/raid1/www/Hosts/bankrupt/TCREUR_Public/130523.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Thursday, May 23, 2013, Vol. 14, No. 101
Headlines
F R A N C E
* Moody's Notes Improving Funding and Liquidity of French Banks
G E R M A N Y
CENTROSOLAR: Creditors Approve EUR50-Mil. Debt-for-Equity Swap
HSH NORDBANK: Says Shipping Crisis May Worsen Through 2014
I R E L A N D
ALLIED IRISH: S&P Rates EUR10-Bil. Euro MTN Program 'CCC+'
I T A L Y
BANCO POPOLARE: S&P Lowers Rating on Preferred Securities to 'C'
TELECOM ITALIA: Poor Q1 Metrics Bar Delivery of Performance Goals
L U X E M B O U R G
INTELSAT JACKSON: Moody's Rates Proposed US$2BB Notes Issue 'B3'
N E T H E R L A N D S
OPERA FINANCE: S&P Withdraws 'D' Ratings on Four Note Classes
* Moody's Notes Rise in Dutch RMBS 60+ Day Delinquencies in March
P O L A N D
BRE BANK: Moody's Withdraws Ratings on Two Covered Bond Issues
P O R T U G A L
* PORTUGAL: Weak Economy Undermines Banks' Chances to Avoid Aid
S P A I N
FTA SANTANDER: Fitch Affirms 'C' Rating on Class F Notes
TDA 26: Moody's Lowers Rating on EUR5.4MM 1-C Notes to Caa2
T U R K E Y
CUKUROVA HOLDING: Owes TRY984.2 Million to TMSF
U K R A I N E
UKRAINIAN RAILWAYS: S&P Raises Corporate Credit Rating to 'B'
U N I T E D K I N G D O M
ATH RESOURCES: Appoints KMPG as Liquidators
BRIDGNORTH TOWN: In Administration, Future Uncertain
COOK TO PERFECTION: Closes Doors; Set to Enter Liquidation
CRF DEVELOPMENTS: McClures Lose Court Challenge Over GBP4MM Claim
DRACO PLC: S&P Affirms 'CCC' Rating on Class F Notes
EQUINITI BONDCO: S&P Assigns Prelim. 'B' Corp. Credit Rating
EQUINITI CLEANCO: Moody's Assigns 'B2' CFR; Outlook Stable
INTEGRATED DENTAL: S&P Assigns 'B' Long-Term Corp. Credit Rating
MH CARBON: Placed in Creditors Voluntary Liquidation
PRIORY GROUP: Fitch Affirms 'B+' Long-Term Issuer Default Rating
ROWECORD ENGINEERING: In Administration, Buyer Emerges
TOWERGATE FINANCE: Fitch Rates GBP396-Mil. Secured Notes 'BB'
TURNSTONE MIDCO: Fitch Assigns 'B+' LT Issuer Default Rating
X X X X X X X X
* S&P Withdraws Ratings on 32 European Synthetic CDO Tranches
* U.S. Money Funds Raises Exposure to Eurozone Banks, Fitch Says
*********
===========
F R A N C E
===========
* Moody's Notes Improving Funding and Liquidity of French Banks
---------------------------------------------------------------
The quality of the funding and liquidity of the large French
banks improved in 2012 as they completed capital deleveraging and
funding plans, says Moody's Investors Service in a new report.
The banks, however, continue to present funding and liquidity
profiles that are weaker than those of their large international
peers.
Moody's will continue to place a particular emphasis on funding
and liquidity profiles when it assess the credit strength of the
large French banks, the rating agency says in the Credit Focus
report "BNP, SG, Credit Agricole and BPCE: Funding and Liquidity
Improving, but Still Below Peers."
"We recognize that funding pressures for European banks,
including the large French groups, have receded in recent
quarters, as investor sentiment has improved," says Alessandro
Roccati, a Moody's Senior Vice President. "The year 2013 started
on a positive note, with large issuances from all major French
banks, but markets remain fragile and prone to setbacks,
particularly given continuing issues in the euro periphery."
The funding profiles of the large French banks are weaker than
those of their international peers because they continue to
depend on more confidence-sensitive wholesale funding, says
Moody's.
Some of the reasons for the dependence are structural and include
strong competition for bank deposits from alternative savings
products and large trading and investment portfolios that add to
wholesale funding needs.
Despite enhancements in matching short-term liabilities with
liquid assets and in extending funding profiles, BNP Paribas
(BNP), Societe Generale (SG), Groupe Credit Agricole (GCA) and
Groupe BPCE (BPCE) have substantial wholesale funding exposures:
EUR1.2 trillion in aggregate at end-2012, says Moody's.
Although Moody's expects gradual decreases in wholesale funding
in 2013 as the banks work to lower customer funding gaps, the
rating agency also expects the elevated exposures to persist
because they partly reflect these structural features.
As for liquidity, Moody's says that although liquidity buffers
have increased significantly, they still rank in the lower range
among international peers. Further, these buffers consist to some
extent of less liquid central bank eligible assets as opposed to
cash and marketable securities.
=============
G E R M A N Y
=============
CENTROSOLAR: Creditors Approve EUR50-Mil. Debt-for-Equity Swap
--------------------------------------------------------------
Ben Willis at PV-Tech reports that Centrosolar Group AG's
creditors have overwhelmingly agreed to swap outstanding debt
from a EUR50 million bond for 5.5 million newly issued shares in
the company.
Centrosolar bond holders approved a deal at a creditors' meeting
on Tuesday to swap their outstanding debt from a EUR50 million 7%
bond for 5.5 million new company shares, PV-Tech relates.
Under the plan, approved, bond holders would transfer their
debentures to a bank acting as a settlement agent and in return
receive the right to acquire a total of 5.5 million new shares,
PV-Tech discloses.
If all bond creditors exercise their acquisition right, they
would each receive 110 new shares in the company per debenture
with a nominal value of EUR1,000 (plus interest accrued), PV-Tech
says.
The implementation of the resolutions passed at the meeting is
subject to the approval of the shareholders at the company's
May 22 shareholders' meeting, PV-Tech notes.
If approved at the shareholders' meeting, the company will
implement the measures in the second half of the year, PV-Tech
states.
In addition, the CentroSolar creditors' meeting appointed
attorney Christian Becker as the bond creditors' joint
representative, PV-Tech relates.
Centrosolar has been hit hard by the downturn in Germany's PV
market, PV-Tech discloses. Earlier this month it posted a 46%
drop in first quarter sales to EUR24.5 million, while operating
losses grew from EUR4.1 million, in the same period last year, to
EUR11 million, PV-Tech recounts.
Centrosolar is a German PV company.
HSH NORDBANK: Says Shipping Crisis May Worsen Through 2014
----------------------------------------------------------
Nicholas Brautlecht at Bloomberg News reports that HSH Nordbank
AG, the world's largest shipping lender, said the crisis
buffeting the industry may worsen through 2014 as clients contend
with a drop in demand and the arrival of a new generation of
container vessels.
According to Bloomberg, HSH Chief Executive Officer Constantin
von Oesterreich said the lender, which holds EUR27 billion (US$35
billion) of shipping loans in its portfolio, has taken provisions
to prepare for the worst-case scenario.
"The market doesn't move sideways for a long time, it will either
get better or worse," Bloomberg quotes Mr. Von Oesterreich as
saying. "It could very well be that it will get tougher before
the end of 2014."
HSH Nordbank, which is controlled by the German states of Hamburg
and Schleswig-Holstein, is trying to reduce bad loans to shipping
clients struggling to service their debt amid the slump in
demand, overcapacity of vessels and low freight rates, Bloomberg
discloses.
Bloomberg relates that Mr. Von Oesterreich said shipping loans
make up EUR27 billion of the lender's EUR125 billion portfolio.
"That's a really high number," Bloomberg quotes Mr. Von
Oesterreich as saying.
Mr. Von Oesterreich said that Hamburg and Schleswig-Holstein have
increased guarantees to cover potential losses at HSH Nordbank to
EUR10 billion from EUR7 billion, a step the bank expects the
European Union to grant preliminary approval for by June 16,
Bloomberg notes.
HSH Nordbank -- http://www.hsh-nordbank.com/-- is a commercial
bank in northern Europe with headquarters in Hamburg as well as
Kiel, Germany. It is active in corporate and private banking.
HSH's main focus is on shipping, transportation, real estate and
renewable energy.
* * *
As reported by the Troubled Company Reporter-Europe on Jan. 22,
2013, Moody's Investors Service downgraded HSH Nordbank AG's
standalone bank financial strength rating (BFSR) to E, equivalent
to a standalone credit assessment of caa2, from E+/b3.
Concurrently, Moody's extended the review for downgrade on
HSH's long and short-term debt and deposit ratings of Baa2 and
Prime-2, respectively.
The lowering of the standalone BFSR reflects the significant
challenges faced by HSH in its efforts to stabilize its franchise
and comply with compensation measures for earlier state aid.
Asset-quality deterioration and the resulting pressure on capital
have triggered renewed requirements for capital strengthening
which Moody's expects to include additional support from the
bank's owners. This support would imply an additional financial
burden for the fragile group. The E/caa2 standalone credit
strength better reflects Moody's view that HSH has reached a
critical stage.
=============
I R E L A N D
=============
ALLIED IRISH: S&P Rates EUR10-Bil. Euro MTN Program 'CCC+'
----------------------------------------------------------
Standard & Poor's Ratings Services said that it has assigned a
'CCC+' nondeferrable subordinated debt rating to Allied Irish
Banks PLC's (AIB) EUR10 billion Euro Medium-Term Note program.
The bank has not yet issued any subordinated instruments under
the program. In addition, S&P affirmed the long- and short-term
senior unsecured debt ratings on the program at 'BB/B'. The
rating on the notes that AIB will issue under the program are
subject to a review of the final documentation of the notes.
When S&P rates a dated nondeferrable subordinated debt instrument
issued by a bank whose stand-alone credit profile (SACP) is in
speculative grade, S&P typically assigns an issue rating two
notches below the SACP. S&P notch dated subordinated debt
ratings from the SACP in countries (like Ireland) where S&P
believes the authorities can impose losses on these instruments
without putting the bank into liquidation. AIB's SACP is 'b+'.
In this instance, S&P widens the notching to three notches. This
is because:
-- S&P assess AIB's capital and earnings as "weak", as defined
in S&P's criteria, which also incorporates its assumption
that AIB's projected risk-adjusted capital ratio will be in
the 3.0%-3.5% range through end-2014.
-- S&P notes that the Irish authorities remain ill-disposed to
subordinated bondholders, in light of the government
bailout of the Irish banking system.
-- S&P considers that AIB has a weak track record with respect
to subordinated liabilities.
=========
I T A L Y
=========
BANCO POPOLARE: S&P Lowers Rating on Preferred Securities to 'C'
----------------------------------------------------------------
Standard & Poor's Ratings Services said it has lowered its rating
on Banco Popolare's Tier 1 rated preferred securities (ISIN
XS0304963290 and ISIN XS0304963373) to 'C' from 'CCC+'. S&P also
affirmed the 'B+' rating on Banco Popolare's lower Tier II
subordinated notes.
The rating action follows Banco Popolare's announcement on May
16, 2013, that it has launched a tender offer on the outstanding
amount of its Tier 1 preferred securities and subordinated debt.
As of now, the total amount of preferred securities was
EUR374 million and the total amount of dated subordinated debt
was EUR781 million.
The rating action does not affect S&P's counterparty credit
rating on Banco Popolare or any other of the issue ratings on the
bank.
The downgrade of the bank's hybrid Tier 1 instrument reflects
S&P's opinion that the proposed tender offer on the preferred
securities is "distressed", under its criteria, as it implies
investors will receive less value than originally promised as the
offer will likely imply a repurchase below par value. S&P takes
into account that, before the rating action, S&P's 'CCC+' rating
on the preferred securities already incorporated its view of the
high risk S&P saw that Banco Popolare may have deferred the
payment of the coupon on these securities, in the future, had the
exchange not occurred. S&P understands that, absent any
repurchase of hybrid pari passu securities over the last 12
months (including this tender offer), Banco Popolare would have
had the option to defer the coupon payment under the terms and
conditions of the hybrid securities. This is mainly because
Banco Popolare posted net losses in the fiscal year ending Dec.
31, 2012, and it did not distribute dividends to ordinary
shareholders in that year. As referred to in S&P's criteria, an
exchange offer on an equity hybrid instrument may reflect the
possibility that, absent the exchange offer taking place, the
issuer might exercise the coupon deferral option, in accordance
with the terms of the instrument. In such an instance, S&P would
lower the rating on the hybrid to 'C', rather than 'D'.
The affirmation of the rating on the lower Tier 2 subordinated
notes reflects S&P's opinion the proposed tender offer on those
securities is opportunistic. According to S&P's criteria, it
considers an offer to be "opportunistic" when an issuer offers to
exchange bonds for below par, when changes in market interest
rates, other technicalities, or market developments have caused
its bonds to trade at a discount.
According to the information provided by the issuer, the
rationale of the proposed transaction is to optimize the issuer's
capital structure under Basel III. Under capital adequacy rules,
the type of securities subject to the offer will be gradually
phased out of regulatory capital. S&P understands that Banco
Popolare complies with current regulatory ratios and continues to
meet the European Banking Authority requirement of a core Tier 1
ratio of 9% without any government support.
On completion of the tender offer, S&P will review the rating on
Banco Popolare's Tier 1 preferred securities.
TELECOM ITALIA: Poor Q1 Metrics Bar Delivery of Performance Goals
-----------------------------------------------------------------
Telecom Italia S.p.A.'s weak Q1 results reflect challenges it is
facing to deliver operating performance targets and thereby
maintain its current rating, says Moody's Investors Service in a
Credit Focus report entitled "Telecom Italia: Answers to
Frequently Asked Questions."
"We expect Telecom Italia S.p.A. to miss some of its operating
performance targets in 2013, evidencing that strong headwinds
will test management's ability to deliver financial metrics
needed to maintain the current rating," says Carlos Winzer, a
Senior Vice President in Moody's Corporate Finance Group and
author of the report. "These challenges will be further
exacerbated by Italy's declining GDP."
On February 11, 2013, Moody's downgraded Telecom Italia's ratings
to Baa3 from Baa2 and maintained the negative outlook. This
rating action was in anticipation of the company's performance
and cash flows declining in 2013 and of a potentially slow
recovery thereafter.
Further downward pressure on the rating could potentially result
if Telecom Italia deviates from management's announced debt
reduction target and the company's overall financial metrics do
not gradually improve in line with the plan. The plan includes a
reported net financial position of less than EUR27 billion by
year-end 2013 (from EUR28.3 billion as of December 31, 2012), as
well as a positive low single-digit compound annual growth rate
(CAGR) in revenues and EBITDA through 2015.
Moody's expects the company's recent EUR750 million hybrid bond
issuance, together with an additional EUR2.2 billion to be issued
over the next 18-24 months from February 2013 and a dividend cut,
to mitigate negative pressure on adjusted leverage. The rating
agency took these measures into account in its recent downgrade
of Telecom Italia's rating. However, the current rating hinges on
management's ability to stabilize the declining domestic business
and thereby sustain operating cash flow and improve credit
metrics.
On February 18, 2013, Moody's assigned a provisional (P)Ba2 long-
term rating to Telecom Italia's proposed issuance of "Capital
Securities due 2073".
===================
L U X E M B O U R G
===================
INTELSAT JACKSON: Moody's Rates Proposed US$2BB Notes Issue 'B3'
----------------------------------------------------------------
Moody's Investors Service assigned a B3 rating to Intelsat
Jackson Holdings S.A.'s new US$2 billion senior unsecured
guaranteed notes issue and a Caa1 rating to the company's US$635
million senior unsecured non-guaranteed notes issue (guaranteed
refers to upstream guarantees from Jackson's operating
subsidiaries).
Jackson is an indirect, wholly-owned subsidiary of Intelsat
Investments S.A., the senior-most entity in the Intelsat group of
companies at which Moody's maintains ratings and the company for
which it maintains corporate family and probability of default
ratings (CFR and PDR respectively), both of which were affirmed
at B3 and B3-PD. All debt instrument ratings were affirmed, as
well as Intelsat's SGL-2 speculative grade liquidity rating
(indicating good liquidity). The outlook remains unchanged at
stable.
The new notes are being issued to fund redemption of Intelsat
Luxembourg's US$1.68 billion 11.25% senior unsecured notes due
February 15, 2017, as well as to refinance US$868 million of
Jackson unsecured and unguaranteed term loans due February 1,
2014. With Intelsat's consolidated debt not materially affected,
the transaction is leverage-neutral and does not affect
Intelsat's B3 CFR. Similarly, since the transaction had
previously been anticipated and has no incremental liquidity
affect, Intelsat's SGL-2 liquidity rating (indicating good
liquidity) is unchanged.
While the transaction increases the proportion of debt at the B3
level to an inflection point affecting Jackson's unsecured and
unguaranteed notes, Moody's has chosen to over-ride the model's
output, leaving those notes at Caa1 (rather than Caa2).
As an administrative matter, since Intelsat's publicly traded
parent company, Intelsat S.A., will be the only company in the
family issuing financial statements, and it will also be
guaranteeing debts at Luxembourg and Jackson, Moody's will move
the family's CFR, PDR, SGL rating and outlook to Intelsat S.A.
from Intelsat.
The following summarizes Moody's rating actions for Intelsat:
Assignments:
Issuer: Intelsat Jackson Holdings S.A.
Senior Unsecured Guaranteed Bond/Debenture, assigned B3 (LGD3,
47%)
Senior Unsecured Non-Guaranteed Bond/Debenture, assigned Caa1
(LGD5, 78%)
Other Ratings:
Issuer: Intelsat Investments S.A.
Corporate Family Rating, affirmed at B3
Probability of Default Rating, affirmed at B3-PD
Speculative Grade Liquidity Rating, affirmed at SGL-2
Outlook, Unchanged at Stable
Senior Unsecured Regular Bond/Debenture, unchanged at Caa2 (LGD6,
96%) [Will be withdrawn in due course]
Issuer: Intelsat Jackson Holdings S.A.
Senior Secured Bank Credit Facility, unchanged at Ba3 (LGD1, 7%)
Senior Unsecured Guaranteed Bond/Debenture, unchanged at B3 with
LGD Assessment revised to (LGD3, 47%) from (LGD3, 44%)
Senior Unsecured Non-Guaranteed Bond/Debenture, unchanged at Caa1
with LGD Assessment revised to (LGD5, 78%) from Caa1 (LGD5, 71%)
Issuer: Intelsat (Luxembourg) S.A.
Senior Unsecured Regular Bond/Debenture, unchanged at Caa2 (LGD5,
87%) [Will be withdrawn in due course]
Senior Unsecured Regular Bond/Debenture, unchanged at Caa2 with
LGD Assessment revised to (LGD6, 91%) from (LGD5, 87%)
Ratings Rationale:
Intelsat's B3 CFR primarily reflects a limited ability to repay
debt, elevated leverage and uncertain free cash flow after 2014.
On average, free cash flow available to reduce debt is limited to
only ~1% of Intelsat's debt because maintenance capital
expenditures, interest expense and cash taxes consume nearly all
of the company's EBITDA. Post-2014 free cash flow is uncertain
since plans for several satellites whose useful lives expire
within four years have not been disclosed and deferred revenue
will exceed customer pre-payments and become a use of cash. There
is also the potential of interest rates increasing and, over
several years, of competition from terrestrial fiber eroding
satellite's market share. Despite these uncertainties and already
elevated leverage of 7.9x (pro forma), Moody's views Intelsat's
capital structure as sustainable since cash flow will be modestly
positive. The company's strong business profile, which features a
large 42 station-kept satellite fleet covering 99% of Earth's
population, and a stable, predictable, contract-based revenue
stream with a solid $10.7 billion backlog (over 4 years of
revenue) booked with well-regarded customers, also supports the
rating.
Rating Outlook
Intelsat's stable ratings outlook is based on reasonable
visibility of modest, positive cash flow through 2014, along with
good liquidity arrangements.
What Could Change the Rating -- Up
With company guidance indicating a three-year period of lower-
than-average capital spending, depending on plans for several
satellites whose useful lives expire within four years, Intelsat
has an opportunity to de-lever by way of debt reduction. Should
this result in sustainable free cash flow to debt
approaching/exceeding 5% of debt (all measures incorporating
Moody's adjustments), positive ratings pressure could result. An
upgrade would also depend on positive industry fundamentals,
maintenance of solid liquidity and clarity on capital structure
planning.
What Could Change the Rating - Down
Downwards rating pressure is most likely to come from debt-
financed capital expenditures related to several satellites whose
useful lives expire within four years or, alternatively, reduced
EBITDA should Intelsat not replace the applicable satellites.
Irrespective, should Debt-to-EBITDA trend back towards 8x, or
should sustainable free cash flow revert to a deficit, or should
liquidity arrangements deteriorate materially, downwards rating
pressure would result.
The methodologies used in this rating were Global Communications
Infrastructure Rating Methodology published in June 2011, and
Loss Given Default for Speculative-Grade Non-Financial Companies
in the U.S., Canada and EMEA published in June 2009.
Headquartered in Luxembourg, and with executive offices in
Washington D.C., Intelsat Investments S.A. (Intelsat) is one of
the two largest fixed satellite services operators in the world.
After a recent IPO by the company's indirect parent, Intelsat
S.A., there is an approximate 20% float of publicly traded shares
with the balance of the company's equity continuing to be owned
by financial investors and management. Annual revenues are
approximately $2.6 billion; EBITDA is approximately $2.0 billion.
=====================
N E T H E R L A N D S
=====================
OPERA FINANCE: S&P Withdraws 'D' Ratings on Four Note Classes
-------------------------------------------------------------
Standard & Poor's Ratings Services has withdrawn its 'D (sf)'
credit ratings on Opera Finance (Uni-Invest) B.V.'s class A, B,
C, and D notes.
The rating actions follows the servicer's confirmation that funds
received from the loan after the settlement date were only
sufficient to pay senior expenses, class A interest, and partial
class A principal. This confirmed that the issuer's outstanding
obligations relating to unpaid amounts owed to the noteholders
would be extinguished.
In February 2012, S&P lowered its ratings on the class A, B, C,
and D notes to 'D (sf)', as the issuer did not make payments on
the due date. As a result of the notes being cancelled, S&P has
withdrawn its ratings on these classes of notes.
Opera Finance (Uni-Invest) was a single loan transaction secured
on 201 assets, comprising office, retail, industrial, and
residential properties in the Netherlands.
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
Opera Finance (Uni-Invest) B.V.
EUR1.009 Billion Commercial Mortgage-Backed Floating-Rate Notes
Ratings Withdrawn
A NR D (sf)
B NR D (sf)
C NR D (sf)
D NR D (sf)
NR-Not rated.
* Moody's Notes Rise in Dutch RMBS 60+ Day Delinquencies in March
-----------------------------------------------------------------
Moody's index of 60+ day delinquencies of Dutch RMBS, comprising
transactions that are both backed and not backed by the Nationale
Hypotheek Garantie (NHG), recorded an increase to 0.83% of the
current balance in March 2013, from 0.67% in March 2012.
The cumulative defaults trend increased to 0.41% of the original
balance in March 2013, from 0.38% in March 2012. The cumulative
losses index remained stable, increasing slightly to 0.07% in
March 2013 from 0.06% in March 2012.
As of March 2013, the Dutch RMBS market had an outstanding pool
balance of EUR254.6 billion, which constitutes a year-on-year
decrease of 8.0%. This decrease was mainly driven by the early
termination of the Stichting Eleven Cities (2, 3, 4, 5, 8) and
Green Lion III transactions. In addition, Holland Mortgage Backed
Series (Hermes) XIV B.V. and Holland Mortgage Backed Series
(Hermes) XVII B.V. have been fully redeemed on their first
optional redemption dates. Currently, the Moody's-rated Dutch
RMBS portfolio comprises 123 outstanding transactions.
On April 26, 2013, Moody's completed a performance review of the
Dutch RMBS market and increased its portfolio loss assumptions in
36 transactions and MILAN CE in four transactions out of 106
transactions reviewed. The increase in the portfolio loss
assumptions was prompted by 1) the worse-than-expected
performance of the underlying mortgage portfolios; and 2)
pressure on loss severities from the continued decline in house
prices in the Netherlands.
Moody's outlook for Dutch RMBS collateral performance is stable.
The Dutch economy is forecast to decrease by 0.6% in 2013. The
nationalization of SNS Reaal NV on February 1, 2013, the
Netherlands' fourth-largest banking group by assets, added an
additional 0.6% of GDP to the 2013 deficit. The seasonally
adjusted unemployment rate has risen rapidly in recent months,
hitting 6.7% in March 2013 on the harmonized Eurostat definition.
Domestic demand is likely to remain constrained by rising
unemployment and a sharp decline in housing prices.
===========
P O L A N D
===========
BRE BANK: Moody's Withdraws Ratings on Two Covered Bond Issues
--------------------------------------------------------------
Moody's Investors Service has withdrawn the following covered
bond ratings of Bre Bank Hipoteczny (Ba1 stable, standalone bank
financial strength rating E+/baseline credit assessment b3
stable):
Mortgage covered bonds issued by Bre Bank Hipoteczny: rating
withdrawn, previously Baa2 on review for downgrade.
Public sector covered bonds issued by Bre Bank Hipoteczny: rating
withdrawn, previously Baa1 on review for downgrade.
Ratings Rationale:
Moody's has withdrawn the rating because it has not received
adequate information to monitor the rating, due to the issuer's
decision to cease participation in the rating process for its
covered bonds.
Moody's last rating action on Bre Bank Hipoteczny's covered bonds
was on April 30, 2013 when it downgraded the ratings of the
public sector covered bonds and placed on review the ratings of
covered bonds issued by the mortgage and public sector program.
===============
P O R T U G A L
===============
* PORTUGAL: Weak Economy Undermines Banks' Chances to Avoid Aid
---------------------------------------------------------------
Patrick Jenkins and Peter Wise at The Financial Times report that
Portugal's banks -- a proxy for the health of the peripheral
eurozone financial system as a whole -- are balanced on a knife-
edge.
According to the FT, though they have sufficient capital for
their current needs, and their funding outlook appears healthier
than it did, the weak local economy is undermining lenders'
chances to make it through the crisis without further assistance.
All three of the big private-sector banks -- Banco Espirito
Santo, BCP Millennium and Banco BPI -- have core tier one capital
ratios, a pivotal measure of financial strength, in accordance
with the latest demands from European regulators and the troika
of the European Central Bank, IMF and European Commission that
bailed out the country in 2011, the FT discloses.
However, the relatively high numbers -- ranging from 10.5 (BES)
to 15% (BPI) under outgoing Basel II rules -- are not as
comforting as they might appear, the FT says. Aside from the
fact that the ratios will fall 1 to 2 percentage points under the
incoming Basel III rule book, there is a more fundamental
problem: capital levels look certain to be eroded by the
worsening loan losses that will come with still-rising
unemployment (17.7%) and shrinking GDP (-3.2% last year), the FT
states.
Four of the top six lenders reported first-quarter losses
totaling more than EUR300 million, reflecting the extent to which
10 consecutive quarters of recession have hit net interest
margins and driven up impairment costs, the FT relates.
=========
S P A I N
=========
FTA SANTANDER: Fitch Affirms 'C' Rating on Class F Notes
--------------------------------------------------------
Fitch Ratings has affirmed F.T.A. Santander Empresas 2's notes,
as follows:
EUR62.81m Class A2 (ISIN ES0338058011): affirmed at 'AA-sf';
Outlook Negative
EUR84.1m Class B (ISIN ES0338058029): affirmed at 'AA-sf';
Outlook Negative
EUR62.3m Class C (ISIN ES0338058037): affirmed at 'Asf'; Outlook
Stable
EUR59.5m Class D (ISIN ES0338058045): affirmed at 'BBsf'; Outlook
Stable
EUR29.0m Class E (ISIN ES0338058052): affirmed at 'Bsf'; Outlook
Negative
EUR53.7m Class F (ISIN ES0338058060): affirmed at 'Csf'; RE0%
KEY RATING DRIVERS
The affirmation of the notes reflects adequate levels of credit
enhancement available to the rated notes. Loans in arrears of
more than 90 days account for 3.4% of the portfolio, up from 2.2%
in May 2012. The balance of defaulted assets in the portfolio has
increased to EUR8.3 million from EUR7.4 million in May 2012.
The transaction is exposed to high obligor concentration risk and
may therefore be subject to increased performance volatility due
to the idiosyncratic risks associated with the largest obligors.
The largest obligor accounts for 10.1% of the portfolio notional
and operates in the utilities industry. This exposure is not
secured by real estate collateral and is due to mature in June
2013. The 10 largest obligors together represent 36.9% of the
portfolio.
The class A2 and B notes' rating and Outlook are limited by the
rating of the Kingdom of Spain ('BBB'/Negative/'F2'). The highest
achievable rating for Spanish structured finance transactions is
'AA-sf', five notches above the sovereign's rating.
Rating Sensitivities
Applying a 1.25x default rate multiplier or a 0.75x recovery rate
multiplier to all assets in the portfolio would not result in a
downgrade of the notes. Additionally, Fitch tested the impact of
the largest obligor defaulting assuming no recovery on the loan.
This scenario wouldn't lead to any downgrades of the rated notes.
F.T.A. Santander Empresas 2 is a granular cash flow
securitization of a static portfolio of secured and unsecured
loans granted to Spanish small- and medium-sized enterprises by
Banco Santander S.A. ('BBB+'/Negative/'F2').
TDA 26: Moody's Lowers Rating on EUR5.4MM 1-C Notes to Caa2
-----------------------------------------------------------
Moody's Investors Service downgraded the ratings of 6 notes and
confirmed the ratings of 3 notes in four Spanish residential
mortgage-backed securities (RMBS) transactions: TDA 23, TDA 26
Mixto and TDA 30. Insufficiency of credit enhancement to address
sovereign risk and revision of key collateral assumptions have
prompted the downgrade action.
Today's rating action concludes the review of 7 notes placed on
review on November 23, 2012, following Moody's revision of key
collateral assumptions for the entire Spanish RMBS market. This
rating action also concludes the review of 2 notes placed on
review on July 2, 2012, following Moody's downgrade of Spanish
government bond ratings to Baa3 from A3 on June 13, 2012.
Ratings Rationale:
The rating action primarily reflects the insufficiency of credit
enhancement to address sovereign risk and revision of key
collateral assumptions. Moody's confirmed the ratings of
securities whose credit enhancement and structural features
provided enough protection against sovereign and revision of
collateral assumptions.
The determination of the applicable credit enhancement driving
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.
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
Moody's has revised its lifetime loss expectation (EL) assumption
in TDA 23 because of worse-than-expected collateral performance
since the last review of the Spanish RMBS sector in November
2012. In TDA 23, cumulative defaults increased to 2.92% of
original pool balance in March 2013 up from 2.4% as of March
2012. Expected loss assumptions remain unchanged at 2.5% of
original pool balance for TDA 26 Mixto and 3.64% for TDA 30.
In all three transactions, Moody's maintained the current Milan
CE assumptions at 12.5%, 12.9% and 12.5% in TDA 23, TDA 26 Mixto
and TDA 30 respectively.
Exposure to Counterparty Risk
The conclusion of Moody's rating review takes into consideration
the exposure to the servicers, also acting as collection account
banks, in each transaction: Banca March (Baa3 under review for
possible downgrade), Banco Sabadell (Ba1) and Catalunya Banc (B1
under review for possible downgrade) for TDA 23, Banca March
(Baa3/UDR) and Banco Sabadell (Ba1) for TDA 26 Mixto and Banca
March (Baa3/UDR) for TDA 30 The revised ratings in all three
transactions were not affected by the current exposure to these
counterparties.
Moody's rating action takes into consideration the exposure to
Banesto (Baa2), the swap counterparty in TDA 30. The rating
agency has assessed the probability and effect of a default of
the swap counterparty on the ability of the issuer to meet its
obligations under the transactions. Additionally, Moody's has
examined the effect of the loss of any benefit from the swap and
any obligation the issuer may have to make a termination payment.
In conclusion, these factors did not negatively affect the rating
on the 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 "Approach to Assessing Linkage to Swap Counterparties in
Structured Finance Cashflow Transactions: Request for Comment."
Methodologies
The methodologies used in these ratings were "Moody's Approach to
Rating RMBS Using the MILAN Framework" published in March 2013,
and "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 its cash flow
model, ABSROM, to 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,
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 (1) the
probability of occurrence of each default scenario and (2) 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.
List of Affected Ratings:
Issuer: TDA 23 Fondo de Titulizacion de Activos
EUR837.2M A Notes, Confirmed at Baa1 (sf); previously on Nov 23,
2012 Downgraded to Baa1 (sf) and Remained On Review for Possible
Downgrade
EUR16.3M B Notes, Downgraded to Ba2 (sf); previously on Nov 23,
2012 Downgraded to Baa2 (sf) and Remained On Review for Possible
Downgrade
EUR6.5M C Notes, Downgraded to Caa1 (sf); previously on Nov 23,
2012 Downgraded to B2 (sf) and Remained On Review for Possible
Downgrade
Issuer: TdA 26-MIXTO, FONDO DE TITULIZACION DE ACTIVOS, BONOS
GRUPO 1
EUR636.4M 1-A2 Notes, Confirmed at Baa1 (sf); previously on Nov
23, 2012 Downgraded to Baa1 (sf) and Remained On Review for
Possible Downgrade
EUR18.2M 1-B Notes, Confirmed at B1 (sf); previously on Nov 23,
2012 Downgraded to B1 (sf) and Remained On Review for Possible
Downgrade
EUR5.4M 1-C Notes, Downgraded to Caa2 (sf); previously on Nov 23,
2012 Downgraded to Caa1 (sf) and Remained On Review for Possible
Downgrade
Issuer: TDA 30 Fondo de Titulizacion de Activos
EUR364.2M A Notes, Downgraded to Baa2 (sf); previously on Nov 23,
2012 Downgraded to Baa1 (sf) and Remained On Review for Possible
Downgrade
EUR8.8M B Notes, Downgraded to B1 (sf); previously on Jul 2, 2012
Baa2 (sf) Placed Under Review for Possible Downgrade
EUR7M C Notes, Downgraded to Caa1 (sf); previously on Jul 2, 2012
B1 (sf) Placed Under Review for Possible Downgrade
===========
T U R K E Y
===========
CUKUROVA HOLDING: Owes TRY984.2 Million to TMSF
-----------------------------------------------
Ercan Ersoy at Bloomberg News reports that Cukurova Holding and
its chairman Mehmet Emin Karamehmet each owe the Savings Deposit
Insurance Fund, or TMSF, TRY984.2 million (US$530 million).
According to Bloomberg, TMSF said in a statement to Borsa
Istanbul that Osman Berkmen, No. 2 executive at Cukurova Holding,
and Tayfun Beyazit, former executive at a Cukurova unit, each owe
TRY854.4 million.
TMSF said that Guray Kilic and Cumhur Ozakman each owe TRY854.4m
million, Bloomberg relates.
TMSF's list includes 45 names of Cukurova units and people that
are indebted to the fund, Bloomberg discloses.
TMSF said that debt amounts don't include late fees, Bloomberg
notes.
As reported by the Troubled Company Reporter-Europe on May 20,
2013, the Savings Deposit Insurance Fund, also known as TMSF,
said Cukurova Holding's assets were seized after the company
failed to pay debt since October 2012.
Cukurova Holding is owned by Mehmet Emin Karamehmet, who holds a
controlling stake in Turkey's largest mobile phone operator
Turkcell.
=============
U K R A I N E
=============
UKRAINIAN RAILWAYS: S&P Raises Corporate Credit Rating to 'B'
-------------------------------------------------------------
Standard & Poor's Ratings Services said that it raised its long-
term corporate credit rating on Ukrainian railway operator The
State Administration of Railways Transport of Ukraine (Ukrainian
Railways) to 'B' from 'B-' and removed it from CreditWatch where
it was placed with positive implications on May 2, 2013. The
outlook is negative.
At the same time, S&P affirmed its 'B' issue rating on the
group's limited-recourse loan participation notes.
The upgrade primarily reflects S&P's view of the improvement in
Ukrainian Railways' liquidity position, following its issue of
$500 million loan-participation notes, due in 2018. Despite the
issue amount being lower than S&P anticipated when it placed the
rating on CreditWatch positive on May 2, 2013, S&P considers that
the proceeds from the notes will enable the company to address
the mismatch between its cash flow generation and debt
amortization. In particular, the company's reliance on short-term
debt, owing to the limited availability of medium- and long-term
financing in Ukrainian markets in general, should now be largely
eliminated (the company renewed or rolled over about Ukrainian
hryvnia [UAH] 3 billion-UAH4 billion each year). The post-
transaction debt maturity profile comprises annual amortization
under its long-term loans and is manageable, in S&P's view.
S&P's liquidity assessment also incorporates Ukrainian Railways'
cautious sense of balance between additional investments and
annual debt repayments.
S&P anticipates that Ukrainian Railways will show modest growth
in 2013 and achieve operating margins that are at least in line
with last year's. S&P also assumes that the company will invest
in some expansionary capital expenditure (capex) projects, but
overall S&P forecasts lower capex than in 2012. S&P do not
expect any changes in the dividend policy and forecasts a similar
level of dividend payouts to the 2012 level. Over the longer
term, S&P believes that any increase in debt related to
expansionary and modernization capex will not surpass leverage of
3x debt to EBITDA, and that the company will take into account
its operational performance when assessing any plans to expand.
Under S&P's criteria, this level of leverage is commensurate with
an "aggressive" financial risk profile.
S&P's issue rating on the limited-recourse loan participation
notes issued by special-purpose vehicle (SPV) Shortline PLC is
'B'.
The notes were issued for the sole purpose of funding the back-
to-back loans to six single railways managed by Ukrainian
Railways on behalf of the Ukrainian government, under the
Ukrainian Railways' group umbrella, which the railways will use
for short-term debt repayment and for general corporate purposes.
The notes are secured by a pledge over the shares of the issuer
and all of the issuer's assets, including in particular, its
rights under the back-to-back loan facilities and the cash in its
bank accounts.
Shortline PLC is incorporated under U.K. law as a public company,
limited by shares and held by a charitable trust. S&P has not
assigned a corporate credit rating to Shortline PLC. The company
is an orphan SPV, whose activity is limited only to the issue of
the notes and the onlending of the proceeds to the six railways.
S&P's analysis relies on the efficiency of the pass-through
structure between the SPV issuer and the six borrowers. In S&P's
view, the documentation governing the relationship between the
issuer and the borrower does not allow for full pass-through of
the corporate tax, but S&P do not consider this to be a material
constraint on the rating.
Ukrainian Railways, alongside the six borrowers that are governed
by Ukrainian law, provides support for the proposed notes to be
issued by Shortline PLC in the form of suretyship agreements.
S&P understands that, under current Ukrainian law, only financial
institutions can provide on-demand guarantees. Under this surety
agreement, however, S&P understands that the surety providers
unconditionally and irrevocably agree on a joint and several
basis to pay the outstanding amount in two business days after
such non-payment.
S&P's opinion of the proposed issue rating is supported by its
view that, in the event of default, the likely recovery for the
noteholders would hinge on the ability and willingness of the
Ukrainian government to negotiate with creditors. S&P considers
formal restructuring as unlikely, given the implied sovereign
support and the strategic nature of Ukrainian Railways' assets.
However, the recovery prospects are constrained by the unsecured
nature of the underlying loans and S&P's view of Ukraine as an
unfavorable insolvency regime for creditors.
The negative outlook on Ukrainian Railways mirrors that on
Ukraine. Under S&P's criteria, the long-term sovereign rating
and transfer and convertibility assessment on Ukraine constrain
the rating on Ukrainian Railways, based on S&P's view that the
group's cash flow generation is sensitive to country risk.
Therefore, a downgrade of Ukraine by one or more notches would
trigger a downgrade of Ukrainian Railways by a similar number of
notches.
S&P could also lower its rating on Ukrainian Railways if:
-- It projects that its liquidity will deteriorate,
demonstrated by a ratio of sources to uses declining
materially to less than 1.0x, or headroom under covenants
declining to less than 15%. This could result from, for
example, a deteriorating operating performance as a result
of a prolonged weak economic environment in Ukraine.
-- S&P anticipates a deterioration in credit metrics,
including leverage (debt to EBITDA) of more than 4.0x.
Alongside a weaker performance, this could result from
higher debt-financed expansion investments, especially if
these investments were to be financed using short-term
rather than medium- to long-term debt as we currently
assume, thus jeopardizing the company's liquidity position.
Ratings stability for Ukrainian Railways, all else being equal,
would depend on S&P revising the outlook on Ukraine to stable.
===========================
U N I T E D K I N G D O M
===========================
ATH RESOURCES: Appoints KMPG as Liquidators
-------------------------------------------
Proactive reports that ATH Resources has confirmed it is winding
up the business, which has final run out of steam.
The AIM-listed company, which owned mines in East Ayrshire,
Dumfries and Galloway and Fife, said it had appointed auditors
KPMG as liquidators, Proactive relates.
"The company was unable to secure the necessary stakeholder
support to implement a solvent or consensual option, and the
board was left with no choice but to seek to wind up the
company," ATH said in a statement obtained by Proactive. "In
light of today's developments, shareholder value in ATH is
negligible."
According to the report, the company's shares have been suspended
since December when it first announced it was going into
administration. It was unable to secure more investment to fund
new mines due to the collapse of the coal price.
Proactive says Hargreaves Surface Mining (HSML) has snapped up
some of the assets, with all 237 employees to be offered new
contracts to keep them in work. As part of the arrangement, HSML
has the option to acquire the operating sites at Netherton and
Duncanziemere once certain conditions have been satisfied, the
report relays.
ATH Resources (LON:ATH) is a Doncaster-based coal miner. The
company employs more than 300 people at its five Scottish open
cast mines.
BRIDGNORTH TOWN: In Administration, Future Uncertain
----------------------------------------------------
Shropshire Star reports that Bridgnorth Town face an uncertain
future after the Midland Alliance outfit was placed into
administration by its members.
The 67-year-old Shropshire club could lose their place in the
league weeks after securing their highest-ever finish, seventh,
under boss Mark Clyde, according to Shropshire Star.
The report relates that former Wolves defender's position is
unclear after an accumulation of historic debts forced the hands
of the club's 30 members. The report notes that they voted to go
into voluntary administration by a 24 to one margin at last
night's Annual General Meeting.
Shropshire Star discloses that it's understood that rent arrears
at the Crown Meadow, which is leased from Shropshire Council, are
among a series of debts owed by Bridgnorth.
Assistant secretary Phil Taylor said: "It's a great shame as Mark
Clyde and the players did a fantastic job last season. . . . But
we are going to fight to keep the club going and try to get the
right people in to help us. Last night, the members had to
recommend that administration was the only option. . . . It was
done with heavy hearts as we are trying to promote football in
the town and keep it going," the report discloses.
Earlier this year, a take-over had been mooted after club chair
Zoe Griffiths stepped down, the report relays.
The report says that a three-man consortium, including accountant
Stan Parkes, declared their interest but the move failed to get
off the ground.
The report discloses that at the time Griffiths said: "I have
been approached by some gentlemen who want to come in and try to
run the club as a business . . . . They are not going to be
bringing any money in, it's more their commercial expertise we
are interested in."
Bridgnorth Town's junior section will not be affected and the
ground's social club is remaining open for the time being, the
report adds.
COOK TO PERFECTION: Closes Doors; Set to Enter Liquidation
----------------------------------------------------------
Cook To Perfection Ltd, the independent award-winning cookshop,
has ceased trading after five years, citing difficult trading
conditions.
The company, which won the Housewares Retail Innovation Award
2012, which operated from an outlet in Kings Lynn and stocked
quality well-known homeware brands such as Le Creuset, Emma
Bridgewater, Cath Kidston, AGA Cookshop, Nespresso and Bodum.
The company's past awards include Britain's Best Cookshop gold
winner in 2009/10, silver winner in 2010/11, Excellence in
Housewares Retailer Initiative Award in 2009, and was featured in
the Smarta 100 list in 2011.
Unfortunately, for customers that have booked cake stands or
moulds, these will not be available and will need to make
alternative arrangements. Parker Andrews have made efforts to
contact customers who have ordered stands or moulds.
The directors have instructed Parker Andrews to assist with the
process and any enquiries regarding the company or interest in
its residual stock should contact Emma Ives at
ei@parkerandrews.co.uk
CRF DEVELOPMENTS: McClures Lose Court Challenge Over GBP4MM Claim
-----------------------------------------------------------------
Belfast Telegraph reports that a man and woman who sold a disused
seaside hotel for GBP4 million have failed in a High Court
challenge over the GBP1 million balance they are still owed.
According to Belfast Telegraph, a judge ruled the sum due to
William and Linda McClure can't take priority over the buyer's
debts to the bank who funded the deal.
In February 2007, the McClures agreed to sell the former Montague
Arms Hotel in Portstewart to CRF Developments Ltd., Belfast
Telegraph relates.
CRF Developments went into administration after the deal was
agreed, Belfast Telegraph recounts. By the time administrators
were called in the firm had debts of around GBP12 million, due,
mostly, to the Ulster Bank, Belfast Telegraph discloses.
DRACO PLC: S&P Affirms 'CCC' Rating on Class F Notes
----------------------------------------------------
Standard & Poor's Ratings Services affirmed its credit ratings on
DRACO (ECLIPSE 2005-4) PLC's class A, B, C, D, E, and F notes.
At the same time, S&P has removed from CreditWatch negative its
ratings on the class A, B, and C notes.
The rating actions follow S&P's review of the credit quality of
the underlying loans under its updated European commercial
mortgage-backed securities (CMBS) criteria.
On Dec. 6, 2012, S&P placed on CreditWatch negative its ratings
on the class A, B, and C notes following the update to its
European CMBS criteria.
DRACO (ECLIPSE 2005-4) is a U.K. CMBS transaction that closed in
December 2005. It was initially secured against five loans,
three of which have repaid in full. Six U.K. commercial
properties secure the remaining two loans in the pool. Since
closing, the outstanding note balance has reduced to GBP152.35
million from GBP284.98 million.
FLINTSTONE PORTFOLIO (95% OF THE SECURITIZED LOAN POOL)
Flintstone Portfolio is a 10-year œ144.08 million interest-only
loan, that matures in October 2015. The loan was fully
securitized at closing, and is secured by a portfolio of five
predominantly office properties in Central London and Southeast
England. The portfolio occupancy rate has increased to 98.56%
from 93.22% between issuance and January 2013. The weighted-
average lease term (to break) reported is eight years and 10
months, compared with a remaining loan term of two years and four
months. In January 2013, the servicer reported a projected 1.37x
interest coverage ratio (ICR) and a 60.28% loan-to-value (LTV)
ratio (based on a March 2012 valuation).
In S&P's opinion, loan refinancing before 2015 may be challenging
to achieve if difficult market conditions persist. However, S&P
do not currently anticipates principal losses on this loan in its
base case scenario.
HERBERT HOUSE (5% OF THE SECURITIZED LOAN POOL)
Herbert House is a nine-year loan maturing in January 2014. The
loan was fully securitized at closing, and is secured by an
office property in Birmingham's city center. A U.K.-based
telecommunication services company leases the property. The
lease is on a full repairing lease basis for a 25-year term from
July 2000 with a break option in 2015. The loan was structured
with scheduled amortization of GBP1.6 million, or 16.4% of the
initial loan balance. In January 2013, the servicer reported a
projected ICR of 1.03x and a 164% LTV ratio (based on a July 2012
valuation).
To address the inherent credit risk in loans secured by single-
tenanted properties with a relatively short lease profile, S&P
has assumed that the tenant will exercise its lease break option.
In S&P's base case scenario, principal losses would be limited to
the class F notes.
CASH FLOW ANALYSIS
S&P's view on the loans' refinance risk suggests that the two
loans could potentially enter special servicing on their
respective loan maturity dates. If this occurs and if low
interest rate conditions persist, the class C, D, E, and F notes
will remain vulnerable to interest shortfalls, in S&P's opinion.
RATING ACTIONS
S&P's ratings in DRACO (ECLIPSE 2005-4) address the timely
payment of interest and payment of principal not later than the
October 2017 final legal maturity date.
Taking into account S&P's review of the two remaining loans, it
considers that the risk of principal and interest losses remains,
as S&P concluded in its last review. S&P therefore believes that
the notes' creditworthiness has not deteriorated. In S&P's
opinion, the available credit enhancement for the class A, B, C,
D, and E notes is sufficient to cover asset-credit and/or
liquidity risks at their current rating levels. Consequently,
S&P has affirmed its ratings on these classes of notes. At the
same time, S&P has removed from CreditWatch negative its ratings
on the class A, B, and C notes.
In S&P's opinion, the class F notes may still experience
principal losses in the near to medium term. S&P has therefore
affirmed its 'CCC (sf)' rating on this class of notes.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an property-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 Rating
To From
DRACO (ECLIPSE 2005-4) PLC
GBP284.978 Million Commercial Mortgage-Backed Floating-Rate Notes
Ratings Affirmed and Removed from CreditWatch Negative
A A+ (sf) A+ (sf)/Watch Neg
B A (sf) A (sf)/Watch Neg
C BBB (sf) BBB (sf)/Watch Neg
Ratings Affirmed
D BB (sf)
E B (sf)
F CCC (sf)
EQUINITI BONDCO: S&P Assigns Prelim. 'B' Corp. Credit Rating
------------------------------------------------------------
Standard & Poor's Ratings Services said that it assigned its
preliminary 'B' long-term corporate credit rating to U.K.-based
services provider Equiniti BondCo PLC, a subsidiary of Equiniti
Group Ltd. (Equiniti). The outlook is stable.
At the same time, S&P assigned its preliminary 'B' issue rating
to the proposed GBP440 million fixed- and floating-rate senior
secured notes due 2018 to be issued by Equiniti BondCo PLC. The
preliminary recovery rating on the proposed notes is '4',
indicating S&P's expectation of average (30%-50%) recovery for
creditors in the event of a payment default.
The final ratings are subject to the successful closing of the
proposed issuance and depend on S&P's receipt and satisfactory
review of all final transaction documentation.
The preliminary ratings reflect S&P's assessment of Equiniti's
"highly leveraged" financial risk profile. Pro forma the
issuance of the senior secured notes, S&P calculates Standard &
Poor's-adjusted debt of about GBP835 million, comprising:
-- GBP440 million of proposed senior notes;
-- A GBP125 million payment-in-kind (PIK) instrument;
-- GBP179 million of preferred shares;
-- GBP66 million of shareholder loans; and
-- GBP25 million of Standard & Poor's adjustments for
operating leases and pensions.
S&P treats the PIK instrument, preference shares, and shareholder
loan as debt under its criteria because S&P do not view the
instruments as being a permanent feature of the group's capital
structure.
S&P also factors into the rating its assessment of Equiniti's
business risk profile at the higher end of the "fair" category.
Equiniti operates in niche segments of shareholder solutions
(largely comprising registrar services and the administration of
employee share plans) and pension solutions to FTSE 350 companies
and large public sector companies in the U.K. In S&P's opinion,
Equiniti has smaller operations and weaker geographic diversity
than larger business services providers. Some segments of the
group's services are subject to financial regulatory oversight.
Potential reputational risk could arise from any deterioration in
the group's service standards, the improper disclosure of
sensitive information, or its failure to comply with regulatory
requirements.
However, these risks are partly offset by Equiniti's strong
market positions, robust EBITDA margins, and good revenue
visibility. This visibility is due to the long-term nature of
Equiniti's contracts and its long-standing relationship with
leading FTSE 350 companies. S&P also views positively the
organization's corporate governance measures, which include
robust internal control systems, the appointment of industry
experts on the board of directors, and substantial training
initiatives. S&P therefore assess Equiniti's management and
governance as "satisfactory."
In S&P's view, Equiniti will continue to steadily improve its
absolute profitability as it seeks to cross-sell its services to
its existing clients, and will generate free operating cash flow
(FOCF) of about GBP15 million-GBP20 million.
S&P could lower the rating if Equiniti experiences severe margin
pressure, or if poorer cash flows weaken its credit metrics.
Substantial debt-financed acquisitions, and/or an increase in
shareholder distributions could also weaken credit metrics, which
could in turn lead S&P to lower the ratings.
If FOCF were to fall materially below S&P's current forecast for
a sustained period, it could lower the ratings.
S&P considers that rating upside is limited at this stage because
of the group's capital structure, relatively modest absolute cash
generation, and aggressive financial policies on leverage.
EQUINITI CLEANCO: Moody's Assigns 'B2' CFR; Outlook Stable
----------------------------------------------------------
Moody's Investors Service assigned a corporate family rating
(CFR) of B2 and a probability of default rating (PDR) of B2-PD to
Equiniti Cleanco Limited (Equiniti), the holding company parent
of the subsidiary guarantors to the group's senior credit
facility and proposed senior secured notes.
Concurrently, Moody's has assigned a provisional (P)B3 rating to
the proposed dual-tranche GBP440 million of senior secured fixed
and floating notes due 2018, issued by Equiniti holding company
subsidiary Equiniti Bondco plc. The outlook on the ratings is
stable. This is the first time that Moody's has assigned ratings
to Equiniti.
"The B2 CFR primarily reflects Equiniti's high financial leverage
and limited scale relative to Moody's rated universe of business
and consumer service companies, partly offset by our expectation
that the company is likely to maintain its adequate cash position
and generate comfortable levels of unencumbered future free cash
flow," says Anthony Hill, a Moody's Vice President - Senior
Analyst and lead analyst for Equiniti.
Equiniti recently announced a proposed refinancing transaction
that Moody's expects to result in the repayment of the company's
existing credit facilities and the proposed issuance of GBP440
million of senior secured fixed and floating notes due 2018.
Since 2007, the majority of Equiniti's shareholders are funds
managed or advised by private equity firm Advent International
Corporation.
Moody's issues provisional ratings in advance of the final sale
of debt instruments and these ratings reflect the rating agency's
preliminary credit opinion regarding the transaction only. Upon a
conclusive review of the final documentation, Moody's will
endeavor to assign a definitive rating to the debt. A definitive
rating may differ from a provisional rating.
Ratings Rationale:
Equiniti's B2 CFR reflects the company's high financial leverage,
which Moody's expects will be around 6.2x debt/EBITDA (on a
Moody's-adjusted basis) for the financial year-end December 2013
(FYE 2013) and pro forma the refinancing transaction. While
Moody's expects Equiniti to gradually reduce leverage over the
coming quarters and achieve a leverage ratio of around 5.5x
debt/EBITDA by FYE 2014, the company is still significantly
exposed to the general economic activity of the UK corporate
sector, which Moody's expects will continue to be flat for at
least the next 12 months. Additionally, with net revenues of
GBP267 million for FYE 2012 derived solely from the UK, the
rating agency views Equiniti's scale as being somewhat limited.
As a middle- and back-office outsource provider of highly complex
administration and payments processing solutions, Equiniti's
specialized business process outsourcing (BPO) services are
largely non-discretionary for their corporate clients. For
example, 61% of Equiniti's reported FYE 2012 EBITDA was generated
from the broad range of business-critical share registrar
services that the company provides. However, and regardless of
the service offerings necessity, key drivers of profitability in
this area are UK corporate actions resulting from mergers and
acquisitions, special dividend payments, and equity offerings --
all areas that have been subdued over the past five years due to
the ongoing economic downturn in the UK. Furthermore, given that
Equiniti's top ten clients made up nearly 40% of the company's
FYE 2012 revenues, its client diversity is modest.
However, more positively, the B2 CFR derives considerable support
from Equiniti's solid business profile. The company reports as
clients approximately 53% and 35% of the companies listed in the
UK's Financial Times-Stock Exchange (FTSE) indices FTSE100 and
FTSE250, respectively. In its core markets, which are primarily
corporate registrar solutions, employee shareholder plan
solutions, and pension administration solutions, Equiniti is
understood by Moody's to have leading market positions made up of
a highly dedicated UK client base. In 2012, Equiniti reported
more than 1,600 large corporations and government agencies as
clients, and a 96% client contract renewal rate as of FYE 2012.
Furthermore, the company continues to target specific areas of
the BPO services industry that have significant barriers to entry
driven by complexity and a high cost-of-failure consequence for
the client. With a rich history of providing services to some of
the UK's largest corporations since the 1950s, over the years
Equiniti has developed the advanced technical expertise, the
critical and professional accreditations, and the sterling
reputation needed to be profitable within this niche area of the
specialized BPO market -- despite any economic cyclicality in the
UK corporate sector. For example, over the past three years
Equiniti's EBITDA margin has been steady at approximately 28%,
and free cash flow has grown from GBP12 million at FYE 2010 to
GBP49 million at FYE 2012 (all figures on a Moody's-adjusted
basis).
Moody's believes that Equiniti's liquidity, pro forma the
transaction, will comfortably cover its near-term requirements.
Pro forma for the transaction, Moody's expects the company to
exhibit an adjusted cash balance of approximately GBP22 million.
Moody's-adjusted free cash flow was GBP49 million at FYE 2012,
and Moody's expects this to be around GBP29 million for FYE 2013
and pro forma the transaction. Internally generated cash flow and
the undrawn proposed super senior GBP75 million revolving credit
facility (unrated) is expected by Moody's to cover the company's
ongoing basic cash needs, such as debt service and amortization,
working capital needs and expected capital expenditures
(including expansionary capital investments).
Outlook
Pro forma the proposed transaction, the rating is weakly
positioned in the B2 rating category. The rating and stable
outlook assigned are forward looking and assume that Equiniti
will deleverage its balance sheet to position the group
comfortably within the current rating category. Moody's would
require Equiniti to reduce its Moody's-adjusted debt/EBITDA
towards 5.5x on a sustainable basis for the company to be
adequately positioned in the B2 rating category. The rating
agency also expects Equiniti's management to continue to apply
discretion in the implementation of its organic and external
growth strategy supporting the expected deleveraging.
What Could Change The Rating Up/Down
Positive pressure on the rating could materialize if Equiniti is
able to reduce its Moody's-adjusted debt/EBITDA sustainably below
5.0x, with Moody's-adjusted EBITDA minus capex coverage of
interest expenses above 2.0x.
Conversely, Moody's would consider downgrading Equiniti's ratings
if the company's credit metrics do not improve in line with
Moody's projections. This would include Moody's-adjusted
debt/EBITDA not falling towards 5.5x over the next 18 months, or
Moody's-adjusted EBITDA minus capex coverage of interest expenses
falling towards 1.5x over the same period.
Principal Methodology
The principal methodology used in this rating was the Global
Business & Consumer Service Industry Rating Methodology published
in October 2010. Other methodologies used include Loss Given
Default for Speculative-Grade Non-Financial Companies in the
U.S., Canada and EMEA published in June 2009.
Headquartered in London, UK, Equiniti is leading provider of
specialized BPO services to private and public sector clients in
the United Kingdom. The company's middle- and back-office
solution outsource offerings broadly include record keeping,
payment management, share register maintenance, pension scheme
administration, employee benefits administration, share dealing
services, asset custodial services and software solutions. For
the fiscal year ended December 31, 2012, Equiniti reported
Moody's-adjusted revenues and EBITDA of GBP267 million and GBP75
million, respectively. 100% of the company's 2012 revenues were
generated from the United Kingdom.
INTEGRATED DENTAL: S&P Assigns 'B' Long-Term Corp. Credit Rating
----------------------------------------------------------------
Standard & Poor's Ratings Services said that it assigned its 'B'
long-term corporate credit rating to U.K.-based dental health
care provider Turnstone BidCo Ltd. (Integrated Dental Holdings;
IDH). The outlook on IDH is stable.
At the same time, S&P assigned its 'B' issue rating to the senior
secured notes to be issued by IDH Finance PLC. The recovery
rating on the senior secured notes is '4', indicating S&P's
expectation of average (30%-50%) recovery in an event of a
payment default.
In addition, S&P assigned its 'CCC+' issue rating to the secured
subordinated notes to be issued by IDH Finance. The recovery
rating on the secured subordinated notes is '6', indicating S&P's
expectation of negligible (0%-10%) recovery in the event of a
payment default.
The rating on IDH reflects S&P's assessment of the group's
financial risk profile as "highly leveraged" and its business
risk profile as "fair."
The "fair" business risk profile is underpinned by IDH's leading
position in the U.K. primary dental care market, as well as the
highly visible and stable nature of its revenue stream. However,
IDH's business risk profile is constrained by what S&P views as
limited volume growth potential and the group's relatively low
diversification.
S&P assess IDH's financial risk profile as "highly leveraged"
because IDH's Standard & Poor's-adjusted leverage is more than
5x. In S&P's assessment of IDH's financial risk profile, it
treats shareholder loans as debt because they accrue interest.
However, S&P also incorporates the cash-conserving nature of
these instruments into its analysis. Under S&P's base-case
scenario, it projects that IDH's interest coverage ratio
excluding interest on shareholder loans (the ratio of adjusted
interest excluding shareholder loans to adjusted EBITDA) will be
comfortably more than 2x over the next couple of years. In S&P's
base-case scenario, it also incorporates annual acquisition
expenditure of GBP50 million-GBP60 million. S&P estimates that
IDH's interest coverage ratio excluding interest on the
shareholder loans will be about 2.5x in 2014; this is on the
basis of EBITDA pro forma for acquisitions.
In S&P's view, IDH should be able to generate sufficient earnings
to enable it to maintain an interest coverage ratio excluding
interest on shareholder loans of close to 2x over the next few
years. This is the level that S&P considers commensurate with
the rating.
S&P could take a negative rating action if cash interest coverage
drops to less than 1.5x. This could happen if fee increases by
the NHS do not keep up with inflationary pressure on the group's
cost base. Such a scenario would result in pressure on the
group's margin and EBITDA. The NHS could minimize fee increases
in order to facilitate cuts to public spending in light of the
weak economic outlook in Europe. In addition, an unexpected
regulatory change could put pressure on the group's volumes and
earnings.
S&P could consider an upgrade if the group reduces its adjusted
leverage to less than 5x on a sustained basis. In view of the
amount of deleveraging required to achieve this, S&P believes it
would be most likely occur as a result of a change in financial
policy. S&P therefore views an upgrade as unlikely.
MH CARBON: Placed in Creditors Voluntary Liquidation
----------------------------------------------------
Parker Andrews have been instructed to place the carbon credit
broker, MH Carbon Ltd, into creditors' voluntary liquidation.
The Company, formed in September 2010, originally acted as a
trader on its own account, buying and selling both Certified
(CERs) and Voluntary (VERs) Carbon Credits. Latterly, the Company
acted as a commission-only broker.
The Company brokered the sale of around GBP18.7 million of carbon
credits to over 5,000 clients during its trading period.
An associated company, MH Commodity Brokers Ltd, will also be
placed into liquidation shortly.
PRIORY GROUP: Fitch Affirms 'B+' Long-Term Issuer Default Rating
----------------------------------------------------------------
Fitch Ratings has affirmed Priory Group No. 3 plc's Long-term
Issuer Default Rating (IDR) at 'B+' and revised the Outlook to
Stable from Negative. Fitch has also affirmed Priory's GBP70
million super senior revolving credit facility (RCF) and GBP631
million senior secured notes due 2018 at 'BB+'/'RR1', and GBP175
million senior notes due 2019 at 'BB'/'RR2'.
The revision of the Outlook to Stable from Negative reflects the
significant reduction in repatriations of patients from Priory's
secure units to the NHS in recent months, which was our main
concern previously. The Stable Outlook is supported by Priory's
improvement in profitability in 2012. Challenging market
conditions had a detrimental impact on revenue in the Healthcare
and Education divisions in 2012. However, the EBITDAR margin
increased to 31.2% from 29.6% in 2011 driven by effective cost
control. "We expect steady profitability despite ongoing pricing
pressure and potentially some volume weakness in the Education
division," Fitch says.
Key Rating Drivers
Impact of New Commissioning System:
"As the NHS reforms have only been effective since April 2013,
Priory could face delays in referrals over the short-term as the
new centralized commissioning system for mental health care is
being fully implemented. However, we continue to believe that
Priory is well placed to benefit from outsourcing of high acuity
patients by the NHS in the long term," Fitch says.
Solid Market Position and Profitability:
The ratings are supported by Priory's leading market position in
the stable private UK mental health care market and its strong
reputation for quality care amongst patients and commissioners.
Improved profitability in 2012 was driven by better occupancy
rates, the maturity of existing sites in the Older People
division and small acquisitions in the Specialist division
combined with central cost management following the integration
of Craegmoor. With its focus on high acuity patients, Priory
exhibits high profit margins relative to other healthcare
providers rated by Fitch in the single 'B' IDR category.
Pricing Pressure Likely:
"The group remains exposed to some pressure in fee negotiations
over the coming years as the commissioning reform is likely to
trigger greater price transparency. However, the fact that the
group is mainly exposed to high acuity patients makes it
relatively protected from material cuts in healthcare spending by
the NHS and local authorities. Also, we expect future volumes to
offset pricing pressure to a large extent," Fitch says.
Execution Risk Limited:
"Negative rating factors include the underlying execution risk
inherent in Priory's expansion plans for its Healthcare division
as well as in potential bolt-on acquisitions in the Specialist
division. However, we consider the execution risk to be limited
given management's track record. With the appointment of Tom
Riall as new CEO in early 2013, we expect some continuity in
management strategy although we will monitor how strategy is
executed under this new leadership," Fitch states.
Satisfactory Financial Flexibility:
"We expect Priory to continue delivering solid cash flow
generation given its high underlying profitability and limited
working capital requirements. Although a significant portion of
the operating cash flow will be used for capex requirements --
including some remedial capex in FY13 and FY14 on some legacy
Craegmoor properties -- we forecast free cash flow (FCF) to be
positive over the next few years and support net deleveraging
prospects. This, combined with a long-dated debt maturity profile
with bullet maturities in 2018 and 2019 provides the group with
satisfactory financial flexibility, commensurate with a 'B+'
IDR," Fitch says.
Significant Asset Base and Recoveries:
"Priory has a significant asset base because it owns the majority
of its properties. As a result, we expect a liquidation of the
group's assets to generate better recovery prospects for
creditors in a distressed situation than a restructuring of the
business as a going concern. Our approach results in outstanding
recoveries for senior secured noteholders (91% to 100%) and
superior recoveries for unsecured noteholders (71% to 90%),"
Fitch says.
Rating Sensitivities
Positive: Future developments that could lead to positive rating
actions include:
-- Funds from operations (FFO) gross adjusted leverage below
5.0x (4.5x net of unrestricted cash) on a sustainable basis.
-- FFO fixed charge cover above 2.5x on a sustainable basis.
Negative: Future developments that could lead to negative rating
action include:
-- FFO gross adjusted leverage above 6.5x (net 6.0x) on a
sustainable basis.
-- FFO fixed charge cover below 2.0x on a sustainable basis.
-- Adverse regulation and pricing pressure reflected in a
permanent decline in profitability.
-- Evidence of material pressure on free cash flow generation.
ROWECORD ENGINEERING: In Administration, Buyer Emerges
------------------------------------------------------
Wales Online reports that Rowecord Engineering, which went into
administration last month, has a potential buyer.
The business went into administration last month with the loss of
more than 400 jobs due to cashflow problems and a fall in orders,
according to Wales Online.
The report relates that administrators Grant Thornton have
confirmed it has received an approach from a south east Asian
entrepreneur with interests in the steel industry, but that
discussions were at a "tentative stage."
Currently Rowecord has a small staff of 75 carrying out work in
progress, the report notes.
However, the report discloses that it is hoped that if a deal is
reached with the prospective buyer some of the 425 employees made
redundant could be reinstated.
Wales Online relays that Grant Thornton senior partner Alistair
Wardell said a creditors report could be produced this week.
"All the accounts need to be brought up to date then we'll see
who's owed what," the report quoted Mr. Wardell as saying.
The report adds that Mr Wardell said: "The structure of the deal
is unknown to us. However, interest has already been shown in
the Rowecord current order book, but no official approach has yet
been made."
Rowecord was founded in 1967 by chairman Ben Hoppe - a past
Western Mail Business Achiever of the Year award winner and who
was awarded an OBE in 2003 for his services to the steel
construction industry.
TOWERGATE FINANCE: Fitch Rates GBP396-Mil. Secured Notes 'BB'
-------------------------------------------------------------
Fitch Ratings has assigned Towergate Finance plc's (Towergate;
'B'/Stable) recent issue of GBP396 million senior secured notes
due 2018 a final rating of 'BB'/'RR1'. The entire amount issued
has taken the form of floating rate notes (FRN) as opposed to a
mix of FRN and a tap on the existing 8.5% senior secured fixed
rate notes. However, this does not have any impact on Towergate's
Issuer Default Rating (IDR) and other instrument ratings. Fitch
has consequently withdrawn the expected rating of 'BB(EXP)'/RR1'
on the 8.5% senior secured notes tap issue.
The final rating follows a review of final documentation which
materially conforms to information received at the time the
agency assigned the expected ratings.
The notes refinance the existing senior secured term loans and
the drawn amounts under the acquisition facility. As part of the
refinancing, GBP14.6m of the existing 8.5% senior secured notes
held by shareholders following the CCV acquisition have been
exchanged into additional 10.5% senior notes due 2019.
Key Rating Drivers
Improving Organic Performance:
The recent affirmation of the IDR and the revision of the Outlook
to Stable from Negative reflect the improvement in Towergate's
organic operating performance over FY12 despite the prolonged
challenging economic conditions and soft premium rates
environment. In Fitch's view, the group's results have been
supported by adequate business diversification; strong revenue
growth in the Underwriting and Paymentshield divisions has
compensated for flat performance in Retail Broking and persistent
pressure in the Network business. The EBITDA margin (adjusted for
one-off costs) has also improved to 37.5% from 36.8% on a pro-
forma basis as a result of cost savings measures implemented
during the year and the disposal of Powerplace, an electronic
marketplace for commercial lines of insurance.
Favourable Impact of Acquisitions:
In our view, Towergate's initial strategy to de-lever via small
bolt-on acquisitions has been successful in FY12 after the lack
of deleveraging and operating underperformance noted in FY11. The
integration of affiliated company CCV in June 2012 enabled the
group to reduce total gross debt to EBITDA to 5.7x (on a pro-
forma basis) from 6.3x at FY11 (before the CCV deal). In
addition, the group has completed 27 small acquisitions during
the year and we expect that the benefits of their integration
within Towergate will materialize over the next 12-18 months.
This, combined with our expectation of sustained operating
performance at the Underwriting and Paymentshield divisions,
should support further deleveraging in the near to medium-term
and Towergate's IDR at 'B' with a Stable Outlook.
Leading UK Non-Life Insurance Intermediary:
Towergate's IDR of 'B' reflects the group's leading position as
an independent insurance intermediary in the UK, its well-
established relationship with leading insurance providers, its
wide distribution platform and underwriting capacity in niche
segments of the personal and SME commercial non-life insurance
market.
Weak Credit Metrics but Adequate Liquidity:
Despite the recent improvement in financial performance, we
consider Towergate's IDR to be constrained by credit metrics.
Although the refinancing of the existing bank debt has no
detrimental impact on leverage levels on a pro-forma basis, the
funds from operations (FFO) fixed charge cover ratio will be
slightly weaker as a result of higher cash interest costs.
However, we expect further improvements in credit metrics over
the next 12-24 months, driven by organic and external growth. In
our view, Towergate maintains satisfactory liquidity and the
completed refinancing provides the group with adequate financial
flexibility, supported by free cash flow generation and the
absence of debt amortization before the main bond maturities fall
due in 2018 and 2019. The group's liquidity position is enhanced
by a new GBP85 million revolving credit facility which can be
used for acquisitions.
Recoveries Unchanged:
"We continue to expect recoveries to be maximized in a going
concern scenario given the asset-light nature of Towergate's
business. Although the 2012 acquisitions have primarily been
funded by additional debt, we expect those to benefit Towergate's
enterprise value in a distressed scenario. The 'BB'/'RR1' rating
for the senior secured FRN that rank pari passu with the existing
senior secured notes reflects strong anticipated recoveries for
creditors in a default scenario. The 'B-'/'RR5' rating for the
2019 senior notes reflects lower-than-average recovery
prospects," Fitch says.
Rating Sensitivities
Positive: Future developments that could lead to positive rating
actions include:
-- FFO gross leverage below 5.0x on a sustainable basis as a
result of greater scale and debt repayments.
-- FFO fixed charge cover above 2.0x on a sustainable basis.
Negative: Future developments that could lead to negative rating
action include:
-- FFO gross leverage above 6.75x on a sustainable basis.
-- FFO fixed charge cover below 1.5x on a sustainable basis.
-- Evidence of material pressure on free cash flow generation.
TURNSTONE MIDCO: Fitch Assigns 'B+' LT Issuer Default Rating
------------------------------------------------------------
Fitch Ratings has assigned Turnstone MidCo 2 and its associated
debt instruments to be issued under IDH Finance plc the following
expected ratings, upon completion of the pending refinancing:
Turnstone MidCo 2.
Long-term Issuer Default Rating (IDR): 'B+(EXP)'
IDH Finance plc
GBP200m planned Senior Secured Notes due 2018: 'BB-(EXP)'/'RR3'
GBP125m planned Senior Secured FRN due 2018: 'BB-(EXP)'/'RR3'
GBP75m Second Lien Notes due 2019: 'B-(EXP)'/'RR6'
IDH Finance plc, the issuer of the planned notes, is 100% owned
by Turnstone Midco 2. The notes as well as the new super-senior
revolving credit facility (RCF) of up to GBP100 million (which is
expected to be undrawn at closing) will be secured substantially
by all of the issuer's and guarantors' assets representing 86.6%
of the group's consolidated sales and 83.1% of consolidated
EBITDA as of March 31, 2013. Pearl Topco Limited (Predecessor
IDH) was acquired on 11 May 2011 by Carlyle and Palamon and was
simultaneously merged with Associated Dental Practices (ADP
Primary Care Services Limited or Predecessor ADP), together
referred to as IDH.
The ratings relate to the pending refinancing of its current
senior loans (GBP330 million in total) and partial repayment of
the shareholder loan (GBP50 million) from the proceeds of the
proposed senior notes and second lien issue in the total amount
of GBP400 million. Final instrument ratings would be contingent
upon the receipt of final documentation conforming materially to
information already received. Failure to conduct the refinancing
according to plan would result in the withdrawal of the above
ratings.
The 'B+(EXP)' IDR reflects Turnstone Midco 2's solid market
positioning as the number one player in the GBP3.3 billion UK NHS
dental care market, where it operates via 550 practices and
serves about 5m patients per annum. IDH is more than double the
size of its next biggest competitor Oasis Healthcare. A
successful notes issue and completion of the capital structure
refinancing would improve the financial flexibility for IDH
allowing it to continue pursuing its acquisition-driven growth
strategy.
Key Rating Drivers
Strong Market Position
IDH's solid market position allows economies of scale in terms of
sourcing of equipment/ material, administration, controlling and
national advertisement.
NHS Funded Sales
Further support to the ratings is given by IDH's revenues derived
from NHS contracts which is the source of 87% of its revenues.
90% of these contracts are so-called 'evergreen contracts' (GDS
contracts) which provide stability to the group's profitability
and cash flows. As the NHS target is to improve the access to NHS
dentistry, there is not much incentive for the NHS to withdraw
those contracts, unless the dentists who are awarded these
contracts are underperforming.
Low Risk Acquisition Strategy
The acquisition strategy for IDH reflects the group's ability to
take advantage of the fragmented dentistry market in the UK.
Fitch considers that such strategy carries an inherent execution
risk, albeit limited in light of management's past experience in
completing acquisitions. Fitch notes that the acquisition of
small practices with GDS contracts with the NHS is relatively
well matched to the group's operations and thus does not bear
major integration costs.
Regulatory Reforms Broadly Neutral
The ratings also reflect the risks associated with the regulatory
reforms impending in the dentistry market in the UK. Fitch
recognizes the risk that the reimbursement method from the NHS to
private dental service providers is likely to change. However,
any changes in contracts -- away from current UDA (Units of
Dental Activity) based contracts -- are only likely to be
introduced around 2017. Protection to the value of the contract
is also provided by the current involvement of IDH in the
government's pilot scheme in the design of contracts as well as
its incumbent position.
Weak Credit Metrics
The business strengths are offset by Turnstone Midco 2's
relatively weak credit metrics. Based on its conservative
projections, Fitch considers Turnstone Midco 2 as highly
leveraged, with funds from operations (FFO) adjusted net leverage
at 6.0x at closing of the refinancing but expects the group to
delever over time to 5.2x by 2016, which is adequate to the
assigned rating given the sector. Higher than expected post-
refinancing cost of funding could, among other factors, have an
impact on projected credit metrics and therefore the post-
refinancing IDR and the instrument ratings.
Treatment of Shareholder Debt
In its analysis, Fitch has classified the various shareholder
instruments present in the group's structure as equity because,
as per Fitch's understanding of the legal documentation received,
the main features of these instruments combined with the inter-
creditor principles match Fitch's assessment of equity-like
instruments.
Adequate Liquidity
Fitch anticipates that post refinancing, Turnstone Midco 2's
liquidity will be adequate with around GBP5 million of cash, a
fully undrawn GBP100 million RCF due in 2018, and without short-
term debt maturities.
Above Average Senior Recovery Ratings
Turnstone Midco 2's recovery ratings reflect Fitch's expectations
that the enterprise value of the company 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 that 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. Fitch estimates that the recovery rate
for the senior secured notes would fall within the 51%-70% range
('RR3'), leading to a one-notch uplift from the IDR to 'BB-
(EXP)'. The recovery rate for the second lien notes would fall
within 0%-10% range ('RR6') leading to a two-notch downgrade from
the IDR to 'B-(EXP)'.
Rating Sensitivities
Negative: Future developments that may, individually or
collectively, lead to negative rating action include:
-- Reduced free cash flow margin below 4% of sales due to
significant profitability erosion, as a result of an
unsuccessful acquisition strategy
-- FFO adjusted net leverage above 6.0x on a sustained basis
-- FFO fixed charge coverage below 1.5x on a sustained basis
Positive: Future developments that may, individually or
collectively, lead to positive rating action include:
-- IDH's ability to increase its diversification and scale
via acquisitions whilst maintaining financial flexibility
-- FFO adjusted net leverage below 4.5x on a sustained basis
-- FFO fixed charge coverage above 2.5x on a sustained basis
===============
X X X X X X X X
===============
* S&P Withdraws Ratings on 32 European Synthetic CDO Tranches
-------------------------------------------------------------
Standard & Poor's Ratings Services withdrew its credit ratings on
32 European synthetic collateralized debt obligation (CDO) and
cash tranches. Of these, S&P has lowered to 'D (sf)' and
withdrawn its rating on one tranche.
S&P has withdrawn its ratings on these tranches for different
reasons, including:
-- The issuer has fully repurchased and cancelled the notes,
-- The early redemption of the notes;
-- The early termination of the notes;
-- The deal was fully unwound; and
-- Losses have reduced the principal amount of the notes.
S&P provides the rating withdrawal reason for each individual
tranche in the separate ratings list.
S&P has lowered to 'D (sf)' and subsequently withdrawn its rating
on one tranche. The downgrade to 'D (sf)' follows confirmation
that losses from credit events in the underlying portfolios
exceeded the available credit enhancement levels. This means
that the noteholders did not receive full principal on the early
termination date for this tranche. The rating lowered to 'D
(sf)' will remain at 'D (sf)' for a period of 30 days before the
withdrawal becomes effective.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
* U.S. Money Funds Raises Exposure to Eurozone Banks, Fitch Says
----------------------------------------------------------------
U.S. prime money market funds (MMFs) increased their exposure to
eurozone banks in April, although asset allocations to these
institutions remain well below 2011 levels, according to Fitch
Ratings.
As of end-April 2013, MMF allocations to eurozone banks
represented 15.1% of assets under management within Fitch's
sample of the 10 largest U.S. prime money funds, a 14% increase
over the prior month. MMFs' eurozone allocations have almost
doubled since end-June 2012, a sign of improving investor
sentiment toward the region. This resumption in eurozone
allocations also suggests that the March decline was a tentative
retreat given the brief market uncertainty after the Cyprus
banking system failure.
Despite the increase, Fitch notes that MMF eurozone bank
exposures remain less than half of their end-May 2011 levels.
Fitch believes that eurozone banks likely have a diminished
appetite for MMF funding, given the volatility that this form of
funding experienced during 2H'11. Furthermore, reductions in some
banks' overseas lending have likely curtailed the banks' need for
U.S. dollar borrowing, including U.S. MMFs.
The largest country exposures in Fitch's sample were Canadian and
Japanese banks, both at 12% of assets. Canadian bank holdings
declined somewhat, but still remain well above May 2011 levels.
The proportion of eurozone and European exposure in the form of
repos, at less than 20% of these banks' collective exposure,
remains well below the levels of roughly 40% of exposure seen
during the height of the crisis last summer.
The full report 'U.S. Money Fund Exposure and European Banks:
Eurozone Rebounds' is available at 'www.fitchratings.com.'
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
share in public markets. At first glance, this list may look
like the definitive compilation of stocks that are ideal to sell
short. Don't be fooled. Assets, for example, reported at
historical cost net of depreciation may understate the true value
of a firm's assets. A company may establish reserves on its
balance sheet for liabilities that may never materialize. The
prices at which equity securities trade in public market are
determined by more than a balance sheet solvency test.
A list of Meetings, Conferences and Seminars appears in each
Thursday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/booksto order any title today.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., 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 * * *