/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/130412.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, April 12, 2013, Vol. 14, No. 72 Headlines C R O A T I A KRALJEVICA: Four Companies Sign Up Shipyard Sub-Concession Deal C Y P R U S * CYPRUS: Sells Gold Reserves to Help Finance Part of Bailout * CYPRUS: Banking Sector Shrinks Since Last Month's Rescue * CYPRUS: S&P Affirms 'CCC/C' Sovereign Ratings; Outlook Stable C Z E C H R E P U B L I C SEBA T: Declared Bankrupt by Liberec Court F I N L A N D KUITU FINLAND: Bankruptcy Estate Files Suit v. Neo Industrial F R A N C E HOLDING BERCY: Fitch Assigns 'B+' Long-Term Issuer Default Rating KEM ONE: Arkema Takes EUR125 Million Hit From Bankruptcy G E R M A N Y IDENTIVE GROUP: Ernst & Young GmbH Raises Going Concern Doubt VERIS GOLD: Incurs US$20 Million Net Loss in 2012 G R E E C E DRYSHIPS INC: E&Y Raises Going Concern Doubt * GREECE: Bank Recapitalization Credit Positive, Fitch Says I R E L A N D PATRICK PUNCH'S: In Liquidation; 50 Jobs Affected I T A L Y BANCA PADOVANA: Moody's Downgrades Standalone BFSR to 'E' * ITALY: Fitch Says Delinquency Levels Continue to Increase K A Z A K H S T A N MANGISTAU ELECTRICITY: Fitch Assigns Rating to Domestic Bond N E T H E R L A N D S FLORIMEX: Files for Bankruptcy; Owes EUR20 Million MONASTERY 2006-1: Liquidity Transfer, Waiver No Impact on Ratings SENSATA TECHNOLOGIES: S&P Assigns 'BB-' Rating to US$400MM Notes P O L A N D COGNOR SA: S&P Cuts Rating on EUR118MM Sr. Sec. Notes to 'CCC-' POLIMEX-MOSTOSTAL: Has Until May 31 to Meet Share Sale Terms R U S S I A KALVACHA GAS: Declared Insolvent by Razgrad Court S P A I N BBVA-6 FTPYME: Moody's Cuts Rating on Class B Notes to 'Caa1' GC FTYPME PASTOR: Moody's Lowers Rating on Class E Notes to 'Ca' HIPOCAT 17: Moody's Lowers Rating on Class C Notes to 'Caa3' NCG BANCO: Fitch Maintains Watch Negative on Ratings * SPAIN: Fitch Says Delinquency Levels Continue to Increase S W I T Z E R L A N D MATTERHORN FINANCING: S&P Assigns 'B+' Corporate Credit Rating U N I T E D K I N G D O M CORNERSTONE TITAN: S&P Lowers Rating on Class E Notes to 'D' ITV PLC: Fitch Raises Long-Term IDR From 'BB+'; Outlook Stable ROYAL BANK: Shareholders File Suit Over 2008 Cash Call X X X X X X X X * Moody's Examines Role of Holdout Creditors in Restructurings * BOOK REVIEW: The Oil Business in Latin America: The Early Years ********* ============= C R O A T I A ============= KRALJEVICA: Four Companies Sign Up Shipyard Sub-Concession Deal --------------------------------------------------------------- International Maritime Information reports that Kraljevica shipyard plans to rent out part of its yard facilities. The bankruptcy trustee of the Croatian shipyard is set to hire out part of its quayside until the finalization of its bankruptcy proceedings, the report relates. According to International Maritime Information, four shipbuilding-related companies have signed up for Kraljevica's quayside land, which is subject to government approval. The sub-lets amount to about 31% of the yard's land, International Maritime notes. Meanwhile, ships nearing completion at the yard were towed to other plants in Croatia and Italy for completion last year, International Maritime discloses. Hina reports that bankruptcy trustee for the Kraljevica shipyard Marija Ruzic on March 21 said subsequent to the government's approval, the Dalmont company would take over a sub-concession of 20,300 square meters of land and 10,000 square meters of sea, while 11,000 square meters of coastline and 4,500 square metres of the coastal belt would be allocated to Kvarnerplastika. Two other companies, Vidis and Takala, would take over several hundred square meters each at the site of the dockyard, Hina says. The sub-concession incorporates around 31% of land, which the dockyard pays, and around 18% of sea, and will be valid until the finalization of the shipyard's bankruptcy proceedings, Hina notes. All four companies are associated with shipbuilding and will pay a fee of HRK3 per square meter each year and 1% of their annual revenue for the use of this space, Hina states. Mr. Ruzic, as cited by Hina, said that two docks would be put up for lease during the proceedings. =========== C Y P R U S =========== * CYPRUS: Sells Gold Reserves to Help Finance Part of Bailout ------------------------------------------------------------- BBC News reports that Cyprus is to sell off much of its gold reserves to help finance part of its bailout. According to BBC, an assessment by the European Commission says Cyprus must sell about EUR400 million (GBP341 million) worth of gold. The country has already been forced to wind down one of its largest banks in order to qualify for a EUR10 billion lifeline from international lenders, BBC notes. Even with that bailout, it is predicted that the Cypriot economy will shrink by 8.7% this year, BBC discloses. Cyprus's total bullion reserves stood at 13.9 tonnes at the end of February, BBC says, citing data from the World Gold Council. At current prices, EUR400 million's worth of gold amounts to about 10.36 tonnes of metal, BBC states. The sale will be the biggest bullion sale by a eurozone central bank since France sold 17.4 tonnes in the first half of 2009, according to BBC. European finance ministers meet in Dublin today to discuss the Cyprus bailout, BBC discloses. * CYPRUS: Banking Sector Shrinks Since Last Month's Rescue ---------------------------------------------------------- The Associated Press reports that a draft bailout document between Cyprus and its international creditors shows that the size of the country's banking sector has been sharply reduced since the country's rescue package was agreed last month. The draft memorandum of understanding, seen by the AP Wednesday, claims the country's banking sector is now three-and-a-half times the size of the country's economy, down from five-and-a-half times. The new figure is placed in brackets, indicating that it could change further before the memorandum is finalized, the AP notes. Cyprus's outsized financial institutions were among the main reasons the country sought a US$10-billion (US$13.04-billion) bailout, the AP discloses. As part of the rescue, Cyprus agreed to break up no. 2 bank Laiki, and impose losses on savers with more than US$100,000 in another lender, the Bank of Cyprus, the AP relates. Before it is implemented, the memorandum has to be agreed by the 17 eurozone finance ministers and the International Monetary Fund and then voted on by several countries' parliaments, the AP states. According to the AP, the draft memorandum also makes 30 proposals for ways Cyprus can increase its tax revenue and cut expenditure, ranging from public-sector job cuts and wage freezes to taxing big lottery wins and increasing the country's sales tax. * CYPRUS: S&P Affirms 'CCC/C' Sovereign Ratings; Outlook Stable --------------------------------------------------------------- Standard & Poor's Ratings Services revised the outlook on the Republic of Cyprus to stable from negative. At the same time, S&P affirmed its long- and short-term sovereign credit ratings on Cyprus at 'CCC/C'. The outlook revision reflects S&P's expectation that the Cypriot government will agree to the terms of an up-to EUR10 billion ESM- IMF financial assistance program and that the program's first loan tranche will be disbursed in time for the government to make a June 4 payment due on a Eurobond. S&P understands that the ESM-IMF loan will be provided at a low interest rate and at long maturities. "Our baseline expectation continues to be that Cyprus will remain a member of the European Economic and Monetary Union (the eurozone). Nevertheless, it seems likely that recently-imposed capital controls will remain, in some form, to protect Cyprus' banks from renewed deposit flight. We expect that the current account deficit will initially widen to more than 10% of GDP as business and financial services exports fall on the expected loss of non-resident transactional deposits. Troika (the EU, IMF, and European Central Bank [ECB]) and Eurosystem lending (the Eurosystem consists of the ECB and eurozone central banks) is likely to fund the greater part of this external financing gap during the life of the program," S&P said. "We understand that once the Memorandum of Understanding formalizing the terms of the program is approved by the Cypriot government, the board of governors of the ESM, and the IMF executive board, the ECB would once again accept Cypriot government securities as collateral in exchange for its credit support to Cyprus' financial institutions. We view this as an important normalization of monetary support for Cyprus' challenged financial sector," S&P added. "In our opinion, Cyprus' economic prospects remain difficult over the near term. We expect economic growth will depend on a significant reorientation of the economic base, likely including the development of offshore gas fields. Expected downsizing in the public sector and financial services sector, as well as the banking system, will likely lead to significant job losses in these areas as well as in real estate and tourism; these sectors account for over 50% of Cyprus' GDP. We project that Cyprus' economy will contract by an estimated 20% between 2013 and 2016. Weak growth and employment prospects may also weigh on public and political support for an ambitious budgetary consolidation program, while raising questions about debt sustainability," S&P noted. The stable outlook balances what S&P views as the formidable economic adjustment challenges Cyprus faces against the time and resources provided by the Troika and the ECB as a result of the recently-agreed financial adjustment program, which S&P expects to be approved shortly by all parties. S&P would likely lower the rating if, contrary to its expectations, the Cypriot government rejects the terms of the revised Memorandum of Understanding. S&P could also lower the ratings later this year if the government appeared unable to fulfill the program's conditions. S&P could consider raising the ratings if the economy were to stabilize sooner and at higher levels than it currently projects, enabling general government debt to GDP to stabilize earlier. S&P could also consider an upgrade, in time, if official creditors were to provide even more concessional lending terms to Cyprus over the course of its adjustment program. =========================== C Z E C H R E P U B L I C =========================== SEBA T: Declared Bankrupt by Liberec Court ------------------------------------------ CTX, citing the insolvency register, reports that the Regional Court in Liberec, northern Bohemia, declared Seba T bankrupt. Seba T had been insolvent since last September, CTX recounts. Owners originally wanted reorganization as a way of settling the firm's insolvency but then withdrew their proposal, CTX notes. According to CTX, insolvency administrator Lenka Vidovicova said that bankruptcy is the only viable option. Seba T's debt exceeds CZK160 million, CTX discloses. Its production was halted last year, CTX recounts. Seba T is a Czech textile company. ============= F I N L A N D ============= KUITU FINLAND: Bankruptcy Estate Files Suit v. Neo Industrial ------------------------------------------------------------- The bankruptcy estate of Kuitu Finland Oy has initiated action against Neo Industrial Oyj in the District Court of Pirkanmaa regarding purchase price of the mill real estate owned by Avilon Fibres Oy, which has been declared bankrupt. Neo Industrial Plc has given a personal guarantee on the repayment of the purchase price. The bankruptcy estate of Kuitu Finland Oy demands that Neo Industrial Plc shall pay EUR5,000,000, which is the remaining principal of the purchase price at the time of Avilon Fibres Oy's bankruptcy March 6, 2013. The bankruptcy estate of Kuitu Finland Oy demands also EUR309.381,24 as building cost index in addition to penalty interests. Additionally, the bankruptcy estate of Kuitu Finland Oy demands Neo Industrial Plc to pay its legal expenses. Neo Industrial Plc considers the action unjustified. The company is preparing a response and shall seek to settle the matter with the bankruptcy estate of Kuitu Finland Oy. =========== F R A N C E =========== HOLDING BERCY: Fitch Assigns 'B+' Long-Term Issuer Default Rating ----------------------------------------------------------------- Fitch Ratings has assigned Holding Bercy Investissement SCA a Long-term Issuer Default Rating (IDR) of 'B+' with a Stable Outlook. Holding Bercy Investissement SCA is the holding company of France-based contract foodservices and concession catering operator Elior Group (Elior). Fitch has also assigned the company's existing EUR2.0 billion senior secured credit facility a 'BB-'/'RR3' rating. Key Rating Drivers Balanced and Resilient Business Profile Elior's large scale, broad product offering, strong customer and business diversification, and high barriers to entry have resulted in consistent performance through the economic cycle. The company has a balanced presence in each sub-market it competes in, both in contract catering and concession catering, and is benefiting from a long-term secular trend toward outsourced foodservices. These factors, combined with the company's high retention rate, strong reputation and expertise, are expected to support continued sales and profit growth over the intermediate term. Position Relative to Peers Elior possesses several company-specific traits akin to low investment grade for business services companies such as a broad range of services and customer diversification as well as a high proportion of contracted revenues and low renewal risk. However the main constraining factor on the rating is Elior's geographical concentration in France and other southern European countries, relative to its closest peers Compass ('A-'/Stable) and Sodexo ('BBB+'/Stable). Strong Cash Flow Conversion The asset-light nature and low capital intensity of the business allows Elior to consistently convert operating profits into strong cash flow before debt service. Given the high prevailing leverage, this aspect is viewed as critical to providing financial flexibility and supporting the overall credit profile of the company. From a business risk standpoint, Fitch considers Elior has a profile in line with a 'BB' rating. However, the company's financial profile is more in line with a 'B' rated issuer, thus bringing the rating to 'B+'. Weak Metrics, Expected Improvement While the business has shown strong growth over the past several years, the company relevered in 2012 to execute a share buyback and, as a result, has only achieved modest credit metric improvement since the LBO in 2006. FFO adjusted leverage increased to almost 8.0x in FY12 from under 6.2x at FY11 while FFO fixed charge cover declined to below 2.0x from above 2.2x the prior year. While Fitch expects the capital structure to remain highly levered over the intermediate term, Elior's credit metrics are projected to show near-term improvement as recent acquisitions are fully integrated and Elior benefits from lower taxation resulting from the French CICE staff cost rebate scheme in FY13. FFO adjusted leverage is projected to decrease to around 6.8x while FFO fixed charge cover is expected to increase to around 2.0x. These credit ratios will be more compatible with the assigned IDR. Adequate Liquidity Elior also completed an "amend and extend" of its current capital structure in April 2012 that pushed the maturity of its RCF to June 2016 and extended the maturity on most of the term loans to June 2017. As such, liquidity and refinancing are not a material rating concern at present. In our view, the company is projected to have sufficient cash and borrowing capacity to repay or refinance near-term maturities. Expected Recovery for Creditors upon Default Elior's Recovery Ratings reflect Fitch's expectations that the enterprise value of the company -- and resulting recoveries for its creditors upon default -- would be maximized in a restructuring scenario (going concern approach), rather than a liquidation due to the asset-light nature of the business. Fitch believes a 6.0x distressed EV/EBITDA multiple and 25% discount to EBITDA resulting from unsustainable financial leverage, possibly as a result of increasingly aggressive acquisition activity or contract losses, are fair assumptions under a distress scenario. This results in above-average expected recoveries (51%-70%) for first lien creditors in the event of default and hence a rating for the senior secured bank debt at 'BB-' one notch above Elior's IDR. Recoveries are supported by share pledges and guarantees representing at least 85% of the group's EBITDA and gross assets. RATING SENSITIVITIES Positive: Future developments that could lead to positive rating actions include: - Additional diversification, by segment and/or geography - Further deleveraging resulting in FFO adjusted gross leverage below 5.0x - FFO fixed charge coverage above 2.8x - FCF/total adjusted debt margin above 12% Negative: Future developments that could lead to negative rating action include: - FFO adjusted gross leverage above 7.0x - FFO fixed charge coverage below 2.0x - FCF/total adjusted debt margin below 5% KEM ONE: Arkema Takes EUR125 Million Hit From Bankruptcy -------------------------------------------------------- Elena Berton at Reuters reports that Arkema said on Wednesday that Arkema will book a first-quarter charge of EUR125 million (US$163 million) to reflect its exposure to unprofitable vinyls business Kem One. A French commercial court opened bankruptcy proceedings for Kem One in March at the request of its new owner, Klesch Group, led by American investor Gary Klesch, Reuters relates. According to Reuters, a court-appointed administrator is due to oversee Kem One's operations as part of the initial six-month procedure. Reuters relates that Arkema said the company will contribute EUR68.7 million to Kem One's financing during the observation period. Klesch Group is also suing Arkema for EUR310 million (US$403 million) in a dispute over the sale of Kem One, Reuters discloses. KemOne is a France-based chlor-alkali and polyvinyl chloride maker. The company operates at 22 industrial sites in 10 countries and has 2,600 employees, of whom 1,780 are based in France. ============= G E R M A N Y ============= IDENTIVE GROUP: Ernst & Young GmbH Raises Going Concern Doubt ------------------------------------------------------------- Identive Group, Inc., filed last month its annual report on Form 10-Q for the year ended Dec. 31, 2012. Ernst & Young GmbH Wirtschaftsprufungsgesellschaft, in Munich, Germany, expressed substantial doubt about Identive Group's ability to continue as a going concern, citing the Company's recurring losses and negative cash flows from operations. The Company reported a net loss of US$53.6 million on US$94.6 million of net revenues, compared with a net loss of US$10.2 million on US$102.7 million of net revenues in 2011. As a result of a significant decline in its stock price and changes to its forecasted revenue, gross margin and operating profit, the Company undertook interim goodwill impairment analyses as of June 30, 2012, and recorded a total goodwill impairment charge of US$27.1 million in its consolidated statements of operations for 2012. In conjunction with the goodwill impairment test, the Company also tested its long-lived assets for impairment and adjusted the carrying value of each asset group to its fair value and recorded the associated impairment charge of US$24.8 million in the consolidated statements of operations for 2012. The Company's balance sheet at Dec. 31, 2012, showed US$104.9 million in total assets, US$55.3 million in total liabilities, and stockholders' equity of US$49.6 million. A copy of the Form 10-K is available at http://is.gd/OIgKpj Identive Group, Inc., provides secure identification solutions that allow people to gain access to buildings, networks, information, systems and services -- while ensuring that the physical facilities and digital assets of the organizations they interact with are protected. The Company's common stock is listed on the NASDAQ Global Market in the U.S. under the symbol "INVE" and the Frankfurt Stock Exchange in Germany under the symbol "INV." The Company's corporate headquarters are located in Santa Ana, California and its European and operational headquarters are located in Ismaning, Germany, where the Company's financial reporting process is performed. The Company maintains facilities in Chennai, India for research and development and in Australia, Canada, Germany, Hong Kong, Japan, The Netherlands, Singapore, Switzerland and the U.S. for local operations and sales. The Company was founded in 1990 in Munich, Germany and incorporated in 1996 under the laws of the State of Delaware. VERIS GOLD: Incurs US$20 Million Net Loss in 2012 ------------------------------------------------- Veris Gold Corp. submitted to the U.S. Securities and Exchange Commission on March 26, 2013, its consolidated financial statements for the year ended Dec. 31, 2012. Deloitte LLP, in Vancouver, Canada, noted that the Company has incurred net losses over the past several years and has a working capital deficit in the amount of US$34.3 million and has an accumulated deficit of US$379 million as at Dec. 31, 2012. "These conditions, along with other matters as set forth in Note 1, indicate the existence of material uncertainties that may cast substantial doubt about the Company's ability to continue as a going concern." The Company reported a net loss of US$20.0 million on US$160.6 million of revenue in 2012, compared with net income of US$26.4 million on US$105.1 million of revenue in 2011. The Company has share purchase warrants issued that are denominated in Canadian dollars. As the Canadian dollar is not the functional currency of the Company, the issued and outstanding warrants are treated as financial instruments (derivative liabilities), and are thus revalued at each reporting period with the change in fair value recorded in net income. For the year ended Dec. 31, 2012 a revaluation gain of US$17.3 million was recognized compared to a gain of US$97.2 million in 2011. The decrease in the gain on warrants was offset by an $11.6 million decrease in derivative losses year over year. The Company's balance sheet at Dec. 31, 2012, showed US$348.5 million in total assets, US$249.8 million in total liabilities, and shareholders' equity of US$98.7 million. A copy of the consolidated financial statements for the year ended Dec. 31, 2012, is available at http://is.gd/1tLneq Veris Gold Corporation (TSX: VG) (OTC QB: YNGFF) (Frankfurt Xetra Exchange: NG6A), headquartered in Vancouver, Canada, is a mid- tier North American gold producer in the business of developing and operating gold mines in geo-politically stable jurisdictions. The Company's primary asset is the permitted and operating Jerritt Canyon gold mine located 50 miles north of Elko, Nevada. The Company also holds a diverse portfolio of precious metals properties in British Columbia and the Yukon Territory, Canada, including the former producing Ketza River mine. The Company's focus has been on the re-development of the Jerritt Canyon mining and milling facility. =========== G R E E C E =========== DRYSHIPS INC: E&Y Raises Going Concern Doubt -------------------------------------------- DryShips Inc. filed on March 22, 2013, its annual report on Form 20-F for the year ended Dec. 31, 2012. Ernst & Young (Hellas), in Athens, Greece, expressed substantial doubt about DryShips Inc.'s ability to continue as a going concern, citing the Company's working capital deficit of US$670 million at Dec. 31, 2012, and in addition, the non- compliance by the shipping segment with certain covenants of its loan agreements with banks. As of Dec. 31, 2012, the shipping segment was not in compliance with certain loan-to-value ratios contained in certain of its loan agreements. In addition, as of Dec. 31, 2012, the shipping segment was in breach of certain financial covenants, mainly the interest coverage ratio, contained in the Company's loan agreements relating to US$769,098,000 of the Company's debt. As a result of this non-compliance and of the cross default provisions contained in all bank loan agreements of the shipping segment and in accordance with guidance related to the classification of obligations that are callable by the creditor, the Company has classified all of its shipping segment's bank loans in breach amounting to US$941,339,000 as current at Dec. 31, 2012. The Company reported a net loss of US$288.6 million on US$1.210 billion of revenues in 2012, compared with a net loss of US$47.3 million on US$1.078 billion of revenues in 2011. The Company's balance sheet at Dec. 31, 2012, showed US$8.878 billion in total assets, US$5.010 billion in total liabilities, and shareholders' equity of US$3.868 billion. A copy of the Form 20-F is available at http://is.gd/0EhRQk Headquartered in Athens, Greece, DryShips Inc. (NASDAQ: DRYS) is an owner of drybulk carriers and tankers that operate worldwide. Through its majority owned subsidiary, Ocean Rig UDW Inc., DryShips owns and operates 10 offshore ultra deepwater drilling units, comprising of 2 ultra deepwater semisubmersible drilling rigs and 8 ultra deepwater drillships, 3 of which remain to be delivered to Ocean Rig during 2013 and 1 is scheduled for delivery during 2015. DryShips owns a fleet of 46 drybulk carriers (including newbuildings), comprising of 12 Capesize, 28 Panamax, 2 Supramax and 4 Very Large Ore Carriers (VLOC) with a combined deadweight tonnage of about 5.1 million tons, and 10 tankers, comprising 4 Suezmax and 6 Aframax, with a combined deadweight tonnage of over 1.3 million tons. * GREECE: Bank Recapitalization Credit Positive, Fitch Says ----------------------------------------------------------- The completion of the recapitalization process for Greek banks should contribute to their funding stability, Fitch Ratings says. If they can achieve sufficient private-sector participation, it could send a signal of improved investor confidence and eventually provide opportunities for them to access capital and wholesale funding markets. This development would be positive for their credit profile. However, a significant extension of the end-April deadline for the four largest banks (NBG, Eurobank, Alpha Bank and Piraeus Bank) to complete their recapitalization plans could prolong the correction of the sector's funding imbalances and its recovery. The bank recapitalizations involve raising equity and issuing contingent convertibles. The final capital needs estimated by the Bank of Greece total EUR40.5 billion and arise mainly from losses on Greek sovereign debt and projected credit losses on domestic loan portfolios based on an external stress test. The central bank also assessed each banks' profitability, deleveraging and capital plans. If the banks are unable to raise private-sector equity to meet the 10% threshold set under the recapitalization framework, the Greek authorities will cover banks' capital needs. The banks should also focus on achieving restructuring and synergy targets, especially in view of recent mergers and acquisitions, and manage asset-quality pressures. This should enhance their chances of attracting potential investors. The banks' 'f' Viability Ratings (VRs) could be upgraded if they achieve better solvency and funding profiles. Fitch will reassess the banks' VRs when their stand-alone credit profiles are clearer, and take into account recent acquisition activity and revised restructuring/recapitalization plans. However, VRs are likely to remain at a deeply speculative-grade level in the medium term because of weak credit fundamentals in the poor domestic operating environment. In addition, the four major banks face increased short-term risks from the restructuring and integration of recent acquisitions. Consolidation of the Greek banking sector could reduce excess capacity and improve financial stability in the longer term, but it also brings many challenges. The most significant transaction -- the NBG-Eurobank merger -- has been suspended, but will prove challenging due to the size of both banks if it eventually proceeds. Greek banks' Long-Term IDRs of 'CCC' remain linked to the sovereign. Their IDRs could at some point be driven by their VRs. The largest four Greek banks received bridge capital under the IMF/EU support framework, temporarily restoring capital levels until their capital-raising plans are completed. The share issues are fully underwritten by the Hellenic Financial Stability Fund, which has received EUR50 billion under the international bail-out program. Private shareholders will retain control of the banks provided they subscribe to at least 10% of the new issue, and will be granted warrants to buy the Fund's shares. ============= I R E L A N D ============= PATRICK PUNCH'S: In Liquidation; 50 Jobs Affected ------------------------------------------------- Business World reports that the Patrick Punch's Hotel in Limerick in has been placed into liquidation, affecting 50 jobs. The workers at the 72-bedroom at the hotel are angry at the closure, with some owed up to EUR5,000 in payment, Business World discloses. They apparently had foregone their wages in recent weeks to ensure the hotel kept trading, Business World says, citing the Limerick Leader newspaper. It is understood there are now around 34 full-time and 14 part- time staff facing redundancy, Business World notes. During the 1980s, Patrick Punch's was one of the most popular pubs in Limerick. It later expanded to become a four-star hotel. ========= I T A L Y ========= BANCA PADOVANA: Moody's Downgrades Standalone BFSR to 'E' --------------------------------------------------------- Moody's Investors Service downgraded Banca Padovana's standalone bank financial strength rating to E, equivalent to a standalone baseline credit assessment (BCA) of ca, from D- (equivalent to a BCA of ba3), and the bank's long-term deposit rating to B3 from Ba2. This action concludes the review initiated on 5 December 2012. At the same time, the rating agency said that it will withdraw all the bank's ratings for business reasons. The bank has no rated debt outstanding at the time of the withdrawal. At the time of withdrawal, Banca Padovana's ratings are as follows: - Long-term local and foreign currency deposit ratings of B3 with negative outlook; - Short-term local and foreign currency ratings of Not-Prime; - Standalone bank financial strength rating (BFSR) of E with no outlook; the BFSR is equivalent to a standalone baseline credit assessment (BCA) of ca. Ratings Rationale: Moody's says that the downgrade of the BCA to ca takes into account Banca Padovana's (i) loss making profile, (ii) the deterioration of asset quality to such high levels that it undermines the solvency and sustainability of the bank in the absence of external support (iii) modest capitalization which provides a wholly insufficient cushion against such asset impairments. Moody's believes that the bank's main source of credit strength stems from a high expectation of support from the cooperative credit banks, which results in a four-notch uplift of its long-term deposit rating to B3. In December 2012, the bank reported a net profit of just EUR0.2 million (1), which was positively influenced by a EUR11 million extraordinary gain (gross of taxes) on the sale of government bonds. This result comes after three consecutive years of net losses owing to weak and deteriorating asset quality and subsequently high provisions for loan losses. Problem loans at December 2012 stood at almost one quarter (2) of the overall loan book of Banca Padovana, which is significantly worse than the system average of 10% as of June 2012 (3). Additionally, capital levels are modest, especially taking into account the weak asset quality of the bank; as of December 2012, Banca Padovana's core tier 1 ratio stood at 7%, which compares to an average of around 12.6% for the smallest Italian banks as of June 2012 (4). Moody's believes that there is a high likelihood that Banca Padovana may require outside support from the co-operative credit bank network (BCCs), as indicated by the BCA of ca. At the same time, Moody's believes that there is a high probability of support for Banca Padovana from the co-operative credit bank network, which results in a four-notch uplift from the standalone BCA of ca to the deposit rating of B3. The rating agency's expectation is based on the co-operative network's track record of aiding troubled members in terms of capital and management support. This is somewhat moderated by Banca Padovana's relatively big size within the sector (its total assets are EUR2.2 billion as of December 2012, one of the largest cooperative sector banks in Italy), which may make it more challenging for the sector to provide support. The outlook on the long-term deposit rating is negative, reflecting the ongoing pressures on Banca Padovana as well as on the cooperative banking group in 2013 and 2014 in the current challenging operating environment. Moody's will withdraw the ratings for its own business reasons. The principal methodology used in these ratings was Moody's Consolidated Global Bank Rating Methodology published in June 2012. (1) Unless noted otherwise, data in this report is sourced from company's reports or Moody's Banking Financial Metrics. (2) Problem loans include: non-performing loans (sofferenze), watchlist (incagli - including only an estimate of those over 90 days overdue), restructured (ristrutturati) and past due loans (scaduti). (3) Source: Bank of Italy's Financial Stability Report, published in November 2012. (4) Source: Bank of Italy's Financial Stability Report, published in November 2012. * ITALY: Fitch Says Delinquency Levels Continue to Increase ----------------------------------------------------------- Fitch Ratings has published an updated version of its SME CLO Compare. The report is updated on a monthly basis. On March 15, 2013, Fitch assigned final rating to a new Italian SME CLO transaction, Pontormo SME Srl. The senior class A1, A2 and A3 notes which benefit from 40.6% credit enhancement (CE) were rated at 'AAsf', Outlook Stable. Pontormo SME Srl is a multi-originator cash flow securitisation of a EUR375.9 million static portfolio of secured and unsecured loans granted to small- and medium-sized enterprises in Italy, originated by Banca di Credito Cooperativo di Fornacette S.c.p.a, Banca di Credito Cooperativo di Castagneto Carducci S.c.p.a. and Banca Popolare di Lajatico S.c.p.a. all of which are not rated by Fitch. On March 26, 2013, the agency assigned expected ratings to a new Spanish SME CLO, IM Cajamar Empresas 5 FTA. The senior class A1 and A2 notes which benefit from 37% CE were assigned a 'A+sf(exp)' rating. IM Cajamar Empresas 5, F.T.A. is a granular cash flow securitisation of a EUR675 million static portfolio of secured and unsecured loans granted to Spanish small- and medium- sized enterprises (SMEs) and self-employed individuals (SEIs). The loans were originated by Cajamar Caja Rural and Caja Rural del Mediterraneo, Ruralcaja. Cajamar and Ruralcaja merged in October 2012 to form Cajas Rurales Unidas (CRU, 'BB'/Stable/'B'). On March 22, 2013, Fitch assigned final ratings to a Spanish leasing transaction, Foncaixa Leasings 2, FTA. The senior class A notes, which benefit from 31% CE were assigned a 'A-sf', Outlook Stable. The transaction is a securitization of a static EUR1.15 billion portfolio of credit rights associated to leasing contracts originated by CaixaBank ('BBB'/Negative/'F2') in Spain. A large share of the portfolio (c. 68% of the assets in the preliminary portfolio analyzed by Fitch) was previously securitized in Foncaixa Leasings 1, FTA and has been refinanced in this transaction. The leasing contracts have been underwritten by Spanish small and medium enterprises domiciled in Spain. Fitch has updated its global rating criteria for collateralized debt obligations backed by loans to small- and medium-sized enterprises (SMEs). The agency anticipates no rating impact from the implementation of this criteria update. As of the updated criteria, Fitch has increased the market value decline (MVD) expectations for commercial properties located in Spain by up to 10% as a result of further recent increased volatility observed in this market. Moreover, commercial MVD assumptions for other jurisdictions have also been increased by up to 5%. Additionally, the agency has revised the average annual default rate expectation for Italy, increasing it to 5% from 3.75%, in line with recent default statistics received from originating banks. On March 8, 2013, Fitch downgraded Italy's Long-term Issuer Default Rating (IDR) to 'BBB+' from 'A-'. As a result a rating cap of 'AA+sf', six notches above Italy's IDR, is applied for all structured finance transactions. Currently Fitch rates nine Italian SME CLOs. While their originators were downgraded, following Italy's downgrade, this downgrade had no impact on the rating of the senior notes, as the transactions' main counterparty roles are performed by international institutions which were not affected by the downgrades. Delinquency levels in Italy and Spain have continued to increase since Q112 reflecting the economic contraction in the eurozone periphery. Loans that are 90 days past due (dpd) but not considered as defaulted by the transaction documents have almost doubled since last year and now represent almost 6% of the Spanish SME portfolio. While part of the increase results from portfolio amortization, the high level of arrears reflects continuing portfolio deterioration as an increasing number of loans become delinquent. Fitch expects cumulative defaults that currently stand at only 3.3% to increase sharply following the increasing pattern of delinquencies, as for most transactions defaults are defined as loans more than 12 months in arrears. Cumulative defaults in Italy have increased rapidly since Q112 and currently represent more than 5% of the initial portfolio balance and over 8% of the outstanding portfolio balance. The worsening performance in Italian and Spanish transactions has been largely offset by the increasing levels of credit enhancement due to structural deleveraging. =================== K A Z A K H S T A N =================== MANGISTAU ELECTRICITY: Fitch Assigns Rating to Domestic Bond ------------------------------------------------------------ Fitch Ratings has assigned Mangistau Electricity Distribution Company JSC's (MEDNC) KZT1,700 million 8% domestic bond due 2023 an expected local currency senior unsecured 'BBB-(EXP)' rating. The rating is in line with MEDNC's Long-term local currency Issuer Default Rating (IDR) of 'BBB-', which has a Stable Outlook, as the bond will be direct and unsecured obligations of the company. A full list of MEDNC's ratings is below. The final rating is contingent upon the receipt of final documentation conforming materially to information already received. The proceeds of the bond issue will be used by the company for financing its investment program for 2013-2015. KEY RATING DRIVERS - State Support MEDNC's ratings are linked to those of Kazakhstan (Long-term foreign and local currency IDRs of 'BBB+'/Stable and 'A-'/Stable, respectively), and notched down by three levels to reflect that little indication has been given by MEDNC's state-owned parent, JSC Samruk-Energy (S-E, BBB/Stable), that it will provide timely financial assistance to MEDNC in case of need. The notching reflects the fact that S-E has not provided tangible financial assistance to MEDNC in the past three years. The dividend payout ratio to S-E from MEDNC was set back to 50% of net profit (or KZT83 million) for 2011 from 100% of net income (or KZT64 million) for 2010, which management expects to remain the case over the medium term. Fitch believes that this will not put significant pressure on the rating. Fitch views MEDNC's standalone business and financial profile as commensurate with a weak 'BB-' rating. S-E does not view MEDNC as a strategic investment but is not actively pursuing a reduction of its stake in MEDNC. The ratings are based on Fitch's assumption that S-E will retain at least majority ownership of MEDNC over the medium term. - Near-Monopoly Position MEDNC's credit profile is supported by its near-monopoly position in electricity transmission and distribution in the Region of Mangistau, one of Kazakhstan's strategic oil & gas regions. It is also underpinned by prospects for economic development and expansion in the region, in relation to oil & gas and transportation, and a cost-plus-based tariff mechanism under which MEDNC operates. The company also benefits from limited foreign exchange exposure and absence of interest rate risks. - Small Scale, High Customer Concentration The ratings are constrained by MEDNC's small scale limiting its cash flow generation capacity, high exposure to a single industry (oil & gas) and, within that, high customer concentration (the top four customers represented over 65% of 2011 revenue). The latter is somewhat mitigated by the state ownership of major customers (Ozenmunaigaz and Kaz GPZ are 100% subsidiaries of KazMunaiGaz National Company; and Mangistaumunaigas and Karazhanbasmunai are 50%-owned by KazMunaiGaz National Company) and by prepayment terms under sales agreements. - Stable Cash Flow From Operations Expected Fitch expects MEDNC to continue generating solid and stable cash flow from operation over 2012-15. Free cash flows are likely to have remained positive in 2012, but may turn negative in 2013, due to substantial capex plans. For 2012, Fitch estimates MEDNC's cash flow from operations at about KZT1.5 billion, before capex (KZT570 million) and dividends (KZT88 million). - Capex-Driven Leverage Increase Expected MEDNC's funds flow from operations (FFO) adjusted leverage for 2011 slightly improved to 2.2x from 2.9x at end-2010. This ratio is expected to remain below 3x in 2012-2013 before increasing to around 3x in 2014, driven by an increase in capex. FFO interest cover also increased to 3.6x at end-2011 from 2.9x at end-2010. Fitch expects interest cover to remain in the low single-digit territory. RATING SENSITIVITIES Positive: Future developments that could lead to positive rating actions include: - A positive change in Kazakhstan's ratings, provided the link between MEDNC and the sovereign strengthens. - Stronger links with the sovereign demonstrated by unexpected explicit state support - Enhancement of business profile, such as diversification and scale with only modest increase in leverage Negative: Future developments that could lead to negative rating action include: - A negative change in Kazakhstan's ratings - Reduction of S-E's stake to less than 50% provided that a new shareholder does not offer meaningful financial support or capex funding - Deterioration in MEDNC's FFO adjusted leverage to 4x or above and FFO interest cover to 2x or below on a sustained basis Liquidity & Debt Structure - Manageable Liquidity Fitch views MEDNC's liquidity as manageable, comprising solely cash as the company does not have any available credit lines. At end-2012, MEDNC's cash balance of KZT1.2 billion was sufficient to cover short-term maturities of KZT1.1 billion. Cash balances are mostly held in local currency with a domestic bank, which is a concern. At end-2012, most of MEDNC's debt was represented by two unsecured fixed-rate bonds of KZT800 million each with maturity in 2013-2014. The rest of the debt is represented by 25- year interest-free loans provided until 2009 by MEDNC's customers to co-finance new network connections. Full List of MEDNC's Ratings Long-term foreign currency IDR: 'BB+', Outlook Stable Long-term local currency IDR: 'BBB-', Outlook Stable National Long-term rating: 'AA(kaz)', Outlook Stable Foreign currency short-term IDR: 'B' Foreign currency senior unsecured rating: 'BB+' Local currency senior unsecured rating: 'BBB-' ===================== N E T H E R L A N D S ===================== FLORIMEX: Files for Bankruptcy; Owes EUR20 Million -------------------------------------------------- FloraCulture International reports that Florimex has filed for bankruptcy as it struggles under a mammoth burden of an estimated EUR20 million. Plans for restart or take-over failed due to a lack of time and interested buyers, FloraCulture discloses. The collapse of the firm, which employed around 300 personnel, has shocked the flower industry, raising fears over Florimex's creditors, FloraCulture relates. Florimex is a Dutch floral wholesaler. Owned by private equity company Bencis, Florimex was one of the largest players in the European flower and plant trade with a turnover of EUR207 million in 2011. It has been active in both the retail and wholesale segments of the market. Florimex's holding was located in Aalsmeer and consisted of Florimex Aalsmeer (cut greens), Cees van Starkenburg (flower wholesale Europe) Baardse (worldwide potted plant wholesale and retail), according to FloraCulture. MONASTERY 2006-1: Liquidity Transfer, Waiver No Impact on Ratings ----------------------------------------------------------------- Moody's has determined the proposed actions to (i) transfer the liquidity facility from Royal Bank of Scotland N.V. (RBS N.V., A3/P-2) to Royal Bank of Scotland PLC (RBS PLC, A3/P-2); and (ii) waive the liquidity facility short term rating trigger, effectively waiving the liquidity facility stand-by drawing requirement, will not, in and of themselves and at this time, result in a reduction or withdrawal of the current ratings of the notes (the "Notes") issued by Monastery 2006-1 B.V. Moody's does not express an opinion as to whether the proposals may be considered to have negative effects in any other respect. Moody's has assessed the proposal to disregard the breach of liquidity facility trigger as a result of the downgrade of RBS to A3/P-2 on 21 June 2012, effectively disregarding the stand-by drawing requirement under the liquidity facility agreement. In reaching the conclusion, Moody's has paid particular regard to the highest rated notes in the transaction being A2(sf). However the linkage to RBS has increased and is significant as there is no stand-by drawing under the liquidity facility and the reserve fund is not fully funded. There is also linkage to RBS as it remains the swap counterparty guaranteeing excess spread in the transaction. The principal methodology used in this rating was Moody's Approach to Rating RMBS Using the MILAN Framework published in March 2013. Moody's Rates Monastery 2006-1's Class D Notes at B3 and Class D Notes at Ca. SENSATA TECHNOLOGIES: S&P Assigns 'BB-' Rating to US$400MM Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services said that it assigned its 'BB-' issue rating to Sensata Technologies B.V.'s proposed $400 million senior unsecured notes with a recovery rating of '5', indicating the expectation of modest (10%-30%) recovery in the event of a payment default. At the same time, S&P placed its 'B+' issue-level rating on the existing US$700 million unsecured notes on CreditWatch with positive implications. If the company completes the transaction as S&P expects, it will raise the issue rating on these notes to 'BB-' and revise the recovery rating on the notes to '5' from '6'. S&P also affirmed the senior secured issue ratings at 'BBB-' with a recovery rating of '1', indicating expectation of very high (90% to 100%) recovery in event of a payment default. S&P affirmed its 'BB' corporate credit rating on the company. The outlook remains stable. "The rating actions reflect our review of the recovery prospects for the senior unsecured noteholders, which we believe will improve following the proposed transaction," said Standard & Poor's credit analyst Dan Picciotto. "We expect the transaction to reduce term loan debt by about US$600 million to about US$480 million from US$1.08 billion and will be funded through notes proceeds and cash on hand. The affirmation of the corporate credit rating reflects our view that Bain Capital's ownership of publicly traded Sensata Technologies Holding N.V. (the ultimate parent of rated Sensata Technologies B.V.) remains substantial (about 36%) and that a higher rating requires significant further exit by Bain. We raised the corporate rating one notch in December 2012 to 'BB' when Bain reduced its holding to less than 50% because we believe this provided further evidence of the lessening influence of Bain on the company's financial policy". The ratings on electronic sensors and controls manufacturer Sensata reflect the company's "aggressive" financial risk profile and "satisfactory" business risk profile. Standard & Poor's believes credit measures will be somewhat better than levels S&P expects for the rating, including funds from operations (FFO) to adjusted debt of about 20% and adjusted debt to EBITDA of about 3.5x. S&P believes these figures will approach 25% and 2.5x, respectively, in 2013, providing some capacity for potential for debt-financed acquisitions. Also, S&P expects Sensata's adjusted EBITDA margin to remain very good at about 29% and revenue to increase modestly, benefiting from: -- A continued slow global economic recovery, including S&P's economists' estimate of 2.7% GDP growth this year and 3.1% in 2014, -- Global light-vehicle production growth (for the U.S. up about 6% to 15.2 million in 2013 per S&P's economist forecast) despite potentially weak conditions in Europe, and -- The potential to supplement growth through some acquisitions. The Netherlands-based Sensata, formerly a division of Texas Instruments Inc., consists of two business units that manufacture highly engineered electronic sensors and controls. S&P's assessment of the company's management and governance is "fair." S&P expects revenue to approach US$2 billion in 2012. The company is significantly exposed to the volatility of the global automotive market, which accounts for more than half of sales. The European auto market is Sensata's largest single exposure, accounting for 24% of 2012 sales, and S&P believes the region presents heightened near-term economic risks. The outlook is stable. S&P believes credit measures will be somewhat better than levels it considers appropriate for the rating of about 20% FFO to debt and 3.5x debt to EBITDA. However, an upgrade is unlikely until Bain has significantly further reduced its investment in Sensata such that a full exit is very likely. It would also depend on S&P's expectation that the company would maintain appropriate credit measures for a higher rating, such as FFO to debt of 25% or more and debt to EBITDA of about 3x or less. A downgrade is possible if results deteriorated such that S&P expected FFO of about 15% or less and debt to EBITDA of 4x or more. Given the planned debt repayment, this would likely require a substantial market downturn in the absence of increasing debt. This could occur, for instance, if revenue declines by more than 15% in 2014 and operating margin declines by more than 2%, and no further debt reduction takes place. This scenario would likely require global recessionary conditions causing declines in global light vehicle production. =========== P O L A N D =========== COGNOR SA: S&P Cuts Rating on EUR118MM Sr. Sec. Notes to 'CCC-' --------------------------------------------------------------- Standard & Poor's Rating Services said that it lowered its long- term corporate rating on Poland-based steel maker Cognor S.A. to 'CCC' from 'CCC+'. The outlook is negative. At the same time, S&P lowered to 'CCC-' from 'CCC' its issue rating on Cognor's outstanding EUR118 million (about Polish zloty [PLN] 485 million) senior secured notes. In addition, S&P corrected its short-term corporate credit rating on Cognor by lowering it to 'C'. The short-term rating was previously incorrect in S&P's systems as 'B'. "The downgrades reflect our view that Cognor's ability to execute a refinancing program over the coming months is highly uncertain in light of its "weak" liquidity, large debt maturities, and weak conditions in the Polish steel industry. In our view, the likelihood of a near-term default or distressed exchange offer has therefore increased. We understand that Cognor's debt maturities include short-term credit facilities of more than PLN80 million to be repaid in the third and fourth quarters of 2013, and EUR118 million senior secured notes due in February 2014. This compares with unrestricted available cash of PLN48 million as of Dec. 31, 2012," S&P said. "We understand that Cognor is formulating a refinancing plan that includes an equity injection of less than PLN100 million and the issuance of new notes of at least PLN370 million. However, the equity injection is more than Cognor's current market value of PLN85 million and therefore we are uncertain that Cognor would succeed in raising this amount. Moreover, we estimate that the main shareholder's ability to maintain his 65% stake as part of the proposed refinancing is low. According to the company, the equity injection should take place in the second quarter of 2013. Even if Cognor executes the equity issue, we believe that its capital structure would remain weak, with debt to EBITDA of more than 6x and no prospect of deleveraging quickly," S&P added. In S&P's view, Cognor's weakening liquidity may lead to further downgrades and ultimately to a default in the coming quarters if there is a lack of progress on the refinancing of its EUR118 million senior secured notes due February 2014. S&P could revise the outlook to stable if Cognor presents a refinancing plan that it considers to be achievable, including a material equity injection. However, S&P believes that the success of the company's refinancing plan is uncertain, particularly in the context of challenging conditions in the Polish steel market. POLIMEX-MOSTOSTAL: Has Until May 31 to Meet Share Sale Terms ------------------------------------------------------------ Piotr Skolimowski at Bloomberg News, citing an e-mailed statement, reports that Polimex-Mostostal said its creditors gave it until May 31 to raise PLN50 million from a share sale, extending deadline in the company's debt restructuring plan. Polimex filed a share sale prospectus with the financial watchdog, Bloomberg relates. As reported by the Troubled Company Reporter-Europe on April 4, 2013, Polska Agencja Prasowa related that Polimex said so far, the company raised around PLN200 million from the issue of N1- series shares. In line with the standstill agreement annex signed in late September, Polimex was to raise some PLN250 million from a share issue addressed to bondholders, some PLN235 million from a share issue addressed to select investors as well as at least PLN330 million from asset disposal, PAP disclosed. Polimex-Mostostal is an engineering and construction company that has been on the market since 1945. The Company is distinguished by a wide range of services provided on general contractorship basis for the chemical as well as refinery and petrochemical industries, power engineering, environmental protection, industrial and general construction. The Company also operates in the field of road and railway construction as well as municipal infrastructure. Polimex-Mostostal is the largest manufacturer and exporter of steel products, including platform gratings, in Poland. =========== R U S S I A =========== KALVACHA GAS: Declared Insolvent by Razgrad Court ------------------------------------------------- FOCUS News Agency reports that the Razgrad Regional Court declared Kalvacha gas insolvent. Kalvacha gas has until recently controlled 12% of the autogas sales in Bulgaria and ranked 19th in the sector with sales revenues of BGN91.3 million for 2011, FOCUS News Agency says, citing Capital Daily's K100 chart. A couple of months ago, however, it was announced the company was facing financial difficulties, but its officials refused any comments on the rumors, FOCUS News Agency recounts. According to FOCUS News Agency, Capital Daily said that in the meantime, a private enforcement agent put up for sale the assets of SK Industrialni Imoti in Stara Zagora (Kalvacha plant), following a BGN7.196 million claim from Eurobank EFG Bulgaria (Postbank). Kubrat-based Kalvacha gas is a fuel retailer. It is part of Stoycho Kalvachev's group Kalvacha. ========= S P A I N ========= BBVA-6 FTPYME: Moody's Cuts Rating on Class B Notes to 'Caa1' ------------------------------------------------------------- Moody's Investors Service downgraded by three notches the rating of the Class B notes and confirmed the ratings of two senior notes in BBVA 6 FTPYME, FTA. At the same time, Moody's confirmed the ratings of all the notes in BBVA 5 FTPYME, FTA and the ratings of two senior notes in BBVA 3 FTPYME, FTA. Moody's also upgraded by two notches to Baa2 (sf) from Ba1 (sf) the rating on the Class C notes in BBVA 3 FTPYME, FTA. While insufficient credit enhancement to address sovereign and counterparty risk triggered the downgrade of some tranches, the adequacy of credit enhancement levels primarily drove the rating upgrade and confirmations of the other tranches. The rating action concludes the review for downgrade initiated by Moody's on July 2, 2012, following the downgrade of Spain's government bond ratings to Baa3 from A3 on June 13, 2012. All three affected transactions are Spanish asset-backed securities (ABS) transactions backed by loans to small and medium-sized enterprises (SME) originated by Banco Bilbao Vizcaya Argentaria, S.A. (Baa3 /P-3, not on watch). Ratings Rationale: The rating action primarily reflects the insufficiency of credit enhancement of the notes downgraded to address sovereign and counterparty risk, and the adequate levels of credit enhancement of the notes upgraded and confirmed. All Spanish SME ABS affected by this rating action are impacted by the introduction of new adjustments to Moody's modeling assumptions to account for the effect of deterioration in sovereign creditworthiness. This action also reflects the revision of key collateral assumptions. Moody's confirmed the ratings of securities whose credit enhancement and structural features provided enough protection against sovereign and counterparty risk. The determination of the applicable credit enhancement that drives this rating action reflects the introduction of additional factors in Moody's analysis to better measure the impact of sovereign risk on structured finance transactions (see "Structured Finance Transactions: Assessing the Impact of Sovereign Risk", March 11, 2013). - Additional Factors Better Reflect Increased Sovereign Risk Moody's has supplemented its analysis to determine the loss distribution of securitized portfolios with two additional factors, the maximum achievable rating in a given country (the local currency country risk ceiling) and the applicable portfolio credit enhancement for this rating. With the introduction of these additional factors, Moody's intends to better reflect increased sovereign risk in its quantitative analysis, in particular for mezzanine and junior tranches. The Spanish country ceiling is A3, which is the maximum rating that Moody's will assign to a domestic Spanish issuer including structured finance transactions backed by Spanish receivables. The portfolio credit enhancement represents the required credit enhancement under the senior tranche for it to achieve the country ceiling. By lowering the maximum achievable rating, the revised methodology alters the loss distribution curve and implies an increased probability of high loss scenarios. Under the updated methodology incorporating sovereign risk on ABS transactions, loss distribution volatility increases to capture increased sovereign-related risks. Given the expected loss of a portfolio and the shape of the loss distribution, the combination of the highest achievable rating in a country for structured finance transactions and the applicable credit enhancement for this rating uniquely determine the volatility of the portfolio distribution, which the coefficient of variation (CoV) typically measures for ABS transactions. A higher applicable credit enhancement for a given rating ceiling or a lower rating ceiling with the same applicable credit enhancement both translate into a higher CoV. - Moody's Revises Key Collateral Assumptions Moody's maintained its default and recovery rate assumptions for the three transactions, which it updated on 18 December 2012 (see "Moody's updates key collateral assumptions in Spanish ABS transactions backed by loans to SMEs." According to the updated methodology, Moody's increased the CoV, which is a measure of volatility. For BBVA 3 FTPYME, the current default assumption is 8.7% of the current portfolio and the assumption for the fixed recovery rate is 50%. Moody's has increased the CoV to 112% from 55%, which, combined with the mean DP and recovery assumptions, corresponds to a portfolio credit enhancement of 23.7%. For BBVA 5 FTPYME, the current default assumption is 12% of the current portfolio and the assumption for the fixed recovery rate is 45%. Moody's has increased the CoV to 81% from 45%, which, combined with the mean DP and recovery assumptions, corresponds to a portfolio credit enhancement of 23.9%. For BBVA 6 FTPYME, the current default assumption is 16.3% of the current portfolio and the assumption for the fixed recovery rate is 45%. Moody's has increased the CoV to 68% from 45%, which, combined with the mean DP and recovery assumptions, corresponds to a portfolio credit enhancement of 26.6%. - Moody's Has Considered Exposure to Counterparty Risk The conclusion of Moody's rating review also takes into consideration the exposure of the three transactions to BBVA, which performs various roles in the transactions (servicer, collection account, issuer account and swap counterparty). In all transactions, BBVA acts as servicer and collections account bank, and transfers collections daily to the treasury accounts in the name of the funds at BBVA. The reserve funds also reside at BBVA. Societe Generale, Sucursal en Espana (SGSE, A2/ P-1) guarantees the cash held in the treasury accounts up to EUR12 million for BBVA 3 FTPYME, EUR9 million for BBVA 5 FTPYME and EUR10 million for BBVA 6 FTPYME, respectively. In addition, any cash held at the treasury accounts in excess of the guarantee amount is transferred on an ongoing basis to SGSE's additional treasury accounts (in the name of the funds). For these three transactions, Moody's incorporated into its analysis the potential default of BBVA as servicer and considered the linkage between the rating of the notes and the rating of BBVA to be medium. This could expose the transaction to a limited commingling loss of one month of collections As part of its analysis, Moody's also assessed the exposure to BBVA as swap counterparty in the three transactions. Based on the provided information, BBVA has been posting cash collateral on a weekly basis. The revised ratings of the notes, which reflect the insufficiency of credit enhancement to address sovereign risk, are consistent with this exposure. - Other Developments May Negatively Affect the Notes In consideration of Moody's new adjustments, any further sovereign downgrade would negatively affect structured finance ratings through the application of the country ceiling or maximum achievable rating, as well as potentially increased portfolio credit enhancement requirements for a given rating. As the euro area crisis continues, the ratings of structured finance notes remain exposed to the uncertainties of credit conditions in the general economy. The deteriorating creditworthiness of euro area sovereigns as well as the weakening credit profile of the global banking sector could further negatively affect the ratings of the notes. Moody's describes additional factors that may affect the ratings in the Request for Comment, "Approach to Assessing Linkage to Swap Counterparties in Structured Finance Cashflow Transactions: Request for Comment", July 2, 2012. In reviewing these transactions, Moody's used ABSROM to model the cash flows and determine the loss for each tranche. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the inverse normal distribution assumed for the portfolio default rate. In each default scenario, Moody's calculates the corresponding loss for each class of notes given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss for each tranche is the sum product of the probability of occurrence of each default scenario; and the loss derived from the cash flow model in each default scenario for each tranche. As such, Moody's analysis encompasses the assessment of stressed scenarios. In the context of the rating review, Moody's has remodeled the transactions and adjusted a number of inputs to reflect the new approach. In addition, during its review the rating agency corrected the interest deferral trigger input for the Class C notes in BBVA 3 FTPYME. Principal Methodology The principal methodology used in these ratings was "Moody's Approach to Rating CDOs of SMEs in Europe", published in February 2007. The revised approach to incorporating country risk changes into structured finance ratings forms part of the relevant asset class methodologies, which Moody's updated and republished or supplemented on March 11, 2013, along with the publication of its Special Comment "Structured Finance Transactions: Assessing the Impact of Sovereign Risk". Other factors used in these ratings are described in "The Temporary Use of Cash in Structured Finance Transactions: Eligible Investment and Bank Guidelines", published in March 2013. List of Affected Ratings Issuer: BBVA-3 FTPYME, Fondo De Titulizacion De Activos EUR215.3M A2(G) Notes, Confirmed at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade EUR40.8M B Notes, Confirmed at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade EUR18.6M C Notes, Upgraded to Baa2 (sf); previously on Jul 2, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Issuer: BBVA 5 FTPYME Fondo de Titulizacion de Activos EUR1472.8M A1 Notes, Confirmed at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade EUR200M A2 Notes, Confirmed at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade EUR130.3M A3(G) Notes, Confirmed at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade EUR39.9M B Notes, Confirmed at Baa2 (sf); previously on Jul 2, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Issuer: BBVA-6 FTPYME, Fondo de Titulizacion de Activos EUR1201.9M A1 Notes, Confirmed at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf) and Remained On Review for Possible Downgrade EUR215.5M A2(G) Notes, Confirmed at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf) and Remained On Review for Possible Downgrade EUR50.3M B Notes, Downgraded to Caa1 (sf); previously on Jul 2, 2012 B1 (sf) Placed Under Review for Possible Downgrade GC FTYPME PASTOR: Moody's Lowers Rating on Class E Notes to 'Ca' ---------------------------------------------------------------- Moody's Investors Service affirmed and confirmed the ratings of the outstanding notes issued by EdT FTYPME PASTOR 3, FTA. At the same time, the rating agency downgraded the rating of the junior note and confirmed the ratings of the other notes issued by GC FTYPME PASTOR 4, FTA. Sufficient credit enhancement, which protects against sovereign and counterparty risk, primarily drove these confirmations. Conversely, insufficient credit enhancement and the high likelihood of loss accounted for the downgrade. The rating action concludes the review for downgrade initiated by Moody's on July 2, 2012. Both transactions are Spanish asset- backed securities transactions backed by loans to small and medium-sized enterprises (SME ABS) originated by Banco Popular Espanol, S.A. (Ba1 on review for possible downgrade/NP). Ratings Rationale: These confirmations primarily reflect the availability of sufficient credit enhancement to address sovereign and increased counterparty risk. The introduction of new adjustments to Moody's modeling assumptions to account for the effect of deterioration in sovereign creditworthiness, the revision of key collateral assumptions and increased exposure to lowly rated counterparties have had no effect on the ratings of most of the notes in both transactions. However, insufficient credit enhancement for the Class E note issued by GC PTYPME PASTOR 4 and the high likelihood of loss under that note, given the observed performance, drove the rating downgrade from Caa3 (sf) to Ca (sf). - Additional Factors Better Reflect Increased Sovereign Risk Moody's has supplemented its analysis to determine the loss distribution of securitized portfolios with two additional factors, the maximum achievable rating in a given country (the local currency country risk ceiling) and the applicable portfolio credit enhancement for this rating. With the introduction of these additional factors, Moody's intends to better reflect increased sovereign risk in its quantitative analysis, in particular for mezzanine and junior tranches. See "Structured Finance Transactions: Assessing the Impact of Sovereign Risk" for a more detailed explanation of the additional parameters. The Spanish country ceiling is A3, which is the maximum rating that Moody's will assign to a domestic Spanish issuer including structured finance transactions backed by Spanish receivables. The portfolio credit enhancement represents the required credit enhancement under the senior tranche for it to achieve the country ceiling. By lowering the maximum achievable rating, the revised methodology alters the loss distribution curve and implies an increased probability of high loss scenarios. Under the updated methodology incorporating sovereign risk on ABS transactions, loss distribution volatility increases to capture increased sovereign-related risks. Given the expected loss of a portfolio and the shape of the loss distribution, the combination of the highest achievable rating in a country for structured finance and the applicable credit enhancement for this rating uniquely determines the volatility of the portfolio distribution, which the coefficient of variation (CoV) typically measures for ABS transactions. A higher applicable credit enhancement for a given rating ceiling or a lower rating ceiling with the same applicable credit enhancement both translate into a higher CoV. - Moody's Revises Key Collateral Assumptions Moody's maintained its default and recovery rate assumptions for both transactions, which it updated on 18 December 2012 (see "Moody's updates key collateral assumptions in Spanish ABS transactions backed by loans to SMEs." According to the updated methodology, Moody's increased the CoV, which is a measure of volatility. For EdT FTYPME PASTOR 3, the current default assumption is 29.0% of the current portfolio and the assumption for the fixed recovery rate is 50.0%. Moody's has increased the CoV to 58.3% from 28.0%, which, combined with the revised key collateral assumptions, corresponds to a portfolio credit enhancement of 35.4%. For GC FTYPME PASTOR 4, the current default assumption is 23.0% of the current portfolio and the assumption for the fixed recovery rate is 45.0%. Moody's has increased the CoV to 52.7% from 34.0%, which, combined with the revised key collateral assumptions, corresponds to a portfolio credit enhancement of 27.5%. - Moody's Has Considered Exposure to Counterparty Risk The conclusion of Moody's rating review also takes into consideration the increased exposure to commingling due to weakened counterparty creditworthiness. In both transactions, Banco Popular Espanol, SA acts as servicer and transfers collections on a weekly basis to the reinvestment accounts at Barclays Bank PLC (A2/P-1). The reserve funds are opened at Barclays Bank. Moody's has incorporated into its analysis the potential default of the servicer, which could expose the transaction to a commingling loss on approximately one month of collections. Confederacion Espanola de Cajas de Ahorro ("CECABANK" Ba1 on review for downgrade /NP) and CAIXA Bank (Baa3/P-3) act as swap counterparties in EdT FTYPME PASTOR 3 and GC FTYPME PASTOR 4, respectively. As part of its analysis, Moody's assessed the exposure to the swap counterparty, which does not have a negative effect on the rating levels at this time. - Moody's Has Considered the Credit Enhancement Levels of the Rated Notes In GC FTYPME PASTOR4, the senior Class A3G notes benefit from a guarantee from the Government of Spain (Baa3), which has been drawn on an ongoing basis to cover the shortfall of due principal, up to an amount of approximately EUR11 million at the time of this review. As a consequence, the Spanish government now has a claim against the special purpose vehicle up to the drawn amount of the guarantee that ranks senior to the mezzanine and junior tranches of the transaction. The insufficient credit enhancement of the Class E notes resulting from this senior claim is the main driver behind its downgrade from Caa3 (sf) to Ca (sf). For all the other notes in both transactions, Moody's has assessed that the level of credit enhancement is commensurate with the ratings assigned, given the rating agency's pool performance expectations and the significant exposure of the pool to the biggest borrowers, particularly in EdT FTYPME PASTOR 3. Therefore, sufficient credit enhancement has driven the confirmation of the ratings of all other notes. - Other Developments May Negatively Affect the Notes In consideration of Moody's new adjustments, any further sovereign downgrade would negatively affect structured finance ratings through the application of the country ceiling or maximum achievable rating, as well as potentially increased portfolio credit enhancement requirements for a given rating. As the euro area crisis continues, the ratings of structured finance notes remain exposed to the uncertainties of credit conditions in the general economy. The deteriorating creditworthiness of euro area sovereigns as well as the weakening credit profile of the global banking sector could further negatively affect the ratings of the notes. Moody's describes additional factors that may affect the ratings in its Request for Comment, "Approach to Assessing Linkage to Swap Counterparties in Structured Finance Cashflow Transactions: Request for Comment", July 2, 2012. In reviewing these transactions, Moody's used ABSROM to model the cash flows and determine the loss for each tranche. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the inverse normal distribution assumed for the portfolio default rate. In each default scenario, Moody's calculates the corresponding loss for each class of notes given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss for each tranche is the sum product of the probability of occurrence of each default scenario and the loss derived from the cash flow model in each default scenario for each tranche. As such, Moody's analysis encompasses the assessment of stressed scenarios. When remodeling the transactions affected by this rating actions, some inputs have been adjusted to reflect the new approach. Principal Methodology The principal methodology used in these ratings was "Moody's Approach to Rating CDOs of SMEs in Europe", published in February 2007. The revised approach to incorporating country risk changes into structured finance ratings forms part of the relevant asset class methodologies, which Moody's updated and republished or supplemented on March 11, 2013 ("Incorporating Sovereign risk to Moody's Approach to Rating CDOs of SMEs in Europe" ), along with the publication of its Special Comment "Structured Finance Transactions: Assessing the Impact of Sovereign Risk". Other factors used in these ratings are described in "The Temporary Use of Cash in Structured Finance Transactions: Eligible Investment and Bank Guidelines", published in March 2013. List Of Affected Ratings: Issuer: EdT FTPYME PASTOR 3 Fondo de Titulizacion de Activos EUR38.7M B Notes, Affirmed A3 (sf); previously on Oct 23, 2012 Confirmed at A3 (sf) EUR15.4M C Notes, Confirmed at Caa1 (sf); previously on Jul 2, 2012 Caa1 (sf) Placed Under Review for Possible Downgrade Issuer: GC FTPYME Pastor 4, FTA EUR50.4M A3G Notes, Confirmed at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade EUR15.8M B Notes, Confirmed at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade EUR15.7M C Notes, Confirmed at Ba2 (sf); previously on Jul 2, 2012 Ba2 (sf) Placed Under Review for Possible Downgrade EUR18.9M D Notes, Confirmed at Caa2 (sf); previously on Jul 2, 2012 Caa2 (sf) Placed Under Review for Possible Downgrade EUR12.6M E Notes, Downgraded to Ca (sf); previously on Jul 2, 2012 Caa3 (sf) Placed Under Review for Possible Downgrade HIPOCAT 17: Moody's Lowers Rating on Class C Notes to 'Caa3' ------------------------------------------------------------ Moody's Investors Service downgraded the ratings of six junior and one senior notes in three Spanish residential mortgage-backed securities (RMBS) transactions: Hipocat 16, FTA, Hipocat 17, FTA and Hipocat 18, FTA. Moody's also confirmed the rating of the senior notes in Hipocat 18, FTA. Insufficiency of credit enhancement to address sovereign risk, deterioration in collateral performance and exposure to issuer account bank have prompted these downgrades. This rating action concludes the review of seven notes placed on review on July 2, 2012, following Moody's downgrade of Spanish government bond ratings to Baa3 from A3 on June 2012. This rating action also concludes the review of one note placed on review on November 23, 2012, following Moody's revision of key collateral assumptions for the entire Spanish RMBS market. Ratings Rationale: These downgrades reflect primarily the insufficiency of credit enhancement to address sovereign risk. Furthermore, Moody's revised some of its collateral assumptions for Hipocat 17 and 18, FTA due to recent deterioration in collateral performance. The rating action on Hipocat 16, FTA also reflects the exposure of the transaction to Banco de Espana acting as issuer account bank. Moody's confirmed the ratings of one note in Hipocat 18, FTA in consideration of the available credit enhancement that provides enough protection against sovereign and counterparty risk The determination of the applicable credit enhancement that drives these rating actions reflects the introduction of additional factors in Moody's analysis to better measure the impact of sovereign risk on structured finance transactions (see "Structured Finance Transactions: Assessing the Impact of Sovereign Risk", March 11, 2013). Additional Factors Better Reflect Increased Sovereign Risk Moody's has supplemented its analysis to determine the loss distribution of securitized portfolios with two additional factors, the maximum achievable rating in a given country (the Local Currency Country Risk Ceiling) and the applicable portfolio credit enhancement for this rating. With the introduction of these additional factors, Moody's intends to better reflect increased sovereign risk in its quantitative analysis, in particular for mezzanine and junior tranches. The Spanish country ceiling, and therefore the maximum rating that Moody's will assign to a domestic Spanish issuer including structured finance transactions backed by Spanish receivables, is A3. Moody's Individual Loan Analysis Credit Enhancement (MILAN CE) represents the required credit enhancement under the senior tranche for it to achieve the country ceiling. By lowering the maximum achievable rating for a given MILAN, the revised methodology alters the loss distribution curve and implies an increased probability of high loss scenarios. - Revision of Key Collateral Assumptions During its review Moody's increased its expected loss (EL) assumption in Hipocat 17, FTA to 4.00% from 2.60% due to worse- than-expected collateral performance. The deterioration in performance is reflected by the rise of loans more than 90 days in arrears as of current portfolio balance to 2.96% as of December 2012 from 0.77% as of March 2012. In the same period cumulative defaults (defined as loans more than 18 months in arrears) surged to 2.36% from 2.00% of original portfolio balance. As a consequence the reserve fund has been used in the last payment date in December 2012 and currently stands at 97% of its target amount. Moody's has not revised the expected loss assumptions in Hipocat 16 and Hipocat 18, FTA and maintained the values at 2.10% and 2.00% respectively. Moody's reassessed the current loan-by-loan information of the three transactions' underlying portfolios to determine the MILAN CE. Moody's increased its MILAN CE assumption in Hipocat 18, FTA to 16.00% from 15.00% as a consequence of the high concentration of loans exceeding a 80% loan-to-value (LTV) ratio and the exposure to flexible mortgage product in the portfolio. Moody's has not revised the MILAN CE assumption in Hipocat 16 and 17, FTA and maintained the values at 15.00% and 12.50% respectively. - Exposure to Counterparty Moody's rating analysis took into consideration the exposure of the senior notes in Hipocat 16, FTA to Banco de Espana and in Hipocat 17 and 18, FTA to Banco Espanol de Credito (Banesto Baa3/P-3/under review for upgrade) acting as issuer account banks. Moody's has assessed the probability and effect of a default of the two entities on the issuers ability to meet its obligations under the transaction. Moody's concluded that the issuer account bank exposure had a negative impact only on the senior notes rating in Hipocat 16, FTA and had no negative impact in Hipocat 17 and 18, FTA. Moody's also analyzed potential payment disruption in Hipocat 16, FTA given the exposure to Banco Bilbao Vizcaya Argentaria, S.A. (BBVA Baa3/P-3) acting as swap counterparty. Moody's concluded that this risk did not have a negative impact on the outstanding ratings. - Other Developments May Negatively Affect the Notes In consideration of Moody's new adjustments, any further sovereign downgrade would negatively affect structured finance ratings through the application of the country ceiling or maximum achievable rating, as well as potentially increase portfolio credit enhancement requirements for a given rating. As the euro area crisis continues, the ratings of structured finance notes remain exposed to the uncertainties of credit conditions in the general economy. The deteriorating creditworthiness of euro area sovereigns as well as the weakening credit profile of the global banking sector could further negatively affect the ratings of the notes. Additional factors that may affect the ratings are described in "Approach to Assessing Linkage to Swap Counterparties in Structured Finance Cashflow Transactions: Request for Comment", published on July 2, 2012. The principal methodology used in these ratings was Moody's Approach to Rating RMBS Using the MILAN Framework published in March 2013. Other factors used in these ratings are described in "The Temporary Use of Cash in Structured Finance Transactions: Eligible Investment and Bank Guidelines", published in March 2013. In reviewing these transactions, Moody's used ABSROM to model the cash flows and determine the loss for each tranche. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the lognormal distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario; and (ii) the loss derived from the cash flow model in each default scenario for each tranche." As such, Moody's analysis encompasses the assessment of stressed scenarios. In the context of the rating review, the transactions have been remodeled and some inputs have been adjusted to reflect the new approach. In addition, for Hipocat 17 and 18, FTA the input for the principal to pay interest on junior notes has been corrected during the review. List Of Affected Ratings Issuer: HIPOCAT 16 Fondo De Titulizacion De Activos EUR956.5M A Notes, Downgraded to Baa3 (sf); previously on Nov 23, 2012 Downgraded to Baa1 (sf) and Remained On Review for Possible Downgrade EUR25M B Notes, Downgraded to B2 (sf); previously on Jul 2, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade EUR18.5M C Notes, Downgraded to Caa2 (sf); previously on Jul 2, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Issuer: HIPOCAT 17, FTA EUR4.4M B Notes, Downgraded to Ba3 (sf); previously on Jul 2, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade EUR24.8M C Notes, Downgraded to Caa3 (sf); previously on Jul 2, 2012 B3 (sf) Placed Under Review for Possible Downgrade Issuer: HIPOCAT 18, FTA EUR737.7M A Notes, Confirmed at A3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade EUR30.3M B Notes, Downgraded to Baa3 (sf); previously on Jul 2, 2012 Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade EUR32M C Notes, Downgraded to Ba2 (sf); previously on Jul 2, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade NCG BANCO: Fitch Maintains Watch Negative on Ratings ---------------------------------------------------- Fitch Ratings has maintained NCG Banco's ('BB+'/RWN/'B') (Cedulas Hipotecarias, CH) 'BBB+' rating on Rating Watch Negative (RWN). The rating actions follows the transfer of mortgage assets to the newly established asset management company in Spain, SAREB, combined with the early amortization of some outstanding mortgage covered bonds. KEY RATING DRIVERS The CH remain on RWN due to the RWN on NCG Banco's Long-term Issuer Default Rating and also due to the uncertainty about potential future cover pool changes resulting from the restructuring plans agreed ahead of the bail-out, which include the sale of part of NCG Banco business units. The CH rating will remain on RWN until there is certainty about the actual assets and liabilities that could eventually be sold, and the effect on the CH rating. As of March 2013, NCG Banco's total mortgage cover pool amounted to EUR18.6 billion after a EUR6.3 billion asset transfer to SAREB was executed just before year end, and the early recognition of c. EUR0.8 billion of defaulted assets with mortgages guarantee. The majority of transferred assets were mortgage loans granted to real estate developers or land (EUR5.9 billion). The transfer of assets has notably improved the current risk profile of the collateral, which is now mostly composed of residential mortgage loans (78%). The expected credit loss rate of the portfolio has decreased to 22.0% from 25.9% under a 'BBB+' rating scenario. Despite the better credit profile, break-even overcollateralization (OC) for the CH rating has increased to 79% due to the inclusion of additional sensitivities regarding excess margin and updated market value decline assumptions for Spanish residential properties and properties secured lending to SMEs. NCG Banco has publicly announced that by mid-April 2013 it will early amortize EUR800 million of CH. With this additional amortization, the total amount of early redemptions since the transfer of assets to SAREB will amount to EUR2.1 billion. The CH balance outstanding by the time this additional early redemption is completed will be EUR8.4 billion. This results in a total OC of 120%, as in August 2012, leaving the effect of the transfer of assets to the SAREB neutral for CH holders in terms of OC. According to Fitch's covered bond criteria, for Spanish issuers rated below 'F2' and in the absence of contractual minimum levels of OC, a 30% haircut is applied to derive a total OC credited. This haircut has been applied to the OC expected after the completion of the series of early amortizations rather than to the lowest level of the last 12 months to derive a total OC credited level of 84%. This is an exception to Fitch's covered bonds rating criteria, which stipulates that for issuers rated 'F2' and below, and in the absence of a public or contractual commitment, the agency would base its assessment on the lowest OC of the last 12 months. In Fitch's view, this is justified by the visibility of the measures taken by NCG Banco since the transfer of assets in order to bring OC levels back to previous levels. The 'BBB+' rating is based on NCG's Long-term IDR of 'BB+' and a Discontinuity Cap of 1 (very high discontinuity risk). It also incorporates stressed recoveries from the total mortgage book in the event of a covered bonds default. The driver of the D-Cap is Fitch's assessment of very high liquidity gap and systemic risk. In the absence of specific provisions to bridge maturity mismatches between hard bullet liabilities and long term amortizing loans, this assessment is derived from the comfort given by the domestic importance of CH as a funding instrument for Spanish banks. RATING SENSITIVITIES The 'BBB+' rating of NCG Banco's CH would be vulnerable to a downgrade if the bank's Long-Term IDR was downgraded by one or more notches to 'BB' or below; or if the liquidity risk was judged to cause full discontinuity, resulting in a D-Cap of 0. The current rating is also exposed to falls in OC credited by Fitch below the 'BBB+' breakeven OC of 79%. OC could be affected by potential future cover pool changes in the event of the sale of part of NCG Banco's business units. * SPAIN: Fitch Says Delinquency Levels Continue to Increase ----------------------------------------------------------- Fitch Ratings has published an updated version of its SME CLO Compare. The report is updated on a monthly basis. On March 15, 2013, Fitch assigned final rating to a new Italian SME CLO transaction, Pontormo SME Srl. The senior class A1, A2 and A3 notes which benefit from 40.6% credit enhancement (CE) were rated at 'AAsf', Outlook Stable. Pontormo SME Srl is a multi-originator cash flow securitization of a EUR375.9 million static portfolio of secured and unsecured loans granted to small- and medium-sized enterprises in Italy, originated by Banca di Credito Cooperativo di Fornacette S.c.p.a, Banca di Credito Cooperativo di Castagneto Carducci S.c.p.a. and Banca Popolare di Lajatico S.c.p.a. all of which are not rated by Fitch. On March 26, 2013, the agency assigned expected ratings to a new Spanish SME CLO, IM Cajamar Empresas 5 FTA. The senior class A1 and A2 notes which benefit from 37% CE were assigned a 'A+sf(exp)' rating. IM Cajamar Empresas 5, F.T.A. is a granular cash flow securitization of a EUR675 million static portfolio of secured and unsecured loans granted to Spanish small- and medium- sized enterprises (SMEs) and self-employed individuals (SEIs). The loans were originated by Cajamar Caja Rural and Caja Rural del Mediterraneo, Ruralcaja. Cajamar and Ruralcaja merged in October 2012 to form Cajas Rurales Unidas (CRU, 'BB'/Stable/'B'). On March 22, 2013, Fitch assigned final ratings to a Spanish leasing transaction, Foncaixa Leasings 2, FTA. The senior class A notes, which benefit from 31% CE were assigned a 'A-sf', Outlook Stable. The transaction is a securitization of a static EUR1.15 billion portfolio of credit rights associated to leasing contracts originated by CaixaBank ('BBB'/Negative/'F2') in Spain. A large share of the portfolio (c. 68% of the assets in the preliminary portfolio analyzed by Fitch) was previously securitized in Foncaixa Leasings 1, FTA and has been refinanced in this transaction. The leasing contracts have been underwritten by Spanish small and medium enterprises domiciled in Spain. Fitch has updated its global rating criteria for collateralized debt obligations backed by loans to small- and medium-sized enterprises (SMEs). The agency anticipates no rating impact from the implementation of this criteria update. As of the updated criteria, Fitch has increased the market value decline (MVD) expectations for commercial properties located in Spain by up to 10% as a result of further recent increased volatility observed in this market. Moreover, commercial MVD assumptions for other jurisdictions have also been increased by up to 5%. Additionally, the agency has revised the average annual default rate expectation for Italy, increasing it to 5% from 3.75%, in line with recent default statistics received from originating banks. On March 8, 2013, Fitch downgraded Italy's Long-term Issuer Default Rating (IDR) to 'BBB+' from 'A-'. As a result a rating cap of 'AA+sf', six notches above Italy's IDR, is applied for all structured finance transactions. Currently Fitch rates nine Italian SME CLOs. While their originators were downgraded, following Italy's downgrade, this downgrade had no impact on the rating of the senior notes, as the transactions' main counterparty roles are performed by international institutions which were not affected by the downgrades. Delinquency levels in Italy and Spain have continued to increase since Q112 reflecting the economic contraction in the eurozone periphery. Loans that are 90 days past due (dpd) but not considered as defaulted by the transaction documents have almost doubled since last year and now represent almost 6% of the Spanish SME portfolio. While part of the increase results from portfolio amortization, the high level of arrears reflects continuing portfolio deterioration as an increasing number of loans become delinquent. Fitch expects cumulative defaults that currently stand at only 3.3% to increase sharply following the increasing pattern of delinquencies, as for most transactions defaults are defined as loans more than 12 months in arrears. Cumulative defaults in Italy have increased rapidly since Q112 and currently represent more than 5% of the initial portfolio balance and over 8% of the outstanding portfolio balance. The worsening performance in Italian and Spanish transactions has been largely offset by the increasing levels of credit enhancement due to structural deleveraging. ===================== S W I T Z E R L A N D ===================== MATTERHORN FINANCING: S&P Assigns 'B+' Corporate Credit Rating --------------------------------------------------------------- Standard & Poor's Ratings Services said it assigned its 'B+' corporate credit rating to Matterhorn Financing & Cy S.C.A. (Matterhorn Financing), the new ultimate parent of Orange Communications S.A., the third-largest wireless network operator in Switzerland. S&P assigned its recovery rating of '6' and issue rating of 'CCC+' to Matterhorn Financing's proposed EUR250 million (Swiss franc CHF304 equivalent) million subordinated payment-in-kind (PIK) Toggle notes due 2019. S&P simultaneously put its corporate credit ratings on Matterhorn Financing, its direct subsidiary Matterhorn Midco & Cy S.C.A., and indirect subsidiary Matterhorn Mobile Holdings S.A., on CreditWatch with negative implications. S&P also put its 'BB' issue ratings on the CHF100 million super senior revolving credit facility (RCF) due 2018, its 'BB-' issue ratings on the existing senior secured notes due 2019, and its 'B-' issue ratings on the existing senior unsecured notes due 2020 on CreditWatch negative. The recovery ratings on these instruments remain unchanged at '1', '2', and '6'. The action reflects S&P's view that the proposed PIK Toggle notes issue would seriously weaken the group's financial risk profile, by creating higher debt to EBITDA and of potential additional cash interests on the interest cover ratio in the future. In addition, this planned third recapitalization in less than a year emphasizes the group's very aggressive financial policy, as set by its controlling equity sponsor. At this stage, S&P projects that its adjusted debt-to-EBITDA ratio will jump to about 6x including the new debt, and that EBITDA interest coverage could deteriorate to more than 2.5x, from its current level above 3x, if interest is paid in cash. S&P's adjusted debt also includes the CHF61 million portion of the recent CHF155 million spectrum investment that will be paid in two installments in 2015 and 2016, and customary adjustments for operating leases, asset retirement, and pension obligations. The rating on Matterhorn is constrained by S&P's assessment of the company's financial risk profile as "highly leveraged," which is moderately cushioned by S&P's assessment of its business risk profile as "fair." S&P believes Matterhorn's business risk profile is constrained by its lack of scale and diversity owing to its narrow business and geographic focus, considerable competition from the dominant market player, some execution risk as the company has yet to achieve its full separation from its previous owner, and ongoing network upgrades. S&P views the company's business risk profile as weaker than those of its two main competitors, Swisscom AG and Sunrise Communications Holdings S.A.. S&P acknowledges that it has managed to turn around its operating performances since 2012, achieving a growing customer base and significant network improvement. At the same time, rapid voice commoditization and substitution issues across the industry, the need to compete on data intensive offers, and the lack of a fixed network represent challenges, in S&P's view. These business weaknesses are balanced by the company's established wireless position, a freshly revamped network, and a wealthy and stable domestic economy, and S&P's expectation that the competitive environment will not change significantly, given high entry barriers and more favorable regulation than in other European markets. S&P expects to resolve the CreditWatch status once the transaction has successfully completed, in which case S&P would lower the corporate credit ratings on all the rated entities and the existing issue ratings by one notch. =========================== U N I T E D K I N G D O M =========================== CORNERSTONE TITAN: S&P Lowers Rating on Class E Notes to 'D' ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its credit ratings on Cornerstone Titan 2005-1 PLC's class C, D, and E notes. At the same time, S&P has affirmed its rating on the class F notes. The rating actions follow S&P's review of the credit quality of the remaining underlying loan pool under its updated criteria for rating European commercial mortgage-backed securities (CMBS) transactions. CREDIT ANALYSIS The transaction originally comprised nine loans secured on 72 properties. Since closing, seven loans have fully repaid. The two remaining loans are secured on two U.K. properties. Both loans have failed to repay at loan maturity and are now in special servicing. THE EAGLE OFFICE PORTFOLIO LOAN (92.2% OF THE TOTAL LOAN POOL) The loan is secured on one property in London, the Mitre House, which is let to a single tenant (CMS Cameron McKenna). The lease is due to expire in 2015. As the borrower failed to repay the loan at loan maturity in July 2012, the loan was transferred to special servicing. The special servicer and the borrower are in dialogue to resolve the loan through a consensual sale. In February 2013, the servicer reported a securitized loan-to- value (LTV) ratio of 111.48% and a securitized interest coverage ratio (ICR) of 2.46x (as at the October 2012 interest payment date, as the latest information for the ICR is not available). Notwithstanding S&P's view on asset recoveries, it believes that the reported valuation figure, may suppress the marketability of the properties in a disposal scenario, as it may create a benchmark for potential buyers. S&P has assumed that there will be losses on this loan in its base case scenario. THE JUBILEE WAY LOAN (7.8% OF THE TOTAL LOAN POOL) The loan is secured on six leasehold retail units and four kiosks within the Parishes Shopping Centre, Scunthorpe, East Midlands. Tenants include F. Hinds (a jewelers) and Deichmann shoes. The loan was due to mature on the July 25, 2010. Following a payment default, the loan was transferred to special servicing. The property is currently being marketed for sale. The special servicer reported that the marketing agents have both estimated gross recoveries of GBP3.20 million to GBP3.45 million. The property is approximately 30% vacant. The vacant space is currently being marketed. It is likely that the unit currently let to HMV (an insolvent tenant) will become vacant and vacancy rates will increase in the near term. In February 2013, the servicer reported a securitized LTV ratio of 181.66%. S&P has assumed that there will be losses on this loan in its base case scenario. CASH FLOW ANALYSIS The class E and F notes have experienced interest shortfalls. Although the remaining loans paid full interest, the weighted- average cost of the remaining notes' coupon exceeded the weighted-average loan coupon on the January 2013 interest payment date (IPD). The class E notes are not subject to an available funds cap (AFC). The class F notes are subject to an AFC. Any shortfall in interest is not paid and does not accrue (and is therefore extinguished). From a rating perspective, S&P is able to treat the interest payments on a class of notes with an AFC mechanism as a pass-through by the issuer of what it has available to it and so meet S&P's requirements for the timely payment of interest (to the extent that the AFC mechanism does not cover any default risk). RATING ACTION S&P's ratings in Cornerstone Titan 2005-1 address timely payment of interest, payable quarterly in arrears, and payment of principal not later than the legal final maturity date (in July 2014). Given the approaching legal maturity date, S&P considers that there is a timing risk in this transaction. Although the level of credit enhancement available to the class C notes remains adequate to absorb the amount of losses that the underlying assets would suffer in higher stress scenarios, S&P took into account the potential risk of a payment default at the note maturity date. Therefore, S&P has lowered to 'BB+ (sf)' from 'A (sf)' its rating on the class C notes. S&P has lowered to 'B- (sf)' from 'B (sf)' its rating on the class D notes because it considers the available credit enhancement to be insufficient to cover asset-credit and liquidity risks at the currently assigned rating level. S&P has also lowered to 'D (sf)' from 'CCC- (sf)' its rating on the class E notes as this class of notes, which is highly vulnerable to principal losses and has experienced interest shortfalls. S&P has affirmed its 'CCC- (sf)' rating on the class F notes because it is highly vulnerable to principal losses, in S&P's opinion. The AFC has addressed the existing shortfalls. S&P will lower its rating on the class F notes to 'D (sf)' if these losses are crystallized. 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 Cornerstone Titan 2005-1 PLC GBP592.043 Million Commercial Mortgage-Backed Floating- And Variable-Rate Notes Ratings Lowered C BB+ (sf) A (sf) D B- (sf) B+ (sf) E D (sf) CCC- (sf) Rating Affirmed F CCC- (sf) ITV PLC: Fitch Raises Long-Term IDR From 'BB+'; Outlook Stable -------------------------------------------------------------- Fitch Ratings has upgraded ITV plc's (ITV) Long-term Issuer Default Rating (IDR) to 'BBB-' from 'BB+'. The Outlook on the Long-term IDR is Stable. The upgrade is based on Fitch's opinion that ITV is now more able to weather the structural changes facing the media industry. The current and future impact of the internet and time-shifted viewing on European free-to-air TV broadcasters and ITV in particular is not as great as Fitch had anticipated 12-24 months ago. ITV has delivered a strong 2012 operating performance and management continues to take a conservative approach with regards to the company's financial profile. ITV is less dependent on cyclical advertising as it continues to grow Online, Pay & Interactive revenues and increase profits from ITV Studios, the company's content business. KEY DRIVERS - Free-to-air TV still important Even though the internet continues to take a growing share of overall UK advertising expenditure, the absolute amount spent on TV advertising has remained stable over the past few years. As the leading commercial free-to-air TV broadcaster in the UK, ITV remains one of the very few ways for advertisers to reach the UK mass market. Increased take-up of pay-TV or content distributed over the Internet is unlikely to significantly dent ITV's reach in the medium to long-term. - Less dependent on cyclical advertising In 2012, ITV's net TV advertising revenue was GBP1.51 billion, unchanged versus 2011. However, group underlying operating profit increased by 12.6% to GBP520 million, due to continued profit growth at ITV Studios and an increasing contribution from the company's online and interactive business. A more diversified revenue mix, better visibility of profits at ITV Studios and continued solid cost control in the broadcast business means that ITV is less susceptible to a significant downturn in TV advertising revenue. - Emphasis on quality content ITV knows how to make and commission quality entertainment for the UK market. They have reformed efforts in this area with clear results. However, other companies (e.g. Sky, Netflix, Amazon, etc) are raising the English language programming stakes even higher and Fitch does not believe this will abate in the years ahead. ITV must continue to invest in quality and stay relevant to UK audiences. - Conservatively-managed balance sheet Due to strong free cash-flow generation, ITV ended 2012 with a reported net cash position of GBP206 million (GBP45 million in 2011). Taking into account operating leases and GBP135 million of restricted cash, funds from operations (FFO) adjusted net leverage fell to 0.1x at the end of 2012 (versus 0.6x at the end of 2011). ITV's management is taking a conservative approach to the company's balance sheet. Even though ITV is paying a special dividend to shareholders in 2013, it has so far this year acquired the freehold of its corporate headquarters for GBP56m and paid down GBP138 million of its GBP200 million 2019 bilateral loan. - Limited Acquisition Risk ITV has made some small acquisitions to bolster its content business. Fitch believes other similar transactions are likely. Such acquisitions could improve ITV's operating profile. Because of ITV's currently strong balance sheet, any acquisition of up to GBP300 million in value would fit comfortably within the 'BBB- '/Stable rating. Any transactions larger in size would be treated by Fitch as event risk. WHAT COULD TRIGGER A RATING ACTION? Negative: Future developments that could lead to negative rating actions include: - Expectations of FFO adjusted net leverage sustained above 1.5x would be considered incompatible with a 'BBB-' rating level. - Erosion of the core TV advertising business, either from a sustained decline in ITV's audience share, or adverse effects from industry trends. Positive: Future developments that could lead to positive rating actions include: - Sustained improvement in the profitability of ITV's core advertising business and continued profitable growth of the content business, together with a conservative approach to leverage could lead to positive rating action. This is not anticipated in the near-term. LIQUIDITY AND DEBT STRUCTURE ITV's liquidity remains healthy. ITV had GBP690 million of cash and cash equivalents on its balance sheet at the end of 2012, of which GBP135 million is considered by Fitch to be restricted as use is limited by financial leases and unfunded pension commitments, or held overseas. ITV also has an undrawn working capital facility of GBP125 million which expires in 2015, and an undrawn GBP250 million revolving credit facility which expires in 2015. ITV's next significant debt repayments are for GBP15 million in June 2014 and GBP78 million in October 2015. The rating actions are as follows: -- Long-term IDR: upgraded to 'BBB-' from 'BB+'; Outlook Stable -- Senior unsecured rating: upgraded to 'BBB-' from 'BB+' ROYAL BANK: Shareholders File Suit Over 2008 Cash Call ------------------------------------------------------ Kirstin Ridley at Reuters reports that a group of shareholders in Royal Bank of Scotland launched a multi-million pound lawsuit against the state-owned bank for misleading investors at the height of the credit crisis in 2008. In the first court document filed in the UK over the bank's record GBP12 billion cash call in April 2008, a group of 21 claimants -- including international investors and pension funds -- allege the bank published a defective prospectus littered with misstatements and omissions, Reuters discloses. The claim was issued in London's High Court just days before a much larger GBP4 billion lawsuit is expected from another investor grouping called the RBoS Shareholders Action Group, Reuters relates. Both claims could lead to RBS's disgraced former CEO Fred Goodwin being forced to appear in court to defend the bank's actions, Reuters notes. "Unless the matter can be resolved amicably, the claimants intend to pursue this litigation vigorously and through to trial in order to seek appropriate redress from the court," Reuters quotes Clive Zietman of UK law firm Stewarts Law, who is representing the 21 claimants, as saying. Only broad outlines have been filed so far of a claim Zietman said could be worth "hundreds of millions of pounds". The RBoS Shareholders Action Group -- a group of some 12,000 ordinary shareholders and 100 institutions -- has also alleged that RBS misled investors about its financial health at the time of the rights issue and is demanding compensation, Reuters discloses. The failure of the bank -- once a small Scottish retail lender that staged a meteoric rise to global prominence before a spectacular collapse which threatened to fell the entire UK financial system -- was averted only by a GBP45 billion taxpayer bailout and billions more in state-backed loans, Reuters notes. Mr. Goodwin's tenure at RBS was brought to an ignominious end after RBS succeeded in its pursuit of ABN AMRO, only to find its Dutch peer's assets overvalued just as the unfolding credit crisis undermined the entire bank sector in late 2007 and 2008, Reuters recounts. RBS, already struggling to secure financing for a ballooning leveraged finance and commercial real estate lending business, launched a rights issue, but with its shares in freefall as the liquidity crisis took hold, it was not enough, Reuters relates. In October 2008, with corporate customers withdrawing deposits and RBS hours away from running out of cash, the government took an 83% stake and Mr. Goodwin became one of the highest-profile failures of the credit crisis, Reuters discloses. The Royal Bank of Scotland Group plc (NYSE:RBS) -- http://www.rbs.com/-- is a holding company of The Royal Bank of Scotland plc (Royal Bank) and National Westminster Bank Plc (NatWest), which are United Kingdom-based clearing banks. The company's activities are organized in six business divisions: Corporate Markets (comprising Global Banking and Markets and United Kingdom Corporate Banking), Retail Markets (comprising Retail and Wealth Management), Ulster Bank, Citizens, RBS Insurance and Manufacturing. On October 17, 2007, RFS Holdings B.V. (RFS Holdings), a company jointly owned by RBS, Fortis N.V., Fortis SA/NV and Banco Santander S.A. (the Consortium Banks) and controlled by RBS, completed the acquisition of ABN AMRO Holding N.V. (ABN AMRO). In July 2008, the company disposed of its entire interest in Global Voice Group Ltd. =============== X X X X X X X X =============== * Moody's Examines Role of Holdout Creditors in Restructurings -------------------------------------------------------------- Sovereign bond restructurings over the last 15 years have generally been resolved quickly and almost always without ligation from holdout creditors, says Moody's Investors Service in a new report in its Sovereign Defaults Series. Reviewing 34 sovereign bond exchanges since 1997, Moody's finds that only two had a significant percentage of holdout creditors. Specifically, in only two cases did holdout creditors represent more than 10% of the value of the outstanding bonds. In only one case -- that of Argentina -- have holdouts led to persistent litigation. "Our analysis shows that concerns over coordination problems among creditors are exaggerated," says Elena Duggar, Moody's Group Credit Officer for Sovereign Risk and author of the report "The Role of Holdout Creditors and CACs in Sovereign Debt Restructurings." "In most cases, a bondholder committee was formed within a reasonably short timeframe and negotiations over the restructuring were concluded relatively quickly," says Ms. Duggar. "The case of Argentina was and remains unique in its unilateral and coercive approach to the debt restructuring." On average, sovereign bond restructurings have closed 10 months after a government has announced its intention to restructure and seven months after the start of negotiations with creditors, says Moody's. Creditors have typically participated in sovereign bond restructuring offers: in the 34 restructurings, creditor participation averaged 95%. The only exchanges with lower participation rates were those of Argentina, with a realized participation rate of 76%, and Dominica, with a rate of 72%. Later on, however, participation rates increased to 93% in Argentina and close to 100% in Dominica. Moody's notes that about 35% of sovereign debt exchanges relied on the use of Collective Action Clauses (or CACs) or exit consents in the bond contracts to bind a larger share of creditors in the restructuring. CACs allow a supermajority of creditors to amend the instrument's payment terms and other provisions, thus allowing the supermajority to agree to a debt restructuring legally binding to all shareholders, including those who vote against the restructuring. The European Stability Mechanism (ESM) Treaty has mandated that CACs be introduced into euro area sovereign bond contracts. Ongoing creditor litigation over Argentina's 2005 debt exchange has been drawing attention to the role of holdout creditors and the problem of free rider incentives, leading to a large body of theoretical work on the topic. The Moody's report reviews empirical evidence from 34 exchanges involving 20 sovereigns and both Moody's-rated and unrated debt instruments. Nine sovereigns performed several debt exchanges in a row. * BOOK REVIEW: The Oil Business in Latin America: The Early Years ----------------------------------------------------------------- Author: John D. Wirth Ed. Publisher: Beard Books Softcover: 282 pages List price: $34.95 Review by Gail Owens Hoelscher Buy a copy for yourself and one for a colleague on-line at http://www.beardbooks.com/beardbooks/oil_business_in_latin_americ a.html This book grew out of a 1981 meeting of the American Historical Society. It highlights the origin and evolution of the stateowned petroleum companies in Argentina, Mexico, Brazil, and Venezuela. Argentina was the first country ever to nationalize its petroleum industry, and soon it was the norm worldwide, with the notable exception of the United States. John Wirth calls this phenomenon "perhaps in our century the oldest and most celebrated of confrontations between powerful private entities and the state." The book consists of five case studies and a conclusion, as follows: * Jersey Standard and the Politics of Latin American Oil Production, 1911-30 (Jonathan C. Brown) * YPF: The Formative Years of Latin America's Pioneer State Oil Company, 1922-39 (Carl E. Solberg) * Setting the Brazilian Agenda, 1936-39 (John Wirth) * Pemex: The Trajectory of National Oil Policy (Esperanza Duran) * The Politics of Energy in Venezuela (Edwin Lieuwen) * The State Companies: A Public Policy Perspective (Alfred H. Saulniers) The authors assess the conditions at the time they were writing, and relate them back to the critical formative years for each of the companies under review. They also examine the four interconnecting roles of a state-run oil industry and distinguish them from those of a private company. First, is the entrepreneurial role of control, management, and exploitation of a nation's oil resources. Second, is production for the private industrial sector at attractive prices. Third, is the integration of plans for military, financial, and development programs into the overall industrial policy planning process. Finally, in some countries is the promotion of social development by subsidizing energy for consumers and by promoting the government's ideas of social and labor policy and labor relations. The author's approach is "conceptual and policy oriented rather than narrative," but they provide a fascinating look at the politics and development of the region. Mr. Brown provides a concise history of the early years of the Standard Oil group and the effects of its 1911 dissolution on its Latin American operations, as well as power struggles with competitors and governments that eventually nationalized most of its activities. Mr. Solberg covers the many years of internal conflict over oil policy in Argentina and YPF's lack of monopoly control over all sectors of the oil industry. Mr. Wirth describes the politics and individuals behind the privatization of Brazil's oil industry leading to the creation of Petrobras in 1953. Mr. Duran notes the wrangling between provinces and central government in the evolution of Pemex, and in other Latin American countries. Mr. Lieuwin discusses the mixed blessing that oil has proven for Venezuela., creating a lopsided economy dependent on the ups and downs of international markets. Mr. Saunders concludes that many of the then-current problems of the state oil companies were rooted in their early and checkered histories." Indeed, he says, "the problems of the past have endured not because the public petroleum companies behaved like the public enterprises they are; they have endured because governments, as public owners, have abdicated their responsibilities to the companies." 189 Jonh D. Wirth is Gildred Professor of Latin American Studies at Standford University. ********* 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 * * *