/raid1/www/Hosts/bankrupt/TCREUR_Public/130124.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
Thursday, January 24, 2013, Vol. 14, No. 17
Headlines
F R A N C E
ATARI SA: Files for Bankruptcy Protection in France
CAPTAIN BIDCO: Moody's Withdraws 'B3' Corp. Family Rating
I R E L A N D
ARZAC: 12 Stores Put Under Examinership
AVOCA CLO VII: Fitch Affirms 'CCCsf' Rating on Class E Notes
SMURFIT KAPPA: Fitch Assigns 'BB+(EXP)' Rating to Senior Notes
SMURFIT KAPPA: Moody's Rates EUR300-Mil. Sr. Secured Notes 'Ba2'
SMURFIT KAPPA: S&P Assigns 'BB' Rating to Proposed EUR300MM Notes
ZURICH BANK: Moody's Withdraws 'E+' BFSR; Outlook Stable
N E T H E R L A N D S
DUCHESS IV: Moody's Hikes Rating on Class D Notes to 'Ba3'
FAB CBO: S&P Raises Rating on Class A-2 Notes to CCC+
HARBOURMASTER CLO 8: Fitch Affirms 'Bsf' Rating on Class E Notes
MAYFAIR EURO: Moody's Affirms 'C' Ratings on Two Note Classes
SNS REAAL: Moody's Corrects November 21 Rating Release
* NETHERLANDS: Corporate Bankruptcies Up 19% in 2012
R O M A N I A
OLTCHIM SA: Romanian Gov't May Ask for Insolvency Procedure
R U S S I A
RGS ASSETS: S&P Assigns 'CCC+ Longterm Rating; Outlook Stable
S E R B I A & M O N T E N E G R O
VEKTRA MONTENEGRO: In Bankruptcy Proceedings; Owes EUR185 Million
S L O V E N I A
* SLOVENIA: Seeks to Avoid International Bailout
U K R A I N E
AEROSVIT: To Seek Protection From Creditors
MHP SA: Moody's Confirms 'B3' CFR; Outlook Negative
MRIYA AGRO: Fitch Upgrades LT Issuer Default Ratings to 'B'
U N I T E D K I N G D O M
BLOCKBUSTER ENTERTAINMENT: Gets 30 Expressions of Interest
BUCCAMENT BAY: Refutes Liquidation Talks; In Dispute with Auditor
DUDMAN: In Administration, 140 Jobs at Risk
FISHY FISHY: In Administration, Cuts 13 Jobs
HMV GROUP: Hilco Acquires Bank Debt for About GBP40 Million
* UK: Retail Chain Failures No Impact on Major REITs, Fitch Says
X X X X X X X X
* Upcoming Meetings, Conferences and Seminars
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F R A N C E
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ATARI SA: Files for Bankruptcy Protection in France
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Ben Fritz at Los Angeles Times reports that a day after its
American unit filed for Chapter 11 bankruptcy protection, Paris-
based Atari S.A. on Monday took a similar measure under Book 6 of
that country's commercial code.
Atari S.A. did not make any indication about its future plans,
though with few assets outside of its American subsidiary, it
will quite possibly sell off parts of the company and dissolve,
Los Angeles Times notes.
Los Angeles Times relates that in a statement, Atari S.A. said it
was filing for legal protection because its longtime backer
BlueBay has sought to sell its 29% stake and demanded repayment
by March 31 on a credit line of US$28 million that it cut off in
December.
"No investor has been willing to replace them as reference
shareholder and principal creditor," Los Angeles Times quotes
Atari S.A. as saying in a statement. As a result, the statement
added, "The company has been starved for funds and unable to
finance its continued growth."
According to Los Angeles Times, Jim Wilson, chief executive of
both Atari Inc. and Atari S.A., said in a statement that
bankruptcy protection is the best hope for the struggling game
company, still known worldwide for such brands as "Pong" and
"Missile Command," to revive itself with a focus on digital
platforms.
"In light of the current situation with BlueBay, we have decided
to take what we think is the best decision to protect the company
and its shareholders," Los Angeles Times quotes Mr. Wilson as
saying in a statement. "Through these ongoing procedures, and
especially the auction process in the U.S., we will seek to
maximize the proceeds in the best interest of the company and all
of its shareholders."
Shares in Atari SA are listed in Paris. They were suspended on
Jan. 22 at EUR0.86 per share, equating to a market capitalization
of EUR25 million, The Deal Pipeline's Paul Whitfield discloses.
U.S. Unit Bankruptcy Filing
As reported by the Troubled Company Reporter-Europe, on Jan. 21,
2013, Atari Inc., Atari Interactive Inc., Humongous, Inc. and
California US Holdings, Inc. filed petitions for relief under
chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the Southern District of New York.
With this move, the U.S.-based Atari operations seek to separate
from the structural financial encumbrances of their French parent
holding company, Atari S.A. (formerly Infogrames S.A.) and secure
independent capital for future growth, primarily in the areas of
digital and mobile games.
Within the next 90 to 120 days, the Companies expect to
effectuate a sale of all, or substantially all, of their assets
in a "sale free and clear" under section 363 of the Bankruptcy
Code or to confirm plans of reorganization that accomplish
substantially the same result. These assets include not only one
of the most widely recognized brand logos, which is familiar to
90% of Americans, according to a recent survey, but also
legendary game titles including Pong(R), Asteroids(R),
Centipede(R), Missile Command(R), Battlezone(R) and Tempest(R).
Other recognized brands include Test Drive, Backyard Sports and
Humongous.
Under current management, Atari Inc. has shifted its business
from traditional retail games to digital games and licensing with
an increased focus on developing mobile games based on some of
Atari's most iconic and enduring franchises. With these moves,
the company has added new revenue models, including digital
download and advertising. As a result, Atari Inc. has become a
growth engine for Atari S.A., which in turn has reported
consecutive annual profits in 2011 and 2012.
The company has recently launched a slew of chart-topping titles
for iOS and Android mobile platforms, including Atari(R) Greatest
Hits, Outlaw(TM), Breakout(R) and Asteroids Gunner(R). The
company has previously announced upcoming mobile and tablet games
based upon the popular Rollercoaster Tycoon franchise and Atari
Casino.
The Chapter 11 process constitutes the most strategic option for
Atari's U.S. operations, as they look to preserve their inherent
value and unlock revenue potential unrealized while under the
control of Atari S.A. During this period, the company expects to
conduct its normal business operations.
The U.S. companies are also seeking approval to obtain
$5.25 million in debtor-in-possession financing from one or more
funds managed by Tenor Capital Management, a firm specializing in
convertible arbitrage and special situations. Each unit has
filed a number of traditional "first-day" pleadings, which are
intended to minimize any disruption of their day-to-day
operations.
Peter S. Partee, Sr. and Michael P. Richman of Hunton & Williams
LLP are proposed to serve as lead counsel for the U.S. companies
in their respective Chapter 11 cases.
About Atari
Atari -- http://www.atari.com-- is a multi-platform, global
interactive entertainment and licensing company. Atari owns
and/or manages a portfolio of more than 200 games and franchises,
including world renowned brands like Asteroids(R), Centipede(R),
Missile Command(R), Pong(R), Test Drive(R), Backyard Sports(R),
and Rollercoaster Tycoon(R). Atari capitalizes on these powerful
properties by delivering compelling games online (i.e. browser
and digital download), on smartphones and tablets and other
connected devices. The Company also develops and distributes
interactive entertainment for video game consoles from Microsoft,
Nintendo and Sony. As a licensor, Atari extends its brand and
franchises into other media, merchandising and publishing
categories.
CAPTAIN BIDCO: Moody's Withdraws 'B3' Corp. Family Rating
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Moody's Investors Service has withdrawn the B3 corporate family
and B3-PD probability of default rating of Captain BidCo SAS with
negative outlook.
Ratings Rationale
Moody's has withdrawn the rating for its own business reasons.
Ascometal, based in Courbevoie, France, wholly owned by Captain
BidCo SAS, is one of the largest producers of specialty
engineered steel in Europe. The company was acquired by funds
affiliated with Apollo Global Management, LLC in October 2011.
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I R E L A N D
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ARZAC: 12 Stores Put Under Examinership
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Irish Examiner reports that Pamela Scott has confirmed that 12 of
its 24 stores have gone into examinership.
The shops affected include the chain's flagship store on Grafton
Street in Dublin, as well as stores in Limerick, Tralee, Carlow,
Drogheda, Arklow, Sligo and Cork, Irish Examiner discloses.
Up to 137 people are employed at the stores, which trade under
the company name Arzac, Irish Examiner says.
The company said staff will be paid as normal, stores will remain
open and gift vouchers and credit notes will be honored in full,
Irish Examiner relates.
According to Irish Examiner, Arzac said it will use the
examinership process to restructure the company, secure fresh
investment and renegotiate rents with landlords.
Arzac is an Irish fashion retailer.
AVOCA CLO VII: Fitch Affirms 'CCCsf' Rating on Class E Notes
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Fitch Ratings has affirmed Avoca CLO VII plc's notes, as follows:
-- EUR283.9m class A-1 (ISIN XS0289562745): affirmed at 'AAAsf';
Outlook Stable
-- EUR62.5m class A-2 (ISIN XS0289563396): affirmed at 'AAAsf';
Outlook Stable
-- EUR145.0m class A-3 (ISIN XS0289564014): affirmed at 'AAAsf';
Outlook Stable
-- EUR48.5m class B (ISIN XS0289565763): affirmed at 'AAsf';
Outlook Stable
-- EUR42.0m class C1 (ISIN XS0289566571): affirmed at 'Asf';
Outlook Stable
-- EUR4.5m class C2 (ISIN XS0290383412): affirmed at 'Asf';
Outlook Stable
-- EUR23.0m class D1 (ISIN XS0289566902): affirmed at 'BBBsf';
Outlook Negative
-- EUR8.5m class D2 (ISIN XS0290383768): affirmed at 'BBBsf';
Outlook Negative
-- EUR28.3m class E1 (ISIN XS0289567546): affirmed at 'Bsf';
Outlook Negative
-- EUR2.8m class E2 (ISIN XS0290384493): affirmed at 'Bsf';
Outlook Negative
-- EUR14.0m class F (ISIN XS0289568437): affirmed at 'CCCsf'
-- EUR40.0m class V (ISIN XS0290386431): affirmed at 'AAAsf';
Outlook Stable
The affirmation reflects the transaction's stable performance
since the last review in February 2012 as well as available
levels of credit enhancement for the notes. The exposure to 'CCC'
rated and below assets has reduced to 3% from 10% over the same
period while the Fitch weighted average rating factor has
improved to 34.14 from 37.11.
Almost half of the assets are located in France and Germany. The
portfolio's exposure to Ireland, Italy and Spain has declined to
9.7% from 12% at the time of the last review while exposure to
Germany has increased by 4% to 20%.The largest industries are
Business Services, Broadcasting and Media and Telecommunications
representing 13%, 11% and 10% of the portfolio volume,
respectively.
The over-collateralization (OC) tests have shown some volatility
during the past year due to defaults. All OC tests are currently
passing but the Class F and interest diversion OC cushions are
tight. The Class A-1 and A-3 notes were partially redeemed to
99.97% of their original balances in May 2012 due to the breach
of the Class F coverage test because of defaults. There have been
five defaults from two issuers since the last review which
totaled EUR32 million. Current defaults represent 0.4% of the
outstanding balance with an expected recovery rate of 4.7%.
The increased level of the IC test is due to the combination of
an increasing weighted average spread (WAS) on the assets, and a
lower cost of the liabilities due to declining interest rates.
The increase of the WAS to 3.78% from 3.15% may be partially due
to investors consenting to amendments to loan documentation in
return for maturity extensions. During the year, there was a
notable shift in the portfolio's maturity profile, with the
proportion of assets maturing between 2014-2016 declining to 50%
from 74% in January 2012. The 2017-2019 bucket increased to 46%
from 21% in the same period.
As part of its analysis, the agency considered the sensitivity of
the notes' ratings to the transaction's exposure to countries
where Fitch has imposed a country rating cap lower than the
ratings on any notes in the transaction. These countries are
currently Spain, Ireland, Portugal and Greece, but may include
additional countries if there is sovereign ratings migration.
Fitch believes that an exposure of up to 15% of the total
investment amount to these countries, under the same average
portfolio profile and assuming the current ratings on the UK and
eurozone countries are stable, would not have a material negative
impact on the notes' ratings.
The affirmation of the Class V combination notes reflects the
affirmation of its components, Class A-1, A-2 and A-3. The Class
V notes' rating addresses the timely payment of interest and the
ultimate repayment of principal by the stated maturity date.
The Negative Outlooks on the junior notes reflect their
vulnerability to a clustering of defaults and negative rating
migration in the European leveraged loan market due to the
approaching refinancing wall.
Avoca CLO VII plc is a securitization of mainly European senior
secured loans, with the total note issuance of EUR711 million
invested in a portfolio of EUR663 million. The portfolio is
actively managed by Avoca Capital Holdings. The transaction's
reinvestment period ends in May 2014 therefore the manager can
reinvest all principal proceeds subject to meeting certain
criteria.
SMURFIT KAPPA: Fitch Assigns 'BB+(EXP)' Rating to Senior Notes
--------------------------------------------------------------
Fitch Ratings has assigned Smurfit Kappa Group's prospective 2020
senior secured notes, to be issued by Smurfit Kappa Acquisitions,
an expected rating of 'BB+(EXP)'. The final rating is contingent
on the receipt of final documents conforming to information
already received. The agency also affirmed SKG's Long-term
foreign currency Issuer Default Rating (IDR) at 'BB', with a
Stable Outlook. A full list of rating actions is at the end of
this release.
Due to the favorable demand on bond markets, and following the
successful issue of three notes (EUR200 million and US$300
million, both maturing in 2018, and EUR250 million maturing in
2020) in 2012, SKG plans to tap the bond market again with a new
EUR300 million issue (fixed rate, seven-years tenor), aimed at
refinancing part of the bank's senior credit facility.
KEY DRIVERS
-- Improved Debt Profile
SKG is issuing a new fixed rate EUR300 million bond, maturing in
2020. The bond proceeds will be used to repay part of its senior
credit facility, comprising approximately EUR144 million of the
tranche B, maturing in 2016 and EUR144 million of tranche C
maturing in 2017. The new issue will therefore be neutral in term
of gross and net leverage. The new notes will be issued by the
financial subsidiary Smurfit Kappa Acquisitions and will rank
pari passu with the existing senior credit facility, senior
secured notes (due in 2017, 2018, 2019 and 2020) and the US
Yankee bond due in 2025, sharing the same guarantees and
collateral. Fitch expects SKG's financial costs to remain broadly
unchanged following the issue. The new issue will further improve
SKG's average debt duration and maturity profile.
-- Solid Performance
SKG's operational performance continues to be solid, despite the
weak economic environment and demand. In 9M12, SKG's recurring
EBITDA increased to EUR781 million from EUR771 million, despite
weaker revenues (-0.5% yoy). Cash generation remained healthy and
net debt decreased to EUR2,640 million from EUR2,941 million at
end-September 2011, with a net debt /EBITDA at 2.6x (2.8x in both
June 2012 and September 2011).
-- Rating Headroom
SKG continues to show steady deleveraging and improvement in its
credit metrics. Fitch expects funds from operations (FFO) gross
leverage to slightly improve in 2012 to close to 4.0x from 4.3x
in 2011. Net leverage should deteriorate slightly, following the
acquisition of Orange County Container Group for EUR260 million,
funded from the group's available cash. However, SKG's credit
metrics have ample headroom within the current rating category.
-- Leading Position
SKG's ratings are further supported by its leading market
positions and exposure to recession-resilient markets. Vertical
integration into containerboard gives some margin protection
against raw material cost inflation. The solid presence in
growing Latin American markets, reinforced by the recent
acquisition of Orange County Container Group, is also a credit
positive.
RATING SENSITIVITY GUIDANCE:
Positive: Future developments that could lead to positive rating
actions include:
- The continuation of the current path in debt reduction and the
improvement in credit metrics, with FFO adjusted leverage
improving to below 3.5x, free cash flow (FCF)/revenue
remaining above 1% and FFO interest coverage increasing to
above 3.0x.
Negative: Future developments that could lead to negative rating
action include:
- A material deterioration in the operating performance, with
sustained negative FCF
- A re-leveraging of the group, due to either deterioration in
trading conditions or to M&A activity, with FFO adjusted
leverage worsening to above 4.5x.
Full List of Rating Actions:
* Smurfit Kappa Group Long-term foreign currency Issuer Default
Rating affirmed at 'BB'
* Smurfit Kappa Acquisitions' new 2020 senior guaranteed notes
assigned at 'BB+(EXP)'
* Smurfit Kappa Acquisitions' senior secured facilities affirmed
at 'BB+
* Smurfit Kappa Acquisitions' guaranteed senior secured notes
affirmed at 'BB+'
* Smurfit Kappa Treasury Funding's senior secured notes due 2025
affirmed at 'BB+'
SMURFIT KAPPA: Moody's Rates EUR300-Mil. Sr. Secured Notes 'Ba2'
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Moody's Investors Service has assigned a Ba2 rating to the
proposed issuance of EUR300 million senior secured notes by
Smurfit Kappa Acquisitions, an indirect subsidiary of Smurfit
Kappa Group. The notes mature in 2020. The group's Ba2 corporate
family rating remains unchanged. The outlook on all ratings is
stable.
The proceeds from the proposed issuance will be used for a
repayment of part of the group's Senior Secured Credit Facility
as well as to cover transaction related fees and expenses. We
expect repayment of approximately EUR292 million of Term Loans B
and C.
Assignments:
Issuer: Smurfit Kappa Acquisitions
Senior Secured Regular Bond/Debenture, Assigned Ba2
Senior Secured Regular Bond/Debenture, Assigned a range of
LGD3, 42 %
Ratings Rationale
The assignment of the Ba2 instrument rating to the proposed
senior secured notes mirrors the pari passu ranking with existing
senior secured notes that carry the same rating. The group's
existing and proposed senior secured notes rank also pari passu
with the senior secured credit facility, as they benefit from the
same guarantee and security package. The senior secured notes are
guaranteed on a senior secured basis by Smurfit Kappa Corporation
Limited and certain of its subsidiaries, and are secured by a
majority of the group's assets. Due to the sharing of the
identical security package, the notes furthermore rank pari passu
with a Yankee bond, rated Ba2 and issued at the level of Smurfit
Kappa Treasury Funding Limited. The ratings are in line with
Moody's Loss Given Default Methodology.
SKG's Ba2 CFR takes into account the group's (i) leading market
positions for paper-based packaging in Europe and Latin America;
(ii) its good geographic diversification with market leading
positions both in Western Europe and certain Latin American
countries as well as strengthened operations in North America
following the recent acquisition of OCCG; (iii) strong and
relatively stable operating margins through the cycle; (iv) track
record of solid free cash flow generation as well as (v) solid
financial flexibility including a well spread maturity profile
with no major near term debt maturities.
At the same time, the rating is constrained by (i) the cyclical
and highly competitive nature of the industry, which leaves
little room for differentiation and the resulting commodity
character of large parts of SKG's product portfolio; (ii) the
group's low segmental diversification as a result of its focus on
kraftliner, testliner and corrugated packaging products; and
(iii) leverage in terms of Debt/EBITDA on a Moody's adjusted
basis with about 4x point in time remaining somewhat on the high
side for the current rating.
The stable outlook reflects Moody's assumption of Smurfit Kappa
being able to sustain current profitability levels despite the
challenging macroeconomic environment in Europe due to its
integrated business model and a sizeable exposure to the
defensive food and beverage industry. It also reflects Moody's
expectation of free cash flow generated to be applied for a
gradual reduction in net debt that should enable SKG over time to
create further headroom in its rating category, absent any
material debt funded acquisitions, capex projects or a sizeable
increase in dividend payments.
Positive rating pressure could develop if market conditions were
to support improvements in leverage (as adjusted by Moody's)
falling to below 3.5x on a sustained basis with RCF/ debt
improving towards 20%.
Negative rating pressure could build if leverage (as adjusted by
Moody's) moves to materially above 4x Debt/EBITDA on a
sustainable basis or RCF/ debt falls to the low teens, or if SKG
would be unable to generate positive free cash flows. Also, a
large debt-financed acquisition or material increases in
shareholder distributions could negatively impact the company's
rating given current macroeconomic uncertainties.
The principal methodology used in this rating was the Global
Paper and Forest Products Industry published in September 2009.
Other methodologies used include Loss Given Default for
Speculative-Grade Non-Financial Companies in the U.S., Canada and
EMEA published in June 2009.
Smurfit Kappa Group plc is Europe's leading manufacturer of
containerboard and corrugated containers as well as specialty
packaging, such as, for example, bag-in-box packaging of liquids
like water and wine. The group holds also the leading position
for its major product lines in Latin America. SKG reported EUR7.4
billion of revenues in the last twelve months ending September
2012.
SMURFIT KAPPA: S&P Assigns 'BB' Rating to Proposed EUR300MM Notes
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Standard & Poor's Ratings Services said that it assigned its 'BB'
issue rating to the proposed EUR300 million senior secured notes
due 2020 to be issued by Smurfit Kappa Acquisitions
(BB/Stable/--). The issuer is a fully owned subsidiary of
Ireland-based paper and packaging producer Smurfit Kappa Group
PLC (Smurfit; BB/Stable/--). The recovery rating on the proposed
senior secured notes is '3', indicating S&P's expectation of
meaningful (50%-70%) recovery in the event of a payment
default.
The recovery rating of '3' on the proposed senior secured notes
reflects S&P's understanding that Smurfit will use the proceeds
of the proposed notes to partly repay its existing term loans B
and C.
S&P understands that the proposed senior secured notes will
benefit from more or less the same documentation and the same
security as the existing senior secured notes.
ZURICH BANK: Moody's Withdraws 'E+' BFSR; Outlook Stable
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Moody's Investors Service has withdrawn the following ratings of
Zurich Bank: (i) the standalone Bank Financial Strength Rating of
E+ (which maps to B3 on the long-term scale); (ii) the long and
short-term backed bank deposit ratings of A3/P-2; and (iii) the
(P)A1 senior unsecured debt program rating. At the time of the
withdrawal, the outlook was stable.
Ratings Rationale
The withdrawal of Zurich Bank's ratings follows the revocation of
its Irish banking license, at the request of the Zurich Group,
and the fact that it has subsequently ceased to operate as a
licensed bank. Following the revocation of the banking license
the entity has been renamed Dunbar Assets Ireland, and deposits
held by Zurich Bank have been returned to the depositors.
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N E T H E R L A N D S
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DUCHESS IV: Moody's Hikes Rating on Class D Notes to 'Ba3'
----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Duchess IV CLO B.V.:
EUR38M Class B Notes, Upgraded to Aa1 (sf); previously on Oct
14, 2011 Upgraded to Aa3 (sf)
EUR30.1M Class C Notes, Upgraded to A3 (sf); previously on
Oct 14, 2011 Upgraded to Baa2 (sf)
EUR32.8M Class D Notes, Upgraded to Ba3 (sf); previously on
Oct 14, 2011 Upgraded to B1 (sf)
EUR4M Class W Combination Notes (current outstanding rated
balance is EUR 2.8M) , Upgraded to Baa1 (sf); previously on
Oct 14, 2011 Upgraded to Baa3 (sf)
Moody's affirmed the rating of the Class A-1 notes issued by
Duchess IV CLO B.V.:
EUR307M Class A-1 Notes, Affirmed Aaa (sf); previously on Oct
14, 2011 Upgraded to Aaa (sf)
Moody's also downgrades the ratings of the following combination
notes:
EUR12.8M Class L Combination Notes (current outstanding rated
balance is EUR 10M), Downgraded to Baa2 (sf); previously on
Oct 14, 2011 Confirmed at A3 (sf)
EUR4.977M Class N Combination Notes (current outstanding
rated balance is EUR 3.8M), Downgraded to Baa2 (sf);
previously on Oct 14, 2011 Confirmed at A3 (sf)
EUR9.634M Class V Combination Notes (current outstanding
rated balance is EUR 7.36M), Downgraded to Baa2 (sf);
previously on Oct 14, 2011 Confirmed at A3 (sf)
The ratings of the Combination Notes address the repayment of the
Rated Balance on or before the legal final maturity. For Class W,
the 'Rated Balance' is equal at any time to the principal amount
of the Combination Notes on the Issue Date increased by the Rated
Coupon of 0.25% per annum respectively, accrued on the Rated
Balance on the preceding payment date minus the aggregate of all
payments made from the Issue Date to such date, either through
interest or principal payments. For Classes L, N and V, the
'Rated Balance' is equal at any time to the principal amount of
the Combination Notes on the Issue Date minus the aggregate of
all payments made from the Issue Date to such date, either
through interest or principal payments. The Rated Balance may not
necessarily correspond to the outstanding notional amount
reported by the trustee.
Classes L, N and V consist of the unrated Class F subordinated
notes and Euro Medium Term Notes (or EMTNs) issued by Citigroup
Global Markets Holdings Inc., currently rated Baa2. The principal
amount of each EMTN component is equal to the principal amount of
the corresponding combination notes. The Rated Balance of these
combination notes has been reduced by distributions from the
Class F component. Moody's analyzed the historical cash-flows to
these combination notes and concluded that their ratings reflect
the rating of Citigroup Global Markets Holdings Inc. as the
issuer of the EMTNs.
Duchess IV CLO B.V., issued in May 2005, is a multi-currency
Collateralised Loan Obligation ("CLO") backed by a portfolio of
mostly high yield European loans. The portfolio is managed by
Babson Capital Europe Limited. This transaction passed its
reinvestment period in May 2010. It is predominantly composed of
senior secured loans.
Ratings Rationale
According to Moody's, the rating actions taken on the notes
result primarily from the delevering of the Class A Notes, which
have been paid down by approximately 32%, or EUR 79 million,
since the rating action in October 2011. As a result of the
delevering, the overcollateralization ratios have increased since
the rating action in October 2011. As of the latest trustee
report dated November 2012, the Class A/B, Class C and Class D
overcollateralization ratios are reported at 141.66%, 123.35% and
108.13%, respectively, versus Oct 2011 levels of 132.33%, 119.56%
and 108.18%, respectively.
In its base case, Moody's analyzed the underlying collateral pool
to have a performing par and principal proceeds balance of EUR
288.77 million, defaulted par of EUR 17.68 million, a weighted
average default probability of 20.29% (consistent with a WARF of
3323), a weighted average recovery rate upon default of 46.4% for
a Aaa liability target rating, a diversity score of 30 and a
weighted average spread of 3.46%. The default probability is
derived from the credit quality of the collateral pool and
Moody's expectation of the remaining life of the collateral pool.
The average recovery rate to be realized on future defaults is
based primarily on the seniority of the assets in the collateral
pool. For a Aaa liability target rating, Moody's assumed that 91%
of the portfolio exposed to senior secured corporate assets would
recover 50% upon default, while the remainder non first-lien loan
corporate assets would recover 10%. In each case, historical and
market performance trends and collateral manager latitude for
trading the collateral are also relevant factors. These default
and recovery properties of the collateral pool are incorporated
in cash flow model analysis where they are subject to stresses as
a function of the target rating of each CLO liability being
reviewed.
In addition to the base case analysis described above, Moody's
also performed sensitivity analyses on key parameters for the
rated notes:
(1) Deterioration of credit quality to address the refinancing
and sovereign risks -- Approximately 24% of the portfolio are
rated B3 and below and maturing between 2014 and 2016, which may
create challenges for issuers to refinance. Approximately 7% of
the portfolio are exposed to obligors located in Ireland, Spain
and Italy. Moody's considered a model run where the base case
WARF was increased to be 3461 by forcing ratings on 25% of such
exposure to Ca. This run generated model outputs that were within
one notch from the base case results.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, which could negatively impact the
ratings of the notes, as evidenced by 1) uncertainties of credit
conditions in the general economy and 2) the large concentration
of speculative-grade debt maturing between 2014 and 2016 which
may create challenges for issuers to refinance. CLO notes'
performance may also be impacted either positively or negatively
by 1) the manager's investment strategy and behavior and 2)
divergence in legal interpretation of CDO documentation by
different transactional parties due to embedded ambiguities.
Sources of additional performance uncertainties are described
below:
1) Portfolio Amortization: The main source of uncertainty in this
transaction is whether delevering from unscheduled principal
proceeds will continue and at what pace. Delevering may
accelerate due to high prepayment levels in the loan market
and/or collateral sales by the manager, which may have
significant impact on the notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility in
market prices.
3) The deal has significant exposure to non-EUR denominated
assets. Volatilities in foreign exchange rate will have a direct
impact on interest and principal proceeds available to the
transaction, which may affect the expected loss of rated
tranches.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Under this methodology, Moody's used its Binomial Expansion
Technique, whereby the pool is represented by independent
identical assets, the number of which is being determined by the
diversity score of the portfolio. The default and recovery
properties of the collateral pool are incorporated in a cash flow
model where the default probabilities are subject to stresses as
a function of the target rating of each CLO liability being
reviewed. The default probability range is derived from the
credit quality of the collateral pool, and Moody's expectation of
the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority and jurisdiction of the assets in the collateral pool.
The cash flow model used for this transaction, whose description
can be found in the methodology listed above, is Moody's EMEA
Cash-Flow model.
This model was used to represent the cash flows and determine the
loss for each tranche. The cash flow model evaluates all default
scenarios that are then weighted considering the probabilities of
the binomial distribution assumed for the portfolio default rate.
In each default scenario, the corresponding loss for each class
of notes is calculated given the incoming cash flows from the
assets and the outgoing payments to third parties and
noteholders. Therefore, the expected loss or EL for each tranche
is the sum product of (i) the probability of occurrence of each
default scenario; and (ii) the loss derived from the cash flow
model in each default scenario for each tranche. Therefore,
Moody's analysis encompasses the assessment of stressed
scenarios.
In addition to the quantitative factors that are explicitly
modeled, qualitative factors are part of the rating committee
considerations. These qualitative factors include the structural
protections in each transaction, the recent deal performance in
the current market environment, the legal environment, specific
documentation features, the collateral manager's track record,
and the potential for selection bias in the portfolio. All
information available to rating committees, including
macroeconomic forecasts, input from other Moody's analytical
groups, market factors, and judgments regarding the nature and
severity of credit stress on the transactions, may influence the
final rating decision.
On August 21, 2012, Moody's released a Request for Comment
seeking market feedback on proposed adjustments to its modeling
assumptions. These adjustments are designed to account for the
impact of rapid and significant country credit deterioration on
structured finance transactions. If the adjusted approach is
implemented as proposed, the rating of the notes affected by the
rating action may be negatively affected.
FAB CBO: S&P Raises Rating on Class A-2 Notes to CCC+
-----------------------------------------------------
Standard & Poor's Ratings Services raised its credit ratings on
F.A.B. CBO 2002-1 B.V.'s class A-1 and A-2 notes. At the same
time, S&P has affirmed its rating on the class B notes.
The rating actions follow S&P's assessment of the transaction's
performance, based on recent transaction developments observed in
the trustee report, and S&P's credit and cash flow analysis based
on the application of its relevant criteria.
Since S&P's previous review of this transaction on April 12,
2012, it has observed further deleveraging of the senior notes,
which has resulted in increased credit enhancement for the class
A-1 notes (see "Transaction Update: F.A.B. CBO 2002-1 B.V.").
With higher defaults since S&P's previous review, the available
credit enhancement for the junior classes of notes has reduced.
The weighted-average spread earned on the collateral pool has
increased to 1.7% from 1.5% in April 2012. All par coverage
tests comply with the required triggers under the transaction
documents.
There are fewer investment-grade assets in the pool than at S&P's
previous review, which is mainly due to pay downs. Assets rated
in the 'CCC' category ('CCC+', 'CCC', and 'CCC-') have also
reduced. Among other things, these factors have reduced the
scenario default rates (SDRs) at each rating level compared with
its previous review (see "Credit Rating Model: CDO Evaluator
6.0," published on March 19, 2012).
S&P has subjected the capital structure to our cash flow
analysis, based on the methodology and assumptions outlined in
its 2012 and 2009 collateralized debt obligation (CDO) criteria,
to determine the break-even default rate (BDR) at each rating
level (see "Global CDOs Of Pooled Structured Finance Assets:
Methodology And Assumptions," published on Feb. 21, 2012, and
"Update To Global Methodologies And Assumptions For Corporate
Cash Flow And Synthetic CDOs," published on Sept. 17, 2009).
"We used the reported portfolio balance that we considered to be
performing, the principal cash balance (if any), the weighted-
average spread, and the weighted-average recovery rates that we
considered to be appropriate. We incorporated various cash flow
stress scenarios, using various default patterns, in conjunction
with different interest rate stress scenarios," S&P said.
S&P used CDO Evaluator 6.0.1 to generate SDRs at each rating
level to help assess the credit risk of the collateral pool. S&P
then compared these SDRs with their respective BDRs.
Taking into account the observations outlined above and the
results of S&P cash flow analysis, S&P considers that the levels
of credit enhancement available to the class A-1 and A-2 notes
are commensurate with higher ratings than those currently
assigned. S&P has therefore raised its ratings on the class A-1
and A-2 notes.
The largest obligor test and largest industry test are two
supplemental stress tests that S&P introduced in its 2012 CDO
criteria. These tests address event and model risk that might be
present in the transaction and assess whether a CDO tranche has
sufficient credit enhancement (not including excess spread) to
withstand specified combinations of underlying asset defaults in
addition to our cash flow analysis. The class A-1 and A-2 notes
pass these supplemental tests at their 'A- (sf)' and 'CCC+ (sf)'
rating levels, respectively.
As at its previous review, there is no credit enhancement
available for the class B notes (the most junior class in the
capital structure). The maximum rating that this class of notes
can achieve under its supplemental stress tests is 'CCC- (sf)',
which is also supported by its cash flow analysis. S&P has
therefore affirmed its 'CCC- (sf)' rating on the class B notes.
S&P has analyzed counterparty risk by applying our 2012
counterparty criteria. The counterparty agreements comply with
the requirements outlined in the criteria.
F.A.B. CBO 2002-1 is a CDO transaction backed by pools of
structured finance assets, which closed in April 2002. The
reinvestment period ended in June 2007 and since then all
scheduled principal proceeds are used towards payment of notes in
accordance with the priority of payments.
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 Report
included in this credit rating report is available at
http://standardandpoorsdisclosure-17g7.com
RATINGS LIST
Class Rating
To From
F.A.B. CBO 2002-1 B.V.
EUR309.5 Million Asset-Backed Floating-Rate Notes
Ratings Raised
A-1 A- (sf) BBB+ (sf)
A-2 CCC+ (sf) CCC- (sf)
Rating Affirmed
B CCC- (sf)
HARBOURMASTER CLO 8: Fitch Affirms 'Bsf' Rating on Class E Notes
----------------------------------------------------------------
Fitch Ratings has affirmed Harbourmaster CLO 8 B.V.'s notes, as
follows:
-- EUR243.6m Class A1 (ISIN XS0277545033): affirmed at 'AAAsf';
Outlook Stable
-- EUR84.0m Class A2 (ISIN XS0277549969): affirmed at 'AAsf';
Outlook Stable
-- EUR20.5m Class B (ISIN XS0277554886): affirmed at 'Asf';
Outlook Negative
-- EUR23.2m Class C (ISIN XS0277555933): affirmed at 'BBBsf';
Outlook Negative
-- EUR21.1m Class D (ISIN XS0277559174): affirmed at 'BBsf';
Outlook Negative
-- EUR11.6m Class E (ISIN XS0277559844): affirmed at 'Bsf';
Outlook Negative
The affirmation reflects the transaction's stable performance
since the last review. The Fitch weighted average rating factor
decreased to 29.2 in December 2012 from 30.6 in January 2012. The
share of assets rated 'CCC' or lower declined to 8.5% from 11.8%
in January 2012. There are currently no defaulted assets in the
portfolio.
The Negative Outlook on the mezzanine and junior notes reflects
their vulnerability to a clustering of defaults and negative
rating migration in the European leveraged loan market.
Furthermore, when faced with a lack of alternative funding
sources, obligors in the portfolio may attempt to restructure the
loans with a view of extending maturities. This would increase
the transaction's risk horizon.
Fitch notes that the maturity of several assets in the portfolio
was extended during 2012, causing the weighted average life of
the portfolio to remain virtually unchanged at 4.0 years. This
was accompanied by an increase in portfolio yield, with the
weighted average spread rising to 3.7% from 3.2% in January 2012.
Credit enhancement has increased for all notes as the transaction
started deleveraging following the end of the reinvestment period
in March 2012. The transaction allows for reinvestment of
unscheduled principal proceeds until March 2014, subject to
certain conditions which are currently not met. The portfolio
manager is thus unable to reinvest any principal proceeds. Fitch
therefore expects the transaction to continue deleveraging.
None of the overcollateralization (OC) tests has failed since the
last review and OC test results have been improving. The interest
diversion test briefly failed in October and November 2012 but
was always in compliance on payment dates. The interest coverage
(IC) test has never been breached. IC test results have been
steadily improving since January 2012.
As part of its analysis, Fitch considered the sensitivity of the
notes' ratings to the transaction's exposure to countries where
Fitch has imposed a country rating cap less than the ratings on
any notes in the transaction. These countries are currently
Spain, Ireland, Portugal and Greece, but may include additional
countries if there is sovereign rating migration. Fitch believes
that exposure of up to 10% of the total investment amount to
these countries, under the same average portfolio profile and
assuming the current ratings on the UK and eurozone countries are
stable, would not have a material negative impact on the notes'
ratings.
MAYFAIR EURO: Moody's Affirms 'C' Ratings on Two Note Classes
-------------------------------------------------------------
Moody's Investors Service has upgraded the rating of the
following notes issued by Mayfair Euro CDO I B.V.:
Issuer: Mayfair Euro CDO I B.V.
EUR262M Class A Floating Rate Senior Notes, Upgraded to Aaa
(sf); previously on Mar 22, 2012 Aa3 (sf) Placed Under Review
for Possible Downgrade
EUR11M (with current outstanding EUR 20.6M) Class B Senior
Subordinated Notes, Affirmed Ca (sf); previously on Dec 11,
2008 Downgraded to Ca (sf)
EUR5.5M (with current outstanding EUR 17.6M) Class C-1 Senior
Subordinated Notes, Affirmed C (sf); previously on Dec 11,
2008 Downgraded to C (sf)
EUR3M (with current outstanding EUR 9.6 M) Class C-2 Senior
Subordinated Notes, Affirmed C (sf); previously on Dec 11,
2008 Downgraded to C (sf)
Mayfair Euro CDO I B.V., issued in June 2001, is a cash flow
Collateralised Debt Obligation ("CDO") backed initially by a
portfolio of mainly investment grade and high-yield bonds, with
up to 10% of loans. The portfolio is managed by Deerfield Capital
Management LLC. This transaction passed its reinvestment period
in May 2006. The transaction is scheduled to mature on the next
payment date, May 2013.
Payments on the Class A Notes are irrevocably and unconditionally
guaranteed by a financial guarantee insurance policy issued by
Assured Guaranty (Europe) Ltd. (formally known as Financial
Security Assurance (U.K.) Limited). The rating of Class A Notes
were placed on review for possible downgrade in March 2012,
following the review for possible downgrade action taken on
Assured Guaranty (Europe) Ltd on March 20, 2012. The Insurance
Financial Strength rating of Assured Guaranty (Europe) Ltd. was
downgraded to A2 from Aa3 on watch for possible downgrade on
January 17, 2013. The rating action concludes the rating review
on Class A Notes of Mayfair Euro CDO I B.V.
Ratings Rationale
According to Moody's, the rating action taken on the Class A
Notes result primarily from Moody's re-assessment of the stand-
alone rating of the Class A notes, which have experienced a
recent increase in overcollateralization levels. A substantial
portion of the Class A Notes has delevered, which consequently
reduced the outstanding amount of Class A Note to the current
level of EUR 10.4 million, from EUR 19.2 million in March 2012,
when the rating of Class A Note was placed on review for possible
downgrade. As a result of the delevering, the
overcollateralization ratio of Class A has increased to 211.5%,
as of the latest trustee report dated December 2012, compared to
March 2012 level of 160.5%. The outstanding Class A Notes are now
exposed to remaining assets with a maturity profile where all
assets are scheduled to mature by April 2013.
Moody's also performed sensitivity analysis assuming all B2 rated
assets and half of Ba1 rated assets default, for an aggregate
loss amount of EUR10 million. The resulting Class A OC ratio
would decrease to 172.5%, which is consistent with the rating
action.
Ratings on Class B and Class C-1/C-2 (together, "Class C") Notes
were affirmed at their current levels due to the substantial
under-collateralization of the respective Notes. According to the
latest investor report dated December 2012, Class B and Class C
par coverage ratios are reported at 70.9% and 37.7%,
respectively, which are consistent with the Ca and C ratings,
respectively.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, which could negatively impact the
ratings of the notes, as evidenced by uncertainties of credit
conditions in the general economy. CDO notes' performance may
also be impacted either positively or negatively by 1) the
manager's investment strategy and behavior and 2) divergence in
legal interpretation of CDO documentation by different
transactional parties due to embedded ambiguities. Sources of
additional performance uncertainties are described below:
1) Low portfolio granularity: The performance of the portfolio
depends to on the credit conditions of a few large obligors,
especially when they experience jump to default. Due to the
pool's lack of granularity, Moody's supplement its base case
scenario with individual scenario analysis. The realization of
higher than anticipated default rate due to the weakness of large
obligors would negatively impact the ratings.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Other Factors used in this rating are described in "Moody's
modifies approach to rating structured finance securities wrapped
by financial guarantors" published in November 2008. If a
structured finance security is wrapped by a financial guarantor,
the Moody's rating will be the higher of (i) the guarantor's
financial strength rating and (ii) the current underlying rating
(i.e., absent consideration of the guaranty) on the security,
regardless of whether the underlying rating is published or not.
No additional cash flow analysis or stress scenarios have been
conducted as the rating was directly derived from par coverage
analysis of notes given the short time to maturity.
In addition to the quantitative factors, qualitative factors are
part of the rating committee considerations. These qualitative
factors include the structural protections in each transaction,
the recent deal performance in the current market environment,
the legal environment, specific documentation features, the
collateral manager's track record, and the potential for
selection bias in the portfolio. All information available to
rating committees, including macroeconomic forecasts, input from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, may influence the final rating decision.
SNS REAAL: Moody's Corrects November 21 Rating Release
------------------------------------------------------
Moody's Investors Service issued a correction to the November 21,
2012 rating release of SNS REAAL Group.
Moody's Investors Service has placed on review for downgrade the
ratings of all SNS REAAL Group's entities. The announcements and
actions were triggered by (1) the rapid deterioration of the
Dutch commercial real-estate (CRE) sector, which raises the
likelihood of future losses on SNS's CRE exposures booked under
the property finance (PF) legacy portfolio; and (2) the rating
agency's view of an increasing probability that the group might
need external support to immunize SNS Bank against potential CRE
losses and preserve its solvency.
The rating agency has taken the following actions on SNS Bank:
(1) Downgraded the standalone bank financial strength rating
(BFSR) to E+ (equivalent to a standalone credit assessment of b3)
from D+/ba1, and placed the BFSR under review for further
downgrade.
(2) Placed on review for downgrade the Baa2/Prime-2 long and
short-term debt and deposit ratings, prompted by the review of
the BFSR.
Because of the actions on SNS Bank, Moody's has also taken the
following actions on the other entities of the group:
(1) Placed on review for downgrade the Baa1 insurance financial
strength ratings (IFSRs) of SNS REAAL Group's main insurance
operations, REAAL Schadeverzekeringen N.V. and SRLEV N.V.
(2) Placed on review for downgrade the Baa3 senior debt rating
and (P) Prime-3 short-term debt rating of SNS REAAL N.V., the
holding company of the Group.
Moody's has also downgraded the ratings of several subordinated
securities issued by various entities of the group and these
ratings remain on review for further downgrade. These rating
actions reflect the group's weakened standalone credit profile,
and, for hybrid instruments (1) Moody's expectations of an
increased risk of omission of future coupon payments; and (2) the
potential for the European Commission (EC) to impose compensation
measures for previous (or potentially renewed) state-aid
measures.
Moody's review will consider the potential impact on SNS's
creditworthiness of the restructuring plan that the group intends
to announce either in late 2012, or in early 2013. Moody's will
assess the extent to which these measures will effectively (1)
restore the capital of the various group entities; and/or (2)
immunize the group against future losses in SNS Bank's legacy PF
portfolio.
A list of affected credit ratings is available at the end of this
Press Release.
RATINGS RATIONALE
-- SNS BANK'S STANDALONE FINANCIAL STRENGTH
SNS Bank's BFSR was downgraded to E+/b3. This reflects Moody's
view that SNS Bank's credit risk has increased, absent any
extraordinary support. SNS Bank's higher credit-risk profile is
driven by (1) the rapid deterioration of the Dutch CRE sector,
and the resulting higher-than-previously anticipated levels of
impairments on the bank's legacy PF portfolio; and (2) the
increasing pressure on SNS Bank's solvency, with a Core Tier 1
ratio of 8.8% at end-September (end-June: 9.6%).
While the bank's capital has previously benefited from the
support of the rest of the group -- notably through asset
transfers and capital injections -- Moody's believes that future
impairments on the bank's PF portfolio may exceed the group's
support capacity.
In combination, these factors suggest a rising likelihood that
SNS Bank will require additional support from sources outside the
group. This is in turn reflected in the downgrade of the
standalone credit assessment to E+/b3.
The downgrade of the standalone credit assessment to E+/b3 was
limited by Moody's expectation that the plan the group intends to
present aims to restore capital and immunize the bank against
future impairments on the legacy PF portfolio, rather than to
remediate an immediate capital shortfall. Furthermore, Moody's
considers the bank's liquidity position to be adequate, which
mitigates the risks of a loss of investor confidence in the
short-term, in Moody's view.
The BFSR remains on review for downgrade, reflecting potential
further deterioration of the bank's standalone credit assessment,
if (1) the group's financial fundamentals deteriorate further;
and/or (2) the EC imposes compensation measures for previous or
potentially renewed state-aid.
-- SNS BANK'S DEPOSIT AND SENIOR UNSECURED DEBT RATINGS
Moody's review of SNS Bank's Baa2/Prime-2 senior unsecured debt
and deposit ratings follows the opening of the review of the
standalone BFSR. The review period will allow Moody's to re-
assess its assumptions of systemic support for the bank, in the
context of the weaker standalone credit profile and the
introduction of the Dutch Intervention Act introduced in June
2012. This Act gives the Dutch Ministry of Finance and the Dutch
central bank (De Nederlandsche Bank) more options for dealing
with troubled institutions, including the transfer of assets and
liabilities to "bridge" banks.
Nonetheless, Moody's continues to consider that there is a high
probability of systemic support available to the bank, in case of
need, which substantially mitigates the deterioration in its
standalone financial strength. This reflects the bank's domestic
retail-deposit market share of around 10%, indicative of its
systemic relevance in the Netherlands. Therefore, Moody's expects
the magnitude of a potential downgrade on the long-term ratings
to be more limited than for the action on the BFSR.
-- INSURANCE FINANCIAL STRENGTH RATINGS
The review for downgrade on the Baa1 IFSRs of REAAL
Schadeverzekeringen and SRLEV reflects (1) the weakening credit
profile of SNS Bank; and (2) the significant contagion risks
between the insurance and the banking operations of the SNS REAAL
Group, notably because of capital, franchise and financial
flexibility inter-linkages.
Moody's says that its review of the IFSRs will focus on the risks
for the insurance operations' market position, profitability,
capitalization and access to capital markets, in the context of
the bank's standalone credit profile and the expected role of the
insurance operations within the SNS REAAL Group. Moody's says
that a potential decision by SNS REAAL to divest the insurance
operations may limit the risks of contagion from the bank, while
a decision to retain these operations could potentially lead to a
multi-notch downgrade of the IFSRs.
-- SNS REAAL HOLDING COMPANY SENIOR DEBT AND SHORT-TERM DEBT
RATING
The rating action on SNS REAAL N.V.'s senior and short-term debt
ratings reflects the similar rating actions on SNS REAAL's
insurance operations and SNS Bank's senior debt rating.
The Baa3 senior debt rating of SNS REAAL continues to reflect the
combination of (1) the credit strengths of the banking and
insurance operations of SNS REAAL; (2) the specific benefit
derived from the diversification afforded by its banking and
insurance activities; (3) the systemic support that would be
available to the banking units and the resulting benefits
attributable to the holding operations; and (4) the structural
subordination of the revenues that the Group receives in the form
of dividends from operating companies.
-- SUBORDINATED DEBT RATINGS
The downgrade of the ratings of several subordinated securities
issued by various entities of the group reflects the weakened
credit profiles of these entities.
The downgrade of SNS Bank's dated subordinated debt ratings to
Caa1 from Ba2 reflects the similar action on the institution's
standalone BFSR. The subordinated debt rating is one notch below
SNS Bank's b3 standalone credit assessment and remains under
review for downgrade.
The downgrade of SNS REAAL's subordinated debt rating to Caa1
from Ba2 mirrors the rating action on SNS Bank's dated
subordinated debt rating. This reflects Moody's opinion that the
intrinsic financial strength of the holding company, which
excludes any benefit from potential systemic support and from
which the subordinated debt will be anchored, cannot be stronger
than the intrinsic financial strength of SNS Bank going forward.
Furthermore, if SNS REAAL sold or decided to sell its insurance
operations, the holding company's intrinsic financial strength
would ultimately be lower than that of the bank, due to its
structural subordination within the group. Given these
uncertainties, the debt rating remains on review for downgrade.
-- HYBRID INSTRUMENTS
Moody's rating actions on the hybrid securities issued by several
of SNS REAAL's entities reflect the weakened credit profiles of
these entities, as well as (1) Moody's expectations for an
increased risk of omission of future coupon payments; and (2) the
potential for intervention by the EC that also increases the risk
of a principal write-down on some instruments.
Moody's notes that the terms and conditions of these hybrids
allow -- or in some cases oblige -- the entities to defer
coupons, subject to certain triggers. Given the weakening credit
profile of SNS Bank and the risk of contagion to the holding
company and to the insurance operations, the probability has
increased that SNS REAAL could skip the coupons on some of these
debts.
Moody's also says that there is an increased probability that SNS
REAAL will not be able to repay the State Aid it received in
2008, because of the overall weakening of the group's credit
profile. This could prompt the EC to impose restrictions on the
Group as a whole, including coupon deferrals on hybrid
instruments.
The downgrade of SNS Bank's EUR200 million Tier 1 instrument
(ISIN XS0172565482) to Caa3(hyb) from B1(hyb) reflects (1) the
downgrade of SNS Bank's standalone financial strength rating; (2)
the existence of a mandatory coupon suspension mechanism in the
event that the bank has no distributable items; and (3) the non-
cumulative feature of the instrument. The instrument is rated
three notches below SNS Bank's baseline credit assessment of b3.
The rating is on review for downgrade, in line with the
standalone credit assessment of the bank.
The downgrade of SNS Bank's Tier 1 Notes to Ca(hyb) from B1(hyb)
reflects (1) the downgrade of SNS Bank's standalone financial
strength rating; (2) the existence of a mandatory coupon
suspension mechanism tied to a breach of minimum solvency ratios
or to regulatory intervention; (3) the optional coupon suspension
mechanism subject to a look-back period of 6 months; and (4) the
non-cumulative feature of the instrument. In addition, the
instruments contain a variation provision, which allows the
issuer to vary the terms of the securities so that they remain
compliant with Tier 1 requirements set by the Dutch regulator,
possibly posing additional credit risk for investors.
The EUR320 million instrument (ISIN XS0468954523) is rated one
notch below the EUR200 million instrument (ISIN XS0172565482), as
Moody's considers its terms lead to higher credit risk. This
reflects notably the possibility that part of the principal may
be written down through the variation of the terms of the
documentation.
The downgrade of SNS REAAL's Capital Securities to Caa2(hyb) from
Ba3(hyb) reflects the similar action taken on SNS Bank's hybrid
debt ratings. The downgrade of the hybrid debt rating also
captures the higher risk of coupon deferral on this instrument
and the cumulative nature of the coupon skip.
The downgrade of the ratings on the hybrid debts issued by SRLEV
to Ba1(hyb) from Baa3(hyb) also reflects Moody's opinion of an
increased probability of deferral of coupons on these securities
and the cumulative nature of the coupon skip.
WHAT COULD MOVE THE RATINGS UP/DOWN
-- SNS BANK
SNS Bank's standalone BFSR is on review for downgrade and as such
the probability of an upgrade is remote. Elements that could lead
to a confirmation include a material improvement in the capital
base or a reduction in the credit risk arising from the PF
portfolio in particular.
Conversely, SNS Bank's standalone BFSR could be downgraded
further if (1) asset quality and capital continue to deteriorate,
making the need for external support still more likely; (2)
funding and liquidity challenges intensify, for example as a
result of deposit outflows combined with increasingly restricted
capital market access; or (3) the EC imposes compensation
measures that are detrimental to the bank's overall franchise.
SNS Bank's long-term ratings would likely be downgraded if
Moody's concludes that the deterioration in SNS Bank's
fundamentals are not fully offset by likely external support.
This may be the case in the event of (1) Moody's perception of an
increased willingness by the government to insulate its own
finances from the crisis affecting financial institutions; (2)
the imposition of burden-sharing with senior creditors, notably
by recourse to the Dutch Intervention Act of June 2012, or (3) a
deterioration of the financial position of the government of the
Netherlands.
-- INSURANCE ENTITIES
According to Moody's, the IFSRs of the insurance companies could
potentially be downgraded if the companies' operations remain
within the SNS REAAL Group. However, the IFSRs might also be
downgraded if SNS REAAL decided to sell these operations, but
Moody's believes that the sale process would not be executed in a
reasonable short period. In these scenarios, the ultimate IFSRs
of the insurance operations would be linked to SNS Bank's
standalone credit assessment, leading to a potential multi-notch
downgrade. Conversely, the ratings could be confirmed if the
group expedites a rapid divestment of its insurance operations.
-- HOLDING COMPANY
The rating agency says that a downgrade of the bank's long-term
ratings or of the insurance entities' IFSRs would likely result
in a downgrade of the holding company's senior debt ratings.
Furthermore, a downgrade of SNS REAAL's senior debt rating would
result in a downgrade of the holding company's short-term debt
rating to Not-Prime from (P) Prime-3.
-- SUBORDINATED AND HYBRID DEBT INSTRUMENTS
A downgrade of SNS Bank's BFSR would result in a downgrade of its
subordinated and hybrid debt instruments. Furthermore, the bank's
hybrid debt ratings could be downgraded if Moody's believes that
the probability of a coupon deferral has increased for those
instruments.
A downgrade of SRLEV's IFSR would lead to a downgrade of hybrid
debts issued by this entity. Moreover, the hybrid debt ratings of
SRLEV could be downgraded if Moody's believes that the
probability of a coupon deferral has increased for those
instruments.
A downgrade of SNS Bank's standalone BFSR would result in a
downgrade of SNS REAAL's subordinated and hybrid debt ratings.
Separately, a decision by SNS REAAL to sell its insurance
operations would likely also result in a downgrade of SNS REAAL's
subordinated and hybrid debt ratings.
List of Affected Ratings
The following ratings were placed on review for possible
downgrade:
- REAAL Schadeverzekeringen N.V. -- insurance financial strength
rating at Baa1;
- SRLEV N.V. -- insurance financial strength rating at Baa1;
- SNS Bank N.V. -- senior unsecured debt rating and long term
bank deposit rating at Baa2;
- SNS Bank N.V. -- short-term bank deposit rating and other
short-term ratings at Prime-2;
- SNS REAAL N.V. -- senior unsecured debt rating at Baa3;
- SNS REAAL N.V. -- senior unsecured MTN rating at (P)Baa3;
- SNS REAAL N.V. -- short term issuer rating at (P)P-3.
The following ratings have been downgraded and placed on review
for further downgrade:
- SNS REAAL N.V. -- subordinated debt rating to Caa1 from Ba2;
- SNS REAAL N.V. -- subordinated MTN rating to (P)Caa1 from
(P)Ba2;
- SNS REAAL N.V. -- preferred stock rating to Caa2(hyb) from
Ba3(hyb);
- SRLEV N.V. -- dated subordinated debt rating to Ba1(hyb) from
Baa3(hyb);
- SRLEV N.V. -- perpetual junior subordinated debt rating to
Ba1(hyb) from Baa3(hyb);
- SNS Bank N.V. -- bank financial strength rating to E+ (mapping
to b3) from D+ (mapping to ba1);
- SNS Bank N.V. -- subordinated debt rating to Caa1 from Ba2;
- SNS Bank N.V. -- subordinate MTN rating to (P)Caa1 from
(P)Ba2;
- SNS Bank N.V. -- EUR200 million Tier 1 securities rating to
Caa3(hyb) from B1(hyb); (ISIN XS0172565482)
- SNS Bank N.V. -- EUR320 million Tier 1 securities rating to
Ca(hyb) from B1(hyb); (ISIN XS0468954523)
SNS Bank backed senior unsecured rating at Aaa with a negative
outlook, and the backed other short term rating of (P)P-1, remain
unaffected by this rating action.
Principal Methodologies
The methodologies used in these ratings were Moody's Consolidated
Global Bank Rating Methodology published in June2012, Moody's
Global Rating Methodology for Property and Casualty Insurers
published in May 2010, Moody's Global Rating Methodology for Life
Insurers published in May 2010 and Moody's Guidelines for Rating
Insurance Hybrid Securities and Subordinated Debt published in
January 2010.
* NETHERLANDS: Corporate Bankruptcies Up 19% in 2012
----------------------------------------------------
Martijn van der Starre at Bloomberg News reports that national
statistics agency CBS in The Hague on Wednesday said that Dutch
companies declared bankrupt, excluding one-person businesses,
rose 19% to 7,373 last year.
According to Bloomberg, the trade industry had 1,532 bankruptcies
while the construction had 1,213 bankruptcies.
=============
R O M A N I A
=============
OLTCHIM SA: Romanian Gov't May Ask for Insolvency Procedure
-----------------------------------------------------------
According to Bloomberg News' Andra Timu, Bursa newspaper reported
that Romania's government may ask for an insolvency procedure for
Oltchim SA, a state-owned unprofitable chemical company,
following talks with the International Monetary Fund and the
European Union.
Bloomberg relates that the Bucharest-based newspaper said, citing
unidentified government officials, said the Cabinet wants to
restructure the unprofitable company and a EUR450-million
(US$599 million) debt to the state, without risking a sanction
from the EU.
Oltchim SA is a state-owned chemical company.
===========
R U S S I A
===========
RGS ASSETS: S&P Assigns 'CCC+ Longterm Rating; Outlook Stable
-------------------------------------------------------------
Standard & Poor's Ratings Services said that it had assigned its
'CCC+' long-term rating to RGS Assets Ltd., owner of Russian
insurer Rosgosstrakh. The outlook is stable.
RGS Assets is registered in Cyprus and owns Rosgosstrakh (BB-
/Stable/--) through two subsidiaries registered in Russia, RGS
Aktivy and RGS Kapital, which do not perform any operating
activity. S&P classifies RGS Assets as an insurance holding
company.
S&P's rating on RGS Assets reflects the strength of its insurance
operations and its structural subordination to the operations of
Rosgosstrakh. The rating is constrained by the very high
leverage at the level of RGS Holdings, RGS Assets' ultimate
holding company.
The stable outlook reflects that on Rosgosstrakh and will
continue to do so unless S&P see additional negative pressure
from the level of RGS Holdings.
Positive rating actions could result if S&P saw significant
deleveraging on the level of RGS Holdings or restructuring of
existing debt with a longer tenor.
=====================================
S E R B I A & M O N T E N E G R O
=====================================
VEKTRA MONTENEGRO: In Bankruptcy Proceedings; Owes EUR185 Million
-----------------------------------------------------------------
SeeNews reports that Vektra Montenegro, which has entered
bankruptcy proceedings, has run up debts of some EUR185 million
(US$247 million) to creditors.
According to SeeNews, broadcaster RTCG said on Monday that
the court-appointed administrator Zdravko Cicmil at the
first meeting with creditors said he had so far received 65
claims for total EUR185.16 million, including interests.
RTCG said that Vektra Montenegro's biggest creditors include:
Hungary's OTP Bank (EUR75 million), NLB InterFinanz, a unit of
Slovenia's Nova Ljubljanska Banka (EUR60 million) and
Crnogorska Komercijalna Banka (EUR29 million), SeeNews relates.
The court hearing on the creditors' claims is scheduled for
February 21, SeeNews discloses.
The bankruptcy proceedings against Vektra Montenegro, a
company owned by businessman Dragan Brkovic, was launched in
December 2012, SeeNews recounts.
Vektra Montenegro is a diversified holding company.
===============
S L O V E N I A
===============
* SLOVENIA: Seeks to Avoid International Bailout
------------------------------------------------
Boris Cerni at Bloomberg News reports that Slovenia is on the
brink of early elections amid corruption allegations against
Prime Minister Janez Jansa that threaten to sink the government
as it fights to avoid an international bailout.
The Citizens List party was scheduled to meet at 5:00 p.m.
yesterday in Ljubljana to decide whether to quit the ruling
coalition after the country's anti-graft agency said the premier
failed to declare some private assets, Bloomberg relates. The
party's departure would force the government into minority rule
or prompt elections unless it finds a replacement, Bloomberg
notes.
According to Bloomberg, Slovenia is looking to avoid becoming the
sixth euro-area nation to resort to financial aid after the
government devised a EUR4 billion (US$5.33 billion) bank bailout.
Mr. Jansa's Cabinet, less than a year in office, is working on an
economic overhaul and savings measures to cope with the country's
second recession in three years, Bloomberg discloses.
"An early vote would in all likelihood mean a delay in Slovenia's
much-needed reforms, particularly to the banking sector,"
Bloomberg quotes William Jackson, an economist at Capital
Economics Ltd. as saying. "Without these, it's difficult to see
how Slovenia will escape from recession and will remain
vulnerable in the event of a deterioration in the external
financing environment, which could lead to renewed fears that a
bailout would be needed."
Mr. Jansa on Jan. 11 said that the country risks a credit-rating
downgrade, an increase in risk premium on Slovenian bonds and in
the cost of capital in case of snap elections, which would also
halt efforts to lead the economy out of the crisis, Bloomberg
recounts.
A coalition break-up would represent a hurdle for the
implementation of the proposed bad bank, despite the law already
being approved, as key implementation rules have not yet been set
up," Bloomberg quotes Jaromir Sindel, an economist at Citigroup
Inc. in Prague, as saying in a note to clients yesterday. "This
would be of a particularly negative consequence, if the bad bank
becomes the topic of any preelection campaign."
=============
U K R A I N E
=============
AEROSVIT: To Seek Protection From Creditors
-------------------------------------------
Olzhas Auyezov at Reuters reports that AeroSvit, Ukraine's
largest airline, was set to seek protection from its creditors in
court this week after grounding most of its flights and leaving
hundreds of people stranded across the globe due to financial
problems.
AeroSvit, which operates 28 planes and serviced 2.8 million
passengers in 2011, had debt of UAH4.27 billion as of the end of
last year, which was almost three times its assets, Reuters,
discloses.
According to Reuters, the Kiev-based company said the court
procedure was part of a reorganization plan aimed "to restore its
operating efficiency and increase revenue inflows". The hearings
were due to start yesterday, January 23.
The company filed for bankruptcy late last December, just before
the New Year holidays, prompting a number of its partners such as
travel firms and airports to suspend services, Reuters recounts.
Trade unions, which include AeroSvit workers, say the company had
issued warnings to all its 2,500 staff that they would be laid
off soon, Reuters relates.
AeroSvit, in turn, has blamed trade unions for driving up staff
wages so much that they became one of the key factors leading to
its downfall, Reuters notes.
In 2011, AeroSvit's financial loss tripled year-on-year to 1.456
billion hryvnias, Reuters discloses. It has not reported 2012
results, Reuters says.
Aerosvit is a private Ukrainian airline. It was founded in 1994
and by 2012, was operating 80 international routes in 34
countries.
MHP SA: Moody's Confirms 'B3' CFR; Outlook Negative
---------------------------------------------------
Moody's Investors Service has confirmed the B3 corporate family
rating (CFR) and B3-PD probability of default rating (PDR) of MHP
S.A., as well as the B3 senior unsecured rating assigned to the
company's US$585 million Eurobond due in 2015. The outlook on the
ratings is negative. Concurrently, Moody's downgraded the
company's national scale rating (NSR) to Baa3.ua.
This concludes the review for downgrade initiated by Moody's on
10 December 2012, following the decision to lower Ukraine's
foreign-currency bond country ceiling to B3 from B1 as a result
of the downgrade of Ukraine's government bond rating by one notch
to B3 from B2 with a negative outlook. These ceilings are lower
than the local-currency ceiling (B2) as they also capture
foreign-currency transfer and convertibility risks.
Moody's review of MHP's rating was focused on an assessment of
the company's ability to address potential liquidity constraints
and a deterioration in its credit metrics in the event of a
depreciation of the Ukrainian national currency (hryvna).
Ratings Rationale
This rating action reflects Moody's view that a potential
currency depreciation should not have a material adverse impact
on MHP's ability to service its foreign-currency denominated debt
and the company will be able to (1) sustain its credit metrics
within its stated financial policy of unadjusted Net Debt/EBITDA
at approximately 2.0x-2.5x and below 3.0x; and (2) maintain an
adequate liquidity profile over the next 12-18 months.
Moody's continues to incorporate in MHP's rating foreign currency
risks given that a large part of its revenues remains domestic,
while most of the debt is denominated in foreign currency.
However, the devaluation risk is partly hedged by MHP's vertical
integration into grain growing and fodder production, which
reduces the share of foreign currency denominated costs in its
total operating expenses compared to other non-integrated
domestic poultry producers. MHP further addresses the currency
risk by growing its export operations. In 2012, export sales
accounted for around 30% of its total revenues and will
contribute around 40% in 2013, following the launch of its new
poultry facilities in Vinnitsya. Another offsetting factor is the
company's historical ability to largely transfer devaluation of
the domestic currency to final consumers, although with a time
lag, given the: (1) relatively large share of imports in the
country's poultry supply (around 16%); (2) significant share of
foreign currency denominated expenses in the cost structure of
non-integrated domestic poultry producers, which forces them to
increase prices in line with the devaluation of hryvna; and (3)
company's dominant position on the domestic poultry market (30%
of total consumption and 50% of the industrial poultry
production), which gives the company pricing power.
MHP's resilience to foreign currency risks was evidenced during
the crisis of 2009, which, inter alia, resulted in average
devaluation of the Ukrainian national currency of around 50%. In
2009, MHP reported robust profitability (an adjusted EBITDA
margin of around 40%), while leverage metrics also remained
healthy with adjusted Debt/EBITDA of 2.2x and RCF/Net Debt of
above 30%.
At the same time, Moody's considers that MHP's capacity to serve
its foreign currency debt could be exposed to actions taken by
the Ukrainian government to preserve the country's foreign-
exchange reserves and the company's revenues and cash flows
generated in the country are exposed to foreign-currency transfer
and convertibility risks, which are reflected in the B3 ceiling.
Aside from the ceiling constraints, Moody's considers that MHP is
solidly positioned in the B3 rating category, given the group's
strong business profile, good profitability and moderate
leverage.
Moody's expects that MHP's liquidity position will remain
adequate in the next 12-18 months. This is based on the rating
agency's forecast that the company will generate positive free
cash flow starting 2013. It is also supported by around $290
million of cash balance and available committed credit lines as
of end September 2012.
The negative outlook on MHP's rating reflects the outlook on
Ukraine's sovereign rating and the consequent risk of a further
downgrade of the foreign-currency bond country rating. Moody's
could consider stabilizing the outlook on MHP's rating following
the stabilization of the outlook on Ukraine's sovereign rating.
What Could Change The Rating UP/DOWN
Given the negative outlook, Moody's does not envisage any
positive pressure being exerted on MHP's ratings in the near
term. Moody's could consider an upgrade of the ratings if (1) it
raises the foreign-currency bond country rating and ceiling; and
(2) MHP continues to demonstrate strong operating performance,
with an adjusted EBITA margin of above 25%, positive free cash
flow, an adjusted debt/EBITDA ratio sustained below 2.0x and a
retained cash flow (RCF)/debt ratio above 30%; and (3) the
company builds up a liquidity cushion. MHP's rating is
constrained by factors related to the Ukrainian political,
business, legal and regulatory environment, given that all its
assets are located within the country. Therefore, the company's
ratings will also be ultimately dependent on further developments
at the sovereign level.
Conversely, downward pressure could be exerted on MHP's ratings
as a result of (1) a further potential downgrade of the sovereign
rating or lowering of the foreign-currency bond country ceiling,
and (2) material deterioration in the company's operating and
financial performance and/or liquidity pressure.
MHP is one of Ukraine's leading agro-industrial groups. Its
operations include the production of poultry and sunflower oil,
as well as the production and sale of convenience foods. The
holding company, MHP S.A., is domiciled in Luxembourg, while all
of MHP's production assets are located in Ukraine. The company is
vertically integrated into grain and fodder production. MHP
operates one of the largest land banks in Ukraine. In 2011, MHP's
dollar-denominated total revenue from continuous operations was
$1.23 billion. As of end-2011, the company employed more than
24,000 staff.
The controlling beneficiary shareholder of MHP (with a stake of
approximately 65%) is Mr. Yuriy Kosyuk, who is the founder and
CEO of the company. Following its May 2008 IPO, MHP is traded on
the London Stock Exchange (LSE).
The principal methodology used in this rating was the Global Food
- Protein and Agriculture Industry published in September 2009
and Mapping Moody's National Scale Ratings to Global Scale
Ratings published in October 2012. Other methodologies used
include Loss Given Default for Speculative-Grade Non-Financial
Companies in the U.S., Canada and EMEA published in June 2009.
Moody's National Scale Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within
a country, enabling market participants to better differentiate
relative risks. NSRs differ from Moody's global scale ratings in
that they are not globally comparable with the full universe of
Moody's rated entities, but only with NSRs for other rated debt
issues and issuers within the same country. NSRs are designated
by a ".nn" country modifier signifying the relevant country, as
in ".mx" for Mexico. For further information on Moody's approach
to national scale ratings, please refer to Moody's Rating
Methodology published in October 2012 entitled "Mapping Moody's
National Scale Ratings to Global Scale Ratings".
MRIYA AGRO: Fitch Upgrades LT Issuer Default Ratings to 'B'
-----------------------------------------------------------
Fitch Ratings has upgraded Mriya Agro Holding Public Limited's
long-term foreign and local currency Issuer Default Ratings (IDR)
to 'B' from 'B-'. The agency also upgraded Mriya's National Long-
term Rating to 'A-(ukr)' from 'BBB+(ukr)'. The Outlook on the
Long-term IDRs and National Long-term Rating is Stable. The
agency has also affirmed the short-term foreign and local
currency IDRs at 'B' and upgraded Mriya's US$250 million senior
unsecured notes due 2016 to 'B' from 'B-'with Recovery Rating
'RR4'.
The upgrade reflects Mriya's demonstrated consistent growth and
profitability as well as expected moderate leverage even after
substantial investments in fixed assets in 2012. We expect Mriya
to maintain high cash flow from operations (CFO) generation
ability and adequate liquidity under its 'B' rating. Mriya's
efficient operations, high profitability and adequate liquidity
position are good mitigants to risk factors outside of management
control, namely dry weather conditions, export restrictions and
international grain price volatility.
KEY DRIVERS
Resilient Operating Performance Expected
Mriya delivered outstanding revenue growth in 2011, and is also
expected to show strong growth in 2012, while keeping the
operating margin relatively stable. However, as the company has
shifted towards a policy of more muted land bank expansion and we
do not envisage a further dramatic improvement in crop yields, we
assume slower revenue growth for 2013 and 2014 albeit subject to
volatility in selling prices. Fitch expects FFO margin at or
above 40%, which is healthy for the rating, supported by
investments in logistics and infrastructure (silos).
Capex Key Part of Strategy
Mriya has muted its land acquisition program and shifted its
focus on enhancing its existing operations' efficiency through
heavy investments in storage facility construction and logistic
fleet expansion. We acknowledge the benefits of these investments
to Mriya's business profile, despite our expectation of a slower
payoff from infrastructure investments relative to land lease
rights acquired (even after taking associated working capital
investments into account). Therefore Fitch assumes a gradual
deleveraging with FFO adjusted net leverage trending towards 2x
by 2015 (2012F: 2.3x). This is consistent with the 'B' rating for
the sector.
Limited Impact from Hryvnia Depreciation
A possible depreciation of the hryvnia should not jeopardize
Mriya's debt service capacity in foreign currency as the
company's dollarized revenues exceed USD-based operating and
interest costs. However, from a balance sheet perspective, the FX
mismatch remains material as Mriya's debt is largely USD-
denominated.
Adequate Liquidity, Limited Debt Redemptions
Mriya's liquidity profile is supported by a strong CFO exceeding
US$100 million per annum in Fitch's projections, a conservative
cash management policy, high marketability of inventories and
flexibility in its capex plans. Mriya funds its working capital
cycle (equating to a US$140 million swing from peak to trough or
0.7x-0.8x EBITDA intra-year) from existing cash and short-term
deposits, proceeds from the sale of grain, and availability under
its revolving lines from EBRD ('AAA'/Stable) and IFC. Mriya also
benefits from a smooth debt maturity profile as the US$250
million Eurobond (57% of total financial debt) only matures in
March 2016.
Corporate Governance Issues Remain
Relative to other Ukrainian peers, such as Kernel and MHP (both
rated 'B+' local currency IDR), Mriya's corporate governance is
still weak, mainly because of related party transactions in
relation to all of its sugar beet production (this represented
35% of Mriya's total revenues in 2011). Although this is a
constraining factor for a future positive rating development,
Fitch understands the sugar companies owned by the controlling
shareholder do not have meaningful financial debt as they have no
major capital spending plans.
Well Placed Relative to Peers
Compared to its closest peers, Mriya has stronger cash flow
generating capacity, offset by smaller scale and lower vertical
integration versus Kernel and MHP, both of which have farming
operations as part of their business models. Although Mriya tends
to focus on lower value-added, commodity-type goods compared with
protein-producers Avangardco ('B'/Stable) and Miratorg
('B'/Stable), Mriya has shown stronger profitability than these
companies. Mriya's leverage is also lower than the average for
'B' rated agribusiness peers in the CIS.
RATING SENSITIVITY GUIDANCE:
Positive: Future developments that could lead to positive rating
actions include:
- Contraction of related party transactions or full
consolidation of the sugar business into the group
- Evidence of positive or at least only moderately negative FCF
Margin
The above factors would have to be accompanied by at least two of
the following triggers:
- FFO margin above 35% or FFO above USD200m in absolute terms
- FFO adjusted net leverage below 1.5x (and below 2.5x at peak
throughout the year)
- FFO fixed charge coverage consistently above 4.5x
- Maintained strong liquidity - available cash, committed
available bank lines and expected next year's CFO less
maintenance capex covering at least 150% of short-term debt
maturities
Negative: Future developments that could lead to negative rating
action include:
- Declining profitability driven by sustained cost increases
and/or yield erosion bringing FFO margin down to the 25%-30%
range
- Weaker liquidity profile
- FFO adjusted net leverage consistently above 2.5x at year-end
(or 3.5x at the peak during the year)
- FFO fixed charge below 3x
===========================
U N I T E D K I N G D O M
===========================
BLOCKBUSTER ENTERTAINMENT: Gets 30 Expressions of Interest
----------------------------------------------------------
Sarah Shannon at Bloomberg News reports that Blockbuster
Entertainment Ltd. has generated more than 30 expressions of
interest from retailers and private-equity firms.
According to Bloomberg, a person familiar with the matter said
that Deloitte LLP is still weeks away from a decision and there
is no front-runner for the U.K. DVD rental chain.
The person said that the simultaneous search for buyers of HMV
Group Plc may be slowing the process as firms bid for both
companies, Bloomberg notes. Deloitte is also handling HMV's
administration, Bloomberg discloses.
Blockbuster last week became the third major U.K. retailer this
year to enter administration, a form of insolvency protection,
Bloomberg relates.
Deloitte is seeking a buyer for the 528-outlet chain and has said
at least 160 stores will be closed, Bloomberg says. The
administrators said that more stores closures are likely beyond
those that are already planned, Bloomberg notes.
According to Bloomberg, Deloitte on Tuesday said that Savills has
been appointed to advise on the company's store portfolio.
Blockbuster UK, which has 4,190 employees, is part of Blockbuster
L.L.C.
BUCCAMENT BAY: Refutes Liquidation Talks; In Dispute with Auditor
-----------------------------------------------------------------
Donia O'Loughlin at FTAdviser.com reports that Buccament Bay
Resort Ltd, Harlequin's main resort, has denied that it is in
liquidation and has blamed its former UK auditor Wilkins Kennedy
for not filing its financial statements or annual returns for the
period from 2005-2012.
According to FTAdviser.com, a certificate of status, signed
January 17 from the Registrar of Companies, has revealed that
Buccament Bay is in "default of its obligations" under the
Companies Act as it has not filed financial statements nor annual
annual returns from the period 2005-2012.
In view of the default, the Buccament Bay Resort, which opened in
August 2010 and is located on the Caribbean island St Vincent, is
likely to be struck off the registrar, FTAdviser.com notes.
However, the certificate also highlighted that although it has
defaulted on its obligations, the company is not in liquidation
and a receiver of the company's property has not been appointed,
FTAdviser.com states.
The FTAdviser.com relates that a spokesperson for Buccament Bay
Resort blamed "historic problems" with its former auditors
Wilkins Kennedy with whom it is currently in a legal dispute.
"While there have been delays in filing accounts for Buccament
Bay this is largely due to historic problems with its former UK
auditors, Wilkins Kennedy, who are now the subject of legal
proceedings by Harlequin for professional negligence in relation
to aspects of the work they did for Harlequin," FTAdviser.com
quotes the spokesperson as saying.
"Harlequin has been working tirelessly with its new auditors and
accountants to rectify these matters. Draft accounts have now
been completed up to March 2011 and we expect to file these
shortly.
"Buccament Bay is not in liquidation and any such suggestion is
completely false. Similarly any suggestion that the company has
appointed or is likely to appoint receivers is also completely
false."
According to FTAdviser.com, David Fenn, managing partner at
Wilkins Kennedy LLP, told FTAdviser: "Wilkins Kennedy were not
appointed as auditors or instructed to file statutory accounts
for Harlequin Property SVG Limited or any other overseas company
within the Harlequin organization.
"Wilkins Kennedy did act as auditors to Harlequin Management
Services (South East) Limited the UK based property marketing
company and resigned in 2010. New auditors were appointed and
subsequent years accounts as audited by them were filed at
Companies House.
"Because of the on-going legal dispute we are not able to comment
further other than to say Wilkins Kennedy is robustly contesting
the claims against us."
DUDMAN: In Administration, 140 Jobs at Risk
-------------------------------------------
Neill Barston at Worthing Herald reports that a total of around
140 jobs are threatened as construction firm Dudman has gone into
administration.
The company, which has its headquarters in Southwick, had,
according to administrators, suffered cash flow problems,
according to Worthing Herald.
The report notes that it managed a turnover of GBP30 million in
2011, but has since come under considerable financial pressure.
Based at Albion Wharf, the firm has grown from its original base
as a haulage company, to produce aggregate and concrete, with a
shipping division. The company has operated quarries, wharves
and rail terminals within Sussex and Hampshire.
FISHY FISHY: In Administration, Cuts 13 Jobs
--------------------------------------------
Juliette Astrup at Daily Echo reports that quayside restaurant
Fishy Fishy in Poole has gone into administration with the loss
of 13 jobs.
Managing director James Ginzler told the Echo that a lack of
footfall and insufficient repeat custom had sounded the death-
knell for the 130-seat restaurant fronting the quay, according to
Daily Echo.
The report relates that a spokesperson for Fishy Fishy said: "The
Poole restaurant site was rented, within a building which had
gone into administration, creating financial issues outside our
control. We regrettably have found it impossible to continue to
trade in that environment, and have taken the decision to cease
trading at our Poole restaurant. The Fishy Fishy restaurant in
Brighton is unaffected by this decision."
The restaurant was opened in late 2010 by television's X-Factor
host Dermot O'Leary with business partners James Ginzler and Paul
Shovlin. It followed the success of the Fishy Fishy Brighton
restaurant, a separate entity which remains in business.
HMV GROUP: Hilco Acquires Bank Debt for About GBP40 Million
-----------------------------------------------------------
Andrea Felsted and Robert Budden at The Financial Times report
that Hilco UK, the retail restructuring group, has acquired the
bank debt of HMV, effectively giving it control and paving the
way for a rescue of the entertainment retailer that fell into
administration last week.
According to the FT, people familiar with the situation said
Hilco had acquired the debt from the group's lenders, Lloyds and
Royal Bank of Scotland for about GBP40 million.
HMV had underlying net debt of GBP176 million as at the end of
October, although people familiar with the matter said this had
fallen to about GBP120 million following the crucial Christmas
and new year trading period, the FT notes.
Although Hilco has not acquired HMV, it means Hilco can
effectively take control of the retailer, and any rival bidder
would need its agreement, the FT states.
The FT relates that people close to the situation said the move
brought stability to HMV and meant that Hilco could work with
administrator Deloitte on the best way to take the business
forward.
"Following the news earlier [Tues]day of Hilco's acquisition of
HMV's secured debt, the administrators will work closely with
them, as secured lender, as we continue to seek a positive
outcome for the business. Stores continue to trade and at this
time we remain hopeful of securing a long-term future for HMV as
a going concern," the FT quotes Nick Edwards, joint administrator
and a partner at Deloitte, as saying.
But analysts and restructuring experts expect the outcome to be a
slimmer chain, with some store closures, the FT says.
Nick Bubb, the independent retail analyst, estimated that HMV
could emerge with between 100 and 150 stores, against about 230
now, the FT discloses.
United Kingdom-based HMV Group plc is engaged in retailing of
pre-recorded music, video, electronic games and related
entertainment products under the HMV and Fopp brands, and the
retailing of books principally under the Waterstone's brand. The
Company operates in four segments: HMV UK & Ireland, HMV
International, HMV Live, and Waterstone's.
* UK: Retail Chain Failures No Impact on Major REITs, Fitch Says
----------------------------------------------------------------
Despite the recent spate of UK retail chain failures at HMV,
Comet, Jessops and Blockbuster, involving nearly 1,200 stores,
major UK REITs should not see their credit profiles materially
affected, Fitch Ratings says.
"Overall, the major UK REITs such as British Land
('BBB+'/Stable), Hammerson ('BBB+'/Stable) and Land Securities
('AAsf') own prime and trading-dominant shopping centers in
first-class locations with up-to-date specifications and leisure
facilities. Footfall and sales have generally remained resilient
through the current period of austerity."
"From our estimates, the various retailers that have gone into
administration should only marginally reduce major UK shopping
centers' retail rents, probably by less than 1% of the total rent
roll at most major UK retail REITs. In some cases, the
administrator will continue to trade from profit-making units
within major shopping centers, while he seeks a buyer for the
whole or part of the retailer. In other cases, major UK REITs
will be able to re-let store units in their shopping centers to
new retailers attracted by stable footfall and resilient
spending," Fitch notes.
"There are also other investors, such as private equity groups,
who are prepared to take over failed retailers, such as, for
example, private-equity owned group Game Plc possibly bidding for
up to 45 HMV stores.
"However, although the retail failures should not materially
undermine their credit profiles, major shopping center and retail
park landlords will have to continue to be vigilant about their
tenants' revenue and financial profile. Strong asset management
will remain a key competitive advantage for UK REITs in what is
now a tenant's market. Overall UK retail property values fell by
6% in 2012 (Source: IPD) and retail rents have fallen 7% since
2008, although the main reductions have come from secondary
retail property stock.
"We are aware of and comforted by major UK REITs with well-
defined contingency plans to deal with a major retailer default,
based on anticipated weakening KPIs, which are made available to
landlords under their lease terms. These coherent and forward-
looking strategies, allied to large shopping centers with a top-
quality tenant base and good transport infrastructure, underline
why these retail shopping centers are performing well above the
average," Fitch adds.
===============
X X X X X X X X
===============
* Upcoming Meetings, Conferences and Seminars
---------------------------------------------
Jan. 24-25, 2013
AMERICAN BANKRUPTCY INSTITUTE
Rocky Mountain Bankruptcy Conference
Four Seasons Hotel Denver, Denver, Colo.
Contact: 1-703-739-0800; http://www.abiworld.org/
Feb. 7-9, 2013
AMERICAN BANKRUPTCY INSTITUTE
Caribbean Involvency Symposium
Eden Roc Renaissance, Miami Beach, Fla.
Contact: 1-703-739-0800; http://www.abiworld.org/
Feb. 17-19, 2013
AMERICAN BANKRUPTCY INSTITUTE
Advanced Consumer Bankruptcy Practice Institute
Charles Evans Whittaker Courthouse, Kansas City, Mo.
Contact: 1-703-739-0800; http://www.abiworld.org/
Feb. 20-22, 2013
AMERICAN BANKRUPTCY INSTITUTE
VALCON
Four Seasons Las Vegas, Las Vegas, Nev.
Contact: 1-703-739-0800; http://www.abiworld.org/
Apr. 10-12, 2013
TURNAROUND MANAGEMENT ASSOCIATION
TMA Spring Conference
JW Marriott Chicago, Chicago, Ill.
Contact: http://www.turnaround.org/
Apr. 18-21, 2013
AMERICAN BANKRUPTCY INSTITUTE
Annual Spring Meeting
Gaylord National Resort & Convention Center,
National Harbor, Md.
Contact: 1-703-739-0800; http://www.abiworld.org/
June 13-16, 2013
AMERICAN BANKRUPTCY INSTITUTE
Central States Bankruptcy Workshop
Grand Traverse Resort, Traverse City, Mich.
Contact: 1-703-739-0800; http://www.abiworld.org/
July 11-13, 2013
AMERICAN BANKRUPTCY INSTITUTE
Northeast Bankruptcy Conference
Hyatt Regency Newport, Newport, R.I.
Contact: 1-703-739-0800; http://www.abiworld.org/
July 18-21, 2013
AMERICAN BANKRUPTCY INSTITUTE
Southeast Bankruptcy Workshop
The Ritz-Carlton Amelia Island, Amelia Island, Fla.
Contact: 1-703-739-0800; http://www.abiworld.org/
Aug. 8-10, 2013
AMERICAN BANKRUPTCY INSTITUTE
Mid-Atlantic Bankruptcy Workshop
Hotel Hershey, Hershey, Pa.
Contact: 1-703-739-0800; http://www.abiworld.org/
Aug. 22-24, 2013
AMERICAN BANKRUPTCY INSTITUTE
Southwest Bankruptcy Conference
Hyatt Regency Lake Tahoe, Incline Village, Nev.
Contact: 1-703-739-0800; http://www.abiworld.org/
Oct. 3-5, 2013
TURNAROUND MANAGEMENT ASSOCIATION
TMA Annual Convention
Marriott Wardman Park, Washington, D.C.
Contact: http://www.turnaround.org/
Nov. 1, 2013
AMERICAN BANKRUPTCY INSTITUTE
NCBJ/ABI Educational Program
Atlanta Marriott Marquis, Atlanta, Ga.
Contact: 1-703-739-0800; http://www.abiworld.org/
Dec. 2, 2013
BEARD GROUP, INC.
19th Annual Distressed Investing Conference
The Helmsley Park Lane Hotel, New York, N.Y.
Contact: 240-629-3300 or http://bankrupt.com/
Dec. 5-7, 2013
AMERICAN BANKRUPTCY INSTITUTE
Winter Leadership Conference
Terranea Resort, Rancho Palos Verdes, Calif.
Contact: 1-703-739-0800; http://www.abiworld.org/
*********
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
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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
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A list of Meetings, Conferences and Seminars appears in each
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related conferences are encouraged. Send announcements to
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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
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*********
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-
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Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez,
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A. Chapman, Editors.
Copyright 2013. All rights reserved. ISSN 1529-2754.
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