/raid1/www/Hosts/bankrupt/TCREUR_Public/120525.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Friday, May 25, 2012, Vol. 13, No. 104
Headlines
C Y P R U S
CYPRUS POPULAR: Moody's Lowers Subordinated Debt Rating to 'Ca'
G E R M A N Y
INVENTUX SOLAR: Financial Investors Keen on Acquiring Firm
I R E L A N D
JAZZ III: S&P Lowers Rating on Class P Combo Notes to 'CCC+'
RITCHIE RISK-LINKED: U.S. Bank Wins Injunction Over Sold Policy
L U X E M B O U R G
SUNRISE COMMUNICATIONS: Fitch Gives BB- LT Issuer Default Rating
R U S S I A
HOME CREDIT: Fitch Puts 'BB-' IDR on Rating Watch Positive
* CITY OF UFA: S&P Affirms 'BB-' Long-Term Issuer Credit Rating
* REPUBLIC OF BASHKORTOSTAN: S&P Affirms 'BB+' LT Issuer Rating
S P A I N
AUTOVIA DE LOS VINEDOS: Moody's Confirms 'B3' Debt Ratings
BBVA RMBS 3: Fitch Lowers Rating on Class C Notes to 'CCsf'
SANTANDER EMPRESAS 4: S&P Lowers Rating on Class E Notes to 'D'
S W I T Z E R L A N D
TRANSOCEAN LTD: Moody's Confirms '(P)Ba1' Sr. Sub. Shelf Rating
U N I T E D K I N G D O M
AIREDALE ELECTRICAL: In Administration, Parent Unaffected
ASCOT ENVIRONMENTAL: Wound Down After Falling Into Administration
CLINTON CARDS: 14 Stores to Close; About 100 Jobs Affected
FAIRHOLD SECURITISATION: Moody's Cuts Ratings on 2 Notes to 'B1'
LANSDOWNE HOTEL: Goes Into Liquidation; 35 Jobs Axed
MBT UK: Follows Parent Firm Into Administration
MILLENNIUM ADMP: Wilmington Group Acquires Assets
MOTORMANIA: In Administration, Jobs at Risk
NEWGATE FUNDING 2007-2: S&P Cuts Rating on Class Db Notes to 'B-'
RANGERS FOOTBALL: Kilmarnock Chairman Urges Caution Over Club
SAMARKAND BANK: S&P Assigns 'CCC/C' Counterparty Credit Ratings
T&T ACCESS: In Administration, Sets July 9 as Claims Due Date
THOMAS COOK: Appoints Harriet Green as New Chief Executive
WORLDSPREADS PLC: Administrators to Pursue High-Stakes Clients
YELL GROUP: To Change Name to Hibu; Raises Going Concern Doubt
* UK: Moody's Says Food Retail Growth Slows as Competition Bites
X X X X X X X X
* BOOK REVIEW: Kenneth M. Davidson's Megamergers
*********
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C Y P R U S
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CYPRUS POPULAR: Moody's Lowers Subordinated Debt Rating to 'Ca'
---------------------------------------------------------------
Moody's Investors Service has downgraded Cyprus Popular Bank
Public Co Ltd. (CPB)'s outstanding domestic subordinated debt
rating to Ca from Caa2 and provisional rating on subordinated
debt issued under CPB's EMTN program to (P)Ca from (P)Caa2. The
downgrades reflect Moody's view that the terms of CPB's offer to
buy-back the outstanding floating-rate subordinated notes at a
discount constitutes a distressed exchange.
The outlook on the Ca-rated domestic subordinated debt remains
developing. CPB's other ratings (B3, deposit rating; E BFSR/caa1
BCA, outlook developing) are unaffected by the subordinated debt
downgrades.
Ratings Rationale
Moody's says that it views the current debt exchange as a
distressed debt exchange due to (i) CPB's weak financial
position, including its low capitalization, with a 1.8% equity-
to-assets ratio following losses suffered from the Greek
government debt exchange; and (ii) its high reliance on funding
from central banks, at 27.5% of its total assets as of December
2011. Moody's approach to evaluating distress exchanges is
described in the agency's rating implementation guidance "Moody's
Approach to Evaluating Distressed Exchanges" published in March
2009.
The Ca ratings on these subordinated securities reflect the
anticipated loss to those creditors that will participate in the
exchange. Under the terms of the exchange, Moody's understands
that investors can either exchange the securities for cash at
55.0% of par, or exchange the subordinated debt for senior debt
at an exchange rate of 72.5%.
Rating 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: Global Methodology published in March 2012.
As of December 31, 2011, CPB had total assets of EUR34.0 billion.
CPB is headquartered in Nicosia, Cyprus
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G E R M A N Y
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INVENTUX SOLAR: Financial Investors Keen on Acquiring Firm
----------------------------------------------------------
According to Bloomberg News, Berliner Zeitung reported that the
insolvent German solar company Inventux Solar Technologies AG is
attracting interest from financial investors.
The newspaper, citing insolvency administrator Rolf Rattunde,
said talks with potential investors started several weeks ago,
Bloomberg relates. Those interested in the Berlin-based company
include financial investors from abroad, according Berliner
Zeitung.
The Troubled Company Reporter-Europe, citing Bloomberg News,
reported on May 24, 2012, that Inventux said it filed for
insolvency in Berlin-Charlottenburg's local court in the third
week of May and is looking for investors. Inventux has been
affected by the "dramatic" price drop in panels and can't produce
at a breakeven point due to Asian competition that's "massively
subsidized," Bloomberg quoted the company as saying in the
statement. Rolf Rattunde from the Leonhardt law firm has been
appointed as temporary administrator, Bloomberg disclosed.
Inventux Solar Technologies AG is a manufacturer of silicon-
based, thin-film photovoltaic panels based in Berlin, Germany.
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I R E L A N D
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JAZZ III: S&P Lowers Rating on Class P Combo Notes to 'CCC+'
------------------------------------------------------------
Standard & Poor's Ratings Services lowered and removed from
CreditWatch negative its credit ratings on the class A-1, B-1, C-
1, D-1, D-2, E-1, E-2, N combination, and P combination notes in
Jazz III CDO (Ireland) PLC's euro-denominated issue. "At the same
time, we affirmed our rating on the class S notes," S&P said.
"Jazz III CDO is a hybrid cash/synthetic arbitrage collateralized
debt obligation (CDO) of corporate entities and sovereigns,
managed by AXA Investment Managers Paris S.A. The asset structure
combines elements of cash CDOs (i.e., purchasing bonds and loans
with the proceeds of the note issuance) and synthetic CDOs (i.e.,
selling protection through a portfolio of credit-default swaps
[CDSs] and total-return swaps). The liability structure combines
both a funded and an unfunded element. The transaction closed in
August 2006," S&P said.
"In July 2011, we placed our ratings on the class A-1, B-1, B-2,
C-1, D-1, D-2, E-1, E-2, N combination, and P combination notes
on CreditWatch negative, due to deterioration in the portfolio's
credit quality," S&P said.
"The rating actions follow our assessment of credit quality
deterioration in the portfolio," S&P said.
CAPITAL STRUCTURE
Notional
Current as of OC as of
notional Dec.2010 Current Current Dec.2010
Class (mil EUR) (mil EUR) interest OC (%) (%)
----- --------- --------- ------------------- --------
Unfunded 783.50 861.50 N/A N/A N/A
S 70.00 70.00 6mEURIBOR+0.30% 9.0 8.6
A-1 45.00 45.00 6mEURIBOR+0.45% 4.9 4.8
B-1 10.00 10.00 6mEURIBOR+0.90% 4.0 3.9
C-1 10.00 10.00 6mEURIBOR+1.40% 3.0 3.1
D-1 5.40 5.40 6mEURIBOR+3.00% 2.0 2.0
D-2 6.60 6.60 7.04% 2.0 1.0
E-1 10.80 10.80 6mEURIBOR+5.25% 0.9 1.0
E-2 1.20 1.20 9.29% 0.9 1.0
Sub 57.50 57.50 N/A 0.0 0.0
N/A - Not applicable.
OC - Overcollateralization = (total funded collateral - tranche
balance [including tranche balance of
all senior tranches])/total risky
exposure.
Sub - Subordinated.
6m - Six-month.
EURIBOR - Euro Interbank Offered Rate.
COMBINATION NOTES
Rated
Current balance
rated as of
balance Dec.2010
Class (mil EUR) (mil EUR) Interest Components
----- --------- --------- -------- (mil EUR)
----------
N 4.12 5.76 N/A 6.60 class D-2
note principal
3.44 subordinated
note principal
P 0.60 0.99 N/A 1.20 class E-2
note principal
0.80 subordinated
note principal
N/A - Not applicable.
S&P said that since its review in December 2010, it considered
that these factors have negatively affected the transaction:
- Defaulted assets: The portfolio currently contains three
assets that S&P considers to be defaulted, compared with none
in December 2010. S&P expects that losses on these assets
will amount to EUR5.38 million.
- Negative ratings migration of the cash obligations and long
CDSs: The amount of assets rated below 'BBB-' has increased
to 17%, from 9% in December 2010.
- Increased credit risk on the funded basis obligations: In
January 2012, S&P lowered to 'A' from 'A+' its long-term
issuer credit rating on the default protection provider,
Natixis S.A. (A/Stable/A-1).
"In our analysis, we subjected the rated notes to various cash
flow scenarios. These incorporated different default patterns,
and exchange rate and interest rate curves, to determine each
tranche's break-even default rate at each rating level," S&P
said.
KEY MODEL ASSUMPTIONS
As of
Current Dec.2010
Total funded collateral (mil EUR) 168.44 170.93
Total risky exposure (mil EUR) 1,099.03 1,174.08
Class E overcollateralization ratio (%) 104 104
Total funded collateral = cash obligations + funded basis
obligations + principal cash - loss
amount on defaulted synthetic assets.
Total risky exposure = cash obligations + long CDS + funded basis
obligations.
"Natixis currently provides currency hedges on 32% of the total
funded collateral in Jazz III CDO (Ireland). In our analysis of
these currency hedges, we have applied our 2010 counterparty
criteria. In our view, our rating on Natixis, and its replacement
covenants, are appropriate to support liabilities rated 'A+' and
below. Therefore, for the class S notes, we conducted our cash
flow analysis assuming nonperformance of the currency hedging
counterparty," S&P said.
"Of the ratings we lowered, the rating on the class P combination
notes was constrained by the application of the largest obligor
default test, a supplemental stress test we introduced as part of
our criteria update. None of the ratings was affected by the
largest industry default test, another of our supplemental stress
tests," S&P said.
"In view of those developments, and as a result of our credit and
cash flow analysis, we consider that the credit enhancement
available to the class A-1, B-1, B-2, C-1, D-1, D-2, E-1, E-2, N
combination, and P combination notes is now commensurate with
lower ratings than we previously assigned. We have therefore
lowered our ratings on these classes of notes and removed them
from CreditWatch negative," S&P said.
"Our credit and cash flow analysis indicates that the credit
enhancement available to the class S notes remains commensurate
with our current rating on these notes, and we have affirmed this
accordingly at 'AA-' (sf)," S&P said.
RATINGS LIST
Class Rating Rating
To From
Jazz III CDO (Ireland) PLC
EUR228.9 Million Fixed- and Floating-Rate Notes Series 1
Rating Affirmed
S AA- (sf)
Ratings Lowered and Removed From CreditWatch Negative
A-1 BBB+ (sf) A+ (sf)/Watch Neg
B-1 BBB- (sf) BBB+ (sf)/Watch Neg
C-1 BB- (sf) BB+ (sf)/Watch Neg
D-1 B- (sf) BB+ (sf)/Watch Neg
D-2 B- (sf) BB+ (sf)/Watch Neg
E-1 CCC- (sf) B+ (sf)/Watch Neg
E-2 CCC- (sf) B+ (sf)/Watch Neg
N combo BB- (sf) BB+ (sf)/Watch Neg
P combo CCC+ (sf) B+ (sf)/Watch Neg
RITCHIE RISK-LINKED: U.S. Bank Wins Injunction Over Sold Policy
---------------------------------------------------------------
Bankruptcy Judge Burton R. Lifland granted the request of U.S.
Bank National Association, in its capacity as securities
intermediary, to enforce the Court's Jan. 17, 2008 order
authorizing the sale of substantially all the assets of Ritchie
Risk-Linked Strategies Trading (Ireland) II, Ltd., to Nutmeg Life
Settlement Trust. U.S. Bank wants the injunctive provisions of
the sale order enforced against The Bancorp Bank to prevent
Bancorp from pursuing, in any fashion or forum whatsoever, its
purported death benefit claim against a life insurance policy
that was included in the sale to Nutmeg.
Bancorp had argued that (i) U.S. Bank's request should have been
brought as an adversary proceeding, not a motion; (ii) the Court
should permissively abstain from determining this matter; and,
(iii) if the Court does not abstain, it should deny the Motion
because Bancorp was not provided with adequate notice.
The Court, however, said U.S. Bank's request need not have been
brought as an adversary proceeding, permissive abstention is
inappropriate, and that Bancorp was afforded adequate notice.
A copy of the Court's May 22, 2012 Memorandum Decision and Order
is available at http://is.gd/qi8oYTfrom Leagle.com.
Sidley Austin LLP's John G. Hutchinson, Esq., and Lee S.
Attanasio, Esq., argue for U.S. Bank National Association, as
Securities Intermediary.
David L. Braverman, Esq., and Richard S. Julie, Esq., at
Braverman Kaskey, P.C., in Philadelphia, represent The Bancorp
Bank.
About Ritchie Risk-Linked
Based in Dublin, Ireland, Ritchie Risk-Linked Strategies Trading
(Ireland) Ltd. and Ritchie Risk-Linked Strategies Trading
(Ireland) II Ltd. were Dublin-based funds of hedge fund group
Ritchie Capital Management. The Debtors were formed as special
purpose vehicles to invest in life insurance policies in the life
settlement market.
Headquartered in Lisle, Illinois, Ritchie Capital Management
Ltd. -- http://www.ritchiecapital.com/-- is a private asset
management firm founded in 1997 by former college football
linebacker Thane Ritchie. The company has offices in New York
and Menlo Park, California.
The hedge funds filed for Chapter 11 protection (Bankr. S.D.N.Y.
Case Nos. 07-11906 and 07-11907) on June 20, 2007. The firm
LeBoeuf, Lamb, Greene & MacRae, LLP, represented the Debtors in
their restructuring efforts. The LeBoeuf firm later merged with
Dewey Ballantine to form Dewey & LeBoeuf. Dewey & LeBoeuf
dissolved in May 2012. When the Debtors filed for bankruptcy,
they listed estimated assets and debts of more than $100 million.
In January 2008, the Bankruptcy Court approved the sale of the
assets of Ritchie Ireland I and II. Nutmeg Life Settlement
Trust, an affiliate of defunct Bear Stearns Co., acquired 182
polices from the Debtors for $56.5 million while ABN Amro NV
bought 891 policies for $396 million, a total of $452.5 million.
In September 2008, the Bankruptcy Court approved the Chapter 11
Liquidation Plan for Ritchie Ireland I and II.
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L U X E M B O U R G
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SUNRISE COMMUNICATIONS: Fitch Gives BB- LT Issuer Default Rating
----------------------------------------------------------------
Fitch Ratings has assigned Sunrise Communications Holdings S.A. a
Long-term Issuer Default Rating (IDR) of 'BB-' with a Stable
Outlook. Fitch has also assigned the senior secured notes issued
by Sunrise Communications International S.A. and the senior
secured credit facilities borrowed by Sunrise Communications AG
and Skylight S.a.r.l. an instrument rating of 'BB', as well as
assigning the company's senior notes an instrument rating of 'B'.
The 'BB-' IDR reflects Sunrise's strong number-two market
position within the Swiss mobile telecommunications market,
underpinned by historical growth in the subscriber base, as well
as stable trends in ARPUs and subscriber acquisition costs. This
enabled Sunrise to achieve double digit EBITDA growth in 2010-
2011 and generate solid free cash flow (FCF), despite material
cuts in mobile termination rates.
The Stable Outlook supports Fitch's expectations of low-single-
digit growth in revenues, underpinned by ongoing customer
additions within the mobile segment, as well as a slight
reduction in the churn rate of landline subscribers through
increased penetration of triple and quad play bundles. The
Outlook also factors in the agency's concerns about the potential
for increased competition from Swisscom and Orange within the
mobile segment. In the fixed-line segment, Fitch believes that
Sunrise's business could be vulnerable to increasing competition
due to its weaker market position relative to Swisscom and
Cablecom. Fitch's analysis did not consider any acquisitions.
The ratings are constrained by the company's leveraged capital
structure, with FFO adjusted net leverage of 4.5x at December
2011, and high cash interest expenses exerting pressure on cash
flow generation. Nonetheless, the agency anticipates that
leverage is likely to decrease over the next one to two years,
supported by further improvements in profitability and FCF
generation.
Downside pressure on the ratings could be exerted if the company
underperformed Fitch's expectations, with failure by the company
to reduce leverage below 4.5x on FFO adjusted net basis over the
next one to two years as well as FFO interest cover falling below
2.75x.
In view of the company's projected leverage profile, an upgrade
is unlikely in the near term. A decrease in FFO adjusted net
leverage at a sustained level well below 4.0x could place upward
pressure on the ratings, as well as an increase in FFO interest
cover above 4.0x.
The notching differential between the IDR and the senior secured
instrument ratings reflects the large amount of outstanding
senior secured debt, with gross senior leverage above 3.0x at
December 2011. The senior notes instrument rating reflects the
structural and contractual subordination of these obligations,
which is likely to result in poor recovery rates. Any upside in
the notching of the instrument ratings will be conditional on
Sunrise repaying a material amount of senior debt.
In its assessment of the capital structure, Fitch has not
included within its leverage metrics the liabilities arising from
the issuance of Preferred Equity Certificates (PECs) issued by
Sunrise Communications Holdings S.A., or the PECs and PIK
Facility issued by the parent company Mobile Challenger
Intermediate Group S.A..
Although the PECs instruments issued by Sunrise Communications
Holdings S.A. are not structurally subordinated to the restricted
group, Fitch believes they have no direct impact on the
probability of default of the restricted group due to the absence
of "events of default" provisions within the documentation.
Similarly, the PECs and the PIK Facility issued by the holding
company Mobile Challenger Intermediate Group S.A. -- i.e. outside
of the restricted group -- are structurally subordinated to the
restricted group's liabilities and benefit only from a residual
equity claim in Sunrise Communications Holdings S.A.. The
equity-like treatment of PECs and PIK Facility is further
reinforced by the presence of contractual provisions within the
financing documentation restricting payments related to these
instruments.
The ratings take also into account the company's comfortable
liquidity profile, with liquidity score expected to remain above
3.0x over the next one to two years, underpinned by adequate cash
balances, availability under the Revolving Credit Facility (RCF)
and FCF generation. Fitch believes this will provide the company
with financial flexibility to service its upcoming debt
obligations - Fitch's liquidity score is defined as the sum of
any available liquidity source, including FCF, divided by the
short-term debt service obligations, i.e. interest and principal.
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R U S S I A
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HOME CREDIT: Fitch Puts 'BB-' IDR on Rating Watch Positive
----------------------------------------------------------
Fitch Ratings has placed Russia's Home Credit and Finance Bank's
(HCFB) Long-term Issuer Default Ratings (IDRs) of 'BB-' on Rating
Watch Positive (RWP).
The RWP reflects Fitch's view that the bank's stand-alone credit
metrics warrant a higher rating level than the 'BB-' level,
meaning that HCFB will likely be upgraded, probably by one notch.
However, prior to taking a final decision on the appropriate
level of HCFB's ratings, Fitch will complete an analysis of the
PPF group, the controlling shareholder of the bank, and consider
more closely the benefits and risks for HCFB of being a member of
the group.
Fitch's assessment of HCFB's stand-alone profile reflects its
strong profitability, currently comfortable capitalization and
liquidity, satisfactory through-the-cycle asset quality
performance, strong expertise and franchise in consumer lending
and reduced refinancing risks.
At the same time, Fitch notes some uncertainty about HCFB's long-
term prospects and the sustainability of its performance given
increasing competition in the Russian consumer finance market.
The recent rapid growth of receivables and moderate increase in
credit loss rates also point to some downside risk for asset
quality indicators, while the stability of the recently acquired
retail deposit base has yet to be tested.
HCFB plans to grow its loan book further in 2012 following a 50%
increase in 2011; management plans to finance this primarily with
retail deposits. Increased credit losses accompanied growth in
2011, and non-performing loans origination (NPLs; overdue by more
than 90 days) rose to 7.8% in 2011 from 7.1% in 2010. In Fitch's
view, constraining credit costs might be challenging for HCFB
given its growth ambitions and risk appetite; however the wide
interest margin (23% in 2011) offers considerable flexibility to
absorb losses, and Fitch estimates the break-even loss rate to be
around 20% of average loans.
Refinancing risk appears to be limited as the bank has become
mostly deposit funded (56% of total liabilities at end-2011) and
liquidity risk relates mainly to potential instability of these.
However, HCFB appears to have a solid deposit collection
capacity, underpinned by its wide regional branch network and its
ability to offer competitive deposit rates to retain customers.
The liquidity buffer, consisting of cash and unpledged bonds
eligible for refinancing with the Central Bank of Russia,
remained, on average, at about 20% of customer deposits, which
appears adequate in the context of the RUB5bn upcoming put
options on domestic bonds in H212. The loan book's strong cash
generation is also supportive of the liquidity position.
Capitalization is comfortable even after the large RUB16bn
dividend payments in 2011-Q112, with a Basel I Tier 1 ratio above
15% at end-Q112. In Fitch's view, internal capital generation
should help to prevent any marked deterioration in capital ratios
in the near term, unless NPLs increase sharply or HCFB makes
further large dividend payments.
Fitch will resolve the RWP on HCFB's ratings following the
completion of its analysis of the PPF group, which it expects to
complete within the next two months. If this review indicates
that there are limited contingent risks for HCFB from the broader
group, then Fitch is likely to upgrade HCFB, most likely by one
notch. However, if the group's financial position indicates a
potentially strong need to utilize the bank's capital and
liquidity to service debt or finance acquisitions, then HCFB's
ratings could be affirmed at their current level.
HCFB is one of the leading mass-market retail lenders in Russia,
with a 23% market share in point-of-sale loans and 4% of credit
card receivables at end-2011. It is 100% owned by PPF group,
which is controlled by Czech businessman Petr Kellner. Excluding
HCFB and other smaller Home Credit banks operating in other
markets, PPF's main assets are a 49% stake in Central and Eastern
European insurer Generali PPF and a number of investments in
Russia. The most notable of the latter are the consumer
electronics retail chain Eldorado and minority stakes in the
second largest private banking group NOMOS-Bank
('BB'/Stable/'bb') and major precious metal producer Polymetal.
The rating actions are as follows:
-- Long-term foreign and local currency IDRs: 'BB-'; placed on
RWP
-- Short-term foreign currency IDR: affirmed at 'B'
-- Viability Rating: 'bb-'; placed on RWP
-- Support Rating: affirmed at '5'
-- Support Rating Floor: affirmed at 'No Floor'
-- Senior unsecured rating: 'BB-'; placed on RWP
* CITY OF UFA: S&P Affirms 'BB-' Long-Term Issuer Credit Rating
---------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its long-term issuer
credit rating on Russia's City of Ufa at 'BB-' and its Russia
national scale rating on the city at 'ruAA-'. The outlook is
positive.
"The 'BB-/ruAA-' ratings on Ufa's senior unsecured debt were
affirmed and the '3' recovery rating, indicating our expectation
of 'meaningful' (50%-70%) recovery in the event of a payment
default, is unchanged," S&P said.
"The affirmation reflects our expectation that higher capital
grants might alleviate Ufa's expenditure pressure and result in
improving budgetary performance and only modest debt accumulation
in the medium term," S&P said.
Ufa is the administrative center of the Republic of Bashkortostan
(BB+/Positive/--) in the Volga Federal District of the Russian
Federation (foreign currency, BBB/Stable/A-3; local currency,
BBB+/Stable/A-2; Russia national scale, 'ruAAA').
"The ratings on Ufa reflect Standard & Poor's view of Ufa's
limited budgetary flexibility, owing to its dependence on federal
and regional authorities' decisions; modest wealth levels; and
high capital-expenditure requirements. However, we assume Ufa's
debt burden will remain modest in the medium term and that, if
necessary, the city will likely receive additional financial
support from Bashkortostan," S&P said.
"The positive outlook reflects our view that expected higher
capital grants will partly alleviate Ufa's expenditure pressure
and might result in improving budgetary performance and only
limited borrowing needs in the medium term," S&P said.
"We could raise the ratings within the next 12 months if Ufa
structurally improves its liquidity position by achieving a more
gradual debt repayment schedule, organizing committed bank lines,
or by accumulating cash reserves thanks to prudent control over
spending growth in line with our upside scenario," S&P said.
"We could revise the outlook to stable within the next 12 months
if the city's budgetary performance remains moderate with
operating margins not exceeding 5% of operating revenues and
liquidity position remains neutral in line with our base-case
scenario," S&P said.
* REPUBLIC OF BASHKORTOSTAN: S&P Affirms 'BB+' LT Issuer Rating
---------------------------------------------------------------
Standard & Poor's Ratings Services had affirmed its 'BB+' long-
term issuer rating on the Russian republic of Bashkortostan. The
outlook is positive.
"The ratings on Bashkortostan are constrained by the republic's
low budget predictability and limited flexibility, owing to
federal controls; the economy's concentration in the oil-
processing industry; long-term expenditure pressures; and modest
wealth in an international context. In our view, Bashkortostan's
low debt, positive liquidity, and prudent financial policies
mitigate these constraints," S&P said.
"The predictability of Bashkortostan's financial position remains
constrained by federal controls over revenues and expenditures
and the evolving nature of inter-budgetary relations.
Furthermore, the major tax contributors to the regional budget
are concentrated in the oil and oil-processing industry. A few
large oil-related taxpayers and their subsidiaries contributed
about 20% of Bashkortostan's consolidated budget tax revenues in
2010-2011, and their contributions remain volatile: they
decreased to 15% of tax revenues in 2009 from 30% in 2007. This
leaves the republic exposed to the policies of large taxpayers
and swings in the economic environment," S&P said.
Wealth levels remain modest. Bashkortostan's gross regional
product (GRP) per capita was less than $8,000 in 2011, which is
markedly lower than the national average.
"In our opinion, pressure on operating and capital expenditures
will continue. In 2011, spending on civil servants' salaries and
social welfare continued to grow, and, together with subsidies
for personnel spending at municipal level, exceeded 40% of total
expenditure. We expect further increases in 2012," S&P said.
"Bashkortostan's capital needs remain high, although
infrastructure has been improving with the implementation of
investment projects cofinanced by the Russian Federation and
other sources over the past few years," S&P said.
"Nevertheless, Bashkortostan's economy grew at an estimated 9.2%
in 2011. As a result, revenues grew by 14% and budgetary
performance remained strong. In 2011, the republic reported an
operating surplus of about 13% of operating revenues and a
deficit after capital accounts of only 3%. We expect GRP growth
in Bashkortostan to exceed the Russian average in 2012-2014,
helping to offset changes in tax legislation that are likely to
negatively affect corporate tax revenue growth. Our base-case
scenario points to some deterioration in financial performance in
2012-2014 due to spending pressure, but, because Bashkortostan
demonstrates a prudent approach to expenditure, we expect the
republic to continue to achieve an operating surplus of 5%-7% of
operating revenues. Negatively, this approach, and liquidity
management policies are not institutionalized, which leads us to
an overall negative view of management in an international
context. Accordingly, in our base case scenario, we expect some
loosening of expenditure controls, leading to deficits after
capital accounts of 11%-15% in 2012-2014. Expenditure is likely
to increase due to pressing infrastructure needs, and will
probably be financed by depletion of currently high cash reserves
and modest accumulation of debt," S&P said.
"In this scenario, tax-supported debt will likely remain modest,
within 25% of revenues until 2014," S&P said.
"The positive outlook reflects our upside-case scenario and our
view that Bashkortostan's operating revenues will increase. It
also reflects our view that the republic's continued prudent
financial policies will enable it to better contain expenditure
pressure and consolidate its solid financial performance," S&P
said.
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S P A I N
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AUTOVIA DE LOS VINEDOS: Moody's Confirms 'B3' Debt Ratings
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Moody's Investors Service has confirmed the B3 ratings on the
following debt obligations of Autovia de Los Vinedos, S.A.
("Auvisa"):
* EUR103 million loan facility provided by the European
Investment Bank (the "EIB Loan")
* EUR64.1 million of bonds (the "Bonds")
The outlook on the ratings is negative. This concludes the review
for downgrade initiated by Moody's on October 20, 2011.
Auvisa is a special purpose company that entered into a 30-year
concession agreement with the Spanish Regional Government of
Castilla-La Mancha in December 2003 to build, operate and
maintain a 74.5 km shadow toll road, namely the Consuegra to
Tomelloso section of the Autovia de los Vinedos motorway linking
the cities of Toledo and Tomelloso in central Spain.
Ratings Rationale
"[Moody's] confirmation of Auvisa's B3 ratings with a negative
outlook follows the conclusion of a review for downgrade of the
Spanish region of Castilla-La Mancha, which resulted in the
confirmation of Castilla-La Mancha's rating of Ba2, with a
negative outlook," says Declan O' Brien, an Analyst in Moody's
Infrastructure Finance Group.
The EIB Loan and the Bonds rank pari passu and benefit from
unconditional and irrevocable guarantees of scheduled principal
and interest under financial guarantee insurance policies issued
by Syncora Guarantee (U.K.) Ltd ("SGUK", rated Ca/developing
outlook, formerly XL Capital Assurance (U.K.) Limited).
The B3 ratings reflects (i) the rating of Castilla-La Mancha as
payer under the concession agreement; (ii) the history of late
payments by Castilla-La Mancha, which has put Auvisa under
pressure to meet debt service payments, although the recent
payment history has been in line with contractual terms; (iii)
operating revenues that are exposed to traffic volume risk; (iv)
the straightforward nature of operations and maintenance and
capital maintenance works; (v) significant leverage, mitigated by
certain structural features; and (vi) protection afforded to
senior creditors by virtue of the compensation on termination
provisions under the concession agreement, which would underpin a
high level of recovery but would be subject to payment risk from
Castilla-La Mancha.
The negative outlook on Auvisa's B3 ratings reflects the ratings
outlook for Castilla-La Mancha as payer under the concession
agreement and the macro-economic pressures in Spain.
What Could Change the Rating Up/Down
Given the negative outlook, Moody's does not anticipate upward
rating pressure in the short term. Assuming future traffic trends
supported a higher rating positioning, Moody's could consider
upgrading Auvisa's ratings in the event of an upgrade of the
rating of Castilla-La Mancha and/or evidence of steady receipt of
payments from Castilla-La Mancha with no material delays in the
payment for outstanding invoices.
Conversely, Moody's could consider downgrading the ratings in the
event of (i) a downgrade of the rating of Castilla-La Mancha;
and/or (ii) a prolonged decrease in observed traffic levels on
the project road.
Principal Methodology
The principal methodology used in this rating was Operational
Toll Roads published in December 2006.
Moody's approach to rating insured or "wrapped" transactions is
outlined in Moody's methodology entitled Assignment of Wrapped
Ratings When Financial Guarantor Falls Below Investment Grade",
published in May 2008.
Auvisa's shareholders are Acciona S.A. and Esconcessoes, SGPS
S.A., which each have a 50% shareholding.
BBVA RMBS 3: Fitch Lowers Rating on Class C Notes to 'CCsf'
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Fitch Ratings has downgraded 11 and affirmed two tranches of
three BBVA RMBS transactions. The agency has also removed ten
tranches from Rating Watch Negative (RWN).
The rating actions follow the further deterioration of the
underlying assets in the portfolio, as well as the receipt and
analysis of the defaulted loans in the portfolio. The agency
believes that the credit support available to the rated notes is
no longer sufficient to withstand the higher investment grade
stresses, and has therefore downgraded the senior notes of BBVA
RMBS 1 and 2 to 'Asf' and 'BBBsf', respectively and of BBVA RMBS
3 to 'BBsf'.
Despite the stabilization in three-months plus arrears, the level
of gross period defaults continues to exceed the gross excess
spread generated by the transactions. With all three
transactions having reported depleted reserve funds on the most
recent payment date, the deals now have technical principal
deficiency ledgers (PDL) ranging from 0.03% (BBVA RMBS 1) to
5.96% (BBVA RMBS 3) of the current note balance. For the least
seasoned of the three transactions, BBVA RMBS 3, this PDL reaches
as far as the class B notes.
The agency has received loan-by-loan level information on current
and past defaulted loans, and conducted an analysis that showed
that most of them have adverse features in particular broker-
originated and high loan-to-value ratios. The agency also
identified that the defaulted borrowers were predominantly self-
employed or working on temporary basis and a significant portion
of them were linked to the IRPH index (between 15% and 30% of the
defaulted loans). The latter is a trend seen in other Spanish
RMBS transactions with portions of IRPH linked loans in the
portfolio. Although 12-month EURIBOR is a base in the
calculation of the IRPH index, this reference rate has not
necessarily followed the steep declining trend of the EURIBOR.
The margin above 12-month EURIBOR currently stands at 330bps, and
is assumed to be putting pressure on the borrowers' ability to
meet their monthly payments.
In its analysis of Spanish RMBS transactions, Fitch applies
additional default probability hits for each of the above
features. However, the analysis of the defaulted loans also
showed that most of the loans that have defaulted are those
originated in or after 2006 (between 36.4% (BBVA RMBS 2) and
76.9% (BBVA RMBS 3) of the defaulted balance). As a result,
Fitch has applied additional default probability hits for loans
originated in 2006 and 2007.
To date, the gestora has taken an active approach towards the
sale of properties on foreclosed loans. The data shows that the
loss severities incurred on such loans range from 3.7% to 72.9%
across all three transactions. As of December 2011, the
outstanding balance of properties in possession of the special
purpose vehicle ranged between 1.7% (BBVA RMBS 1) and 6.9% (BBVA
RMBS 3) of the current portfolio balances. Based on the updated
valuations for the underlying properties received from the
gestora, which show an average house price decline of 40.8%,
Fitch estimated a loss of EUR10.4m, EUR19.4m and EUR49.3m in BBVA
RMBS 1, 2 and 3 respectively.
With the stresses applied to the transactions, the agency found
that the credit support available to the rated tranches was no
longer sufficient to maintain the ratings, and has therefore
downgraded the senior and mezzanine notes of BBVA RMBS 1 and 2,
and the full capital structure of BBVA RMBS 3. The Negative
Outlooks assigned to the class A and B notes of BBVA RMBS 1 and
2, reflect Fitch's ongoing concerns over the future performance
of the underlying assets, particularly in the current economic
environment.
Fitch also notes that BBVA RMBS 2 and 3 are close to breaching
their class A pro-rata amortization. The ratio of class A notes
to the outstanding balance of non-delinquent loans (defined as
loans in arrears by less than three months) for each of the deals
stands at 1.05 (BBVA RMBS 2) and 1.06 (BBVA RMBS 3), compared to
the trigger level of 1.0. The agency believes that the trigger
may be breached in the future, and for this reason maintained the
same ratings on the most senior tranches across transactions.
The rating actions are as follows:
BBVA RMBS 1, FTA:
-- Class A2 (ISIN ES0314147010): downgraded to 'Asf' from 'AA-
sf'; off RWN; Outlook Negative
-- Class A3 (ISIN ES0314147028): downgraded to 'Asf' from 'AA-
sf'; off RWN; Outlook Negative
-- Class B (ISIN ES0314147036): downgraded to 'BBsf' from
'BBBsf'; off RWN; Outlook Negative
-- Class C (ISIN ES0314147044): affirmed at 'CCCsf'; Recovery
Estimate revised to 0% from 55%
BBVA RMBS 2, FTA:
-- Class A2 (ISIN ES0314148018): downgraded to 'BBBsf' from
'AAsf'; off RWN; Outlook Negative
-- Class A3 (ISIN ES0314148026): downgraded to 'BBBsf' from
'AAsf'; off RWN; Outlook Negative
-- Class A4 (ISIN ES0314148034): downgraded to 'BBBsf' from
'AAsf'; off RWN; Outlook Negative
-- Class B (ISIN ES0314148042): downgraded to 'BBsf' from
'BBBsf'; off RWN; Outlook Negative
-- Class C (ISIN ES0314148059): affirmed at 'CCCsf'; Recovery
Estimate revised to 5% from 90%
BBVA RMBS 3, FTA:
-- Class A1 (ISIN ES0314149008): downgraded to 'BBsf' from
'Asf'; off RWN; Outlook Stable
-- Class A2 (ISIN ES0314149016): downgraded to 'BBsf' from
'Asf'; off RWN; Outlook Stable
-- Class B (ISIN ES0314149032): downgraded to 'CCCsf' from
'Bsf'; off RWN; Recovery Estimate 0% assigned
-- Class C (ISIN ES0314149040): downgraded to 'CCsf' from
'CCCsf'; Recovery Estimate 0%
SANTANDER EMPRESAS 4: S&P Lowers Rating on Class E Notes to 'D'
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Standard & Poor's Ratings Services lowered its credit ratings on
Fondo de Titulizacion de Activos Santander Empresas 4's class A1,
A2, A3, D, and E notes.
"On Sept. 8, 2011, we lowered our ratings on the class A1, A2,
A3, C, D, and E notes, taking into account the most recent
developments that we had observed in the transaction at that
time," S&P said.
"Since then, there has been a further deterioration in the credit
quality of the assets, which has increased the ratio of
cumulative defaults to 4.14% of the original balance of the
assets securitized at the April 2012 interest payment date (IPD),
compared with 3.05% at the April 2011 IPD and 1.40% a year
before," S&P said.
"As we expected in our analysis for the Sept. 8, 2011 rating
actions, this evolution has generated a breach of the interest-
deferral trigger level (set at 3.90%) for the class E notes,
which have defaulted in their interest payments as of the April
2012 IPD. As a result, we have lowered our rating on the class E
notes to 'D (sf)'," S&P said.
"We have also lowered our rating on the class D notes to 'CCC-
(sf)' due to their vulnerability to interest deferral, given the
rising trend in cumulative defaults. Due to the deterioration in
this transaction, we believe that the class D trigger (set at
4.80%) will be breached within the next year," S&P said.
"Moreover, due to a lack of funds, an increasing amount of
outstanding principal balance has not amortized the notes on
recent IPDs, as it should in accordance with the amortization
rules in the priority of payments. This has resulted in a
reduction in all credit enhancement levels -- to 7.73% at the
April 2012 IPD, compared with a 2.37% a year before. We have
taken this into account in 's rating actions," S&P said.
"On April 30, 2012, we lowered our rating on one of the
transaction counterparties, Banco Santander S.A., to A-
/Negative/A-2. This meant that remedy actions were required, in
line with the transaction documents. Banco Santander is the
guaranteed investment contract (GIC) provider and swap provider
in this transaction, and given that it is also the only
noteholder, we have received confirmation that no remedy actions
are going to be taken. Consequently, the maximum rating this
transaction can now achieve -- even if for credit and cash flow
reasons it could be higher -- is equal to the long-term issuer
credit rating on Banco Santander (A-). As a result, we have
lowered our ratings on the class A1, A2, and A3 notes to 'A-
(sf)'," S&P said.
"The details in the table are intended to provide transparency on
the components of our ratings, and are not credit ratings in
themselves. The ratings are current as of May 22, 2012. As we
take further rating actions, these ratings may be subject to
change. Current ratings for the transaction can be found on the
Global Credit Portal," S&P said.
SANTANDER EMPRESAS 4 -- ESTIMATED MAXIMUM RATINGS
Estimated
maximum
rating
Estimated rating if all counterparties
and the sovereign were rated 'AAA': AA (sf)
Estimated rating if all counterparties
were rated 'AAA' and the sovereign 'BBB+': AA (sf)
Estimated rating if the sovereign
was rated 'BBB+' and counterparty
remedy actions were taken: AA (sf)
Estimated rating if the sovereign
was rated 'BBB+' and counterparty
remedy actions were not taken: A- (sf)
Santander Empresas 4 was originated by Banco Santander and closed
in November 2007. The portfolio comprises secured and unsecured
loans granted to Spanish small and midsize enterprises (SMEs) in
their normal course of business.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS LIST
Class Rating
To From
Fondo de Titulizacion de Activos Santander Empresas 4
EUR3.586 Billion Floating-Rate Notes
Ratings Lowered
A1 A- (sf) AA (sf)
A2 A- (sf) AA (sf)
A3 A- (sf) AA (sf)
D CCC- (sf) CCC+ (sf)
E D (sf) CCC- (sf)
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S W I T Z E R L A N D
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TRANSOCEAN LTD: Moody's Confirms '(P)Ba1' Sr. Sub. Shelf Rating
---------------------------------------------------------------
Moody's Investors Service confirmed Transocean Ltd.'s senior
unsecured debt rating at Baa3, senior unsecured shelf rating at
(P)Baa3, and senior subordinate shelf rating at (P)Ba1. In
addition, the ratings for the Commercial Paper rating was
affirmed at P-3, and the ratings for the unsecured notes issued
by Transocean Worldwide Inc. and Global Marine Inc. were
withdrawn. The outlook for the long term ratings is negative.
This action concludes the rating review for possible downgrade
that was announced on November 9, 2011. The ratings were
confirmed because Transocean has taken significant steps in the
last six months to reduce leverage and increase liquidity, an
important cushion for the unknown costs of the Macondo
litigation.
Ratings Rationale
Transocean's Baa3 senior unsecured rating is supported by its
leading market share in the global offshore drilling industry,
tempered by expectations for elevated debt leverage and a history
of shareholder friendly initiatives. Moody's expects leverage to
decline significantly in 2012 as Transocean's cash flow recovers
from the lost revenue in 2011 associated with the excessive rig
down-time caused by the retrofitting and re-certification of the
vast majority of the company's deepwater rig fleet. The steps
taken to increase liquidity in the last six months including the
issuance of US$1.2 billion of equity and the suspension of
shareholder distributions at least through the first quarter of
2013 are clearly credit positive. However, risk still remains
around the execution of the company's de-leveraging plan, as well
as the potential liability associated with the Macondo incident.
"It appears that the worst is over for Transocean's operating
performance now that most of upgrade work on its deepwater fleet
has been completed," said Stuart Miller, Moody's Vice President -
- Senior Analyst. "Our rating action reflects the prospects for
improved cash flow, and also acknowledges the steps taken by
company management over the last six months to build financial
flexibility. These actions should better position the company to
handle the contingent liabilities associated with the Macondo
incident, and eventually, to increase investment in its fleet."
The ratio of debt to EBITDA at the end of the first quarter was
4.6x including Moody's adjustments. This leverage is considered
very high for the current Baa3 rating. However, Moody's believes
that leverage could decline to 3.5x by the end of 2012 because of
improvements in trailing EBITDA and if the repayment of current
debt maturities is made with internal sources of cash. The 3.5x
leverage level marginally supports Transocean's Baa3 rating only
because of its large scale and leading market position, but it
also leaves little room for the investment needed to keep pace
with its deepwater competitors.
Transocean maintains a good liquidity profile with approximately
US$4.0 billion in cash and nearly 100% availability under its
US$2.0 billion 5-year revolving credit facility. Moody's expects
the company to generate just over US$1 billion of free cash flow
over the next twelve months. The free cash flow, supplemented by
opportunistic asset sales and a portion of the cash on hand,
should be sufficient to repay the US$2.7 billion of debt that
matures in the next year assuming none of the debt is refinanced.
The negative outlook reflects the risk that management de-
prioritizes the importance of reducing Transocean's highly
leveraged financial position in light of its corporate history of
shareholder friendly initiatives. For this reason, continuing
progress in management's plan to reduce long term debt to less
than US$9 billion is necessary to stabilize the rating outlook.
While not expected in the near term, the quantification of the
Macondo liabilities to an amount that could be paid without any
new debt issuance would provide additional grounds to stabilize
the rating outlook earlier. A downgrade would be likely if new
information indicates that leverage may remain above 4.0x for an
extended period of time either because of new operational issues
or new, quantifiable, negative developments associated with the
Macondo litigation. An upgrade will be considered once the
Macondo contingent liability is materially resolved and when
there is better visibility for sustained leverage below 3.0x.
The withdrawal of the ratings for Transocean Worldwide Inc. and
Global Marine Inc. was driven by the fact that there is
insufficient information available to maintain these ratings.
Neither subsidiary provides audited financial statements and the
parent company does not provide guarantees for the debt of these
subsidiaries.
The principal methodology used in rating Transocean was the
Global Oilfield Services Ratings Industry Methodology published
in December 2009.
Transocean, Inc. is a leading provider of offshore contract
drilling for oil and gas companies around the world. The company
is a wholly owned subsidiary of Transocean Ltd., which is
headquartered in Zug, Switzerland.
===========================
U N I T E D K I N G D O M
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AIREDALE ELECTRICAL: In Administration, Parent Unaffected
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Aaron Morby at Construction Inquirer reports that Airedale
Mechanical and Electrical continues to trade and unaffected by
the administration of its subsidiary, Airedale Electrical.
Latest accounts lodged with Companies House showed GBP30 million
turnover Airedale Electrical employs 60 staff and delivered a
pre-tax profit of GBP158,000 at March year-end in 2011, according
to Construction Inquirer. The report relates that the electrical
contractor largely worked for parent company Airedale Mechanical
& Electrical, which turned over GBP66 million in the same period,
making a pre-tax profit of GBP961,000 and employed a total of 154
staff.
Airedale Electrical is a Leeds-based contractor company.
ASCOT ENVIRONMENTAL: Wound Down After Falling Into Administration
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MenMedia News reports that Ascot Environmental is being wound
down after filing for administration, leaving 56 staff with
unpaid wages.
Dan Butters and Bill Dawson of Deloitte have been appointed as
joint administrators to the Radcliffe-based firm and its holding
company, UK Capital Venture Holdings.
All work on live contracts had been terminated before their
appointment, and the administrators said they had no option but
to wind down Ascot's operations with immediate effect, according
to MenMedia News. The report relates that just two employees
have been retained to assist with the wind-down of Ascot
Environmental, which will take up to two weeks.
MenMedia News notes that staff has been advised to claim for
unpaid wages via the Redundancy Payments Service. The joint
administrators are working to calculate the full extent of the
firm's liabilities and say it is too early to say what return, if
any, creditors will get, the report says.
Ascot had been severely impacted by the continued difficulties in
the construction industry, the report relays.
Ascot Environmental is an environmental engineering firm.
CLINTON CARDS: 14 Stores to Close; About 100 Jobs Affected
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BBC News reports that a total of 14 Scottish Clinton Cards stores
are to close at the end of this month with the loss of about 100
jobs. Ten of the shops are Clinton shops and four are Birthdays-
branded stores, the report notes.
The company went into administration earlier this month.
According to BBC, a decision about the future of the remaining
outlets will be made in the next few weeks.
Overall in the UK, 44 shops are to close, BBC relays.
In March, Clinton Cards reported a loss of GBP3.7 million for the
six months to the end of January and said the outlook for 2012
was worse than previously thought, BBC recounts.
It had loans of GBP35 million to banks, which were then sold on
its supplier, American Greetings, BBC relates.
BBC notes that while the banks had waived certain conditions for
the loans, American Greetings had pressed for repayments that
Clinton Cards could not meet.
The administrators Zolfo Cooper said it expected further closures
among the remaining outlets in the coming weeks although it said
it could not rule out the possibility of some stores earmarked
for closure being saved, according to BBC.
"We have received expressions of interest from a number of third
parties and are confident that the remaining retail estate will
be better placed going forward," BBC quotes Peter Saville, Joint
Administrator and Partner at Zolfo Cooper, as saying.
"It appears unlikely, however, that we will be able to find a
buyer for the majority of the Birthdays stores and our analysis
highlights that we cannot justify continuing to trade certain
Birthdays and Clinton Cards stores into June.
"As a result, there is no alternative option but to close these
44 stores in May."
Clinton Cards is a UK card retailer.
FAIRHOLD SECURITISATION: Moody's Cuts Ratings on 2 Notes to 'B1'
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Moody's Investors Service has taken the following rating actions
(amounts reflect initial outstandings):
Issuer: Fairhold Securitisation Limited
GBP329M Class A Notes, Downgraded to Baa3 (sf); previously on
Dec 13, 2011 A1 (sf) Placed Under Review for Possible
Downgrade
GBP24M Class B Notes, Downgraded to B1 (sf); previously on
Dec 13, 2011 Baa2 (sf) Placed Under Review for Possible
Downgrade
GBP84.7M Class A(N) Notes, Downgraded to Baa3 (sf);
previously on Dec 13, 2011 A1 (sf) Placed Under Review for
Possible Downgrade
GBP5.8M Class B(N) Notes, Downgraded to B1 (sf); previously
on Dec 13, 2011 Baa2 (sf) Placed Under Review for Possible
Downgrade
The Class A, Class B, Class A(N) and Class B(N) Notes were placed
on review for possible downgrade on December 13, 2011. Today's
action concludes Moody's review of the transaction.
Ratings Rationale
The downgrade action reflects Moody's increased loss expectation
for the Notes since the last review. The increased loss
estimation is mainly due to increased refinancing risk because of
rising swap mark to markets ("MtM") and the generally adverse
economic backdrop which is likely to impact the refinancing
chances of the securitized loans.
Fairhold closed in March 2006 and was subsequently tapped in
2007. It represents the securitization of a loan granted by the
Issuer to Fairhold Finance Limited (the "Borrower"). The loan's
repayment relies on the receipt of ground rent payments, warden's
apartments rents and transfer fees arising from freehold and long
leasehold reversionary interests in 406 sheltered housing
developments (the "Portfolio") owned by thirteen property owning
subsidiaries of the Borrower. The Portfolio's cashflows relate to
18,678 sheltered housing apartments and 310 warden's apartments
located in town centers throughout the United Kingdom.
The Notes and the intercompany loans between Issuer and Borrower,
and Borrower and Property Owners are all bullet loans maturing in
2015, charging interest based on 6 month Libor plus a margin. The
loans and notes have virtually identical terms, except that the
Notes mature two years later, in 2017. The ground rent and
wardens rent cashflows adjust in accordance with the cumulative
retail price index ("RPI"), uplifting at specified intervals.
Each ground rent lease contract is typically structured as an
annual amount payable in two half-year installments, payable over
125 years. The ground rent amounts payable inflate by the
cumulative UK retail price index ("RPI ") over the first 23 years
of the lease contract, at year 23, and thereafter increase by
cumulative RPI once every 21 years. The RPI measure is floored at
0%, thus the ground rent cannot decrease even if RPI has
decreased over that period.
The warden rents are contractual requirements under the ground
rent lease contracts whereby the property owners must provide a
warden's services to each building in the Portfolio. Two of the
Property Owners companies have the rights over the warden's rents
arising from the entire Portfolio. The other Property Owners
companies pay the warden's rent over to either one of the two
specified vehicles semi-annually. The warden's rents are paid for
by the other leaseholders in each building out of their annual
building service charges. These rental amounts are subject to
upward-only rent reviews every five years, where the rents
increase to the higher of cumulative RPI over one or 5 years, and
the increase in value of the apartments over the same measurement
period.
Finally, transfer fees are due to the ground rent owner upon
certain events, such as when the lessee sells its interest in the
leasehold property to another person during their lifetime.
Moody's ratings historically only considered a partial benefit to
transfer fees in terms of transaction coverage, and gave no
benefit to them in the valuation of the Portfolio.
The Portfolio has exhibited stable performance since closing. As
at the 15 April 2012 reporting date, the Portfolio generated
annual income of GBP 11.6 million, which consisted of 57.4%
ground rent income, 26.5% warden rent income and 16.0% transfer
fees income. These proportions have not varied significantly
through time. Neither the funding nor the intercompany loans have
experienced any payment problems to date, and neither have there
been any partial or full prepayments of the loans or the Notes
since closing.
However, transaction leverage has been increasing since closing.
It currently stands at 87.6%, including the April 2012 GBP 240.1
million swap mark to market and GBP 443.5 million Note balance,
compared with the actuarial valuation of GBP 780.8 million from
February 2012. In 2007, this ratio was 65.9% including the swaps.
The increased swap mark to market amounts were not offset by
corresponding increases in the underlying portfolio valuation, as
had been envisaged by Moody's at closing.
The main parameters in Moody's analysis were (i) the default
probability of the securitized funding loan (both during its term
and at maturity) as well as (ii) Moody's value assessment for the
ground rents Portfolio.
As explained before, the funding loan has been performing well
with no issues to date. Therefore, the default probability of the
loan is principally due to the refinancing risk when the loans
reach maturity in 2015 and as such the default risk of the Notes
is concentrated into the period between the loan maturity date
and note maturity date in 2017.
Moody's is aware that ground rent portfolios are potentially
attractive to certain types of investors, in particular those
looking for exposure to long-dated, inflation-linked cashflows.
Despite this, Moody's believes that ground rent portfolios are
still a relatively niche asset class, and as such the market is
still neither particularly deep nor are ground rent portfolios
apparently liquid. This, combined with the difficult refinancing
conditions, which are expected to persist throughout 2015, and
with the need to unwind the swaps, caused Moody's to revise its
refinancing outlook for the underlying loans, to incorporate a
greater probability of default at the loan's maturity date.
The other driver of the ratings is Moody's valuation. The
portfolio valuation supplied in the investor reporting follows an
actuarial approach. There is doubt in Moody's view whether a
buyer of the portfolio would purchase solely on the basis of an
actuarial valuation, given the uncertainty around projecting very
long-dated cashflows. Market comparables to date have indicated
that a yield-based approach would be used to valuing similar
portfolios.
In the analysis, Moody's took a blended approach, giving part
value to an actuarial method and part value to a yield-based
method, to derive Moody's sustainable portfolio valuation of GBP
550 million. This results in a Moody's LTV ratio of 80.6%, prior
to the swap MtM and 124.3% including the whole MtM as at April
2012.
In the event of a portfolio sale, and under current interest rate
and interest conditions, it is highly likely that the existing
hedging structure would need to be dismantled and a termination
payment, close to the swap MtM would become payable by the issuer
and borrowers. Swap termination payments ("TP") rank senior to
the senior Notes during any allocation of funds prior to Note
enforcement and pari passu with senior Note interest otherwise.
The requirement to pay TP, will further constrain the
availability of financing at the refinancing date, all else being
equal. Moody's has assumed a base-case TP of GBP 150 million in
its updated credit assessment of the Notes. Significant and
persistent deviations above this level, not offset by
corresponding asset value increases or by deleveraging may result
in additional negative rating pressure in future.
In general, Moody's analysis reflects a forward-looking view of
the likely range of commercial real estate collateral performance
over the medium term. From time to time, Moody's may, if
warranted, change these expectations. Performance that falls
outside an acceptable range of the key parameters such as
property value or loan refinancing probability for instance, may
indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. There may
be mitigating or offsetting factors to an improvement or decline
in collateral performance, such as increased subordination levels
due to amortization and loan re- prepayments or a decline in
subordination due to realized losses.
Primary sources of assumption uncertainty are the current
stressed macroeconomic environment and continued weakness in the
occupational and lending markets. Moody's anticipates (i) delayed
recovery in the lending market persisting through 2013, while
remaining subject to strict underwriting criteria and heavily
dependent on the underlying property quality, (ii) strong
differentiation between prime and secondary properties, with
further value declines expected for non-prime properties, and
(iii) occupational markets will remain under pressure in the
short term and will only slowly recover in the medium term in
line with anticipated economic recovery. Overall, Moody's central
global macroeconomic scenario is for a material slowdown in
growth in 2012 for most of the world's largest economies fuelled
by fiscal consolidation efforts, household and banking sector
deleveraging and persistently high unemployment levels. Moody's
expects a mild recession in the Euro area.
As the Euro area crisis continues, the rating of the structured
finance notes remain exposed to the uncertainties of credit
conditions in the general economy. The deteriorating
creditworthiness of euro area sovereigns as well as the weakening
credit profile of the global banking sector could negatively
impact the ratings of the notes.
The methodologies used in this rating were Moody's Approach to
Real Estate Analysis for CMBS in EMEA: Portfolio Analysis (MoRE
Portfolio) published in April 2006, and Update on Moody's Real
Estate Analysis for CMBS Transaction in EMEA published in June
2005.
Other factors used in this rating are described in European CMBS:
2012 Central Scenarios published in February 2012.
The updated assessment is a result of Moody's ongoing
surveillance of commercial mortgage backed securities (CMBS)
transactions. Moody's prior assessment is summarized in a press
release dated December 13, 2011. The last Performance Overview
for this transaction was published on March 28, 2012.
In rating this transaction, Moody's used both MoRE Portfolio and
MoRE Cash Flow to model the cash-flows and determine the loss for
each tranche. MoRE Portfolio evaluates a loss distribution by
simulating the defaults and recoveries of the underlying
portfolio of loans using a Monte Carlo simulation. This portfolio
loss distribution, in conjunction with the loss timing calculated
in MoRE Portfolio is then used in MoRE Cash Flow, where for each
loss scenario on the assets, the corresponding loss for each
class of notes is calculated taking into account the structural
features of the notes. As such, Moody's analysis encompasses the
assessment of stressed scenarios.
LANSDOWNE HOTEL: Goes Into Liquidation; 35 Jobs Axed
----------------------------------------------------
Amanda Poole at Belfast Telegraph reports that the Lansdowne
Hotel in north Belfast has gone into liquidation with the loss of
35 jobs.
James Wong, a director of the Welcome Group, which has owned the
Antrim Road hotel since 2001, told the Belfast Telegraph he was
saddened it had to "hand it back to the bank" on May 22.
The report relates that Mr. Wong blamed difficult economic
conditions for the closure of the hotel and restaurant.
Mr. Wong explained that none of the restaurants and takeaways in
the Welcome Group, which was established in 1973, were affected,
the Belfast Telegraph.
"The Lansdowne Hotel was put into liquidation . . . We employed
35 staff, so unfortunately they have lost their jobs, but we made
sure they were all paid up to date," the report quotes Mr. Wong
as saying.
"It has been struggling and we have been pumping money into it,
but we got no help. The bank wouldn't help."
The Lansdowne Hotel, on the corner of the Lansdowne Road and
close to Belfast Castle, was established more than 30 years ago.
MBT UK: Follows Parent Firm Into Administration
-----------------------------------------------
FashionUnited reports that Masai GB Ltd has confirmed that it has
fallen into administration and has appointed Chris Laughton --
chrislaughton@mercerhole.co.uk -- and Peter Godfrey-Evans --
petergodfrey-evans@mercerhole.co.uk -- of Mercer & Hole as joint
administrators.
The administration of the UK arm follows the filing for
bankruptcy in Switzerland of the group's parent company, Masai
Marketing & Trading AG earlier this month, according to
FashionUnited. In the UK, the report notes, the company has a
turnover of GBP8 million and operates 10 stores and a number of
concessions, the administrators have confirmed that they will be
working with the company's management and staff to sell the
business and/or its assets.
"Our present intention is that the company's retail stores will
continue to operate. The appointment of Mercer & Hole as
administrators coincides with the start of MBT's 4-week summer
sale promotion. This should improve the prospects for the
business and will help us do the best we can for creditors," the
report quoted Chris Laughton as saying.
Masai GB Ltd is the UK distributor of MBT (Masai Barefoot
Technology) footwear.
MILLENNIUM ADMP: Wilmington Group Acquires Assets
-------------------------------------------------
Wilmington Group Plc has acquires acquisition of the business and
certain assets of Millennium ADMP Ltd which is in administrative
receivership, for a cash consideration of GBP465,000.
The Business was acquired by Wilmington Millennium Ltd, a wholly
owned subsidiary of Wilmington formed for the purpose of making
the acquisition. Wilmington will fund the consideration from
existing debt facilities.
The Business provides information and services to the insurance
market and provides data and sales services to Smee & Ford Ltd
another wholly owned Wilmington subsidiary.
During the year ended June 30, 2011, the Business made profits
before interest, tax and amortization of GBP0.4 million on
turnover of GBP5.9 million. The Business has gross assets of
approximately GBP0.9 million.
Charles Brady, chief executive officer of Wilmington, commented,
"We are pleased to have been able to rescue one of our trading
partners and secure the continuing employment of their staff. For
Wilmington the acquisition represents an opportunity not only to
secure the continued support for the activities of Smee & Ford
but to benefit from the services which Millennium provides to a
number of major insurance companies".
MOTORMANIA: In Administration, Jobs at Risk
-------------------------------------------
The Star reports that Motormania has been placed into
administration, putting jobs at risk.
Motormania has appointed financial advisors Grant Thornton as
administrators, according to The Star. Along with its sister
company Midland Car Parts, it is hoped the businesses can be sold
as a going concern, the report relates.
More than 90 people are employed across the company.
"Motormania and Midland Car Parts are long-established businesses
with a strong reputation. We are continuing to trade the
businesses with a view to selling as going concerns and are in
discussions with a number of interested parties," the report
quoted David Bennett -- david.bennett@uk.gt.com -- from Grant
Thornton as saying.
Motormania is a car parts firm with a branch in Sheffield.
NEWGATE FUNDING 2007-2: S&P Cuts Rating on Class Db Notes to 'B-'
-----------------------------------------------------------------
Standard & Poor's Ratings Services took various credit rating
actions in Newgate Funding PLC's series 2007-2 and 2007-3.
The rating actions follow the application of S&P's December 2011
U.K. residential mortgage-backed securities (RMBS) criteria and
our 2010 counterparty criteria.
For series 2007-2, S&P says:
-- it has lowered and removed from CreditWatch negative its
ratings on the class A2, A3, M, Bb, Cb, and Db notes;
-- it affirmed ratings on the class E and F notes; and
-- its ratings on the class A1a and A1b notes are no longer on
CreditWatch negative for credit reasons, but they remain on
CreditWatch negative for counterparty reasons.
"For series 2007-3, we have lowered and removed from CreditWatch
negative our ratings on all classes of notes," S&P said.
PERFORMANCE
"In our opinion, the collateral pools for both transactions have
exhibited relatively stable performance in recent periods.
Delinquencies have declined since the highs of 2009; 90+ day
arrears have fallen to current levels of 26.13% in Newgate 2007-2
and 13.91% in Newgate 2007-3. Similarly, cumulative losses are
3.14% and 1.98% for Newgate 2007-2 and Newgate 2007-3," S&P said.
"Amortization of both collateral pools has been limited, due to
the high percentage of interest-only loans (in excess of 70% in
each pool) and low prepayment rates. This has led to the limited
build-up of credit enhancement in both transactions, which is
particularly negative for the junior classes of notes, as both
transactions are currently amortizing sequentially," S&P said.
"Both transactions are currently paying sequentially and have a
90+ day delinquency pro rata trigger of 20%. However, given the
proximity of the current 90+ day delinquency level of 25.21% to
the pro rata trigger for Newgate 2007-2, we have considered the
possibility of this transaction paying pro rata at a point in the
future based on historical arrears movements, and factored this
into our cash flow analysis," S&P said.
"Application of our December 2011 U.K. RMBS criteria has resulted
in a lower weighted-average foreclosure frequency (WAFF), but a
higher weighted-average loss severity (WALS) for both Newgate
2007-2 and Newgate 2007-3. This has led to an overall increase in
the required credit coverage for these transactions," S&P said.
"The small size of the class A1a and A1b notes has meant a large
build-up of credit enhancement for these notes. After applying
our updated cash flow stresses, the cash flow results for these
notes were commensurate with their current rating levels," S&P
said.
"We have affirmed our ratings on the class E and F notes in
Newgate 2007-2, based on the results of our credit and cash flow
analysis, and our view that these classes of notes are unlikely
to default within the next 12 months," S&P said.
"For all other classes of notes in both transactions, credit
enhancement levels have not risen sufficiently to mitigate the
increase in required credit coverage. Consequently, upon the
application of our updated cash flow stresses, these notes were
unable to achieve ratings commensurate with their current rating
levels. We have therefore lowered and removed from CreditWatch
negative our ratings on these classes of notes," S&P said.
COUNTERPARTY
"In both transactions, the liquidity facility agreement is not in
line with our 2010 counterparty criteria," S&P said.
"In Newgate 2007-2, the highest potential rating is therefore
capped at the issuer credit rating (ICR) on the liquidity
facility provider--in this case, Lloyds TSB Bank PLC (A/Stable/A-
1). However, we have not capped the ratings on the class A1a and
A1b notes, because they were able to pass our cash flow stresses
at their current ratings without giving benefit to the liquidity
facility," S&P said.
"The highest potential rating on Newgate 2007-3's class A2b, A3,
Ba, Bb, Cb, D, and E notes, is equal to the ICR on the liquidity
facility provider--in this case, Bank of America (A/Negative/A-
1). Consequently, we have lowered our rating on the class A2b
notes to 'A (sf)'. The rating on the class A1 notes, however, has
not been capped by the ICR on the liquidity facility provider,
because the notes were able to pass our cash flow stresses at
their current rating without giving benefit to the liquidity
facility. However, after our Nov. 29, 2011 downgrade of the
account bank (Barclays Bank PLC; A+/Stable/A-1), the 'A-1+'
trigger on the account bank was breached. As no remedy action by
Barclays Bank has taken place, the rating on the class A1 notes
is capped by the 'A+' long-term ICR on Barclays Bank.
Consequently, we have lowered our rating on the class A1 notes to
'A+ (sf)'," S&P said.
"Newgate Funding's series 2007-2 and 2007-3 are U.K.
nonconforming RMBS transactions, with collateral consisting of
first-ranking mortgages over freehold and leasehold owner-
occupied properties originated by Mortgages 1 Ltd.," S&P said.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS LIST
Class Rating Rating
To From
Newgate Funding PLC
EUR177.55 Million And GBP337.5 Million Mortgage-Backed
And Excess Spread Floating-Rate Notes Series 2007-2
Ratings Affirmed
E B- (sf)
F B- (sf)
Ratings Lowered and Removed From CreditWatch Negative
A2 A (sf) A+ (sf)/Watch Neg
A3 A (sf) A+ (sf)/Watch Neg
M BBB (sf) A+ (sf)/Watch Neg
Bb BB- (sf) A- (sf)/Watch Neg
Cb B (sf) BBB- (sf)/Watch Neg
Db B- (sf) B+ (sf)/Watch Neg
Ratings Remaining on CreditWatch Negative[1]
A1a AAA (sf)/Watch Neg
A1b AAA (sf)/Watch Neg
[1] These ratings are no longer on CreditWatch negative for
credit reasons, but they remain on CreditWatch negative for
counterparty reasons.
Newgate Funding PLC
EUR485 Million and GBP503.55 Million Mortgage-Backed
Floating-Rate Notes Series 2007-3
Ratings Lowered and Removed From CreditWatch Negative
A1 A+ (sf) AA- (sf)/Watch Neg
A2b A (sf) AA- (sf)/Watch Neg
A3 BBB+ (sf) A (sf)/Watch Neg
Ba BB (sf) A- (sf)/Watch Neg
Bb BB (sf) A- (sf)/Watch Neg
Cb B (sf) BB+ (sf)/Watch Neg
D B- (sf) BB- (sf)/Watch Neg
E B- (sf) B (sf)/Watch Neg
RANGERS FOOTBALL: Kilmarnock Chairman Urges Caution Over Club
-------------------------------------------------------------
The Press Association reports that Kilmarnock Chairman Michael
Johnston has further dampened expectations of heavy sanctions for
a newco Rangers Football Club PLC in the Scottish Premier League
as he highlighted the "substantial penalties" already imposed on
the administration-hit Ibrox club.
The SPL clubs are due to meet Wednesday to vote on proposals for
sanctions on newco clubs and increased penalties for clubs who go
into administration, according to The Press Association.
The report notes that Charles Green, who is fronting a Rangers
ownership consortium, plans to push for a newco if a Company
Voluntary Arrangement (CVA) is rejected and there is a feeling
among many non-Gers fans that if the club is allowed to remain in
the SPL, its forfeit must be heavy.
However, The Press Association notes that SPL Chief Executive
Neil Doncaster has laid the ground for leniency by claiming there
is little difference between both exit routes from administration
and Johnston has claimed new owners should not be hamstrung by
punishments.
The club have already been fined GBP160,000 and had a 12-month
signing ban imposed on them by the Scottish Football Association
for financial irregularities and the loss of their UEFA license
means they miss out on a Champions League qualifying place next
season, The Press Association says.
Mr. Johnston flagged up those sanctions by way of addressing the
Rangers dilemma faced by the SPL clubs, The Press Association
discloses.
About Rangers Football Club
Rangers Football Club PLC -- http://www.rangers.premiumtv.co.uk/
-- is a United Kingdom-based company engaged in the operation of
a professional football club. The Company has launched its own
Internet television station, RANGERSTV.tv. The station combines
the use of Internet television programming alongside traditional
Web-based services. Services offered include the streaming of
home matches and on-demand streaming of domestic and European
games, which include dedicated pre-match, half-time and post-
match commentary. The Company will produce dedicated news
magazine and feature programs, while the fans can also access a
library of classic European, Old Firm and Scottish Premier League
(SPL) action. Its own dedicated television studio at Ibrox
provides onsite production, editing and encoding facilities to
produce content for distribution on all media platforms.
SAMARKAND BANK: S&P Assigns 'CCC/C' Counterparty Credit Ratings
---------------------------------------------------------------
Standard & Poor's Rating Services assigned its 'CCC' long-term
and 'C' short-term counterparty credit ratings to Uzbekistan-
based Samarkand Bank. The outlook is positive.
"The ratings on Samarkand Bank reflect its anchor of 'b+', its
'weak' business position, 'very strong' capital and earnings,
'weak' risk position, 'below average' funding and 'adequate'
liquidity, as our criteria define these terms. The stand-alone
credit profile (SACP) is 'ccc'," S&P said.
"The positive outlook on Samarkand Bank reflects our expectations
that the bank's business position and earnings capacity will
gradually improve when it receives a foreign exchange license,
which is expected in 2012. In our view, this will help diversify
the bank's clientele. In addition we anticipate that the bank
will maintain its 'adequate' liquidity and at least 'strong'
capitalization over at least the next 18-24 months. We also
expect that the recently revised strategy might help the bank
move away from excessive lending concentrations, including those
to related parties, although in the longer term," S&P said.
"We could raise the ratings if the bank succeeds in improving its
business diversity and revenue base, while continuing to
gradually improve its risk management and operational capacity
and maintaining capitalization at acceptable levels," S&P said.
"We could revise the outlook to stable if we see no material
improvements in the bank's business development and risk position
in the near future, or if the bank fails to realize its strategy
of improving business and risk diversification and market
positions. We could consider a negative rating action if the
bank's RAC ratio were to fall below 10%," S&P said.
T&T ACCESS: In Administration, Sets July 9 as Claims Due Date
-------------------------------------------------------------
Access International reports that T&T Access Solutions went into
bankruptcy administration.
The company, which operates from a single location in Bucharest,
had a wide ranging fleet of approximately 300 platforms,
including Airo, Omme and Socage machines, according to AI News.
AI News understands it was also operating a number of machines
re-rented from Riwal.
The Official Insolvency Gazette in Romania said creditors have
until July 9 to submit claims, the report relates. The first
creditors' meeting will be held in Bucharest on 14 August.
T&T was founded six years ago by joint owners Marius Tabacu and
Tudor Tatar. It is a Romanian access rental company.
THOMAS COOK: Appoints Harriet Green as New Chief Executive
----------------------------------------------------------
BBC News reports that Thomas Cook has appointed a new chief
executive.
Harriet Green, currently the chief executive at electronic parts
distributor Premier Farnell, will take up the role in July this
year, BBC discloses.
She will face the task of reviving the travel firm, which last
year issued three profit warnings and was forced to take an
emergency GBP200 million loan, BBC says.
Former chief executive Manny Fontenla-Novoa resigned in August
last year, BBC recounts. He was replaced on a temporary basis by
his deputy, Sam Weihagen.
As reported by the Troubled Company Reporter-Europe on May 15,
2012, The Press Association related that Thomas Cook warned its
shareholders that their failure to back two planned disposals
could lead to the firm going into administration. The tour
operator posted documents to shareholders in which it explained
the financial importance of the planned sale and leaseback of
part of its aircraft fleet and the disposal of five Spanish
hotels, according to The Press Association. The report noted
that Thomas Cook said in the circular that its directors were
confident that shareholders will deliver the required majority
when they vote on the disposals at a general meeting in London on
May 29.
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.
WORLDSPREADS PLC: Administrators to Pursue High-Stakes Clients
--------------------------------------------------------------
Simon Mundy at The Financial Times reports that WorldSpreads'
administrators are set to pursue several high-stakes clients of
the group for GBP2.5 million of losses incurred through losing
bets.
The company went into administration last month after informing
regulators that it had only GBP16.6 million of cash to repay
GBP29.7 million of client funds, the FT recounts. According to
the FT, a witness statement filed last month by Lindsay McNeile,
its chairman, said that WorldSpreads mixed client money with its
own, while falsifying its accounts to hide mounting losses.
At a creditors' meeting in London on Wednesday, the special
administrators of the company -- Jane Moriarty
( janemoriarty@kpmg.co.uk ) and Samantha Bewick
( samantha.bewick@kpmg.co.uk ) of KPMG -- said WorldSpreads'
debtors owed the company GBP2.5 million, with most of this owed
by several high-value clients, the FT relates.
Several high-stakes clients allege that these customers amassed
losses, in some cases amounting to several hundred thousand
pounds, after becoming involved in attempts by senior figures at
the company to manipulate its share price, the FT discloses.
Mr. McNeile is not one of those accused of wrongdoing, the FT
notes.
After the company's collapse left its equity worthless, the
administrators will now seek to force the clients to make good on
their losing bets, the FT says.
At the creditors' meeting, several clients argued that all the
remaining cash should be treated as clients' funds, which would
give them priority over Royal Bank of Scotland, which holds
secured debt of GBP1.5 million, the FT relates.
In response to one client's complaint about Ernst & Young's
apparent failure to detect the accounting irregularities, in its
role as WorldSpreads' auditor, Ms. Moriarty did not rule out the
possibility of action against E&Y, according to the FT. The
administrators would "consider whether the audit was
appropriate", Ms. Moriarty, as cited by the FT said.
The administrators hope to begin payouts to creditors in
September, but warned that the process could be held up further,
the FT notes.
Worldspreads plc is a financial spread-betting firm.
YELL GROUP: To Change Name to Hibu; Raises Going Concern Doubt
--------------------------------------------------------------
Katherine Rushton at The Telegraph reports that while Yell Group
might have GBP2.2 billion of debt on its books, it didn't stop
the Yellow Pages directory publisher from spending "hundred of
thousands of pounds" on a new name even its boss admits is
meaningless.
According to the Telegraph, the company paid top-flight
consultants to weigh up 60 different names over five months, only
to alight on "hibu."
It unveiled the new name as it chalked up GBP1.4 billion losses
and said "material uncertainty" could cast significant doubt on
its future as a going concern, the Telegraph relates.
Mike Pocock, chief executive, said the company needed to find a
new name because it was "viewed as a dinosaur", but admitted that
hibu was "just a word" with no real meaning, the Telegraph notes.
Hibu, the Telegraph says, will replace Yell as the company name
and will be used for all its digital services, although the
business will hang onto the old Yellow Pages monicker for its
paper directory.
About Yell Group
Headquartered in Reading, England, Yell Group plc --
http://www.yellgroup.com/-- is an international directories
business operating in the classified advertising market through
printed, online, and phone media in the U.K. and the US. Yell
also owns 100% of TPI (renamed "Yell Publicidad"), the largest
publisher of yellow and white pages in Spain, with operations in
certain countries in Latin America.
* * *
As reported by the Troubled Company Reporter-Europe on Jan. 27,
2012, Standard & Poor's Ratings Services raised its long-term
corporate credit rating on U.K.-based classified directories
publisher Yell Group PLC to 'B-' from 'SD' (Selective Default).
The outlook is negative. "The upgrade reflects our reassessment
of Yell's credit profile after the completion of its first subpar
debt repurchase on Jan. 19, 2012."
* UK: Moody's Says Food Retail Growth Slows as Competition Bites
----------------------------------------------------------------
Growth in the UK food retail sector has slowed down as the market
has become more competitive and consumers spend less, says
Moody's Investors Service in a published Special Comment. Weaker
retail sales and intense promotional activity are putting
pressure on retailers' margins. Moody's expects this slowing
growth to weigh on rated UK food retailers' financial profile.
The new report is entitled "UK Food Retail Growth Slows As
Competition and Economic Pressures Bite".
"We expect that UK food retail sales will grow only in the low
single-digit range through 2014 as a result of the challenging
economic environment," says Yasmina Serghini-Douvin, a Vice
President -- Senior Analyst in Moody's Corporate Finance Group
and author of the report.
Moody's cautions that like-for-like sales growth will remain
under pressure. Retailers with strong value propositions, such as
Morrisons (A3/P-2 stable) and Iceland Foods (Ba3 stable), should
continue to capture customers. More upscale retailers such as
Marks & Spencer (M&S, Baa3 stable) may suffer if there is a
protracted downturn.
Moody's expects that retailers will continue to extract cost
savings to offset pressures on volumes and to maintain
competitive pricing. However, the rating agency still anticipates
pressure on profit margins this year, especially if fuel prices
edge up.
Moody's expects growth in the UK food retail sector to be mostly
organic and that future acquisitions will not have a significant
impact on the sector. Market shares are also likely to be largely
unchanged.
New store openings will constrain free cash flow and present a
risk to return on assets. Moody's expects that food retailers
will continue to expand their store network to areas where they
are under-represented, as well as increase their portfolio of
convenience stores. As a result, capital expenditure will remain
somewhat high this year, reducing financial flexibility.
Non-food categories have performed poorly in recent years. This
has weighed more on retailers such as M&S and Tesco (Baa1/Prime-2
stable), which have greater exposure to this area. Retailers such
as Tesco are adapting their strategies in response, but Moody's
would expect non-food to remain part of their businesses as it
generates higher-margin sales.
Online food retail is a small part of the industry but it is
growing fast. Tesco benefits from being the longest established
UK food retailer online, but Sainsbury's (not rated) and M&S are
growing, albeit from a low base. While Moody's views having an
online presence as a differentiating factor between grocery
retailers, it does not yet constitute a key rating driver.
===============
X X X X X X X X
===============
* BOOK REVIEW: Kenneth M. Davidson's Megamergers
------------------------------------------------
Author: Kenneth M. Davidson
Publisher: Beard Books
Hardcover: 427 pages
Listprice: $34.95
Review by Henry Berry
Megamergers are nothing new to the business world. One of the
first occurred in 1901, when Carnegie Steel merged with several
rival steel corporations, resulting in the billion-dollar United
States Steel. Since then, megamergers have been a part of
American business. However, the author notes that megamergers
have historically "occurred sporadically and been understandable"
on face value. By contrast, in recent decades there has been a
"current wave of large mergers [that] is unprecedented."
In Megamergers - Corporate America's Billion-Dollar Takeovers,
Davidson looks at the unprecedented number of megamergers
occurring today and considers whether this signals a change in
the thinking of U.S. business leaders. Legislators, corporate
executives, mergers specialists, and anyone else involved in,
or affected by, megamergers will find this book enlightening.
An announcement of a merger is usually accompanied with the
pronouncements that it will result in greater synergies,
operational efficiencies, and improved servicing of markets.
Mr. Davidson questions whether this has, in fact, been the case.
He analyzes the subsequent financial performance of the corporate
behemoths produced by these megamergers and concludes that the
majority of them were not justifiable nor, ultimately,
productive. Mr. Davidson is an admitted skeptic about the value
of mergers to the overall economy and to employees, stockholders,
and consumers. He is critical of the overly optimistic
rationales prevalent in today's business climate that lead many
businesspersons into mergers. For the most part, though, he
keeps his biases in check. He rejects many of the common
criticisms of mergers. For example, he finds unpersuasive the
argument that mergers should be rejected on the ground that they
undermine market competitiveness. Nor, does he say, is it
worthwhile to revisit the ongoing debate over whether "'risk
arbitrageurs are good guys or bad guys."
The author states that his "first intention [is] to paint a
picture of what is happening [to] clarify the issues involved and
areas of dispute." He offers a balanced examination of the
megamerger phenomenon, particularly as it pertains to the energy
and financial services industries. He goes beyond seeing
megamergers only as phenomena of contemporary corporate culture,
and his analyses go beyond mere statistics. Megamergers have
their roots not only in business ambitions and current trends,
but also in human nature. Recognizing this, the author also
addresses the psychology underlying megamergers. As noted in the
section "The Acquisition Imperative," mergers present a
temptation to the decision-making executives of successful
companies "look[ing] beyond their product and consider[ing] the
disposal of excess profits." Mr. Davidson explains why a merger
appears to many executives to be a better option than
distributing profits to shareholders, starting new businesses, or
investing in securities. The informed perspective Mr. Davidson
offers in this book, first published in 2003, is just as relevant
today. It is a book that brings new wisdom to old ways of
thinking about megamergers.
An attorney for the U. S. Federal Trade Commission for 25 years,
Kenneth M. Davidson has also been a corporate attorney and a
visiting law professor.
*********
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, Ivy B. Magdadaro, Frauline S.
Abangan and Peter A. Chapman, Editors.
Copyright 2012. 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 Peter Chapman at 240/629-3300.
* * * End of Transmission * * *