating on Class E Notes to 'CCsf' * IRELAND: Wants EU Authorities to Share Bank Bail-Out Costs L A T V I A LATVIJAS KRAJBANKA: Operations Suspended; Future Uncertain L I T H U A N I A BANKAS SNORAS: Investigators Issue Warrant for Portsmouth Owner SNORAS BANK: Fitch Lowers Rating on Long-Term IDR to 'C' R U S S I A ROSPROMBANK: Moody's Downgrades Deposit Ratings to 'B3' U N I T E D K I N G D O M DECO 6: S&P Keeps 'BB-' Rating on Class D Notes EXPRO HOLDINGS: Moody's Downgrades CFR to Caa1; Outlook Negative FAB UK 2004-1: Fitch Lowers Ratings on 2 Note Tranches to 'CCsf' MOTHERCARE PLC: Launches Review of Struggling UK Business PAG HOTELS: Administrators Sell Castle Venlaw for GBP695,000 SKIPTON BUILDING: Moody's Provides Updates on Darrowby No. 1 Plc TATA STEEL: Moody's Assigns Negative Outlook to 'B2' CFR THOMAS COOK: Calls In Advisers; May Face Restructuring X X X X X X X X * EUROPE: New EC Law to Impose Losses on Ailing Bank Bondholders * BOOK REVIEW: Corporate Debt Capacity ********* ============= A R M E N I A ============= * ARMENIAN BANKS: Moody's Changes Outlook on Ba3 Ratings to Neg. ---------------------------------------------------------------- Moody's Investors Service has taken these rating actions on these Armenian banks: * The outlook was changed to negative from stable on the Ba3 long-term foreign-currency deposit ratings of three Armenian banks Ardshininvestbank, ACBA-Credit Agricole and Unibank. * The outlook was changed to negative from stable on Ardshininvestbank's Ba2 and Unibank's Ba3 long-term local currency deposit ratings. * The outlook was changed to negative from stable on Prometey Bank's B1 long-term local and foreign-currency deposit ratings; Ardshininvestbank's D- and Prometey Bank's E+ standalone bank financial strength ratings (BFSRs) were affirmed with a stable outlook. The rating announcements were prompted by: (i) Moody's change of Armenia's sovereign ratings outlook to negative from stable, announced on November 21, 2011, and (ii) the assessment of the effect of increasing downside risks to the operating environment on the banks' credit profiles. Ratings Rationale -- Negative outlook on Ba3 foreign-currency deposit ratings The negative outlook on the Ba3 long-term foreign-currency deposit ratings of Ardshininvestbank, ACBA-Credit Agricole and Unibank is driven by the negative outlook on the Ba3 country ceiling for foreign-currency deposits in Armenia. The affected three banks' foreign-currency deposit ratings and outlooks will move in tandem with the respective country ceiling for such deposits. The foreign-currency deposits ratings of other rated Armenian banks are below the Ba3 ceiling and as a result, are unaffected. -- Negative outlook on local-currency deposit ratings The deposit ratings of three banks -- Ardshininvestbank, Unibank and ACBA-Credit Agricole -- incorporate Moody's assessment of moderate systemic support from the government in case of need. The negative outlook on Ardshininvestbank's Ba2 and Unibank's Ba3 local currency deposit rating is triggered by the negative outlook on Armenia's Ba2 local-currency debt rating. Ardshininvestbank's and Unibank's local-currency deposit ratings -- which receive one-notch systemic support uplift from their Ba3 and B1 standalone ratings, respectively -- could be downgraded if Armenia's government debt ratings were downgraded. However, ACBA-Credit Agricole's Ba2 local-currency debt rating would not be affected by a potential downgrade of Armenia's government debt, because the bank's deposit ratings also benefit from parental support from Credit Agricole (its largest shareholder). Consequently, the outlook on ACBA-Credit Agricole's Ba2 local-currency deposit rating remains stable. The local-currency deposit ratings of other Armenian banks, which do not receive systemic support uplift, are unaffected. -- Affirmation of Prometey Bank's E+ BFSR with a stable outlook, negative outlook on the deposit ratings Prometey Bank's E+ BFSR -- mapping to B1 on the long-term scale -- was affirmed with a stable outlook; however, the outlook on Prometey Bank's B1 long-term local and foreign-currency deposit ratings was changed to negative from stable. The change of the outlook to negative from stable on the deposit ratings reflect the risks associated with (i) the bank's small size and rapid growth strategy; (ii) its exposure to Armenia's undiversified economy and challenging operating environment; and (iii) high funding concentrations, as the 20 largest deposits account for around 56% of its customer funds at end-H1 2011. However, Prometey Bank's ratings are supported by (i) the bank's high capitalization level, with an equity-to-assets ratio of 54.2% at end-H1 2011; (ii) acceptable asset quality, with non- performing loans at less than 1% of the gross loans at end-H1 2011; and (iii) strong profitability, as Prometey Bank's return on assets stood at 3.5% at end-H1 2011. -- Affirmation of Ardshininvestbank's D- BFSR with a stable outlook Moody's says that the affirmation of Ardshininvestbank's D- BFSR -- mapping to Ba3 on the long-term scale with a stable outlook -- reflects (i) the bank's strong capitalization level, with an equity-to-assets ratio of 22.9% at end-Q3 2011; (ii) acceptable asset quality, with non-performing loans at less than 2% of the gross loans at end-Q3 2011; and (iii) adequate profitability, as the bank's annualized return on assets stood at 1.74% at end-Q3 2011. The rating is constrained by (i) exposure to Armenia's undiversified economy and challenging operating environment; and (ii) possible corporate governance challenges as it is controlled by a single individual, however this risk is mitigated by IFC's involvement in the bank as a minority shareholder . Ardshininvestbank: - Outlook on Ba2 local-currency and Ba3 foreign-currency deposit ratings changed to negative from stable - BFSR is affirmed at D- with a stable outlook ACBA-Credit Agricole: - Outlook on Ba3 foreign-currency deposit rating changed to negative from stable - D- BFRS and Ba2 local-currency deposit ratings are unaffected and carry a stable outlook Unibank: - Outlook on Ba3 local and foreign-currency deposit ratings changed to negative from stable - E+ BFRS is unaffected and carries a stable outlook Prometey Bank: - Outlook on B1 local and foreign-currency deposit ratings changed to negative from stable - BFSR is affirmed at E+ with a stable outlook Principal Methodologies The methodologies used in this rating were Bank Financial Strength Ratings: Global Methodology published in February 2007, Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology published in March 2007, and Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt published in November 2009. All banks affected by the rating actions are headquartered in Yerevan, Armenia: - Ardshininvestbank reported audited total (IFRS) assets of US$323.6 million as of end-December 2010. - ACBA-Credit Agricole reported audited total (IFRS) assets of US$462.2 million as of end-December 2010. - Unibank reported audited total (IFRS) assets of US$289.4 million as of end-December 2010. - Prometey Bank reported audited total (IFRS) assets of US$75.7 million as of end-December 2010. ============= F I N L A N D ============= STORA ENSO: S&P Affirms 'BB' Long-Term Corporate Credit Rating -------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Finland-based forest products company Stora Enso Oyj to stable from positive. "At the same time, we affirmed all of our credit ratings on Stora Enso, including the 'BB' long-term corporate credit rating," S&P related. "The outlook revision primarily reflects our assessment that the probability of an upgrade over the near term has declined. This is based on our assumptions of weaker demand for Stora Enso's key products over the near term, due to macroeconomic uncertainty. We are also factoring in higher investment levels over the short to medium term, reflecting the group's strategic growth projects. We still believe, however, that Stora Enso will be able to maintain rating-commensurate credit measures, for example adjusted funds from operations (FFO) to debt of 20%-25% and adjusted debt to EBITDA of 3x-3.5x. For the 12 months ended Sept. 30, 2011, the corresponding ratios stood at about 25% and 2.9x," S&P said. S&P revised base case financial forecast is underpinned by these key assumptions: "A moderate decline in demand driven by macroeconomic uncertainty. We believe that this will have a negative effect on pricing prospects, although we recognize upside potential in newsprint and magazine papers due to industry closures," S&P said. A decline in average input costs in 2012 compared with 2011 but with a meaningful risk that these will remain at challenging levels. Any substantial deviation from this assumption could cause further downward pressure on prices. A meaningful increase in capital spending and adjusted debt levels. Stora Enso has several ongoing expansion projects, including a containerboard machine in Poland and a pulp mill in Uruguay. In addition, the group has stated that it has plans to build an integrated pulp and board plant in China. "The ratings on Stora Enso continue to reflect our view of the group's fair business risk and significant financial risk profiles," S&P said. "The stable outlook reflects our view that Stora Enso can maintain adjusted funds from operations to debt of 20%-25% and adjusted debt to EBITDA of 3x-3.5x, despite potentially weaker market conditions and increased investment levels," S&P said. =========== F R A N C E =========== BANQUE PALATINE: Fitch Affirms Individual Rating at 'D' ------------------------------------------------------- Fitch Ratings has affirmed Banque Palatine's (BP) Long-term Issuer Default Rating (IDR) at 'A+'. BP's IDRs are aligned with those of Groupe BPCE (GBPCE) due to its affiliation to the latter's central body, BPCE (both rated 'A+'/Stable). The affiliation means that BPCE must ensure BP's liquidity and solvency is appropriate at all times. A change in BPCE's IDRs would thus be reflected in BP's IDRs. Fitch has not assigned BP a Viability Rating as the bank's strategy and financial profile are greatly influenced by GBPCE. BP is a small bank specializing in retail and SME lending in France, where it has a modest franchise. The bank recently underwent a strategic repositioning and will now focus on SME lending, its core business. It disposed of its stakes in non- strategic subsidiaries in 2010 and H111, following which core activities generated 74% of H111 operating profit. Operating profitability improved in H111 due to rising interest margins thanks to loan repricing and lower impairment charges. The sale of subsidiaries also boosted net results. The bank's impaired loan ratio stood at an acceptable 4.9% at end-H111, excluding a EUR88 million exposure transferred to the bank by its parent and fully guaranteed by GBPCE. Concerns remain regarding significant loan concentration and a significant 48% of the overall loan exposures were to SMEs, which are particularly exposed to the depreciated environment. The portion of customer deposits within the bank's total funding structure represented 54% at end-H111. BP also issues short-term certificates of deposit (CD) and these are largely taken up by the bank's customers. CD volumes demonstrate a high level of stability. In accordance with the affiliation process, funding is closely monitored by GBPCE, and a liquidity back-up line is available from BPCE. Liquidity is reinforced by the availability of securities eligible for repo (EUR552 million at end-H111) and readily available loans for rediscount (EUR686 million). BP continued to report acceptable capital ratios. At end-H111, the Fitch core capital to weighted risks reached 8.87%. The rating actions are as follows: -- Long-term IDR: affirmed at 'A+'; Stable Outlook -- Short-term IDR: affirmed at 'F1+' -- Individual Rating: affirmed at 'D' -- Support Rating: affirmed at '1' -- Certificate of Deposit program: affirmed at 'F1+' -- "Bons a Moyen Terme Negociables" (BMTN) program: affirmed at 'A+' ============= G E R M A N Y ============= COMMERZBANK AG: May Need Extra EUR5-Bil. to Boost Capital --------------------------------------------------------- BBC News reports that shares in Commerzbank AG have closed down 15% on Nov. 22 following reports that it may need more capital. According to BBC, Reuters cited unnamed sources as saying that Germany's second largest bank needed an extra EUR5 billion (US$6.7 billion, GBP4.3 billion) to build its core capital. That is well above the EUR2.94 billion the bank had previously said was needed, BBC notes. Commerzbank, 25% owned by the German government, reported a EUR687 million loss in the third quarter, largely attributed to its exposure to Greece, BBC discloses. The possible higher capital requirement for Commerzbank could raise questions about whether the German banking sector as a whole requires extra funds, BBC states. As reported by the Troubled Company Reporter-Europe on Feb. 25, 2011, the Financial Times related that Commerzbank received more than EUR16 billion of hybrid capital from the government, which also took a 25% equity stake in a 2009 bail-out in return for a further EUR1.8 billion, according to the FT. The bank, which has a market capitalization of EUR8.3 billion, needed support after acquiring troubled rival Dresdner Bank, the FT disclosed. Headquartered in Frankfurt am Main, Germany, Commerzbank AG -- http://www.commerzbank.com/-- is the parent company of a financial services group active around the world. The group's operating business is organized into six segments providing each other with mutually beneficial synergies: Private and Business Customers, Mittelstandsbank, Central and Eastern Europe, Corporates & Markets, Commercial Real Estate and Public Finance and Treasury. FRANZ HANIEL: Moody's Changes Outlook on Ba1 Ratings to Negative ---------------------------------------------------------------- Moody's Investors Service has changed to negative from stable the outlook on the Ba1 corporate family rating and instruments ratings of Franz Haniel & Cie. GmbH. Concurrently, Moody's has affirmed the ratings at Ba1. Moody's maintains these ratings on Franz Haniel & Cie. GmbH and its following affiliates: Long-Term Corporate Family Ratings (domestic currency) of Ba1 Probability of Default rating of Ba1 Senior Unsecured (domestic currency) ratings of Ba1 Senior Unsecured MTN (domestic currency) ratings of (P)Ba1 Haniel Finance BV BACKED Senior Unsecured MTN (domestic currency) ratings of (P)Ba1 Haniel Finance Deutschland GmbH BACKED Senior Unsecured MTN (domestic currency) ratings of (P)Ba1 Ratings Rationale "T[he] rating action follows material declines in the market valuation of Haniel's portfolio over the course of recent months," says Alex Verbov, Moody's lead analyst for Haniel. "The change of outlook also reflects Moody's expectation that there is limited visibility for a possible recovery of Haniel's market value gearing which is measured as portfolio valuation compared to the debt level of Haniel" adds Mr. Verbov. This expectation is driven by the inability of Haniel to reduce debt without incurring valuation losses and the continued uncertainty regarding the overall economic recovery which in turn can have an effect on the prospects of Haniel's major holdings, Metro and Celesio to recover their market values to historical levels. Moody's notes that a number of factors contributed to these recent negative developments, including (i) general value declines; (ii) changes related to Haniel's portfolio companies, such as Celesio's profit warnings and the recently announced update on its strategy; and (iii) high turnover in key management personnel at Haniel as well as its major holdings in recent months. Haniel has a very high degree of concentration in its top three holdings, Metro, Celesio and Takkt (more than 80% of its total portfolio). As a result, both the magnitude of the declines and the high correlation of negative developments across the company's portfolio have led to a more disproportionally negative impact than would be expected with a more balanced portfolio. In addition, current cash interest cover, excluding divestments but including holding costs and dividends to Haniel family, remains relatively weak. It remains to be seen what impact a possible disposal of Kaufhof by Metro could have on the market value gearing of Haniel, as both the timing, scope and use of the proceeds of this transaction remain uncertain at this stage. The liquidity profile of Haniel remains strong, as the company benefits from large long-term undrawn facilities in excess of EUR1 billion and has limited debt maturities until October 2014, when EUR 1 billion bond matures. On a 200-day average basis, and including Moody's adjustments, Haniel's market value gearing is at around 40% but is expected to worsen further if share prices of Metro and Celesio remain at a similar level in the near future, thereby moving to above the level that Moody's has set for Haniel to maintain the Ba1 rating. On a point in time basis, the market value gearing is already at 46%. There is an increased risk that Haniel will be unable to improve its market value gearing back to levels that are commensurate with a Ba1 rating, i.e. to below 40% within the coming months, hence the negative outlook. To maintain the Ba1 rating Moody's expects the market value gearing to gradually improve towards 40%, either as the value of its holdings improves or as the company reduces its debt via increased dividend inflows or divestments. The rating incorporates also the expectation that the company will continue to successfully roll over its bilateral facilities, enabling it to maintain a very strong liquidity profile. What Could Change the Outlook Up/Down A rating upgrade is currently unlikely as the Ba1 rating continues to be weakly positioned. Indeed, stabilization and possible partial recovery of the market valuation of Haniel's portfolio are already factored into the rating. Negative pressure could be exerted on the rating in the event of a continued deterioration in Haniel's market leverage metrics. This would be reflected by (i) sustained leverage of materially above 40%, driven by continued negative development in underlying portfolio investments; and/or (ii) a failure to maintain a strong liquidity buffer via the timely extension of maturing bilateral banking facilities. The principal methodology used in rating Franz Haniel & Cie GmbH was the Global Investment Holding Companies Industry Methodology published in October 2007. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Based in Duisburg, Germany, Franz Haniel & Cie. GmbH is a large family-owned investment company with diversified industrial interests. These generated consolidated sales of EUR27.4 billion in the year to December 2010. HAUS 1998-1: Moody's Cuts Rating on 2 RMBS Note Classes to 'Ba2' ---------------------------------------------------------------- Moody's Investors Service has downgraded German residential mortgage-backed securities (RMBS) notes issued by Haus 1998-1 Limited: -- B2 Notes, Downgraded to Ba2(sf); previously on April 13, 2011, Baa1(sf) Placed on Review for Downgrade -- B DC Notes, Downgraded to Ba2(sf); previously on April 13, 2011, Baa1(sf) Placed on Review for Downgrade Ratings Rationale The rating action concludes the review for downgrade initiated by Moody's on April 13, 2011 and takes into consideration the worse- than-expected performance of the collateral. The downgrade reflects the performance of the transaction to date and the credit quality of the outstanding collateral in the pool. -- PORTFOLIO PERFORMANCE The performance of this transaction has been deteriorating since 2007. Outstanding defaults and loans under enforcement amount to 3.9% and 10.3% of the outstanding portfolio balance, respectively. Losses experienced since closing amount to 0.55% of the original portfolio balance. The current mortgage pool factor is approximately 3.6% and the top 10 borrowers in the pool represent approximately 9% of the outstanding portfolio balance, exposing the transaction to significant borrower concentration risk. -- KEY ASSUMPTIONS AND SENSITIVITY ANALYSIS Despite the considerable deleveraging of the transaction since closing, the above mentioned factors led Moody's to reassess its lifetime loss expectation for this transaction. Considering the current amount of realised losses and completing a roll-rate and severity analysis of the portfolio, Moody's has increased the portfolio expected loss assumption to 0.91% of the original pool balance (equivalent to 10% of current pool balance), from the previous level of 0.55%. The expected recovery rate was assumed at 40%. Moody's has also assessed loan-by-loan information to determine the MILAN Aaa CE. As a result, Moody's has set its MILAN Aaa CE assumptions to 35%. This level is mainly due to the high expected loss figure for a relative small outstanding portfolio. As of November 2011, available credit enhancement under the class A1 notes is 92%, under the class B1 notes 48% and under the class B2 notes 14%. Moody's tested the sensitivity of the affected ratings to various stress scenarios. The results show that the ratings would be able withstand an increase in the expected loss assumption up to 10.3% of current pool balance, all other parameters remaining constant. Similarly, the ratings would be able to withstand an increase in the MILAN Aaa CE assumption up to 45%, all other parameters remaining constant. These assumptions remain subject to uncertainties such as the future general economic activity, interest rates, prepayment rates and house prices. If realised recovery rates were to be lower or default rates were to be higher than assumed, the rating would be negatively affected. -- TRANSACTION OVERVIEW Haus 1998-1 Limited is a transaction originated by Deutsche Bank AG under which loan claims secured by the residential mortgages of 16,000 primarily second-lien German borrowers were transferred to investors. At closing, the total portfolio was approximately EUR716 million. Notes are issued based on a senior/subordinated structure. All payments are based on the seniority of the respective class, except for class B DC notes that rank equal to class B1 notes in respect to a portion of its interest payments. Four classes of notes (class A1, class B1, class B2, and class B3) pay monthly interest and pass-through principal (sequentially for the unscheduled payments but pro-rata between those four classes of notes in regards to the unscheduled payments). The two remaining classes of notes are interest-only strips. Payments on the class A DC and class B DC are based on a notional amount equal to the outstanding balance of class A1 notes and the sum of class B1 and class B2 notes, respectively. The interest rates of each of these notes is the difference between (i) an adjusted weighted average loan rate net of all ongoing transaction fees, such as servicer and trustee fees; and (ii) the interest payable under the corresponding P&I notes. Interest payments on the most subordinated class B3 notes are linked to the same adjusted weighted average loan rate. The principal methodology used in these ratings was Moody's Approach to Rating RMBS in Europe, Middle East, and Africa published in October 2009. In rating this transaction, Moody's used ABSCORE to model the cash flows and determine the loss for each tranche. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the lognormal distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss, or EL, for each tranche is the sum product of (i) the probability of occurrence of each default scenario; and (ii) the loss derived from the cash flow model in each default scenario for each tranche. As such, Moody's analysis encompasses the assessment of stressed scenarios. ============= H U N G A R Y ============= AXA BANK: Moody's Assigns 'D+' Bank Financial Strength Rating ------------------------------------------------------------- Moody's Investors Service has assigned a long-term deposit rating of A2, a Bank Financial Strength Ratings (BFSR) of D+, which corresponds to Baa3 on Moody's long-term rating scale, and a short-term rating of Prime-1 to AXA Bank Europe (ABE). The outlook is stable for all ratings. Ratings Rationale ABE's BFSR of D+, corresponding to Baa3 on Moody's long-term rating scale, reflects the bank's sound liquidity, expected to further improve with the contemplated issue of covered bonds, and its good capital ratio. These strengths are nevertheless partly offset by the bank's relatively low profitability due principally to its limited business scale in Belgium and the cost of development of its activity in Central and Eastern Europe (CEE). This weighs on ABE's capacity to generate enough income to absorb the high fixed costs inherent to retail banking business, and renders its performance very sensitive to fluctuations of margins. In addition, ABE has a material exposure to Hungarian mortgages through its local branch, the bulk of which is denominated in Swiss Francs. The general deterioration of the performance of the local mortgages and the impact of the latest law passed in Hungary allowing borrowers in Swiss Francs to repay their loans by the year-end at exchange rates below current market rates are expected to exert pressure on ABE's profit and potentially on its capital depending on the magnitude of the loss. The stable outlook on the BFSR reflects Moody's opinion that no particular factor is likely to change significantly the bank's credit profile in the short-term and the fact that the risks on the mortgage book in Hungary is already incorporated to a certain extent in the current rating. Moody's factors a very high probability of support from AXA Group's insurance operating entities (Aa3 insurance financial strength rating, stable) into ABE's long-term deposit rating, resulting into four notches of uplift from its Baa3 stand-alone rating. This is based on the rating agency's perception that ABE functions as a captive company of AXA Group and plays an important role for the insurance companies of the group. This is evidenced by (i) the strong integration of commercial strategies and synergies between the bank's retail banking business and the group's insurance business in Belgium and some CEE countries, and (ii) the provision of services by ABE to the group's insurance companies, notably by designing and executing on behalf of the insurance companies the hedging derivatives for variable annuity contracts outside the US, and by providing them with access to liquidity on the interbank market. Ratings Sensitivity ABE's BFSR could be upgraded if the bank demonstrates an improved capacity to generate stable recurring profits. This, however, would be unlikely to lead to upward pressure on the long-term rating given the already very high level of parental support factored into the ratings. Nonetheless, an upgrade of AXA Group's operating entities' insurance financial strength rating (IFSR) could lead to upward rating pressure on ABE's long-term ratings. Downward pressure may be exerted on ABE's BFSR from a significant deterioration in the performance of the loan books, notably in Hungary. ABE's long-term deposit rating would likely be downgraded as a result of a downgrade of the BFSR. It could also be downgraded in the event of a downgrade of the rating of AXA Group's operating entities' IFSR and/or a lower perception by Moody's of the probability of parental support that would be extended to the bank. 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. ============= I R E L A N D ============= BANK OF IRELAND: Junior Bondholders May Suffer 100% Loss -------------------------------------------------------- BreakingNews.ie reports that losses of up to 100% could be imposed on some subordinated bondholders in Bank of Ireland. According to BreakingNews.ie, the Irish Department of Finance said the bailed-out lender still needs to raise EUR350 million by the end of this year to meet the financial target of EUR4.2 billion set by the Central Bank. It revealed Finance Minister Michael Noonan is considering using powers available to him under the Credit Institutions (Stabilisation) Act to apply for a subordinated liabilities order (SLO), BreakingNews.ie discloses. The legislation, passed last year, gives the minister wide-ranging powers to deal with the banks, BreakingNews.ie notes. Mr. Noonan has invited submissions from interested parties by the end of the month before making a decision, BreakingNews.ie states. Headquartered in Dublin, Bank of Ireland -- http://www.bankofireland.com/-- provides a range of banking and other financial services. These include checking and deposit services, overdrafts, term loans, mortgages, business and corporate lending, international asset financing, leasing, installment credit, debt factoring, foreign exchange facilities, interest and exchange rate hedging instruments, executor, trustee, life assurance and pension and investment fund management, fund administration and custodial services and financial advisory services, including mergers and acquisitions and underwriting. The Company organizes its businesses into Retail Republic of Ireland, Bank of Ireland Life, Capital Markets, UK Financial Services and Group Centre. It has operations throughout Ireland, the United Kingdom, Europe and the United States. * * * As reported by the Troubled Company Reporter-Europe on Oct. 14, 2011, Moody's Investors Service 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. Moody's said the outlook is negative. TBS INTERNATIONAL: In Talks with Bankers on Debt Restructuring -------------------------------------------------------------- TBS International plc is continuing its discussions with its consortium of bankers to restructure its bank debt and alleviate some of the pressure on its cash flow. The discussions continue to focus on reaching agreements with all of the Company's different lending syndicates. While the Company's discussions with its lenders have not reached the stage where the terms of a restructuring have been fully agreed upon, the Company is continuing to meet all of its obligations to its vendors, shippers and consignees even though its lenders have made it clear that they would not agree to a restructuring in which any value were attributed to the Company's common equity. Although the Company cannot assure that agreement will be reached, negotiations continue to take a positive tone. The Company has a forbearance in place through Dec. 15, 2011, and is exploring the possibilities for an extension thereof to allow the Company and its bankers to continue negotiating a more permanent solution. During this period, the Company wants to remind all of its customers, vendors and business partners that its business continues as usual with all vendors being paid in the normal course on a timely basis. About TBS International plc Dublin, Ireland-based TBS International plc (NASDAQ: TBSI) -- http://www.tbsship.com/-- provides worldwide shipping solutions to a diverse client base of industrial shippers through its Five Star Service: ocean transportation, projects, operations, port services and strategic planning. The TBS shipping network operates liner, parcel and dry bulk services, supported by a fleet of multipurpose tweendeckers and handysize/handymax bulk carriers, including specialized heavy- lift vessels and newbuild tonnage. TBS has developed its franchise around key trade routes between Latin America and China, Japan and South Korea, as well as select ports in North America, Africa, the Caribbean and the Middle East. The Company reported a net loss of US$247.76 million on US$411.83 million of total revenue for the year ended Dec. 31, 2010, compared with a net loss of US$67.04 million on US$302.51 million of total revenue during the prior year. The Company also reported a net loss of US$55.16 million on US$282.64 million of total revenue for the nine months ended Sept. 30, 2011, compared with a net loss of US$29.21 million on US$311.06 million of total revenue for the same period a year ago. The Company's balance sheet at Sept. 30, 2011, showed US$659.28 million in total assets, US$409.77 million in total liabilities and US$249.51 million in total shareholders' equity. PricewaterhouseCoopers LLP expressed substantial doubt about the Company's ability to continue as a going concern. PwC believes that the Company will not be in compliance with the financial covenants under its credit facilities during 2011, which under the agreements would make the debt callable. According to PwC, this has created uncertainty regarding the Company's ability to fulfill its financial commitments as they become due. As reported in the TCR on Feb. 8, 2011, TBS International on Jan. 31, 2011, announced that it had entered into amendments to its credit facilities with all of its lenders, including AIG Commercial Equipment, Commerzbank AG, Berenberg Bank and Credit Suisse and syndicates led by Bank of America, N.A., The Royal Bank of Scotland plc and DVB Group Merchant Bank (the "Credit Facilities"). The amendments restructure the Company's debt obligations by revising the principal repayment schedules under the Credit Facilities, waiving any existing defaults, revising the financial covenants, including covenants related to the Company's consolidated leverage ratio, consolidated interest coverage ratio and minimum cash balance, and modifying other terms of the Credit Facilities. The Company currently expects to be in compliance with all financial covenants and other terms of the amended Credit Facilities through maturity. As a condition to the restructuring of the Company's credit facilities, three significant shareholders who also are key members of TBS' management agreed on Jan. 25, 2011, to provide up to US$10 million of new equity in the form of Series B Preference Shares and deposited funds in an escrow account to facilitate satisfaction of this obligation. In partial satisfaction of this obligation, on Jan. 28, 2011, these significant shareholders purchased an aggregate of 30,000 of the Company's Series B Preference Shares at US$100 per share directly from TBS in a private placement. ZOO ABS IV: Fitch Raises Rating on Class E Notes to 'CCsf' ---------------------------------------------------------- Fitch Ratings has upgraded seven classes of Zoo ABS IV PLC's notes and affirmed the senior tranches as follows: -- EUR100m class A-1R affirmed at 'BBBsf', Outlook Stable -- EUR150m class A-1A (ISIN XS0298493072) affirmed at 'BBBsf', Outlook Stable -- EUR87.3m class A-1B (ISIN XS0298495523) affirmed at 'BBBsf', Outlook Stable -- EUR27m class A-2 (ISIN XS0298496505) affirmed at 'BBsf', Outlook revised to Stable from Negative -- EUR30m class B (ISIN XS0298496927) upgraded to 'B+sf' from 'Bsf', Outlook Stable -- EUR35m class C (ISIN XS0298497495) upgraded to 'B-sf' from 'CCsf', Outlook Stable -- EUR28m class D (ISIN XS0298498386) upgraded to 'CCCsf' from 'Csf' -- EUR8.5m class E (ISIN XS0298498972) upgraded to 'CCsf' from 'Csf' -- EUR5.6m class P (ISIN XS0298626564) upgraded to 'B-sf', from 'CCsf', Outlook Stable The upgrades of all the mezzanine and junior tranches reflect the performance of the transaction relative to other European issuances of Structured Finance CDOs. The credit enhancement (CE) available for all the rated tranches range from 6.1% for the class E up to 32% for the senior A-1 tranches and has built up since the last review. The upgrades also reflect the ability of the manager to actively manage the portfolio during the still ongoing reinvestment period and the ability of the portfolio to pass the recommended rating levels even in high defaults scenarios. The A-1 tranches were affirmed at 'BBBsf' in order to reflect the risk of a portfolio comprising almost entirely mezzanine tranches of structured finance assets with a weighted average portfolio rating of 'BBB-sf'/'BB+sf' and a weighted average modelled base case recovery rate of 15.7%. The A-2 tranches' revised Outlook is due to the actions taken on the notes below and the upgrade of the class P combo notes reflects the upgrade of class C. Zoo ABS IV is a securitization of mainly European SF securities with an original note issuance of EUR514.2 million invested in a portfolio of EUR500 million. The portfolio is actively managed by P&G SGR S.p.A.. Fitch has assigned a Two Stars Issuer Report Grade (IRG), "Basic", to the reporting due to the lack of detailed information about the counterparties and relative triggers. * IRELAND: Wants EU Authorities to Share Bank Bail-Out Costs ------------------------------------------------------------ Jamie Smyth at The Financial Times reports that the Irish government said European authorities should share the cost of Ireland's EUR63 billion (US$84 billion) bank bail-out because "reckless lending" by international banks to Irish banks contributed to their collapse. Michael Noonan, Ireland's finance minister, gave warning on Wednesday that the huge cost of bailing out Irish banks with taxpayers money was driving up national debt and posing a risk to the country's economic recovery, the FT relates. Ireland faces a EUR63 billion bill for recapitalizing its main banks, which have all required state bail-outs to cope with a property crash and banking crisis, the FT discloses. The cost of the banking bail-out forced the previous government to turn to the European Union and International Monetary Fund for a EUR85 billion bail-out last year, the FT notes. According to the FT, Mr. Noonan said Dublin had advanced proposals to the European authorities, which would enable Ireland to reduce its overall debt burden. He added these had not yet reached the level of negotiations with decision makers, the FT notes. One proposal would see the government borrow money from the European Financial Stability Facility at low interest rates to pay off EUR31 billion in promissory notes it issued for the recapitalization of Anglo Irish Bank and Irish Nationwide Building Society, the FT says. It is estimated this could save billions of euros in interest charges due on the promissory notes, the FT states. The government is seeking to reduce its bank bail-out costs by between EUR15 billion and EUR20 billion, which it believes would reduce its national debt to more sustainable levels, the FT discloses. =========== L A T V I A =========== LATVIJAS KRAJBANKA: Operations Suspended; Future Uncertain ---------------------------------------------------------- Gustav Sandstrom and Charles Duxbury at Dow Jones Newswires report that Latvia suspended the operations of Latvijas Krajbanka, a unit of Lithuanian bank Bankas Snoras. According to Dow Jones, Latvia's Financial and Capital Markets Commission cited an "established deficiency of funds" in its suspension of Latvijas Krajbanka. The agency, as cited by Dow Jones, said the prosecutor general's office had been "notified of the above shortcoming." On Wednesday, Latvian Finance Minister Andris Vilks told the Baltic News Service that talks over the completion of Latvia's program of financial assistance from the International Monetary Fund and the European Commission are likely to remain unfinished until next week while the authorities decide on Latvijas Krajbanka's future, Dow Jones relates. That came a day after the Latvian treasury canceled a planned bond issue, saying that the suspension of Latvijas Krajbanka, along with the already volatile situation on financial markets in Europe, "increased investor concerns about their further investments," Dow Jones notes. Headquartered in Riga, Latvia, AS Latvijas Krajbanka provides commercial banking services to businesses and private individuals in Latvia and the markets of the Commonwealth of Independent States. As of Dec. 31, 2009, AS Latvijas Krajbanka had 115 customer service centers and 190 automated teller machines. AS Latvijas Krajbanka is a subsidiary of AS banka Snoras. ================= L I T H U A N I A ================= BANKAS SNORAS: Investigators Issue Warrant for Portsmouth Owner --------------------------------------------------------------- BBC News reports that a Europe-wide arrest warrant has been issued for the owner of Portsmouth Football Club Vladimir Antonov because Lithuanian prosecutors want to question him as part of an investigation into alleged asset stripping at Bankas Snoras AB. The prosecutors are also seeking his business partner Raimondas Baranauskas since both are former managers and shareholders of the bank and deny any wrongdoing, according to BBC News. BBC News notes that Portsmouth FC said its business operations were unaffected and its day-to-day operations "carry on as normal". "Both former managers of the bank Snoras have been recognised as suspects with regard to misappropriation of property on a large scale and forgery of documents . . . . Mr. Baranauskas is also suspected of fraudulent accounting and abuse of authority. . . . Prosecutor General Mr. Valys signed European arrest warrants issued against these persons," the prosecutors said in a statement obtained by the news agency. Mr. Baranauskas also held the posts of the chairman of the bank board and president. BBC News discloses that Mr. Antonov owns 68% of Bankas Snoras and an administrator has been appointed to assess its financial position. As reported by the Troubled Company Reporter-Europe on Nov. 22, 2011, Bloomberg News related that the central bank said Bankas Snoras's state-appointed administrator was to release its final report on the alternatives for the bank's restructuring on Nov. 23. The Lietuvos Bankas, based in the capital, Vilnius, said that it will give its resolution on the Snoras's future operations on Nov. 24, according to Bloomberg. The government took over Snoras on Nov. 16 after the central bank discovered that about EUR300 million (US$405 million) of assets may be missing and the lender was at risk of insolvency, Bloomberg recounted. The country's Prosecutor General opened an investigation into possible fraud and embezzlement, Bloomberg disclosed. Lawmakers approved legislation on Nov. 17 allowing the government to split Snoras into two banks, with good and bad assets, Bloomberg related. Bloomberg noted that the Finance Ministry on Nov. 18 said the bad bank is planned to file for protection from creditors, while the government will seek an investor for the good bank with healthy assets and insured deposits "as soon as possible". The ministry, as cited by Bloomberg, said that no public money will be required to save Snoras because the bank has sufficient assets to cover insured deposits. According to Bloomberg, it said that uninsured liabilities such as bonds will receive "a substantial haircut". Bankas Snoras AB is Lithuania's fifth biggest lender. Snoras held LTL6.05 billion in deposits and had assets of LTL8.14 billion at the end of September. It competes with Scandinavian lenders including SEB AB, Swedbank AB (SWEDA), and Nordea AB. It also controls investment bank Finasta and Latvian lender Latvijas Krajbanka AS. SNORAS BANK: Fitch Lowers Rating on Long-Term IDR to 'C' -------------------------------------------------------- Fitch Ratings has downgraded Snoras Bank's Long-term Issuer Default Rating (IDR) to 'C'. The downgrade reflects Fitch's view that Snoras' default is imminent. This follows the publication on November 18, 2011, by the Lithuanian Ministry of Finance of a document in which it states that "the Government does not expect to use public money in the resolution of Snoras" and "liabilities not covered by the deposit insurance mechanism will receive a substantial haircut." The Bank of Lithuania (BoL) announced on November 20, 2011, that Snoras's administrator is now expected to finalize its report on the options for the bank's restructuring on November 23, with the BoL to review these options on November 24. Fitch expects to downgrade Snoras to 'RD' (Restricted Default) upon confirmation that the bank's restructuring will involve losses for some categories of creditors. The bank could also be downgraded to 'RD' if the restructuring announcement is delayed, but restrictions in respect to the bank's servicing of its liabilities and creditors' access to funds remain in place for an extended period of time. The ratings could be upgraded if the Lithuanian authorities ultimately decide that creditors will not be forced to suffer losses as a result of the bank's restructuring. However, given the statements made by the Ministry of Finance, this scenario now seems very unlikely. Snoras is the fifth largest bank in Lithuania by assets and ranks third by retail deposits. On November 17, 2011, Fitch placed the bank's Long-term IDR on Rating Watch Negative (RWN) and downgraded the Viability Rating to 'f' following the announcement that the bank had entered administration and been subject to forced nationalization. The rating actions are as follows: -- Long-term foreign currency IDR downgraded to 'C' from 'B+', RWN removed -- Short-term foreign currency IDR downgraded to 'C' from 'B', RWN removed -- Viability Rating: affirmed at 'f' -- Individual Rating affirmed at 'F' -- Support Rating downgraded to '5' from '4', RWN removed -- Support Rating Floor revised to 'No Floor' from 'B+', RWN Removed =========== R U S S I A =========== ROSPROMBANK: Moody's Downgrades Deposit Ratings to 'B3' ------------------------------------------------------- Moody's Investors Service has downgraded the long-term local and foreign currency deposit ratings of Russia-based Rosprombank to B3 from B2. The bank's E+ standalone financial strength rating (BFSR), mapping into B3 on the long-term scale, was affirmed. All ratings carry a stable outlook. Ratings Rationale Moody's says that the downgrade and affirmation were triggered by Moody's recent rating action on Rosprombank's parent -- Marfin Popular Bank Public Co Ltd -- whereby its standalone rating was lowered to B3. The downgrade of Rosprombank's deposit ratings to B3 was driven by the lower capacity of Marfin to provide parental support to the Russian subsidiary in case of need. In line with Moody's methodology ("Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology"), Moody's uses the standalone rating of the parent entity as the anchor rating when incorporating parental support for the ratings of foreign subsidiaries. This now results in no rating uplift for Rosprombank's deposit ratings above its standalone credit strength of B3 (previously one notch of uplift). 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 Moscow, Russia, Rosprombank reported -- under Russian GAAP -- total consolidated assets of RUB9.9 billion (around US$319 million) at October 1, 2011. =========================== U N I T E D K I N G D O M =========================== DECO 6: S&P Keeps 'BB-' Rating on Class D Notes ----------------------------------------------- Standard & Poor's Ratings Services withdrew its 'A+ (sf)' credit rating on DECO 6 - UK Large Loan 2 PLC's commercial mortgage- backed class A1 notes, following the redemption of these notes. The ratings on the other classes of notes in this transaction are unaffected. As per the October 2011 cash manager report, the class A1 notes fully redeemed on Oct. 28, 2011, following the full repayment of the St Enoch Loan. The other classes of notes in this transaction remain unaffected by the rating action. DECO 6 - UK Large Loan 2 is a U.K. commercial mortgage-backed securities (CMBS) transaction, which closed in December 2005 with notes totaling GBP555.18 million. The notes have a final legal maturity in July 2017. Potential Effects of Proposed Criteria Changes "We have taken the rating action based on our criteria for rating European CMBS. However, these criteria are under review (see 'Advance Notice of Proposed Criteria Change: Methodology And Assumptions For Rating European Commercial Mortgage-Backed Securities,' published on Nov. 8, 2011)," S&P related. "As highlighted in the Nov. 8 Advance Notice of Proposed Criteria Change, we expect to publish a request for comment (RFC) outlining our proposed criteria changes for rating European CMBS transactions. Subsequently, we will consider market feedback before publishing our updated criteria. Our review may result in changes to the methodology and assumptions we use when rating European CMBS, and consequently, it may affect both new and outstanding ratings on European CMBS transactions," S&P said. "Until such time that we adopt new criteria for rating European CMBS, we will continue to rate and surveil these transactions using our existing criteria (see 'Related Criteria And Research')," S&P said. Ratings List Rating Class To From DECO 6 - UK Large Loan 2 PLC GBP555.119 million Commercial Mortgage-Backed Floating-Rate Notes Rating Withdrawn A1 NR A+ (sf) Ratings Unaffected A2 A+ (sf) B A+ (sf) C BBB (sf) D BB- (sf) NR--Not rated. EXPRO HOLDINGS: Moody's Downgrades CFR to Caa1; Outlook Negative ---------------------------------------------------------------- Moody's Investors Service downgraded the corporate family rating and the probability of default rating of Expro Holdings UK 3 Limited to Caa1 from B3. It also downgraded the rating of the senior secured US$1.4 billion notes due 2016 to B3 from B2. The rating outlook is negative. Ratings Rationale The downgrades reflect Expro's somewhat weak performance so far in the year ending March 2012, with Ebitda and operating cash flow generation below Moody's expectations. Moody's now expects leverage (as adjusted by Moody's) to end FY2012 higher than expected at around 8x. It also incorporates Moody's view that the company's near-term market outlook is uncertain and that continued weak operating performance is likely to put further pressure on the company delivering on its business plan in line with Moody's previous expectations. Despite an increase in revenue (excluding AX-S) in constant currency terms of 9% year-on-year in Q1 FY2012 ended on 30 June 2011, reported adjusted operating profit actually fell 9% year- on-year. Revenue growth was driven by growth in North America Offshore and South West Africa (ex Angola). Much of the decline in operating profit was due to delays and higher costs experienced in its South & West Africa business. Expro's operations have not benefitted materially from the upturn in WTI earlier in the year and continue to exhibit trough like profitability. Moreover, Expro's backlog has remained relatively flat over the past year at around US$1.3 billion. Expro received an equity injection of US$250 million from its shareholders (with the final US$26 million tranche received in August 2011) to boost liquidity and provide funds for capital expenditure to grow the business. However, Moody's notes that the delay in the company's business plan will impact leverage expectations for 2012 and these will be exacerbated by the impact of the mezzanine debt, which will increase over time through the continuing rollup of a material portion of interest. Following the majority of the equity injection, Expro reported cash of US$250 million at June 30, 2011. In Q2FY12 it used part of that to fully repay US$75 million drawn on the bank revolver, which was also upsized to US$160 million. Anticipated negative free cash flow until FY2013 following an increase in capital expenditure weakens the company's liquidity profile and recent working capital swings have been detrimental to current liquidity. However, there is no debt amortization or refinancing requirement until the revolver matures in December 2014 and covenant compliance is currently acceptable, although covenants tighten on a quarterly basis. The negative outlook reflects the fact that the credit is weakly positioned in the Caa1 rating category, given the combination of high leverage and negative anticipated free cash flow, together with the tightening covenants In view of the rating action, no material upward pressure is currently contemplated. For the outlook to be stabilized, Moody's expects adjusted leverage, to fall towards 7x, with sufficient headroom under the bank covenants and continued access to the RCF, resulting in a stronger overall liquidity profile for the rated entity. The ratings could be lowered if earnings deteriorate and weaken covenant headroom, or if other liquidity concerns emerge. The principal methodology used in rating Expro Holdings UK 3 Limited was the Global Oilfield Services Rating 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. Headquartered in the United Kingdom, Expro is a leading provider of services and products to the upstream oil and gas industry. About 25% of revenue is from onshore markets and about 75% from offshore markets. In July 2008, the company was bought by a private equity consortium led by Arle Capital Partners (formerly named Candover Partners) and GS Capital Partners VI Fund, L.P. For the year ending March 2011, the Expro group reported revenue of about US$1 billion. FAB UK 2004-1: Fitch Lowers Ratings on 2 Note Tranches to 'CCsf' ---------------------------------------------------------------- Fitch Ratings has downgraded six tranches of FAB UK 2004-1 B.V. and affirmed one tranche, as follows: -- GBP123,562,700 class A-1E floating-rate notes due 2045 (ISIN: XS0187962104): downgraded to 'BBsf' from 'BBBsf'; Outlook Negative -- GBP5,883,938 class A-1F zero coupon notes due 2045 (ISIN: XS0187962369): downgraded to 'BBsf' from 'BBBsf'; Outlook Negative -- GBP10,000,000 class A-2E floating-rate notes due 2045 (ISIN: XS0187962799): downgraded to 'Bsf' from 'BBsf'; Outlook Negative -- GBP8,800,000 class A-3E floating-rate notes due 2045 (ISIN: XS0187962872): affirmed at 'CCCsf' -- GBP4,700,000 class A-3F fixed-rate notes due 2045 (ISIN: XS0187963094): downgraded to 'CCsf' from 'CCCsf' -- GBP5,336,415 class S1 combination notes due 2045 (ISIN: XS0187963334): downgraded to 'BBsf' from 'BBBsf'; Outlook Negative -- GBP2,935,901 class S2 combination notes due 2045 (ISIN: XS0187963508): downgraded to 'CCsf' from 'CCCsf' The downgrades reflect the transaction's poor performance. The over-collateralization (OC) tests have been failing since the beginning of 2009 and have deteriorated over time. The downgrade also reflects the high risk embedded in the portfolio as it comprises almost entirely mezzanine tranches of structured finance assets with low potential for recoveries. Moreover the deal is failing both the weighted average spread and weighted average coupon tests, which means it has limited ability to de- leverage the senior tranches by trapping excess spread The pool shows a high level of concentration of UK RMBS assets, with a large part of the portfolio comprising sub-prime assets. The 'CCCsf' and below bucket totals nearly 10% of the total assets. The Class A-3E notes have been affirmed as the ratings are in line with the expectations for the transaction's performance. The combo notes have been downgraded because of the similar actions taken on the A-1F and A-3F tranches, respectively. FAB UK 2004-1 B.V. is a securitization of mainly European structured finance assets with a total note issuance of GBP204.5 million invested in a target portfolio of GBP200 million. The portfolio is actively managed by Gulf International Bank (UK) Limited. Fitch has assigned a Two Stars Issuer Report Grade (IRG), "Basic", to the reporting due to the lack of detailed information about the counterparties and relative triggers. MOTHERCARE PLC: Launches Review of Struggling UK Business --------------------------------------------------------- The Scotsman reports that Mothercare plc has launched a review of its struggling UK business after a dire first half in its home market overshadowed strong growth overseas, pushing the group into the red. The company, which has 352 British stores and almost 1,000 overseas, has already announced it is cutting 110 stores in the UK but said it will look to adjust the size and shape of its business in line with current conditions, the Scotsman discloses. The review is due to be completed in the first quarter of 2012, the Scotsman states. Mothercare is battling intense competition from supermarkets and online specialists, as well as consumer uncertainty in the face of tough economic headwinds, the Scotsman says. Ben Hunt, an analyst at Oriel Securities, previously said the company should consider winding down its UK arm completely, the Scotsman recounts. Mr. Hunt, as cited by the Scotsman, said: "Closing the UK business may seem like a radical idea, but people clearly fear the loss-making UK business will continue to be a burden on the company." Mothercare, which owns the Early Learning Centre brand, made an underlying pre-tax loss of GBP4.4 million in the 28 weeks to October 8, compared with a profit of GBP12.2 million a year earlier, the Scotsman discloses. Total group sales rose 4% to GBP413 million while total British sales fell 4.3% with the division swinging to an operating loss of GBP18.5 million, the Scotsman relates. Mothercare plc is a mother and baby products retailer. PAG HOTELS: Administrators Sell Castle Venlaw for GBP695,000 ------------------------------------------------------------ Mark Entwistle at Southern Reporter writes that Colliers International, acting on behalf of the joint administrators of PAG Hotels Limited, sold Castle Venlaw Hotel to an unnamed private couple for what it says was close to the asking price of offers over GBP695,000. As reported in the Troubled Company Reporter on Aug. 18, 2010, Business Sale Report said that two of PAG Hotels' Scottish hotels have been put up for sale as fully operational businesses. Castle Venlaw Hotel on the outskirts of Peebles has been put onto the market for offers over GBP795,000 while Auchen Castle Hotel is for sale at offers over GBP1.25 million. The report related that Blair Nimmo and David Costley-Wood of KPMG accountants placed PAG Hotels into administration at the end of June after being called in by Santander bank. As a result, more than 30 jobs are at risk, but both hotels remain open, the report added. The administrators can be reached at: Blair Carnegie Nimmo David Costley-Wood KPMG LLP 191 West George Street Glasgow, G2 2LJ Tel: 0141 226 5511 Fax: 0141 204 1584 E-mail: blair.nimmo@kpmg.co.uk E-mail: david.costley-wood@kpmg.co.uk Castle Venlaw Hotel officially reopened after a major refurbishment at the beginning of March 1999, and it was eight years later, in the September 2007, that it was acquired by PAG Hotels Ltd. SKIPTON BUILDING: Moody's Provides Updates on Darrowby No. 1 Plc ---------------------------------------------------------------- Moody's Investors Service stated that the assignment by Skipton Building Society of further advances and the product switch of existing mortgages, will not, in and of themselves and at this time, result in a reduction or withdrawal of the current rating of the notes issued by Darrowby No. 1 Plc. As per the Mortgage Sale Agreement, further advances and product switches can only be made by Skipton as seller if it is rated at least P-2 as of the further advance or product switch date. On October 7, 2011, the long-term deposit and short-term ratings of Skipton were downgraded to Ba1/Not Prime from Baa1/P-2, therefore resulting in a rating trigger breach under the Mortgage Sale Agreement. In response to such breach, the Seller proposes that further advances and product switches be still allowed in spite of their non-prime short-term rating (the "Proposal"). In order to mitigate the claw back risk following an insolvency event of Skipton as Seller, Skipton will provide monthly solvency certificates before any further advances are purchased by the Issuer. Moody's notes that product switches do not give rise to claw back risk as they do not entail further sales of receivables to the Issuer. The further advance and product switch features are in line with other transactions originated by mid-sized UK lenders. In determining the impact of the Proposal on the current Moody's rating of the Notes, Moody's considered, among other things, the risk of clawback following a potential seller insolvency. The principal methodology used in this rating was Moody's Approach to Rating RMBS in Europe, Middle East and Africa published in October 2009. Moody's ratings address the expected loss posed to investors by the legal final maturity of the notes. Moody's ratings address only the credit risks associated with the transaction. Other risks have not been addressed, but may have a significant effect on yield to investors. TATA STEEL: Moody's Assigns Negative Outlook to 'B2' CFR -------------------------------------------------------- Moody's Investors Service has assigned a negative outlook on the B2 corporate family rating of Tata Steel UK Holdings Limited and B2/LGD 3(49) ratings assigned to its EUR4.1 billion senior secured senior bank facilities. Ratings Rationale The change of the outlook from stable to negative reflects the expectation that the weakening economic outlook in Europe and a deteriorating conditions in the European steel sector will likely lead to a slower improvement in the operating performance and financial profile of TSUKH, with Debt/EBITDA likely remaining closer to 6x times in the current year (ending March 2012). This trend comes at a time when the company is executing additional restructuring and investment measures, with the 5-year investment plan recently announced by the company (EUR800 million in IJmuiden in the Netherlands and GBP400 million for Long Products in Scunthorpe), that will lessen FCF generation in the next several years, limiting TSUKH's ability to reduce leverage. The B2 ratings, however, are supported by the assumption of uninterrupted support of the parent company Tata Steel Ltd (rated Ba3/stable), that in Moody's view has sufficient financial flexibility to assist with the execution of the restructuring and investment measures at the European subsidiary. Any revision of the degree of financial support available to TSUKH and its lenders from the parent company could impact the B2 ratings. The ratings could also be lowered as a result of a profound deterioration in the operating performance of Tata Steel UK, with Total Debt rising to 7x times, that will put under stress Moody's current assumptions of the recovery rates supporting the ratings on TSUKH's loans. An upgrade of the ratings would require a sustained strong operating performance, leading to consistent FCF generation, and a deleveraging of the balance sheet with Debt/EBITDA leverage sustainably below 3.5x. In October 2010, TSUKH successfully refinanced its bank facilities with new EUR4.2 billion senior secured syndicated loans. The new facilities have a back-loaded repayment profile and should allow more financial flexibility to TSUKH in the near term, with only limited debt repayments in 2012-2014 and no refinancing requirements until 2015. The rating assumes that TSUKH will continue to proactively manage its liquidity position. Moody's expects that the new GBP690 million revolver facility, negotiated as part of the refinancing package at the end of 2010, should be sufficient to cover working capital requirements of the business, and also note the existing intercompany arrangements for procurement and working capital funding that offer additional flexibility. At the end of June 2011, the company reported GBP175 million outflow of working capital, which is in line with the cyclical patterns in the cash flows. The availability of funding under the revolver facility is subject to the financial covenants (including Debt Payment Cash Coverage covenant). Moody's expects that the company will remain in compliance with its covenants in the current year. The principal methodology used in rating Tata Steel UK Holdings Limited was the Global Steel Industry Methodology published in January 2009. Tata Steel UK Holdings Limited ("TSUKH" or the "Company") is the 100% owned subsidiary of Tata Steel Ltd, a Mumbai-based international steel producer, and is the holding company for the European steel operations that principally comprise the former Corus group. The Company is the second largest producer of steel in Europe with c.18 mtpa crude steel capacity and GBP9.6 billion revenues reported for the year ended in March 2011. Tata Steel Ltd is an integrated steel company headquartered in Mumbai. After the acquisition of Corus, Tata Steel became the world's sixth largest steelmaker with an annual production capacity of around 28 million tons of crude steel. THOMAS COOK: Calls In Advisers; May Face Restructuring ------------------------------------------------------ Louisa Peacock at The Telegraph reports that Thomas Cook endured another miserable day on Wednesday after it emerged its lenders had called in professional advice, raising the prospect of a root-and-branch restructure. Separately, David Cameron made the very rare move of asking the Business Department for a status report on the company, The Telegraph notes. Brokers were left in a state of shock after events this week, with Citigroup sending a note to clients warning it could not place a target price on Thomas Cook stock, The Telegraph relates. Its share price failed to make significant gains following its 75% collapse on Tuesday, Nov 22, The Telegraph discloses. According to The Telegraph, several major brokers kept "sell" recommendations, with many warning the company was running out of time to convince the markets and customers it was a safe bet. Thomas Cook's number one shareholder, Lloyds Banking Group, pulled out almost half its stock in the company, taking its holding to 4.59%, The Telegraph discloses. Thomas Cook admitted on Tuesday it was close to breaching banking covenants, sending jolts across the trading floor, according to The Telegraph. It was the second time in a month the firm had asked its lenders to come to the rescue, after securing another separate GBP100 million loan, taking its net debt to GBP900 million, The Telegraph notes. The share price recovered slightly to 10.72p, up from 10.2p, but attention turned to the possible restructuring of the company as it emerged Ernst & Young had been appointed advisers, The Telegraph says. "It could easily be restructured. At this stage it may be difficult for the 17 banks to have conversations directly with the company so appointing an adviser takes the emotion out of it," The Telegraph quotes one analyst as saying. According to The Telegraph, he said the alternatives were refinancing the debt burden in exchange for hefty fees or a debt-for-equity swap -- something the company ruled out on Tuesday. Thomas Cook Group plc is a United Kingdom-based company. The Company, together with its subsidiaries, is engaged in the provision of leisure travel services. Its main brands include Airtours, Aspro, Club 18-30, Cresta, Manos, Neilson, Sunset, Sunworld Holidays, Swiss Travel Service, Thomas Cook, Thomas Cook Style Collection, Thomas Cook Signature and Thomas Cook Tours. It has six geographic operating divisions: United Kingdom, Central Europe, West and East Europe, Northern Europe, North America and Airlines Germany. =============== X X X X X X X X =============== * EUROPE: New EC Law to Impose Losses on Ailing Bank Bondholders ---------------------------------------------------------------- Reuters reports that the European Commission is set to propose a law within weeks that could let supervisors impose losses on the bondholders of a flagging bank, officials said, a move it has delayed until the end of the year for fear it will panic markets. The law is part of a European framework on winding up or salvaging troubled banks, seen as crucial to preventing another financial crisis, but which is sensitive because it has echoes of the Greek bailout package, in which holders of Greek government bonds share some of the losses, Reuters notes. Banks are also worried that the new European law would break a finance industry taboo that bondholders are spared losses, making investors more reluctant to lend to banks and possibly compounding a credit freeze, Reuters discloses. According to Reuters, banks have said that forcing bondholders, especially senior ones, to take a hit when a bank is in trouble should only be a last resort option. Officials told Reuters that this remained part of the proposal, which if accepted by EU member states and the European parliament, will become EU law. One official, speaking on condition of anonymity, said the new rules would correct the imbalance between the treatment of bondholders and of shareholders, many of whom lost their investments in banks that failed during the crisis, Reuters relates. * BOOK REVIEW: Corporate Debt Capacity -------------------------------------- Author: Gordon Donaldson Publisher: Beard Books, Washington, D.C. 2000 (reprint of 1961 book published by the President and Fellows of Harvard College). List Price: 294 pages. $34.95 trade paper, ISBN 1-58798-034-7. "The research project who results are reported in this volume was primarily concerned with the risk element involved in the utilization of debt as a source of permanent capital for business," Bertrand Fox, Director of Research, succinctly writes in the "Foreword". The research project was funded by and conducted by an organization connected with Harvard College, the original publishers of this book in the early 1960s. The research was not a body of data for analysis as research typically is in business studies or sociological studies. In the end, Donaldson recommends perspectives and practices going beyond the research. This doesn't necessarily go against the findings of the research, but rather shows the limitations of the thinking of most businesspersons at the time or their blind spots regarding the role of debt, especially with respect to potentials for growth, longevity, and other interests of business management. The businesses are not identified. Given Donaldson's credibility and reputation and the Harvard name behind the research project however, the research data is taken as factual and reliable. The research was garnered from participating corporations and financial institutions. Though there are a few tables, the research is not limited to financial information strictly as figures and other balance sheet data. Donaldson was interested as much in corporate leaders' psychology and presumptions about debt more than current debt situations and corporate policies regarding debt. Financial institutions were included as part of the study as well because their views toward corporate debt and the way they worked with the financial parts of corporations had an effect on corporate debt of the time. As Donaldson found from the research, both corporations and financial institutions understood debt in conventional, traditional, ways. For the corporations, these ways could be hampering operations and strategy. The ways corporations were being hampered were unseen however unless they started looking at their books differently and became open to taking on debt differently. Donaldson's singular achievement was to see in the research ways in which corporations were being hampered and in thus propose a new way of regarding debt. This was a revolutionary step for the large majority of businesses. And for even the small number of businesses which were pursuing unconventional debt practices, Donaldson's studies and new perspective put these on solid ground giving better guidance. Donaldson's readings of the research reflect corporate managers' own statements (also part of the research) regarding their views on their company's financial analysis and debt. Managers are quoted, "Our management is essentially conservative."; "The word which describes our corporate image is 'dignified'."; "I supposed in a way we're lazy." The author treats these as "attitudes"--as in a chapter "Management Attitudes to Non-Debt Sources"-- realizing that it is such "attitudes" more than what financial figures disclose or debt itself which colors practices about the fundamental business matter of debt. Donaldson brings into the open managers false sense of debt. This false sense is bound in with conventional, inherited concepts and images of a corporation having no relation to facts. Such conventional views are perpetuated by an aversion to risk. The less debt, the less risk, according to the prevailing precept. But Donaldson points out that managers who observe this actually often pursue greater risks in product development, entering new markets, mergers, and other activities. Corporate "attitudes" to debt since the book's 1961 publication attest to the deep influence of Donaldson's groundbreaking perspective. Consumer debt, the growth of credit cards, and other financial phenomena also evidence changed regard of debt found in Donaldson's work. The tipping of the balance to too much debt for many corporations and beyond cannot be attributed to the book however. For in urging new concepts and uses of debt for the better management of corporations, Donaldson also goes into determination and control of risks entailed in new types of debt. Gordon Donaldson retired in 1993 after close to 20 years at the Harvard Business School. ********* 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 * * *