/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/130222.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Friday, February 22, 2013, Vol. 14, No. 38 Headlines C R O A T I A BADEL 1862: Files Motion for Pre-Bankruptcy Settlement Procedure F R A N C E PAGESJAUNES GROUPE: Fitch Lowers IDR to 'B-'; Outlook Negative SEAFRANCE SA: Eurotunnel to Fight Antitrust Review of Ship Buy H U N G A R Y E-STAR ALTERNATIVE: Polish Unit Acquires HUF760-Mil. Debt I C E L A N D HOUSING FINANCING: Iceland Ready to Provide Bailout I R E L A N D ANGLO IRISH: Probe Into E&Y's Behavior as Auditor to Continue I T A L Y EDISON SPA: Fitch Lifts Long-Term IDR From 'BB'; Withdraws Rating K A Z A K H S T A N KAZKOMMERTSBANK: Fitch Raises Subordinated Debt Ratings to 'B-' L I T H U A N I A TELCO UAB: S&P Raises Long-Term Corporate Credit Ratings to 'B' L U X E M B O U R G GRAND CITY: S&P Assigns 'BB-' Corp. Credit Rating; Outlook Stable N E T H E R L A N D S E-MAC DE 2005-I: S&P Lowers Rating on Class E Notes to 'CCC' R O M A N I A ATLAS TELECOM: Judiciary Administrator Sells Fiber Network MECHEL TARGOVISTE: Files for Insolvency S L O V E N I A * SLOVENIA: New Government May Lead Nation Into Bankruptcy S P A I N IM CAJAMAR: Fitch Affirms 'CCsf' Rating on Class E Certs. U N I T E D K I N G D O M A SUIT THAT FITS: Exits Administration After Pre-Packaged Sale HMV GROUP: Administrators Close 37 More Stores; 464 Jobs Affected * UK: Insolvency Service Budget Cuts Affect Enforcement Activity * UK: Pre-Packaged Administration Deals Attract Controversy X X X X X X X X * Plain Packaging Biggest Risk for Tobacco Firms, Fitch Says * BOOK REVIEW: Corporate Venturing -- Creating New Businesses ********* ============= C R O A T I A ============= BADEL 1862: Files Motion for Pre-Bankruptcy Settlement Procedure ---------------------------------------------------------------- SeeNews reports that Badel 1862 said on Wednesday the company has submitted a motion for the launch of a pre-bankruptcy settlement procedure. According to SeeNews, the company said in a bourse filing that, at the same time, the procedure launched by the Croatian government to sell a 65.84% stake in the company remains ongoing. In January, Badel 1862 said potential buyers that had placed bids for the stake had started conducting due diligence at the company, SeeNews relates. Badel 1862 posted a non-consolidated net loss of HRK36.6 million (US$6.5 million/EUR4.8 million) in 2012, SeeNews discloses. Badel 1862 is a Croatian wine and spirits producer. =========== F R A N C E =========== PAGESJAUNES GROUPE: Fitch Lowers IDR to 'B-'; Outlook Negative -------------------------------------------------------------- Fitch Ratings has downgraded PagesJaunes Groupe S.A.'s Long-term Issuer Default Rating (IDR) to 'B-' from 'B'. Fitch Ratings has also downgraded PagesJaunes Finance & Co S.C.A's senior secured notes rating to 'B+' from 'BB-'. The Outlook is Negative. The downgrade follows PagesJaunes' (which has changed its name to Solocal) announcement that 2013 will see further gross operating margin (GOM; PagesJaunes' EBITDA proxy, EBITDA before staff profit sharing) attrition with no stabilization in cash flow generation in the short term. Fitch believes it may take at least a few years to show signs of stabilization, during which the company must refinance its large 2015 maturities. KEY DRIVERS - Continued Cash Flow Declines: Fitch previously guided that unless PagesJaunes demonstrated that it could stabilize cash flows, a negative rating would be considered. The company's guidance for 2013 is for GOM to fall to between EUR445 million-EUR425 million, from EUR464 million in 2012 and EUR488 million in 2011. Fitch is concerned that the company's cash flow will continue to decline beyond 2013. Therefore, PagesJaunes could approach the period when it must refinance its large 2015 maturities without demonstrating that it has successfully stabilized its core business. - Negative Outlook: Although the company has refinanced twice in the past two years, Fitch is concerned that a lack of stabilization could hamper PagesJaunes' ability to refinance its 2015 maturities. A Stable Outlook does not reflect this risk. If the company makes progress in refinancing these maturities, or if the company makes progress in stabilizing its business, which would support a successful refinancing, then Fitch envisages revising the Outlook to Stable. - Slowing Internet Revenue Growth: PagesJaunes' internet revenue growth slowed substantially in H212, with more aggressive competition from traditional media as well as other digital media impacting the company's growth. While cyclical factors are likely to be affecting the company's online revenue growth, Fitch is concerned that part of this decline may be structural i.e. a more aggressive environment in the French advertising market. - Continued Digital Transition: Although Fitch recognizes management's ability to manage the reduction in print revenues and the growth in internet revenues in a more successful way than peers across Europe, the transition to a digital business is still in progress. During the company's February 2013 investor day, the company alluded to additional re- organization efforts in 2014. Fitch believes that this might require the hiring of additional specialized sales staff and other additional costs. While Fitch understands the rationale for such an investment, the benefits of this might take a number of years to materialize. - Recovery Ratings: Fitch has revised downwards its assumptions that derive the recovery ratings. In the case of a hypothetical distressed scenario, Fitch assumes a post-restructuring EBITDA of approximately EUR315m. Fitch continues to use a multiple of 5.5x. Although the lower post-restructuring EBITDA does result in slightly lower recoveries, the recovery rating of RR2 assigned to the senior secured debt does not change. - Strong Brand Name: Fitch recognizes the strength of the PagesJaunes brand name and the company's presence in the online segment. This could allow PagesJaunes to stabilize cash flows at some point. However, Fitch does not have visibility of when this could occur. - Positive Cash Flow Generation: Fitch believes that despite the challenges that PagesJaunes faces in its continued transition towards a digital media company, the issuer is still expected to generate positive cash flows and meet its debt service requirements until the significant bullet debt repayments that are due in 2015. RATING SENSITIVITY GUIDANCE: Positive: Future developments that could lead to positive rating actions include: - If the company makes progress in refinancing its 2015 maturities, then Fitch envisages revising the Outlook to Stable - Stabilization in PagesJaunes' GOM and cash flow generation - Sustained internet revenue growth and no significant erosion in EBITDA margin Negative: Future developments that could lead to negative rating action include: - Dramatic reduction in online revenues, as well as an erosion in profitability of the online segment - FFO net leverage more than 6x - Negative net free cash flow generation LIQUIDITY AND DEBT STRUCTURE The refinancing transaction at the end of 2012 pushed most of PagesJaunes' large 2013 maturities to 2015, resulting in a more favorable maturity profile for the group. However, the company now has a significant maturity of EUR1.2 billion in 2015. The company generated a pre-dividend free cash flow margin of 17% in 2012, which is strong for the current rating and, aided by the presence of the 3x dividend restrictions and the cash sweep of 75% of excess cash flow, should help the company to deleverage as it approaches this wall of debt. SEAFRANCE SA: Eurotunnel to Fight Antitrust Review of Ship Buy -------------------------------------------------------------- Stewart Bishop of BankruptcyLaw360 reported that Groupe Eurotunnel SA on Tuesday said it will challenge a U.K. antitrust regulator's stance that its EUR65 million (US$86 million) purchase of three ships from collapsed ferry company SeaFrance SA could lead to higher prices in the market for transport across the English Channel. The report related that the Competition Commission said earlier Tuesday that by adding ferry services to Eurotunnel's existing Channel Tunnel business, the company would boost its already high share of the cross-Channel transport market, restricting competition. SeaFrance is the operator of the undersea rail link between Britain and continental Europe. The Commercial Court in Paris has ordered the full liquidation of SeaFrance on the Jan. 9, 2012. As a result, the company is no longer able to trade. ============= H U N G A R Y ============= E-STAR ALTERNATIVE: Polish Unit Acquires HUF760-Mil. Debt --------------------------------------------------------- MTI-Econews reports that E-Star Polska has purchased a HUF760 million debt earlier claimed from E-Star Alternative by Raiffeisen Bank for about HUF310 million. E-Star Alternative said on Wednesday that in addition to the substantial discount, the importance of the transaction lies in the fact that the bulk of these receivables constitutes the single secured creditor claim against the troubled company, MTI-Econews relates. The first reorganization plan proposed by E-Star would have ensured return of 100% of the principal part of the secured claims over two years, MTI-Econews notes. E-Star, which has been under bankruptcy protection since last December, announced on February 5 that creditors rejected the company's proposals to extend E-Star's payment deadline by 120 days, MTI-Econews recounts. E-Star Alternative is a Hungarian energy services company. ============= I C E L A N D ============= HOUSING FINANCING: Iceland Ready to Provide Bailout --------------------------------------------------- Omar R. Valdimarsson at Bloomberg News reports that Housing Financing Fund said the government would bail out the lender before it is unable to honor its debts. "There's no risk of a default," Bloomberg quotes Sigurdur Jon Bjornsson, chief financial officer of the Reykjavik-based Housing Financing Fund, as saying in an interview late on Wednesday. "The Treasury, if it needed to, would bail out the fund." The comments follow Moody's Investors Service decision on Wednesday to downgrade HFF to junk, Bloomberg relates. According to Bloomberg, Moody's cited the fund's capital shortfall and growing loan losses. Iceland, which let its biggest banks default on US$85 billion in 2008, said in November it's ready to inject ISK13 billion (US$100 million) into state-backed HFF to keep the lender afloat, Bloomberg recounts. The lender, which provides mortgages that are linked to the inflation rate, is losing business to commercial rivals such as Arion Bank hf and Islandsbanki hf, which are unfettered by such indexation, Bloomberg discloses. As inflation hovers above 4%, borrowers have turned away from HFF and sought alternative home loans to prevent their debt burdens growing with consumer prices, Bloomberg notes. Mr. Bjornsson, as cited by Bloomberg, said that HFF's small capital buffer doesn't pose a threat to its survival. "We're discussing a very large fund," Bloomberg quotes Mr. Bjornsson as saying. "In comparison with other financial institutions it has lost about 5% of its assets, while other asset portfolios were written down by between 45% and 65%. These 5% aren't enough to bring down the fund." Housing Financing Fund is Iceland's biggest mortgage bank. ============= I R E L A N D ============= ANGLO IRISH: Probe Into E&Y's Behavior as Auditor to Continue ------------------------------------------------------------- Vincent Ryan at Irish Examiner reports that despite the liquidation of IBRC, regulators are still planning to go ahead with an investigation into Ernst & Young's behavior as auditor of Anglo Irish Bank. The Chartered Accountants Regulatory Board is investigating Ernst & Young for its role while auditors to Anglo Irish Bank, Irish Examiner discloses. KPMG has since been appointed as the special liquidator to IBRC, the entity which took over the winding down of Anglo Irish Bank, Irish Examiner relates. In response to a parliamentary question from Sinn Fein's finance spokesperson Pearse Doherty, Finance Minister Michael Noonan confirmed that the liquidation of IBRC will not interfere with the investigation into Ernst & Young's actions as Anglo Irish Bank's auditor, Irish Examiner discloses. According to Irish Examiner, a spokesperson for the board said that its investigation into Ernst & Young began in 2011 but that the investigation had been put on hold until the Director of Public Prosecutions finishes criminal investigations into Anglo Irish Bank. A date for when the investigation might resume and when findings can be expected remain unclear as the DPP is unwilling to comment on any ongoing cases, Irish Examiner notes. Anglo Irish Bank was an Irish bank headquartered in Dublin from 1964 to 2011. It went into wind-down mode after nationalization in 2009. In July 2011, Anglo Irish merged with the Irish Nationwide Building Society, with the new company being named the Irish Bank Resolution Corporation. ========= I T A L Y ========= EDISON SPA: Fitch Lifts Long-Term IDR From 'BB'; Withdraws Rating ----------------------------------------------------------------- Fitch Ratings has upgraded Edison Spa's Long-term Issuer Default Rating (IDR) and senior unsecured ratings to 'BBB-' from 'BB' and the Short-term IDR to 'F3' from 'B'. The Outlook on the Long-term IDR remains Positive. Simultaneously, Fitch has withdrawn all of Edison's ratings because the ratings are no longer considered by Fitch to be relevant to the agency's coverage. Following restructuring of Edison's shareholder structure in 2012, Electricite de France (EDF 'A+'/Stable) holds 97.4% of the capital and 99.48% of the voting rights of Edison's ordinary shares were delisted, but its notes remain outstanding. Edison has been fully consolidated into EDF's group since H212. The upgrade of the ratings to 'BBB-', reflects an upgrade of Edison's standalone rating to 'BB+' from 'BB-', and includes a one-notch uplift reflecting the links with the parent, assessed in accordance with Fitch's Parent and Subsidiary Linkage methodology. The improvement of its standalone profile reflects Edison's stronger credit metrics in 2012 as well as its liquidity position that benefited from the cash proceeds from the sale of Edipower Spa and the reimbursement of Edipower's shareholders' loan, which totaled EUR1.2 billion. Fitch's estimates funds from operations (FFO) to adjusted net debt at YE12 to have been below 3.0x from 7.1x at YE11 while FFO interest coverage improved to above 5.0x from 2.5x over the same period. The Positive Outlook reflects the potential for stronger links with EDF upon full integration of operating, treasury and trading functions, possibly including central funding once the outstanding debt is repaid. The current uplift reflects EDF's liquidity support received for the repayment of Edison's EUR700 million club deal bank facility that was repaid with cash proceeds from the sale of Edipower as well as the transfer to EDF of certain of Edison's treasury management functions established in September 2012. Edison's future bank and bond maturities include a EUR1.5 billion syndicated bank facility due in April 2013, a EUR700 million bond due in 2014 and EUR500 million and EUR600 million bonds due in 2015 and 2017 respectively. Despite Edison's improved operating performance and de-leveraging which occurred in 2012, the standalone rating reflects Edison's relatively high business risk profile given the weak market environment in which it operates as well as the negative spread between spot gas price and Edison's long term take-or-pay gas contracts prices. Edison's earnings in 2012 benefited from the successful renegotiation of two gas contracts with a settlement of around EUR680 million in total (EUR347 million for years prior to 2012) following the international arbitration procedures with Ras Gas (LNG gas supplier based in Qatar) and ENI Spa (gas supply contract from Libya) respectively. EDF expects a positive outcome for the gas contract renegotiation with the Algeria-based Sonatrach. Fitch notes that the renegotiations completed so far are not conclusive as due to the persistent difficulties in the Italian gas market that continue to show falling margins, a new round of contract revisions are already ongoing in order to restore profitability to these contracts. =================== K A Z A K H S T A N =================== KAZKOMMERTSBANK: Fitch Raises Subordinated Debt Ratings to 'B-' --------------------------------------------------------------- Fitch Ratings has upgraded the subordinated debt ratings of Kazakhstan's Kazkommertsbank (KKB, 'B'/Stable/'b') to 'B-'/RR5 from 'CCC'/RR6, JSC Russian Standard Bank's (RSB, 'B+'/Stable/'b+') to 'B'/RR5 from 'B-'/RR6, and of Russia's Locko-bank ('B+'/Stable/'b+') to 'B(EXP)'/RR5 from 'B-(EXP)'/RR6. Ukraine-based JSC The State Export-Import Bank of Ukraine's (Ukreximbank) (Ukrexim, 'B'/Stable/'b') subordinated debt rating has been affirmed at 'CCC', and the Recovery Rating on this instrument revised to 'RR5' from 'RR6'. All these banks' other ratings were unaffected by the current rating actions. RATING ACTION RATIONALE AND DRIVERS The rating actions follow the publication in December 2012 of Fitch's revised criteria 'Assessing and Rating Bank Subordinated and Hybrid Securities'. According to this criteria, for gone concern securities that are only supposed to absorb losses upon failure/at the point of non-viability, the base case notching will be one below an issuer's Viability Rating (VR) throughout the rating scale. As Fitch views KKB, RSB and Locko's subordinated debt issues as gone concern securities (i.e. designed to absorb losses only at the point of failure), these are now notched once off the banks' VRs. Ukrexim's subordinated debt rating remains two notches below the bank's VR because of additional non-performance risk due to potential coupon deferral before the point of non-viability. Fitch's old methodology for rating subordinated debt of issuers rated 'B+' or lower involved conducting a bespoke break-up analysis of the bank's balance sheet upon default. This analysis typcially resulted in forecasted recoveries of zero for subordinated debt, resulting in the assignment of an 'RR6' Recovery Rating and a debt rating two notches below the bank's VR. The revised methodology acknowledges that banks are often not broken up (liquidated) upon default and that in most (although not all) cases holders of subordinated debt receive some level of recoveries when a bank is resolved. The revision of all four banks' securities' Recovery Ratings to 'RR5' (corresponding to average recoveries of 10%-30%) reflects this change in approach, and has driven the upgrade of KKB, RSB and Locko's subordinated debt ratings. Ukrexim's subordinated debt rating reflects incremental non- performance risk resulting from the flexibility to defer coupons in certain circumstances, for example if the bank reports negative net income for a quarter. The two notch differential between the bank's VR of 'b' and the subordinated debt rating of 'CCC' therefore reflects one notch for this incremental non- performance risk and one notch (in line with KKB, RSB and Locko) for potentially weaker recoveries due to the instrument's subordination. RATING SENSITIVITIES The subordinated debt ratings of each of the four banks could be upgraded or downgraded if the banks' VRs are upgraded/downgraded. In addition, Fitch acknowledges that regulatory treatment of bank failures, and the specifics of bank resolution mechanisms, are evolving globally, and that these mechanisms are also likely to develop in Russia, Kazakhstan and Ukraine. If bank resolutions in these markets consistently result in subordinated debt holders receiving zero, or negligible, recoveries, then the Recovery Ratings on subordinated debt could be revised back down to 'RR6', resulting in downgrades of the debt ratings. ================= L I T H U A N I A ================= TELCO UAB: S&P Raises Long-Term Corporate Credit Ratings to 'B' --------------------------------------------------------------- Standard & Poor's Ratings Services said it raised its long-term corporate credit ratings on Lithuania-headquartered mobile telecommunications operator UAB Bite Lietuva (Bite) and on its 100% owner Bite Finance International B.V. to 'B' from 'B-'. S&P also removed the ratings from CreditWatch, where it placed them with positive implications on Jan. 29, 2013. The outlook is stable. The issue rating on the EUR200 million senior secured floating- rate notes issued by Bite Finance International B.V. is 'B', in line with the corporate credit rating on Bite. At the same time, S&P withdrew the ratings on Bite Finance International's EUR172 million senior secured notes and on its outstanding subordinated notes that have been repaid. The upgrades reflect the extended maturity profile of Bite's debt with no maturity until 2017 and, in S&P's opinion, its adequate liquidity. The proceeds of the proposed notes were used to repay the EUR172 million notes due 2014, the outstanding subordinated floating-rate notes due 2017, the outstanding revolving credit facility (RCF) maturing in June 2013, and a payment-in-kind (PIK) note and the related fees and expenses. The EUR200 million notes due 2018 were issued on largely the same terms as the EUR172 million senior secured notes, albeit with a higher coupon. S&P has assumed in its calculations that the company would manage the interest-rate risk by entering a fixed-rate interest swap. S&P expects adjusted net debt to EBITDA at 3.9x and funds from operations (FFO) to debt to 18% at year-end 2013. S&P expects Bite's profitability to further improve in 2013 because S&P believes the company could benefit from growth in its Latvian operations if it continues to gain market share. In Latvia, Bite remains a distant No. 3, but its market share by revenues has grown gradually from 10.8% in June 2010 to 17.4% in September 2012, according to the company. In Lithuania, S&P expects revenues and market share to remain stable. The stable outlook reflects S&P's opinion that Bite's adjusted EBITDA margin will continue to improve to about 28.5% in 2013 (from 27% in 2012), mainly on the back of performance in Latvia. S&P also factors in the group's maintenance of adequate liquidity and comfortable covenant headroom, and adjusted debt to EBITDA below 4x. S&P also expects Bite to hedge its interest rate on the EUR200 million senior secured floating-rate notes in the near term. S&P could lower the ratings if the EBITDA margin contracted toward 25%, because this would translate to adjusted debt to EBITDA of 4.5x and FFO to debt below 15% and threaten the group's cash flow generation. S&P could also take a negative rating action if covenant headroom was less than adequate. Ratings upside is unlikely at this stage given S&P's assessments of Bite's business risk and financial risk profiles. =================== L U X E M B O U R G =================== GRAND CITY: S&P Assigns 'BB-' Corp. Credit Rating; Outlook Stable ----------------------------------------------------------------- Standard & Poor's Rating Services said that it assigned its 'BB-' long-term corporate credit rating to Luxembourg-incorporated real estate investment company Grand City Properties S.A. (GCP). The outlook is stable. The rating on GCP reflects S&P's assessment of the company's business risk profile as "fair" and its financial risk profile as "aggressive." GCP focuses on the German residential real estate market. The company owns and manages a property portfolio of 15,000 residential units (including signed pipeline transactions), mostly located in Nordrhein-Westfalen in the west of Germany. The company estimates its total annual rental income at EUR70 million and its portfolio value at EUR655 million. GCP's business focus is to buy and turn around underperforming apartment blocks by renovating and re-tenanting the flats. GCP's "fair" business risk profile reflects S&P's view of the lower volatility of the German residential sector compared to other property sectors like commercial real estate. S&P considers that GCP's properties benefit from solid demand from a large pool of tenants in most of its locations across West Germany. S&P views the company's operating efficiency, evident in its high collection and tenant retention rates, as a positive factor for the rating. The business risk profile is mainly constrained by the company's relatively high vacancy rate (17%) and geographic concentration; the average quality of the apartment blocks; and the likelihood of ongoing renovation expenses that are necessary to increase the profitability of the property portfolio. GCP's "aggressive" financial risk profile reflects its current leverage of about 60%, which includes the proportional reconsolidation of joint ventures. GCP's leverage is high relative to its European rated peers and is one of the main rating constraints. However, in S&P's opinion this is mitigated by: the company's financial policy that limits leverage at about 55% of the loan- to-value (LTV) ratio; its policy of fixing interest rates on loans; and its long-dated debt maturity profile, with no significant debt maturities until 2016-2017. "In our opinion, GCP should post stable recurring cash flow and benefit from stable property yields in 2013. We take into account the solid demand from tenants and investors in most of GCP's asset locations, and our understanding that the company does not commit to residential acquisitions before it can secure financing or equity. Under our base-case scenario for 2013, we forecast positive like-for-like net rental income and asset revaluation of about 4%, with stable renovation and financing costs. Rating stability depends on GCP maintaining an interest coverage ratio of more than 1.8x and a debt-to-capital ratio of less than 65%," S&P said. S&P could lower the rating if GCP's interest coverage ratio falls to 1.5x on sustained basis. S&P believes recurring cash flow could fall if like-for-like rental income growth declines, if renovation costs increase, and if the time lag between large asset acquisitions and disposals widens. The rating could also come under pressure from a sharp increase in debt, leading to a debt-to-capital ratio of more than 65%. This could occur if the company undertakes a large leveraged acquisition, experiences significantly higher renovation capex, or if property yields rise due to falling investor demand. Conversely, S&P could raise the rating if GCP is able to post interest coverage of much more than 2x on a sustained basis. Factors supporting this level of coverage include sustained rental income growth, higher return on renovation costs, and a lower cost of financing. Equally, S&P could raise the rating if the debt-to-capital ratio falls to about 55%, most likely due to high rental growth supporting lower property yield and a higher amount of equity-financed acquisitions. ===================== N E T H E R L A N D S ===================== E-MAC DE 2005-I: S&P Lowers Rating on Class E Notes to 'CCC' ------------------------------------------------------------ Standard & Poor's Ratings Services took various credit rating actions in E-MAC DE 2005-I B.V., E-MAC DE 2006-I B.V., and E-MAC DE 2006-II B.V. Specifically, S&P has: -- Lowered its ratings on E-MAC DE 2005-I's class C, D, and E notes, E-MAC DE 2006-I's class D and E notes, and E-MAC DE 2006-II's class D and E notes; -- Lowered and placed on CreditWatch negative its ratings on E-MAC DE 2005-I's class B notes, E-MAC DE 2006-I's class A, B, and C notes, and E-MAC DE 2006-II's class B and C notes; and -- Affirmed its rating on E-MAC DE 2005-I's class A notes. The rating actions are due to the ongoing poor performance of these transactions. To date, E-MAC DE transactions show the highest arrears levels of all of the German residential mortgage-backed securities (RMBS) transactions that S&P rates. Total arrears (loans in arrears for more than 30 days) in the E-MAC DE 2005-I, E-MAC DE 2006-I, and E-MAC DE 2006-II transactions have been increasing since closing. Total arrears now amount to what S&P considers to be high levels of between 11.6% and 14.2% of the current outstanding balances, compared with levels of between 9.8% and 12.2% in April 2010 when S&P applied new stresses to the transaction. The servicer, Paratus AMC GmbH, does not report defaulted loans and loans in foreclosure. Therefore, in S&P's analysis, as an approximate equivalent it has considered the development of 150+ days delinquencies, which amount to between 8.4% and 10.9% of the current outstanding balances as per the latest payment date in November 2012. The reserve funds in E-MAC DE 2005-I and 2006-II are fully or almost fully funded. However, due to insufficient funds available in the waterfall, the reserve fund for E-MAC DE 2006-I has been drawn constantly and decreased further, to approximately 10% of its target level, since S&P last reviewed the transaction on Nov. 7, 2011. The low average recovery rate of between 44% and 51% severely affects S&P's loss severity assumptions. Since closing, reported net losses have increased to about 2.7% of the closing balance in E-MAC DE 2005-I and E-MAC DE 2006-II, and to about 4.2% in E-MAC DE 2006-I. However, the high and increasing arrears figures suggests to S&P that there is potential for further losses. The downgrades and CreditWatch negative placements are due to the ongoing poor performance of the transactions. S&P has affirmed its 'AA- (sf)' rating on E-MAC DE 2005-I's class A notes, because S&P considers the current level of credit enhancement to be commensurate with the current rating. S&P expects to resolve the CreditWatch placements after it has received further information from the servicer relating to arrears and foreclosures, at which time S&P will perform further credit and cash flow analysis on these transactions. These three E-MAC DE transactions are true sale German RMBS transactions, originated and serviced by Paratus AMC (previously GMAC-RFC). STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Reports included in this credit rating report are available at: http://standardandpoorsdisclosure-17g7.com RATINGS LIST Class Rating To From E-MAC DE 2005-I B.V. EUR301.5 Million Mortgage-Backed Floating-Rate Notes Ratings Lowered C B- (sf) BB (sf) D CCC+ (sf) B (sf) E CCC (sf) B- (sf) Rating Lowered and Placed On CreditWatch Negative B BBB (sf)/Watch Neg A- (sf) Rating Affirmed A AA- (sf) E-MAC DE 2006-I B.V. EUR502.5 Million Mortgage-Backed Floating-Rate Notes Ratings Lowered D CCC (sf) B- (sf) E CCC- (sf) CCC (sf) Ratings Lowered and Placed On CreditWatch Negative A A (sf)/Watch Neg AA- (sf) B BB- (sf)/Watch Neg BBB (sf) C B (sf)/Watch Neg BB- (sf) E-MAC DE 2006-II B.V. EUR703.5 Million Mortgage-Backed Floating-Rate Notes Ratings Lowered D CCC+ (sf) B (sf) E CCC (sf) B- (sf) Ratings Lowered and Placed On CreditWatch Negative B BB+ (sf)/Watch Neg BBB (sf) C B (sf)/Watch Neg BB- (sf) ============= R O M A N I A ============= ATLAS TELECOM: Judiciary Administrator Sells Fiber Network ---------------------------------------------------------- According to Telecompaper, local paper Ziarul Financiar reported that Global Money Recovery, the judiciary administrator of Atlas Telecom Network, which is now insolvent with debts of around EUR70 million, has sold Atlas' optical fiber network to a company from the capital Bucharest. Ziarul Financiar cited Horia Cristian Tiril, the lawyer handling the case at GMR, as its source. Atlas was the first player on the fixed telephony market to enter into competition with Romtelecom in 2003, Telecompaper recounts. Telecompaper notes that a report by GMR disclosed that the company entered into insolvency in 2011. Atlas Telecom Network is a Romanian fixed operator. Atlas Telecom's telecommunications infrastructure has around 2,500 kilometers, of which about 1,000 kilometers were fiber. According to a September 2012 report from GMR, Atlas' network covered Arad, Timis, Sibiu, Cluj, and Bihor. MECHEL TARGOVISTE: Files for Insolvency --------------------------------------- Florentina Dragu at Ziarul Financiar reports that Mechel Targoviste said in a statement on Wednesday the company has filed for insolvency with a view to restart activity once its restructuring process is complete. Mechel Targoviste is a Romanian steel maker. =============== S L O V E N I A =============== * SLOVENIA: New Government May Lead Nation Into Bankruptcy ---------------------------------------------------------- Boris Cerni at Bloomberg News reports that Prime Minister Janez Jansa said a new Slovenian government formation to replace the minority administration would probably lead the nation into bankruptcy this year. The parties that are trying to form a new Cabinet and topple the current one "don't know exactly what they are going to do and I am afraid that if we see such an outcome, the agony will continue and we will be close to bankruptcy this year," Bloomberg quotes Mr. Jansa as saying in an interview with public broadcaster TV Slovenija late on Wednesday. Mr. Jansa, as cited by Bloomberg, said that the other option is to agree on the most important tasks to be carried through with the current government and then decide on the timing of an early vote. Slovenia, a member of the euro region, was plunged into political uncertainty last month over corruption allegations against Jansa that prompted two of his coalition partners to abandon the Cabinet, increasing the risk of an early vote and a possible bailout, Bloomberg discloses. ========= S P A I N ========= IM CAJAMAR: Fitch Affirms 'CCsf' Rating on Class E Certs. --------------------------------------------------------- Fitch Ratings has placed three tranches of three Spanish RMBS transactions on Rating Watch Negative (RWN) and maintained RWN on six tranches. The agency also affirmed three tranches with ratings below 'Bsf'. The rating actions reflect concerns over the recent trends in recoveries received from the sale of underlying assets across most Fitch-rated RMBS transactions. These recent trends have resulted in Fitch's decision to review the assumptions and performance of the sector as a whole. Fitch will publish further commentary on the updates to the analysis of Spanish RMBS in the coming weeks. The rating actions are: IM Cajamar 5, FTA Class A (ISIN ES0347566004): 'Asf'; RWN maintained Class B (ISIN ES0347566012): 'Asf'; RWN maintained Class C (ISIN ES0347566020): 'Asf'; RWN maintained Class D (ISIN ES0347566038): 'BBsf'; placed on RWN Class E (ISIN ES0347566046): affirmed at 'CCsf'; Recovery Estimate 10% IM Cajamar 6, FTA Class A (ISIN ES0347559009): 'Asf'; RWN maintained Class B (ISIN ES0347559017): 'Asf'; RWN maintained Class C (ISIN ES0347559025): 'BBBsf'; placed on RWN Class D (ISIN ES0347559033): affirmed at 'CCCsf'; Recovery Estimate 35% Class E (ISIN ES0347559041): affirmed at 'CCsf'; Recovery Estimate 0% IM BCG RMBS 1, FTA Class A (ISIN ES0347139000): 'BBB+sf'; RWN maintained Class B (ISIN ES0347139018): 'BBBsf'; placed on RWN =========================== U N I T E D K I N G D O M =========================== A SUIT THAT FITS: Exits Administration After Pre-Packaged Sale -------------------------------------------------------------- Jonathan Moules at The Financial Times reports that A Suit That Fits was rescued through a pre-packaged sale of assets to DW Clothing -- a company wholly owned by turnaround specialist Keith Watson -- and the settlement of a GBP350,000 claim from the Nepalese manufacturer of its garments. The company was able to continue trading under its existing name, the FT notes. In December, the company was forced to call in the administrators, after HM Revenue & Customs finally lost patience over an unpaid tax bill, the FT recounts. Bailiffs were appointed by the tax authority to repossess sewing machines and other equipment at the company's London headquarters, in an attempt to recover the GBP96,000 debt, the FT relates. Employees and suit wearers aside, not everyone has welcomed the pre-pack deal, the FT says. In the case of A Suit That Fits, dozens of suppliers were left out of pocket, including the company's bank RBS, which was owed just over GBP200,000 at the time of the administration, the FT notes. Competitors felt aggrieved, too, the FT states. The owner of a rival tailoring business, who asked remain anonymous, told the FT he was angry that A Suit That Fits had been rescued, after it had driven prices down in the industry by pursuing an unsustainable business model. Until now, many lossmaking companies -- as A Suit That Fits was ahead of its administration -- have been able to continue trading by agreeing "time to pay" repayment schedules for outstanding tax bills with HMRC, the FT discloses. A Suit That Fits is a tailoring business set up by school friends David Hathiramani and Warren Bennett in 2006. HMV GROUP: Administrators Close 37 More Stores; 464 Jobs Affected ----------------------------------------------------------------- BBC News reports that Deloitte said it is to close a further 37 stores of HMV Group leading to the loss of 464 jobs. The closures, to take place over the next four to six weeks, come on top of the 66 stores already set to be shut, BBC discloses. HMV currently has 219 stores in the UK, so the latest move means almost half its branches in the UK will be closed, BBC notes. "This step has been taken in order to enhance the prospects of the restructured business continuing as a going concern," BBC quotes Nick Edwards, one of the joint administrators, as saying About HMV Group 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. On Jan. 14, HMV Group went into administration after suppliers refused a request for a GBP300 million lifeline for the company. Deloitte was appointed as administrator to the chain, which was hit by growing competition from online rivals, supermarkets, and illegal downloads. Deloitte is currently in talks with potential buyers of the business, which has 223 UK stores in total, and a workforce of about 4,000. The administrators received "well over 50" expressions from parties interested in buying HMV as a going concern. Hilco, a restructuring specialist, emerged as one of the front runners. Potential bidders include video game retailer Game, private equity firm Endless, Jon Moulton's Better Capital as well as Oakley Capital. No deadline has been set for formal bids for HMV. On Jan. 22, Hilco acquired the bank debt of HMV, effectively giving it control and paving the way for a rescue of the company. 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. On Feb. 4, around 200 jobs were secured after HMV's administrators offloaded the company's last remaining music and entertainment venues. HMV's majority shareholding in G-A-Y Group, which comprises a number of bars and Heaven nightclubs, was sold to the founder and other shareholder in the business, Jeremy Joseph. On Feb. 7, Deloitte announced the closure of 66 lossmaking HMV stores, resulting in the loss of 930 jobs, taking the company's headcount nationwide to about 3,000. Irish Operations On Jan. 16, HMV's operation in the Irish Republic, which employs 300 people, was put into receivership. A total of 16 HMV outlets were closed in Ireland. Deloitte, which was appointed receiver, is also attempting to secure a purchaser for the Irish stores. * UK: Insolvency Service Budget Cuts Affect Enforcement Activity ---------------------------------------------------------------- Jane Wild at The Financial Times reports that MPs have said delinquent directors are escaping sanction for misconduct and criminality because cuts to the Insolvency Service budget have left it too impoverished to pursue all cases of wrongdoing. According to the FT, the Commons' business, innovation and skills committee said in a report on Feb. 6 that the inability to prosecute and censure misbehavior was damaging confidence in the service. "The aim must be to disqualify or sanction all directors found guilty of misconduct, and the funding necessary to achieve this should be provided," the FT quotes Adrian Bailey, chairman of the committee, as saying. "Any dilution of enforcement activity sends completely the wrong message." The service had its budget cut by 11% in the year to March 2011, the FT discloses. Some 470 of its staff, or 18% of the workforce, were made redundant during that year and about 40 freelance investigators were dropped, the FT states. Further job losses followed, the FT notes. MPs warned that any further cuts would leave the service at risk of being unable to cope, the FT says. According to the FT, without more funds, offenders would continue to go unchecked and confidence in the service would decline further. Despite some high-profile business failures, casework has declined sharply during the past three years, the FT relates. Analysts had put the low rate of company insolvencies compared with previous recessions down to so-called zombie businesses, sustained only by low interest rates and the forbearance of creditors, the FT discloses. * UK: Pre-Packaged Administration Deals Attract Controversy ----------------------------------------------------------- Jonathan Moules at The Financial Times reports that pre-packaged administration deals have attracted controversy because of the effect they have on suppliers and competitors. Under a pre-pack, a company goes into a formal insolvency process, but can emerge days later under new ownership in pre-arranged a sale, having shed liabilities but retained assets -- leaving creditors worse off, the FT discloses. Others defend pre-packs, though, and the "phoenix" companies they create, the FT notes. "While it may appear at first blush to be unfair to creditors to receive a low or nil return, one should not lose sight of the fact that, if that company were in fact not rescued and placed into liquidation, a worse result would be achieved," the FT quotes Sarah McLennan, lawyer in the business litigation group of law firm Faegre Baker Daniels, as saying. "Often the only people willing to buy a company out of insolvency are those who were running the old company," Ms. McLennan, as cited by the FT, said. "Jobs can, and often are, saved by companies being rescued like this." Until now, many lossmaking companies -- as A Suit That Fits was ahead of its administration -- have been able to continue trading by agreeing "time to pay" repayment schedules for outstanding tax bills with HMRC, the FT discloses. According to the FT, data from Syscap, an independent finance provider, showed that more companies are expected to find them in this position. Syscap says it received 480 requests for funding from businesses needing help meet their January 31 tax payments, up from 300 requests the previous year, the FT discloses. "HMRC is under a lot of pressure to get the tax that they are owed in as quickly as possible," the FT quotes Philip White, Syscap's chief executive, as saying. "That means they have to put a lot of pressure on all businesses to pay their tax bill as quickly as possible." HMRC used its powers to seize property to meet unpaid bills, 10,577 times in the year ending March 2012, according to figures obtained by Syscap, the FT discloses. That was almost double the 5,520 uses of this power of "distraint" in the previous 12 months, the FT notes. The FT relates that Matt Swan, chairman of the chartered surveying business Plowman Craven, said if more companies seek pre-pack deals as a result, not all will be undeserving. "[Pre-pack administration] is a wretched business," Mr. Swan, as cited by the FT, said. He said nevertheless, having been through the process, it is often the only way to save a company that has got into trouble but remains fundamentally sound, the FT notes. =============== X X X X X X X X =============== * Plain Packaging Biggest Risk for Tobacco Firms, Fitch Says ------------------------------------------------------------ Plain cigarette packaging of the type proposed this week by New Zealand could be particularly damaging to manufacturers' pricing power if replicated in other countries, Fitch Ratings says. While plain packaging legislation is the biggest regulatory risk facing the tobacco industry, it is still unclear how many other countries may follow suit. Fitch says, "We believe the biggest impact if bigger tobacco markets were to successfully introduce similar rules would be on manufacturers that sell premium and above-premium cigarette brands. As all tobacco packages would look the same, their added appeal would fade, potentially reducing the price difference between brands. Loss of pricing power would be particularly concerning for tobacco companies as it is the ability to increase prices that has allowed them to maintain growth despite falling volumes. Another effect that is difficult to predict is the risk of a widespread pickup in illicit trade, as packages become more vulnerable to being forged. "Any similar rules in major European markets would be likely to have the biggest impact on Philip Morris International, because its portfolio is skewed towards premium brands, and Imperial Tobacco, which has lower-priced brands but relies on Europe for a bigger overall proportion of sales. "We believe politicians in many European countries could be in favor of introducing plain packaging. But any attempt to do this would be met with multiple legal challenges similar to those being brought against Australia - the first country to implement rules of this type, in December 2012. The extent and speed with which other countries might follow is therefore unclear and would depend on the extent to which the courts or arbitration panels could see plain packaging as an infringement of companies' intellectual property or a breach of trade agreements. "Plain packaging rules are unlikely in the US in the short to medium term, after the success tobacco companies had in fighting a less severe challenge to intellectual property such as graphic warning labels. "Any change is likely to be very slow and our ratings therefore only factor in expectations of falling pricing power for the relatively small Australian market. However, they do factor in other regulatory pressures that are more certain. These include the gradual extension of smoking and advertising restrictions and higher excise regimes in the developing markets of eastern Europe, Asia and Latin America. These pressures in emerging markets will be more than offset in the short term by the trend for consumers in these countries to move on to more expensive products and brands." * BOOK REVIEW: Corporate Venturing -- Creating New Businesses ------------------------------------------------------------- Authors: Zenas Block and Ian C. MacMillan Publisher: Beard Books, Washington, D.C. 2003 (reprint of 1993 book published by the President and Fellows of Harvard College). List Price: 371 pages. $34.95 trade paper, ISBN 1-58798-211-0. Creating new businesses within a firm is a way for a company to try to tap into its potential while at the same time minimizing risks. A new business within a firm is like an entreprenuerial venture in that it would have greater flexibility to opportunistically pursue profits apart from the normal corporate structure and decision-making processes. Such a business is different from a true entrepreneurial venture however in that the business has corporate resources at its disposal. Such a company business venture has to answer to the company management too. Corporate venturing -- to use the authors' term -- offers innovative and stimulating business opportunities. Though venturing is in a somewhat symbiotic relationship with the parent firm, the venture would never threaten to ruin the parent firm as a entrepreneur might be financially devastated by failure. Block and MacMillan contrast an entreprenuerial enterprise with their subject of corporate venturing, "When a new entrepreneurial venture is created outside an existing organization, a wide variety of environmental factors determine the fledgling business's survival. Inside an organization . . . senior management is the most critical environmental factor." This circumstance is the basis for both the strengths and limitations of a corporate venture. In their book, the authors discuss how senior management working with the leadership of a corporate venture can work in consideration of these strengths and weaknesses to give the venture the best chances for success. If the venture succeeds beyond the prospects and goals going into its formation, it can always be integrated into the parent company as a new division or subsidiary modeled after the regular parts of a company with the open-ended commitment, regular hiring practices, and reporting and coordination, etc., going with this. As covered by the authors, done properly with the right commitment, sense of realism and practicality, and preliminary research and ongoing analysis, corporate venturing offers a firm new paths of growth and a way to reach out to new markets, engage in fruitful business research, and adapt to changing market and industry conditions. The principle of corporate venturing is the familiar adage, "nothing ventured, nothing gained." While it is improbable that a corporate venture can save a dying firm, a characteristic of every dying firm is a blindness about venturing. Just thinking about corporate ventures alone can bring to a firm a vibrancy and imagination needed for business longevity. Ideas, insights, and vision are the essence of corporate venturing. But these are not enough by themselves. Corporate venturing is based as much on the right personnel, especially the top leaders. The authors advise to select current employees of a firm to lead a corporate venture whenever feasible because they already have relationships with senior management who are the ultimate overseers of a venture and they understand the corporate culture. In one of their several references to the corporate consultant and motivational speaker Peter Drucker, the authors quote him as identifying only half jokingly the most promising employees to lead the corporate venture as "the troublemakers." These are the ones who will be given the "great freedom and a high level of empowerment" required to make the venture workable and who also are most suited to "adapt rapidly to new information." Such employees for top management of a venture are not entirely on their own. The other side of this, as Brock and MacMillan go into, is for such venture management to earn and hold the trust and confidence of the firm's top management and work within the framework and follow the guidelines set for the venture. Corporate venturing is an operation which is a hybrid of the standard corporate interests and operations and an independent business with entrepreneurial flexibility mainly from focus on one product or service or at most a few interrelated ones, simplified operations, and streamlined decision-making. From identifying opportunities and getting starting through the business plan and corporate politics, Brock and MacMillan guide the readers into all of the areas of corporate venturing. Zenas Block is a former adjunct professor with the Executive MBA Program at the NYU Stern School of Business. Ian C. MacMillan is associated with Wharton as a professor and a director of a center for entrepreneurial studies. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than US$3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Thursday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/booksto order any title today. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Europe is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez, Joy A. Agravante, Ivy B. Magdadaro, Frauline S. Abangan and Peter A. Chapman, Editors. Copyright 2013. All rights reserved. ISSN 1529-2754. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Europe subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000 or Nina Novak at 202-241-8200. * * * End of Transmission * * *