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/raid1/www/Hosts/bankrupt/TCREUR_Public/120919.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Wednesday, September 19, 2012, Vol. 13, No. 187 Headlines H U N G A R Y MAGYAR TELECOM: Moody's Cuts Corp. Family Rating to 'Caa1' I R E L A N D ANGLO IRISH: Ireland Favors Use of Bonds to Refinance Bailout CLERYS: In Receivership, Staff Unaffected IRISH BLOOD: Blood Service Pension Fund Insolvent, CEO Says N E T H E R L A N D S CNH EQUIPMENT: Moody's Assigns Provisional Ratings ENTERPRISE NETWORKS: Moody's Cuts CFR/PDR to 'Caa1'; Outlook Neg. P O L A N D HYDROBUDOWA POLSKA: Court Declares Bankruptcy by Liquidation R O M A N I A * ROMANIA: Corporate Insolvencies Down 1.43% in Jan-Aug 2012 U K R A I N E * CITY OF DNIPROPETROVSK: S&P Affirms 'B' Issuer Credit Rating U N I T E D K I N G D O M BARNISH HOMES: Anglo to Recover GBP1.5-Mil. of GBP9.5-Mil. Owed JJB SPORTS: In the Brink of Administration, Sells Stores JJB SPORTS: JD Sports Drops Out of Bidding Race RANGERS FOOTBALL: Proceedings in Ticketus Dispute Set to Begin THAMES WATER: Moody's Issues Summary Credit Opinion TIUTA INTERNATIONAL: Investors Opt to Wind Up Series 1 Fund XCHANGETEAM: Set to Go Into Liquidation X X X X X X X X * Moody's Says Sluggish EU Demand Constrains Global Auto Growth * S&P Takes Various Rating Actions on 21 European CDO Tranches ********* ============= H U N G A R Y ============= MAGYAR TELECOM: Moody's Cuts Corp. Family Rating to 'Caa1' ---------------------------------------------------------- Moody's Investors Service has downgraded the corporate family rating (CFR) and probability of default rating (PDR) of Magyar Telecom B.V. ("Invitel") to Caa1 from B3. Moody's also downgraded the rating on the senior secured notes due 2016 to Caa1 from B3. The outlook remains negative. Ratings Rationale The downgrade of Invitel's ratings reflects (i) the accelerating decline in voice revenues, Invitel's highest margin product, to the benefit of mobile substitution and triple-play cable operators which continues to put pressure on Invitel's EBITDA margins (ii) weaker than expected growth in the internet segment which fails to generate enough positive momentum to counter the drop in ARPU (iii) an uncertain macro-economic environment (iv) aggressive policy-making exemplified by the previous crisis tax levied on telecom operators and the recently announced telecom tax which will be fully borne by the company (iv) expectations that continued negative free cash-flow might leave the company with a weak liquidity profile which makes the sustainability of the current capital structure uncertain in the medium-term. Invitel's Caa1 CFR is supported by the company's (i) leading position as the second-largest fixed-line telecommunications service provider in Hungary; (ii) sound profitability levels with EBITDA margin between 40%-45%; (iii) long dated maturity profile as the company has no scheduled debt repayment before 2016. The downgrade mainly captures the continuing weak profile of Invitel's liquidity profile with the company fully reliant on current cash positions to absorb its negative free cash flow. In addition, capex spending, although somewhat discretionary, is needed to upgrade networks and/or maintain market position in certain regions and cannot be sustainably halted. At the current pace of cash-burning, Moody's believes the company could be left with minimal liquidity by the end of 2013. The current capital structure hence appears untenable in its current state absent any financial shareholder support, which, until now, has not been expressed. The downgrade also reflects Invitel's performance in the first half of 2012 which shows no halting of the declining trends observed in voice revenues with this segment recording a 22% drop in residential and 7% in corporate revenues (both in constant currency terms) in H1 2012 vs. H1 2011. In addition to fixed to mobile substitution and the bundled telephone offers from cable operators, the increasingly tough competitive environment has also driven prices down as clients look for best-value alternatives in a tough domestic economic climate. In addition, the Hungarian Forint (Invitel's main operating currency), which declined to a record low at the end of 2011, has continued to be volatile in the first half of 2012 and future currency movements remain largely unpredictable. This is compounded by an aggressive strategy from the government to impose taxes on the telecommunication industry. First, since 2010, through a three year "crisis-tax" on the operators which cost Invitel EUR10.9million in 2011 and now through a "Telecom Tax" based on end-user traffic. Although this is in essence a consumer tax, the company has decided not to pass on the increased costs as it fears the consequences on churn would outweigh the margin benefits. The negative outlook reflects Moody's views that (i) the current capital structure is under pressure given the lack of long term liquidity solution and the lacklustre performance expectations (ii) the competitive and macro-economic landscapes will continue to put pressure on Invitel's end-customers and hence limit a potential recovery (iii) the cash-flow profile of the issuer will, eventually, be constrained by the required continued investment in its network infrastructure. What Could Change the Rating -- UP Whilst Invitel's ratings are currently constrained by the company's limited financial flexibility, its rating outlook could stabilise following (i) tangible signs of a stabilizing market environment; (ii) meaningful growth in Internet and broadband activity; (iii) sustained free cash flow generation; and/or (iv) substantial cash injection from the sponsor to stabilize Invitel's long term liquidity profile. What Could Change the Rating -- DOWN Negative ratings pressure would arise following (i) no apparent resolution over the currently weak liquidity profile of the company or explicit support from the sponsor; (ii) further reduction in the company's EBITDA and free cash flow generation. The principal methodology used in rating Magyar Telecom B.V. was the Global Telecommunications Industry Methodology published in December 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. ============= I R E L A N D ============= ANGLO IRISH: Ireland Favors Use of Bonds to Refinance Bailout ------------------------------------------------------------- Joe Brennan at Bloomberg News reports that sources said Irish authorities now favor using government bonds to refinance the rescue of the former Anglo Irish Bank, easing funding pressure on the State over the next decade. According to Bloomberg, one source said that under a plan being weighed up, the Government would inject as much as EUR40 billion of notes of as long as 40 years in duration into the bank. These may be used as collateral for ECB funds, replacing EUR30 billion of promissory notes used for the bank's 2010 bailout. The State issued Anglo with the promissory notes, or IOUs, two years ago to stave off the bank's collapse, Bloomberg recounts. Now renamed Irish Bank Resolution Corp, the lender takes the notes and exchanges them with the Central Bank for emergency liquidity assistance, Bloomberg notes. This assistance amounted to EUR41.7 billion at the end of June, with the notes making up the bulk of the collateral, Bloomberg discloses. The notes were included in Government debt in 2010, helping to triple the State's borrowings over the last five years, Bloomberg states. The Government is to pay IBRC about EUR3 billion a year for at least the next decade to pay off the debt, Bloomberg discloses. IBRC in turn uses that money to repay the Central Bank, Bloomberg says. According to Bloomberg, under the plan being studied, the State would issue a long-term bond to the lender. Anglo Irish Bank was an Irish bank headquartered in Dublin from 1964 to 2011. It went into wind-down mode after nationalization in 2009. In July 2011, Anglo Irish merged with the Irish Nationwide Building Society, with the new company being named the Irish Bank Resolution Corporation. CLERYS: In Receivership, Staff Unaffected ------------------------------------------ IrishTimes.com reports that Clerys has been place into receivership. The firm will operate business as usual with the 147 staff unaffected by the move, according to the report. Receivers Paul McCann -- paul.mccann@ie.gt.com -- and Michael McAteer -- michael.mcateer@ie.gt.com -- of Grant Thornton said they were in advanced talks to secure the store's future with a potential buyer with strong retail credentials, IrishTimes.com relates. "The joint receivers hope to be in a position to make an announcement regarding new ownership shortly," Grant Thornton said in a statement obtained by the news agency. The owners and operators of the landmark department store were Clery & Co (1941) plc, Denis Guiney Limited and Yterrbium Limited. IrishTimes.com shares that two stores in the group, Guiney of Talbot Street and Denis Guiney Furnishings, which operates two Clerys Home Furnishing stores in Leopardstown and Naas, are to be liquidated. Clerys opened in 1853 as one of the world's first purpose-built department stores. It was taken over by the Guiney family in 1941 but has been struggling in recent years with severely depressed consumer spending in Ireland and the need to restructure debts. IRISH BLOOD: Blood Service Pension Fund Insolvent, CEO Says ----------------------------------------------------------- Catherine Shanahan at The Irish Examiner reports that the Irish Blood Transfusion Service (IBTS) has a EUR35 million hole in its pension pot, up from EUR24 million at the end of 2010. The report says the figure was confirmed by chief executive Andrew Kelly last week after publication of the state-sponsored body's annual report and in advance of publishing its annual accounts. According to the report, Mr. Kelly said the pension fund was "currently insolvent", but the IBTS was in talks with the Department of Health in an attempt to resolve the issue. "Obviously, we have to resolve the funding issues. We can't carry on like this. The implications of winding up the scheme are too great, clearly this is not on the horizon," the report quotes Mr. Kelly as saying. The Irish Examiner relates that Mr. Kelly said discussions with the department were "at a sensitive stage". About 950 individuals, including both current and former employees, are members of the pension scheme, the report notes. Of these, about 600 are active members while the remainder is comprised of both pensioners and former employees who left to work elsewhere but chose to defer their entitlements under the scheme until retirement age. ===================== N E T H E R L A N D S ===================== CNH EQUIPMENT: Moody's Assigns Provisional Ratings -------------------------------------------------- Moody's Investors Service has assigned provisional ratings to the notes to be issued by CNH Equipment Trust 2012-C (CNH 2012-C), sponsored by CNH Capital America LLC (CNH), an affiliate of CNH Global N.V. (Ba2, stable). The transaction is a securitization of US retail installment contracts and loans backed primarily by new and used agricultural equipment. The complete rating actions are as follows: Issuer: CNH Equipment Trust 2012-C $160,100,000 Class A-1 Notes, rated (P)Prime-1 (sf) $240,000,000 Class A-2 Notes, rated (P)Aaa (sf) $240,000,000 Class A-3 Notes, rated (P)Aaa (sf) $95,125,000 Class A-4 Notes, rated (P)Aaa (sf) $16,923,000 Class B Notes, rated (P)A2 (sf) Ratings Rationale Collateral for the transaction, originated by CNH and serviced by affiliate New Holland Credit Company, LLC, consists of retail installment sale contracts and retail installment loans secured by agricultural (91.98%) and construction (8.02%) equipment, both new (52.53%) and used (47.47%). The ratings are based on an analysis of the credit quality of the collateral, the historical performance of similar collateral originated by the sponsor, the servicing ability of New Holland Credit Company, LLC, and the level of credit enhancement available under the proposed capital structure. Moody's median cumulative net loss expectation is 0.65% and the Volatility Proxy Aaa Level is 6.50% for the CNH 2012-C pool. The expected loss is primarily based on the observed performance for the sponsor's managed portfolio and the performance of prior securitizations that have similar pool characteristics to the CNH 2012-C pool. The expected loss is also based on an analysis of the historical performance of static pools of quarterly originations from the sponsor, stratified along certain key credit metrics. Consideration is also given for the differences between the economic conditions underlying observed historical performance and Moody's expectation of future economic conditions. The 0.65% expected loss for the CNH 2012-C pool is lower than the expected loss of 0.70% on the CNH 2012-B pool, the most recent transaction of CNH that was rated by Moody's. The improvement in the expected loss for this transaction is driven by a modest improvement in the expected performance of construction equipment and continued low loss levels in 2010 and 2011 vintage transactions. Expected loss numbers may be nearing a stable state and, given the lack of material diversity in industry exposure, Aaa Volatility Proxy Levels are unchanged from 2012-A or 2012-B and are likely at or near cycle lows. The current drought conditions in the Midwest are not expected to have a material impact on losses for this deal for three main reasons. Crop and revenue insurance for grain producers along with government disaster assistance for livestock producers is expected to fill much of the farmers' cash flow gap due to drought losses. Additionally, farmers with crops are seeing much higher prices. Lastly, farmers, in general, have very strong balance sheets and are in a good position to cope and respond to the drought conditions. The V Score for this transaction is Low/Medium, which is in line with the score assigned to the U.S. Agricultural and Construction Equipment Loan ABS sector. The V Score indicates "Low/Medium" uncertainty about critical assumptions. Overall, Moody's views the credit risk for this asset class to be relatively straight- forward and well understood given the high granularity of the collateral pools and the long track record of securitization over varying economic conditions. The assessment of Low/Medium, as opposed to Low, is primarily driven by the non-homogenous nature of the assets and the varying sensitivity of the obligors to changes in economic conditions, given that the obligors can vary from small and medium businesses to large corporations. Agricultural equipment receivables account for a majority (91.98%) of the collateral securitized in this deal, which is a positive given that the construction equipment receivables have performed significantly worse historically, particularly through the recent economic downturn. Although delinquency levels for agricultural loans increased throughout the economic downturn, they have since fallen to historical lows and, in Moody's view, the fundamentals for the agricultural sector remain sound. Moody's Parameter Sensitivities: If the net loss used in determining the initial rating were changed to 1.45%, 3.25%, or 5.25%, the initial model-indicated output for the Class A notes might change from Aaa to Aa1, A2, and Baa3, respectively. If the net loss used in determining the initial rating were changed to 0.85%, 1.25%, or 1.95%, the initial model-indicated output for the Class B notes might change from A2 to A3, Baa3, and Ba3, respectively. Parameter Sensitivities are not intended to measure how the rating of the security might migrate over time, rather they are designed to provide a quantitative calculation of how the initial rating might change if key input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. Parameter Sensitivities only reflect the ratings impact of each scenario from a quantitative/model-indicated standpoint. Qualitative factors are also taken into consideration in the ratings process, so the actual ratings that would be assigned in each case could vary from the information presented in the Parameter Sensitivity analysis. Principal Methodology The principal methodology used in this rating was"Moody's Approach to Rating Securities Backed by Equipment Leases and Loans," published in March 2007. Additional research including a pre-sale report for this transaction is available at www.moodys.com. The special reports, "Updated Report on V Scores and Parameter Sensitivities for Structured Finance Securities" and "V Scores and Parameter Sensitivities in the U.S. Equipment Lease and Loan ABS Sector" are also available on moodys.com. ENTERPRISE NETWORKS: Moody's Cuts CFR/PDR to 'Caa1'; Outlook Neg. ---------------------------------------------------------------- Moody's Investors Service downgraded Enterprise Networks Holding B.V.'s ("ENH") Corporate family and probability of default ratings to Caa1 from B3. The B3 rating on the EUR200 million senior secured notes due November 2015 issued by EN Germany Holdings B.V. and guaranteed by ENH remains unchanged. The outlook on all ratings remains negative. Downgrades: Issuer: Enterprise Networks Holding B.V. Probability of Default Rating, Downgraded to Caa1 from B3 Corporate Family Rating, Downgraded to Caa1 from B3 Ratings Rationale The rating downgrade was prompted by ENH's EUR114 million cash burn in the third quarter of its fiscal year 2012 (ending September 30) triggered by sizeable cash outflows for working capital, restructuring costs and one-time charges as well as pressure on gross margins despite a stabilization in quarterly revenues (6% year-over-year growth). As a consequence, ENH's cash on balance sheet dropped to EUR137 million at June 30 from EUR211 million at March 31 and the company made full drawings under its EUR40 million revolving credit facility. "We expect that a higher revenue base in the seasonally strong fourth quarter will facilitate a return to positive free cash flow in the fourth quarter, thereby, modestly improving the currently low cash balance at fiscal year-end 2012," said Kathrin Heitmann, Moody's lead analyst for ENH. However, the continuing fierce price competition in the industry, the weak macroeconomic environment in Europe and likely additional sizeable restructuring measures will result in continued weak profit margins and negative free cash flow generation in fiscal year 2013. This will put further pressure on the company's limited financial flexibility and could lead to additional funding requirements and reduced headroom under financial covenants. Positive free cash flow generation and sound financial flexibility are key rating drivers as ENH will need to constantly reinvest in new products and platforms to maintain its position against much larger and better capitalized competitors such as Cisco and Microsoft. The negative rating outlook reflects the risk of a further rating downgrade in case of a further erosion in the company's liquidity cushion and diminishing headroom under financial covenants. The Caa1 corporate family rating continues to reflect the company's good competitive position within the enterprise telephony market and favorable replacement trends facing the industry. At the same time the industry is evolving to include integrated communications offerings (including email, instant messaging, video as well as integration into vast corporate databases) and is characterized by intense price competition. These industry characteristics have resulted in a continued shrinkage of ENH's revenue base and sizeable restructuring costs in order to adapt the cost structure to the changing market conditions. ENH's current credit metrics position the company weakly in its rating category, evidenced by debt/EBITDA of 6.2x; EBITDA margin of 5% and FCF/debt of -21% for the last twelve months period 30 June 2012. The B3 (LGD 3- 39%) rating for the group's EUR200 million senior secured notes issued by EN Germany Holdings B.V. (EN Germany) is determined using Moody's Loss Given Default (LGD) Methodology. Moody's groups ENH's debt into three classes of creditor protection: (i) the EUR40 million secured revolving credit facility with super-priority ranking in liquidation; (ii) the EUR200 million senior secured bonds (EUR162 million carrying value at June 30, 2012) and about EUR286 million trade payables at June 30, 2012 at LGD3; and (iii) about EUR85 million of underfunded pension obligations (at September 30, 2011), EUR52 million of short-term lease rejection claims for finance (EUR17 million at June 30, 2012) and operating leases (EUR35 million at September 30, 2011) and EUR23 million of other unsecured bank debt at June 30, 2012 at subsidiary level ranking at the bottom of the waterfall. The increased level of unsecured debt and non-debt claims at operating level compared to the rating assignment in 2010, as well as the reduced outstanding amount of the bonds results in an improved position of the group's bondholders and thus, results in a rating uplift for the initially EUR200 million senior secured notes (carrying value of EUR162 million at June 30, 2012) under Moody's LGD methodology compared to the Caa1 corporate family rating. The position of bondholders is also supported by the cash flow offer contained in the bond indenture according to which ENH has to make a repurchase offer to all holders of the notes each June 30 and December 31 in the amount of the accumulated cash flow account funds (EUR12.5 million plus accrued interest, if any) and has led to a reduction in the amount of outstanding bonds. The EUR146 million cumulative preference shares have not been incorporated into the LGD framework. What Could Change The Rating Up/Down Moody's would consider a rating downgrade if (1) ENH's business kept shrinking over the next few quarters or (2) the company proved unable to halt the drain on cash from its operations and stabilize cash on balance sheet and in case of (3) diminishing headroom under financial covenants. A rating upgrade would require a track record of free cash flows with a substantial scale down of restructuring charges so that leverage moves below 4.5x on a sustainable basis. The principal methodology used in rating Enterprise Networks Holdings B.V. and EN Germany Holdings B.V. was the Global Communications Equipment Industry Methodology published in June 2008. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Enterprise Networks Holding B.V. is a leading global provider of communications-related products and services to enterprises, including businesses, government agencies and other organizations. It is jointly owned by private equity firm The Gores Group (51%) and Siemens AG (49%). While the holding company is registered in Amsterdam, Netherlands, the corporate headquarters of the group are in Munich, Germany. ENH generated EUR2.1 billion revenues in fiscal year ending September 30, 2011. =========== P O L A N D =========== HYDROBUDOWA POLSKA: Court Declares Bankruptcy by Liquidation ------------------------------------------------------------ On September 17, 2012, the Management Board of PBG S.A. (in company voluntary arrangement) was notified of a decision issued on September 13, 2012, by the District Court for Poznan-Stare Miasto of Poznan, XI Commercial Insolvency and Arrangement Division (the Court), declaring the bankruptcy of HYDROBUDOWA POLSKA S.A. (in company voluntary arrangement) by liquidation of its assets. The decision will become final one week after the date on which it is served on the Company, unless it is appealed against before the lapse of that period. Hydrobudowa is a unit of Polish builder PBG SA. ============= R O M A N I A ============= * ROMANIA: Corporate Insolvencies Down 1.43% in Jan-Aug 2012 ------------------------------------------------------------ Florentina Dragu at Ziarul Financiar reports that Romania's Trade Registry on Tuesday said 11,043 companies filed for insolvency in the first eight months of 2012, down 1.43% from 11,230 companies in the year-earlier period. ============= U K R A I N E ============= * CITY OF DNIPROPETROVSK: S&P Affirms 'B' Issuer Credit Rating -------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B' long-term issuer credit rating and 'uaA-' Ukraine national scale rating on the Ukrainian city of Dnipropetrovsk. The outlook is stable. The recovery rating on Dnipropetrovsk's senior unsecured debt remains at '4'. "The ratings on Dnipropetrovsk reflect Ukraine's very weak public finance system, which results in low financial flexibility and predictability for the city, as well as material contingent liabilities related to municipal utilities and a poor and concentrated economy. These constraints are mitigated by Dnipropetrovsk's low debt burden and strong financial support from the central government," S&P said. "The stable outlook reflects our expectation, according to our base-case scenario, that despite a possible slowdown in economic growth and tax revenues, Dnipropetrovsk's adherence to cautious expenditure policies, coupled with continued central-government support, will likely result in operating surpluses above 5% and only modest deficits after capital accounts over the medium term. It also reflects the city's low tax-supported debt and debt service in 2012-2014," S&P said. "We would likely take negative rating actions on Dnipropetrovsk if operating expenditures, weaker revenues, or the municipal companies' financial positions put additional stress on the city's operating performance, resulting in sustained operating deficits and a weaker liquidity position. The deterioration of the city's liquidity resulting from short-tem debt accumulation could also put pressure on the rating," S&P said. "We could take positive rating actions if the city displayed stronger budgetary performance in line with our up-side scenario, in particular when combined with a clear and structural reduction of the payables of the city's GREs. In the longer run, positive rating actions will likely depend on the city formally adopting debt and liquidity policies, coupled with improvements in Ukraine's institutional framework. Ratings upside would also depend on our rating actions on Ukraine," S&P said. =========================== U N I T E D K I N G D O M =========================== BARNISH HOMES: Anglo to Recover GBP1.5-Mil. of GBP9.5-Mil. Owed --------------------------------------------------------------- BBC News reports that Barnish Homes that was placed into administration last month has estimated that the former Anglo Irish Bank will get back just GBP1.5 million of the GBP9.5 million it is owed. Barnish Homes owned a large site on West Circular Road in west Belfast, next to the former Mackies site, BBC discloses. A GBP9.5 million mortgage was registered on the site in 2005, however, in a statement of affairs, the Randalstown firm's directors estimate that the site is now worth just GBP1.5 million, according to BBC. Smaller creditors of the firm are owed GBP55,000, none of which will be repaid, BBC states. When Barnish Homes was placed into administration, the bank, now called IBRC, also appointed receivers to some of the assets of a number of related companies, BBC recounts. Those firms are Barnish Construction, Quayside Construction and Quayside Retail. Mortgage documents suggest that the assets in receivership include two pubs, BBC notes. Barnish Homes is a County Antrim property firm. JJB SPORTS: In the Brink of Administration, Sells Stores -------------------------------------------------------- Press Association reports that JJB Sports, whose best stores are due to be snapped up by its arch rival, has gone from market leader to the brink of administration. Former Blackburn Rovers footballer and Wigan Athletic owner Dave Whelan bought a single store in Wigan in 1971 before an aggressive expansion drive made it the UK's biggest sports retailer with more than 400 stores, the report recounts. In 2007, the report relates, Mr. Whelan sold his family's holding for GBP190 million to a joint venture formed by Icelandic financial group Exista and Chris Ronnie, who previously worked at Umbro and Sports World owner Sports Direct. The group was hit hard by the squeeze on consumer spending triggered by the financial crisis and by the stellar performance of rivals Sports Direct and JD Sports, Press Association relates. By late 2008, JJB was in a battle for survival, the report discloses. Press Association says that despite shareholders with deep pockets, such as the Bill and Melinda Gates Foundation, numerous fundraisings and closing half of its stores, JJB has been unable to revive fortunes. The sportswear retailer company recently put itself up for sale and is expected to be bought by Mike Ashley's Sports Direct International in a pre-pack administration that will see Mr. Whelan's former rival take his pick of the best stores in the estate, the report notes. JJB secured its most recent lifeline four months ago when it landed GBP20 million from US retailer Dick's Sporting Goods and a further GBP10 million from existing shareholders, Press Association relates. It earmarked GBP20 million of the most recent funding on converting 60 of its most important stores in 2012 and 2013 into a new format which during trials produced much-improved sales and margins, the report relates. More dire trading despite the UK's summer of sport left the stricken firm asking shareholders for another cash injection, but this time they ran out of patience, finally forcing the group to throw in the towel and put itself up for sale, The Press Association adds. JJB SPORTS: JD Sports Drops Out of Bidding Race ----------------------------------------------- Mark Wembridge at The Financial Times reports that JD Sports Fashion has pulled out of the running to buy rival JJB Sports, leaving Mike Ashley's Sports Direct International as favorite to take over the struggling sportswear retailer. JD Sports Executive Chairman Peter Cowgill told the FT that his company withdrew from the sale process because of the two retailers' different store sizes. "We could have made a piecemeal bid, but JJB's store sizes wouldn't have been suitable for the JD format," the FT quotes Mr. Cowgill as saying. "The only interest would have been to take on the whole of JJB. A partial bid was not worthwhile. It was either all or nothing." Administrator KPMG has been appointed to sell JJB and has been in discussions with several parties, including private equity groups, to dispose of the loss-making retailer, the FT relates. Mr. Ashley's Sports Direct is thought to be tempted by the opportunity to cherry pick the best of JJB's 180 stores and close the remainder, the FT notes. Gareth Mackie at The Scotsman reports that Sports Direct is believed to be close to arranging to buy the most profitable stores from JJB under a "pre-pack" administration. The deal, which was expected to be announced as early as Monday, could see more than half of JJB's 180 stores closed, but it is believed the Office of Fair Trading (OFT) would launch an investigation into any attempt by Sports Direct to buy its nearest rival, the Scotsman notes. According to the Scotsman, it is now understood that JJB will not be able to ward off administration, but is working towards a pre-pack arrangement, which will allow it to be sold on immediately. This move, the Scotsman relays, would allow Sports Direct to jettison loss-making stores but avoid the damaging impact of a prolonged administration. Sports Direct used to own a stake in JJB, but sold that stake three years ago, the Scotsman recounts. JJB Sports plc -- http://www.jjbcorporate.co.uk/-- is a sports retailer. JJB Sports is a multi-channel sports retailer supplying branded sports and leisure clothing, footwear and accessories. It operates out of over 185 stores across the United Kingdom and Ireland with e-commerce offering. RANGERS FOOTBALL: Proceedings in Ticketus Dispute Set to Begin -------------------------------------------------------------- Mike Farrell at STV News reports that Ticketus is expected to begin court proceedings in the coming weeks against former Rangers owner Craig Whyte over a GBP26.7 million deal he used to fund his takeover. The ticketing firm is pursuing Mr. Whyte after he used future season ticket sales to wipe out the Ibrox club's GBP18 million debt to Lloyds Banking Group last May, STV relates. Ticketus, which is an investee company of Octopus Investments, is taking legal action against Mr. Whyte after administrators Duff and Phelps failed to agree to a company voluntary arrangement (CVA) with creditors in June, STV discloses. It is unclear whether Ticketus will launch the action in Scottish or English courts, while most of Mr. Whyte's business interests are linked to the British Virgin Islands-registered firm, Liberty Capital Ltd., including Rangers FC Group, the company he used to buy Sir David Murray's 85% stake for GBP1, STV notes. The civil action raised by the investment company is not likely to be heard until next year, STV discloses. "Ticketus is continuing to pursue, through the courts, the terms of the corporate and personal guarantees agreed with Craig Whyte at the time of the original contract between Ticketus and Rangers FC in May 2011," STV quotes a spokesman for the firm as saying on Monday. After being appointed in February, Duff and Phelps sought guidance from the Court of Session over the contract Mr. Whyte had agreed with Ticketus to effectively fund his takeover of the Ibrox club, STV relates. Lord Hodge found that Ticketus did not, under Scots law, own future season ticket sales at Rangers as it had claimed, STV recounts. 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. THAMES WATER: Moody's Issues Summary Credit Opinion --------------------------------------------------- Moody's Investors Service's summary credit opinion on Thames Water Utilities Ltd. and includes certain regulatory disclosures regarding its ratings. This release does not constitute any change in Moody's ratings or rating rationale for Thames Water Utilities Limited and its affiliates. Moody's current ratings on Thames Water Utilities Limited its affiliates are: Thames Water Utilities Limited (TWUL) LT Corporate Family Rating of Baa1 Thames Water Utilities Finance Limited Backed Senior Secured Class A rating of A3 Backed Senior Unsecured MTN program rating of (P)Baa1 Backed Senior Unsecured MTN rating of Baa1 Thames Water Utilities Cayman Finance Limited (TWUCF) Backed Senior Secured Class A rating of A3 Backed Subordinate Class B rating of Baa3 Thames Water (Kemble) Finance PLC (Kemble) Backed Senior Secured rating of B1 Ratings Rationale Moody's maintains a corporate family rating (CFR) of Baa1 with stable outlook on TWUL reflecting (i) the company's low business risk profile as the monopoly provider of essential water and sewerage services; (ii) stable returns under a transparent and predictable regulatory framework; (iii) a high level of gearing; and (iv) the creditor protections incorporated within the company's financing structure. A corporate family rating is an opinion on the expected loss associated with a company's financial obligations assuming that it has a single class of debt and is a single consolidated legal entity. The Baa1 CFR is in line with the corporate family ratings assigned in two of the three comparable transactions in the UK water sector, Anglian Water and Yorkshire Water, and one notch above that for Southern Water (the latter was downgraded in July 2011 -- please refer to the associated press release for further detail). Like its peers, TWUL's credit quality is constrained by the expectation that the company will maintain a highly leveraged financial structure and by its exposure to refinancing risk, i.e. dependence upon continued market access to fund ongoing capital expenditure and the risk of adverse financial market conditions that may prevent TWUL from funding its very large capex program or refinancing its debt on reasonable terms. The rating consolidates the legal and financial obligations of TWUL, TWUF and TWUCF (both financing subsidiaries) and Thames Water Utilities Holdings Limited (a holding company), which together constitute the ring-fenced TWU Financing Group as defined under the terms and conditions of its MTN program (the TWUL MTN Programme) and factors in the associated structural enhancements. The A3 rating of the Class A Bonds issued under the TWUL MTN Programme reflects the strength of the debt protection measures for this class of bonds and other pari passu indebtedness (together, the Class A Debt), the senior position in the cash waterfall and post any enforcement of security. The rating also, however, factors in the subordinated Class B Debt (Class B Bonds and other pari passu debt) which, whilst it is contractually subordinated, serves to reduce the operator's financial flexibility. Downgrade or default of the Class B Debt could have an impact on the viability of the company's funding model as a whole since the inability to raise additional Class B Debt in the future could undermine the capital structure and affect the credit quality of the senior debt. The Baa3 rating of the Class B Bonds reflects the same default probability as factored into the rating of the Class A Debt but also Moody's expectation of a heightened loss severity for the Class B Debt following any default, given its subordinated position. The B1 rating assigned to the GBP400 million notes issued by Kemble (a financing subsidiary of Kemble Water Finance Limited, a holding company for TWUL) under its GBP1.0 billion Guaranteed Secured Medium Term Note Programme (the Kemble Notes), reflects (i) the low business risk profile of TWUL, as the monopoly provider of water and wastewater services in its area; (ii) the stable and transparent regulatory framework for the water sector in England and Wales; (iii) the high level of gearing at TWUL and other debt in the group (debt can increase up to 92.5% of TWUL's RCV before a distribution lock-up comes into effect); (iv) the terms of the TWUL MTN Programme; (v) the large capital investment program planned by TWUL for the current regulatory period; and (vi) the terms of the Kemble MTN program including a cash trapping provision. WHAT COULD CHANGE THE RATING UP/DOWN TWUF and TWUCF The stable outlook on the ratings reflects Moody's expectation that TWUL's financing structure should be relatively resilient to downside scenarios due to the cash trapping triggers designed to ensure that cash is retained in the company if certain ratio thresholds are breached. Such cash could then be used to absorb the effect of possible downsides. Given the company's funding structure and Moody's expectation that TWUL will maintain leverage close to the maximum level permitted by its financial covenants, there will be limited potential for an upgrade of its ratings. Upward rating pressure would require a material and permanent improvement in debt protection measures. Negative pressure on the ratings could derive from (i) an unexpected, severe deterioration in operating performance that results in TWUL remaining persistently in breach of the distribution lock-up triggers; (ii) a material change in the regulatory framework for the UK water sector leading to a significant increase in TWUL's business risk; (iii) unforeseen funding difficulties; and (iv) TWUL being required to deliver the main part of the proposed Thames Tunnel. Kemble The stable outlook for the Kemble Notes reflects Moody's view that the transaction is reasonably resilient to downside sensitivities. Given the high leverage at TWUL, the additional debt at Kemble and Moody's expectation that there will be only limited de-leveraging over the life of the Kemble Notes, there will be little potential for an upgrade. Under the terms of the TWUL MTN Programme, there is a distribution lock-up at the operating company if (i) Class A RCV gearing or Senior (Class A and Class B) RCV gearing exceeds 75% or 85% respectively; or (ii) Class A Adjusted ICR or Senior Adjusted ICR falls below 1.30x or 1.10x respectively. A material deterioration in these financial metrics, compared to forecasts and such that the trigger levels appeared more likely to be breached, would result in negative rating pressure for the Kemble Notes. Such deterioration could be the result of serious underperformance in operating or capital expenditure at TWUL, or adverse macro-economic developments, including deflation. Negative funding conditions or adverse changes in the regulatory framework or structure of the water sector in England and Wales may also cause downward rating pressure. Again, Moody's notes that it would likely strain the credit standing of TWUL and hence Kemble if TWUL were to be required to deliver the main Thames Tunnel (estimated construction cost GBP4.1 billion). Moody's considers, however, that this is unlikely. The principal methodology used in these ratings was Moody's global Rating Methodology for Regulated Water Utilities published in December 2009. TIUTA INTERNATIONAL: Investors Opt to Wind Up Series 1 Fund ----------------------------------------------------------- Paul Thomas at MoneyMarketing reports that investors have voted unanimously in favour of placing the Connaught Income Fund Series 1 into liquidation. MoneyMarketing relates that at a Sept. 12 investors' meeting at the National Exhibition Centre in Birmingham, over 92% of investors present at the meeting chose a formal insolvency process to wind down the UCIS fund, which at one stage was GBP118 million in size. At the meeting, the report relates, investors also chose to replace BDO as the administrator of Tiuta International Limited, the arm of Tiuta plc which used GBP105 million of Series 1 funds as a funding line, and to replace the firm with Duff & Phelps. Tiuta International entered administration last month with the loan books sold to Connaught for GBP1, the report notes. Connaught Asset Management had the casting vote and chose to honor the wishes of investors in appointing D&P as the fund's liquidator, MoneyMarketing states. As reported in the Troubled Company Reporter-Europe on July 27, 2012, mortgagestrategy said Tiuta International has been placed into administration. The London-based firm was a former a subsidiary of UK bridging provider Tiuta. In mid-June 2012, it was announced that the board of Connaught was winding up its income fund series one and two, both of which partly funded bridging lending Tiuta, according to mortgagestrategy. Tiuta International is the holding firm for Connaught Asset Management's GBP100 million series one bridging loan fund. XCHANGETEAM: Set to Go Into Liquidation --------------------------------------- John Owens at prweek.com reports that recruitment specialist Xchangeteam ceased trading on September 5 with liquidation proceedings starting on September 19. Corporate recovery specialist Butcher Woods is overseeing the liquidation process of the firm, which joined the Pertemps Network in 2011, according to prweek.com. Xchangeteam, which had offices in London and Bristol, was launched in 1999 by Emma Brierley. The company covered recruitment in the communications, client services, digital, marketing and media sectors. =============== X X X X X X X X =============== * Moody's Says Sluggish EU Demand Constrains Global Auto Growth --------------------------------------------------------------- Growth in the global auto industry in 2013 will be constrained by sluggish demand in Europe and weakening sales in China, says Moody's Investors Service in its Global Auto Industry Outlook published on Sept. 17. Moody's outlook for the sector over the next 12-18 months remains stable. The new report, entitled "Global Automotive Manufacturers: Sluggish European Demand Continues To Weigh On Global Auto Sales Growth", is now available on www.moodys.com. Moody's subscribers can access this report via the link provided at the end of this press release. "Although we forecast global light vehicle sales growth of 4.4% in 2012, we have revised our forecast for 2013 demand growth to 2.9% from our January forecast of 4.5%," says Falk Frey, a Senior Vice President in Moody's Corporate Finance Group and author of the report. "Our growth revision is driven by weaker-than- expected demand in Europe and slowing economic pace in China." Moody's forecasts that western European light vehicle demand will contract in 2013 by 3%, compared with its January forecast of 3% growth, because of weaker markets in southern Europe and in Italy especially. Moody's has revised lower its forecast for light vehicle demand in China, to 8.5% from its January expectation of 10% growth, in line with Moody's revised 2013 GDP growth forecast for the country. Moody's expects to see more automotive manufacturers taking restructuring action to tackle overcapacity in Europe. However, any restructuring efforts will only be credit positive for European original equipment manufacturers (OEMs) if they reduce their capacities and costs to sustainable levels of demand and this leads to capacity utilization rates of 90% or higher. Manufacturers' profit margins are also diverging. Renault, Peugeot and Fiat's margins will remain under pressure because of overcapacity and low demand, especially in southern Europe. This will also begin to weigh on German OEMs' margins. Japanese manufacturers' margins have improved from their low after the 2011 earthquake and tsunami, but the continued strong yen will slow margin growth. Moody's expects US manufacturers to retain similar or slightly lower margins in the next 12-18 months but tougher competition, slower US growth and higher losses in Europe may cause them to erode slightly. Moody's would consider revising the outlook to positive if the rating agency forecast global light vehicle growth to exceed 5% in the next two years and, assuming that capacity did not outgrow demand, utilization rates improved (especially in Europe) and pricing remained firm. Moody's would revise the outlook to negative if volume growth in the global automotive industry fell below 2%, net pricing declined and capacity utilization rates deteriorated, or if the rating agency expected operating profits to decline for any other reason. * S&P Takes Various Rating Actions on 21 European CDO Tranches -------------------------------------------------------------- After running its month-end SROC (synthetic rated overcollateralization) figures, Standard & Poor's Ratings Services took various credit rating actions on 21 European synthetic collateralized debt obligation (CDO) tranches. Specifically, S&P has: -- Placed on CreditWatch negative its ratings on eight tranches; -- Placed on CreditWatch positive its ratings on six tranches; And -- Affirmed its ratings on seven tranches. For the full list of rating actions, see "European Synthetic CDO CreditWatch Actions After Running August 2012 Month-End SROC Figures." "The SROC levels for the ratings placed on CreditWatch negative fell below 100% during the August 2012 month-end run. We will publish these SROC figures in the SROC report covering August 2012, which is imminent. The Global SROC Report provides SROC and other performance metrics on over 823 individual CDO tranches," S&P said. "For those transactions where our September 2009 CDO criteria are not applicable, we have run our analysis on the CDO Evaluator 2.7 and CDO Evaluator 4.1 models," S&P said. "For the transactions where our September 2009 CDO criteria apply, we have run our analysis on CDO Evaluator 6.0.1. For transactions run on this model, the ratings list includes the top obligor and industry test SROCs at the current rating level. The 'largest obligor default test' assesses whether a CDO tranche has sufficient credit enhancement to withstand specified combinations of underlying asset defaults based on the ratings on the assets, with a flat recovery of 5%. The 'largest industry default test' assesses whether a CDO tranche rated 'AAA' to 'AA-' has sufficient credit enhancement to withstand the default of all obligors in the transaction's largest industry, with a flat recovery of 17%," S&P said. "In addition, we have affirmed our ratings on the tranches for which credit enhancement is, in our opinion, still at a level consistent with their current ratings," 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 ********* 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 * * *